As Filed with the Securities and Exchange Commission on March 29, 1999
Registration No. 333-68747
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
and
POST-EFFECTIVE AMENDMENTS
under
THE SECURITIES ACT OF 1933
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<TABLE>
<S> <C> <C>
MERRILL LYNCH & CO., INC. DELAWARE 13-2740599
(Exact name of registrant as specified in charter) (State of incorporation) (I.R.S. employer identification number)
MERRILL LYNCH PREFERRED FUNDING VI, L.P. DELAWARE 13-4034253
(Exact name of registrant as specified in certificate of (State of organization) (I.R.S. employer identification number)
limited partnership)
MERRILL LYNCH PREFERRED CAPITAL TRUST VI DELAWARE 13-7174482
(Exact name of registrant as specified in certificate of trust) (State of organization) (I.R.S. employer identification number)
</TABLE>
World Financial Center
North Tower
New York, New York 10281-1334
(212)449-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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MARK B. GOLDFUS, ESQ.
General Counsel
Corporate Law
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281-1334
(212)449-6990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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<TABLE>
<S> <C> <C>
Copies to:
NORMAN D. SLONAKER, ESQ. DONALD R. CRAWSHAW, ESQ. RICHARD T. PRINS, ESQ.
Brown & Wood LLP Sullivan & Cromwell Skadden, Arps, Slate,
One World Trade Center 125 Broad Street Meagher & Flom LLP
New York, New York 10048 New York, New York 10004 919 Third Avenue
New York, New York 10022
</TABLE>
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Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
The Registrants hereby amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains:
(a) a prospectus which is to be used by Merrill Lynch & Co., Inc.
("ML&Co.") in connection with offerings of its:
o debt securities;
o warrants;
o common stock;
o preferred stock; and
o depositary shares;
(b) a prospectus which is to be used by ML&Co. in connection with
offerings of its Structured Yield Product Exchangeable for Stock; and
(c) a prospectus including alternate pages, which is to be used in
connection with offerings of:
o the preferred securities of Merrill Lynch Preferred Capital Trust VI
("ML Trust");
o the preferred securities of Merrill Lynch Preferred Funding VI, L.P.
("ML Partnership");
o the subordinated debentures of ML&Co.; and
o the guarantees of ML&Co. of:
o the preferred securities of ML Trust;
o the preferred securities of ML Partnership; and
o specified debentures issued by ML&Co.'s affiliates.
o Additionally, there is a prospectus supplement relating to ML&Co.'s
medium-term notes and 32 prospectuses to be used by ML&Co.'s
wholly-owned subsidiary, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated in connection with market-making
transactions.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
[LOGO]
Merrill Lynch & Co., Inc.
DEBT SECURITIES, WARRANTS, PREFERRED STOCK,
DEPOSITARY SHARES AND COMMON STOCK
o By this prospectus, we may o When we offer securities, we
offer from time to time up to will provide you with a
$ of our: prospectus supplement or a term
sheet describing the terms of
o debt securities; the specific issue of securities
including the offering price of
o warrants; the securities.
o warrants; o You should read this prospectus
and the prospectus supplement or
o common stock; the term sheet relating to the
specific issue of securities
o preferred stock; and carefully before you invest.
o depositary shares.
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 date of this prospectus is , 199 .
<PAGE>
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 all the
securities offered under this prospectus.
<PAGE>
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
general corporate purposes, unless otherwise specified in the prospectus
supplement or term sheet relating to a specific issue of securities. Our general
corporate purposes may include financing the activities of our subsidiaries,
financing our assets and those of our subsidiaries, lengthening the average
maturity of our borrowings and financing acquisitions. Until we use the net
proceeds from the sale of any of our securities for general corporate purposes,
we will use the net proceeds to reduce our short-term indebtedness or for
temporary investments. We expect that we will, on a recurrent basis, engage in
additional financings as the need arises to finance our growth, through
acquisitions or otherwise, or to lengthen the average maturity of our
borrowings. To the extent that securities being purchased for resale by our
subsidiary, Merrill Lynch Pierce, Fenner & Smith Incorporated, referred to in
this prospectus as MLPF&S, are not resold, the aggregate proceeds that we and
our subsidiaries would receive would be reduced.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
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 and ratios of earnings to combined fixed charges and preferred
stock dividends for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)................. 1.2 1.2 1.2 1.2 1.1
Ratio of earnings to combined fixed charges
and preferred stock dividends(a)............... 1.2 1.2 1.2 1.2 1.1
</TABLE>
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
THE SECURITIES
ML&Co. intends to sell its securities from time to time. These securities
may include the following, in each case, as specified by ML&Co. at the time of
offering:
o common stock;
o preferred stock;
o depositary shares representing preferred stock;
o debt securities, comprising senior debt securities and subordinated
debt securities, each of which may be convertible into common stock or
preferred stock;
o warrants to purchase debt securities;
o warrants to purchase shares of common stock;
o warrants to purchase shares of preferred stock;
o warrants entitling the holders to receive from ML&Co. a payment or
delivery determined by reference to decreases or increases in the
level of an index or portfolio ("Index Warrants") based on:
o one or more equity or debt securities;
o any statistical measure of economic or financial performance such
as a currency or a consumer price or mortgage index; or
o the price or value of any commodity or any other item or index;
o warrants to receive from ML&Co. the cash value in U.S. dollars of the
right to purchase ("Currency Call Warrants") or to sell ("Currency Put
Warrants" and, together with the Currency Call Warrants, the "Currency
Warrants") specified foreign currencies or units of two or more
specified foreign currencies;
o preferred stock which may be:
o convertible into preferred stock or common stock or
o exchangeable for debt securities, preferred stock or depositary
shares representing preferred stock.
We may offer the securities independently or together with other securities
and the securities may be attached to, or separate from other securities. We
will offer the securities to the public on terms determined by market conditions
at the time of sale and set forth in a prospectus supplement or term sheet
relating to the specific issue of securities.
ML&Co. will offer the securities described in this prospectus either
separately or together in one or more series of up to $ aggregate public
offering price or its equivalent in foreign currencies or units of two or more
currencies, based on the applicable exchange rate at the time of offering, as
shall be designated by ML&Co. at the time of offering, subject to reduction on
account of the sale of other securities under the registration statement of
which this prospectus is a part.
DESCRIPTION OF DEBT SECURITIES
Unless otherwise specified in a prospectus supplement, the senior debt
securities are to be issued under an indenture (the "1983 Indenture"), dated as
of April 1, 1983, as amended and restated and as further amended, between ML&Co.
and The Chase Manhattan Bank, as trustee or issued under an indenture (the "1993
Indenture"), dated as of October 1, 1993, as amended, between ML&Co. and The
Chase Manhattan Bank, as trustee (each, a "Senior Debt Trustee"). The 1983
Indenture and the 1993 Indenture are referred to as the "Senior Indentures".
Unless otherwise specified in a prospectus supplement, the subordinated debt
securities are to be issued under an indenture (the "Subordinated Indenture"),
between ML&Co. and The Chase Manhattan Bank, as trustee (the "Subordinated Debt
Trustee"). The Senior Debt Securities and Subordinated Debt Securities may also
be issued under one or more other indentures (each, a "Subsequent Indenture")
and have one or more other trustees (each, a "Subsequent Trustee"). Any
Subsequent Indenture relating to senior debt securities will have terms and
conditions identical in all material respects to the above-referenced Senior
Indentures and any Subsequent Indenture relating to subordinated debt securities
will have terms and conditions identical in all material respects to the
above-referenced Subordinated Indenture, including, but not limited to, the
applicable terms and conditions described below. Any Subsequent Indenture
relating to a series of debt securities, and the applicable trustee, will be
identified in the applicable prospectus supplement or term sheet. A copy of each
indenture is filed, or, in the case of a Subsequent Indenture, will be filed, as
an exhibit to the registration statement relating to the securities. The
following summaries of the material provisions of the indentures are not
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the respective indentures, including the definitions of
terms.
TERMS OF THE DEBT SECURITIES
ML&Co. may issue the debt securities from time to time, without limitation
as to aggregate principal amount and in one or more series. ML&Co. may issue
debt securities upon the satisfaction of conditions, including the delivery to
the applicable Trustee of a resolution of the Board of Directors of ML&Co., or a
committee of the Board of Directors, or a certificate of an officer of ML&Co.
who has been authorized by the Board of Directors to take that kind of action,
which fixes or establishes the terms of the debt securities being issued. Any
resolution or officer's certificate approving the issuance of any issue of debt
securities will include the terms of that issue of debt securities, including:
o the aggregate principal amount and whether there is any limit
upon the aggregate principal amount that ML&Co. may subsequently
issue;
o the stated maturity date;
o the principal amount payable whether at maturity or upon earlier
acceleration, and whether the principal amount will be determined
with reference to an index, formula or other method;
o any fixed or variable interest rate or rates per annum;
o any interest payment dates;
o any provisions for redemption, the redemption price and any
remarketing arrangements;
o any sinking fund requirements;
o whether the debt securities are denominated or payable in United
States dollars or a foreign currency or units of two or more
foreign currencies;
o the form in which ML&Co. will issue the debt securities, whether
registered, bearer or both, and any restrictions applicable to
the exchange of one form for another and to the offer, sale and
delivery of the debt securities in either form;
o whether and under what circumstances ML&Co. will pay additional
amounts ("Additional Amounts") under any debt securities held by
a person who is not a U.S. person for specified taxes,
assessments or other governmental charges and whether ML&Co. has
the option to redeem the affected debt securities rather than pay
any Additional Amounts;
o whether the debt securities are to be issued in global form;
o the title and series designation;
o the minimum denominations;
o whether, and the terms and conditions relating to when, ML&Co.
may satisfy all or part of its obligations with regard to payment
upon maturity, or any redemption or required repurchase or in
connection with any exchange provisions by delivering to the
holders of the debt securities, other securities, which may or
may not be issued by or be obligations of ML&Co., or a
combination of cash, other securities and/or property ("Maturity
Consideration");
o any additions or deletions in the terms of the debt securities
with respect to the Events of Default set forth in the respective
indentures;
o the terms, if any, upon which the debt securities are convertible
into common stock or preferred stock of ML&Co. and the terms and
conditions upon which any conversion will be effected, including
the initial conversion price or rate, the conversion period and
any other provisions in addition to or instead of those described
in this prospectus;
o whether, and the terms and conditions relating to when, holders
may transfer the debt securities separately from warrants if the
debt securities and warrants are issued together; and
o any other terms of the debt securities which are not inconsistent
with the provisions of the applicable indenture.
Please see the accompanying prospectus supplement or the terms sheet you
have received or will receive for the terms of the specific debt securities
being offered. ML&Co. may deliver this prospectus before or concurrently with
the delivery of a terms sheet. ML&Co. may issue debt securities under the
indentures upon the exercise of warrants to purchase debt securities. See
"Description of Debt Warrants". Nothing in the indentures or in the terms of the
debt securities will prohibit the issuance of securities representing
subordinated indebtedness that is senior or junior to the subordinated debt
securities.
Prospective purchasers of debt securities should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as the debt securities. The prospectus supplement relating to
an issue of debt securities will describe these considerations, if they apply.
ML&Co. will issue each series of debt securities, as described in the
prospectus supplement, in fully registered form without coupons, and/or in
bearer form with or without coupons, and in denominations set forth in the
prospectus supplement. There will be no service charge for any registration of
transfer of registered debt securities or exchange of debt securities, but
ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charges imposed in connection with any registration of transfer or
exchange. Each indenture provides that ML&Co. may issue debt securities in
global form. If any series of debt securities is issued in global form, the
applicable prospectus supplement will describe the circumstances, if any, under
which beneficial owners of interests in any of those global debt securities may
exchange their interests for debt securities of that series and of like tenor
and principal amount in any authorized form and denomination.
The provisions of the indentures permit ML&Co., without the consent of
holders of any debt securities, to issue additional debt securities with terms
different from those of debt securities previously issued and to reopen a
previous series of debt securities and issue additional debt securities of that
series.
The senior debt securities will be unsecured and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. The subordinated debt
securities will be unsecured and will be subordinated to all existing and future
senior indebtedness of ML&Co. Because ML&Co. is a holding company, the right of
ML&Co. and its creditors, including the holders of the debt securities, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that a bankruptcy
court may recognize the 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
Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
ML&Co. will pay or deliver principal and any premium, Additional Amounts,
Maturity Consideration and interest in the manner, at the places and subject to
the restrictions set forth in the applicable indenture, the debt securities and
the applicable prospectus supplement. However, at its option, ML&Co. may pay any
interest and any Additional Amounts by check mailed to the holders of registered
debt securities at their registered addresses.
Holders may present debt securities for exchange, and registered debt
securities for transfer, in the manner, at the places and subject to the
restrictions set forth in the applicable indenture, the debt securities and the
applicable prospectus supplement. Holders may transfer debt securities in bearer
form and the coupons, if any, pertaining to the debt securities by delivery.
There will be no service charge for any transfer or exchange of debt securities,
but ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with a transfer or exchange.
Unless otherwise indicated in the applicable prospectus supplement, ML&Co.
will issue the debt securities under the indentures. If so specified in a
prospectus supplement, ML&Co. may issue subordinated debt securities under a
separate indenture which provides for a single issue of zero coupon convertible
subordinated debt securities, a form of which is filed as an exhibit to the
registration statement of which this prospectus is a part. If ML&Co. issues debt
securities under any indenture, the applicable prospectus supplement will set
forth the terms of the debt securities and will identify the applicable
indenture and trustee.
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 or deliver the principal of, and any premium, Additional
Amounts, Maturity Consideration or interest on, the debt
securities; and
o perform and observe all of ML&Co.'s other obligations under the
indentures, and
o ML&Co. or any successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
indentures.
MODIFICATION AND WAIVER
Each indenture may be modified and amended by ML&Co. and the applicable
trustee with the consent of holders of at least 66 2/3% in principal amount or
aggregate issue price of each series of debt securities affected. However,
without the consent of each holder of any debt security affected, no amendment
or modification to any indenture may:
o change the stated maturity of the principal or Maturity
Consideration of, or any installment of interest or Additional
Amounts on, any 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, or reduce the amount or change the type of
Maturity Consideration deliverable on, any debt security or
reduce the amount of principal or Maturity Consideration which
could be declared due and payable before the stated maturity;
o change the place or currency of any delivery or payment of
principal or Maturity Consideration of, or any premium, interest
or Additional Amounts on any debt security;
o impair the right to institute suit for the enforcement of any
delivery or payment on any debt security;
o reduce the percentage in principal amount or aggregate issue
price of the outstanding debt securities of any series, the
consent of whose holders is required to modify or amend the
applicable indenture; or
o modify the foregoing requirements or reduce the percentage in
principal amount or aggregate issue price of outstanding debt
securities necessary to waive any past default to less than a
majority.
No modification or amendment of the 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 or
aggregate issue price of the outstanding debt securities of any series may, with
respect to that series, waive past defaults under the applicable indenture and
waive compliance by ML&Co. with certain provisions of that indenture, except as
described under "-Events of Default".
EVENTS OF DEFAULT
Each of the following will be an Event of Default with respect to each
series of debt securities issued under each indenture:
o default in the payment of any interest or Additional Amounts when
due, and continuing for 30 days;
o default in the payment of any principal or premium, when due;
o default in the delivery or payment of the Maturity Consideration
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 applicable indenture for the benefit of that
series or in the debt securities of that series, and continuing
for 60 days after written notice as provided in the applicable
indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co. and
o any other Event of Default provided with respect to debt
securities of that series.
If an Event of Default occurs and is continuing for any series of debt
securities, the applicable trustee or the holders of at least 25% in principal
amount or aggregate issue price of the outstanding debt securities of that
series may declare all amounts, or any lesser amount provided for in the debt
securities of that series, due and payable or deliverable immediately. At any
time after the applicable trustee or the holders have made a declaration of
acceleration with respect to the debt securities of any series but before the
applicable trustee has obtained a judgment or decree for payment of money due,
the holders of a majority in principal amount or aggregate issue price of the
outstanding debt securities of that series may rescind any declaration of
acceleration and its consequences, provided that all payments and/or deliveries
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 debt securities of any series may waive an 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 of ML&Co. contained in, or a
provision of, any indenture which cannot be modified under the
terms of that indenture without the consent of each holder of
each series of debt securities affected.
The holders of a majority in principal amount or aggregate issue price of
the outstanding debt securities of a series may direct the time, method and
place of conducting any proceeding for any remedy available to the applicable
trustee or exercising any trust or power conferred on the trustee with respect
to debt securities of that series, provided that any direction is not in
conflict with any rule of law or the applicable indenture. Subject to the
provisions of each indenture relating to the duties of the appropriate trustee,
before proceeding to exercise any right or power under an indenture at the
direction of the holders, the applicable trustee is entitled to receive from
those holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any direction.
Unless otherwise stated in the applicable prospectus supplement, any series
of debt securities issued under any indenture will not have the benefit of any
cross-default provisions with other indebtedness of ML&Co.
ML&Co. will be required to furnish to each trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the applicable
indenture.
SPECIAL TERMS RELATING TO THE SENIOR DEBT SECURITIES
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 any lien specifically
permitted by the Senior Indentures, 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 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 Senior Indentures 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 Senior Indentures, 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.
LIMITATIONS 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 the transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the Senior Indentures 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.
SPECIAL TERMS RELATING TO THE SUBORDINATED DEBT SECURITIES
Upon any distribution of assets of ML&Co. resulting from any dissolution,
winding up, liquidation or reorganization, payments on subordinated debt
securities are subordinated to the extent provided in the Subordinated Indenture
in right of payment to the prior payment in full of all senior indebtedness, but
the obligation of ML&Co. to make payments on the subordinated debt securities
will not otherwise be affected. ML&Co. may not make any payment on subordinated
debt securities at any time when there is a default in the payment or delivery
of any amounts due on any senior indebtedness, including payment of any sinking
fund. Because the subordinated debt securities are subordinated in right of
payment to any senior indebtedness, in the event of a distribution of assets
upon insolvency, some creditors of ML&Co. may recover more, ratably, than
holders of subordinated debt securities. Holders of subordinated debt securities
will be subrogated to the rights of holders of senior indebtedness to the extent
of payments made on senior indebtedness upon any distribution of assets in any
proceedings in respect of subordinated debt securities.
As of December 25, 1998, a total of approximately $75.4 billion of ML&Co.'s
indebtedness would have been senior indebtedness.
SPECIAL TERMS RELATING TO CONVERTIBLE DEBT SECURITIES
The following provisions will apply to debt securities that will be
convertible into common stock or preferred stock of ML&Co. unless otherwise
provided in the prospectus supplement relating to the specific issue of debt
securities.
The holder of any convertible debt securities will have the right,
exercisable at any time during the time period specified in the applicable
prospectus supplement, unless previously redeemed, to convert convertible debt
securities into shares of common stock or preferred stock of ML&Co. as specified
in the prospectus supplement, at the conversion rate per principal amount of
convertible debt securities set forth in the applicable prospectus supplement.
In the case of convertible debt securities called for redemption, conversion
rights will expire at the close of business on the date fixed for the redemption
specified in the applicable prospectus supplement, except that, in the case of
redemption at the option of the holder, if applicable, the conversion right will
terminate upon receipt of written notice of the exercise of the option.
For each series of convertible debt securities, the conversion price or
rate will be subject to adjustment as contemplated in the applicable indenture.
Unless otherwise provided in the applicable prospectus supplement, these
adjustments may occur as a result of:
o the issuance of shares of ML&Co. common stock as a dividend;
o subdivisions and combinations of ML&Co. common stock;
o the issuance to all holders of ML&Co. common stock of rights or
warrants entitling holders to subscribe for or purchase shares of
ML&Co. common stock at a price per share less than the current market
price per share; and
o the distribution to all holders of ML&Co. common stock of:
o shares of ML&Co. capital stock other than common stock;
o evidences of indebtedness of ML&Co. or assets other than cash
dividends paid from retained earnings and dividends payable in
common stock referred to above; or
o subscription rights or warrants other than those referred to
above.
In any case, no adjustment of the conversion price or rate will be required
unless an adjustment would require a cumulative increase or decrease of at least
1% in such price or rate. ML&Co. will not issue any fractional shares of ML&Co.
common stock upon conversion, but, instead, ML&Co. will pay a cash adjustment.
If indicated in the applicable prospectus supplement, convertible debt
securities convertible into common stock of ML&Co. which are surrendered for
conversion between the record date for an interest payment, if any, and the
interest payment date, other than convertible debt securities called for
redemption on a redemption date during that period, must be accompanied by
payment of an amount equal to interest which the registered holder is entitled
to receive.
ML&Co. will determine the adjustment provisions for convertible debt
securities at the time of issuance of each series of convertible debt
securities. These adjustment provisions will be described in the applicable
prospectus supplement.
Except as set forth in the applicable prospectus supplement, any
convertible debt securities called for redemption, unless surrendered for
conversion on or before the close of business on the redemption date, are
subject to being purchased from the holder of the convertible debt securities by
one or more investment banking firms or other purchasers who may agree with
ML&Co. to purchase convertible debt securities and convert them into common
stock or preferred stock of ML&Co., as the case may be.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed
in accordance with, the laws of the State of New York.
DESCRIPTION OF DEBT WARRANTS
ML&Co. may issue warrants for the purchase of debt securities ("Debt
Warrants"). The Debt Warrants are to be issued under debt warrant agreements to
be entered into between ML&Co. and a bank or trust company, as debt warrant
agent as set forth in the prospectus supplement relating to the specific issue
of Debt Warrants being offered. We have filed a copy of the form of debt warrant
agreement, including the form of warrant certificates representing the Debt
Warrants, reflecting the alternative provisions to be included in the debt
warrant agreements that will be entered into with respect to particular
offerings of Debt Warrants, as an exhibit to the registration statement of which
this prospectus is a part. The following summaries of the material provisions of
the debt warrant agreement and the debt warrant certificates are not complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the debt warrant agreement and the debt warrant certificates,
respectively, including the definitions of terms.
TERMS OF THE DEBT WARRANTS
The applicable prospectus supplement will describe the terms of the
specific issue of Debt Warrants being offered, the debt warrant agreement
relating to the Debt Warrants and the debt warrant certificates representing the
Debt Warrants, including the following:
o the designation and aggregate principal amount of the debt
securities that holder of a Debt Warrant may purchase upon
exercise of the Debt Warrant and the price at which the purchase
may be made;
o the terms of the debt securities purchasable upon exercise of the
Debt Warrants, including whether the debt securities will be
senior debt securities or subordinated debt securities;
o the procedures and conditions relating to the exercise of the
Debt Warrants;
o the designation and terms of any debt securities with which the
Debt Warrants are issued, including whether the debt securities
will be senior debt securities or subordinated debt securities
and under which indenture the debt securities will be issued;
o the number of Debt Warrants issued with each debt security;
o any date on and after which the Debt Warrants and any related
debt securities are separately transferable;
o the date on which the right to exercise the Debt Warrants begins;
o date on which the right to exercise the Debt Warrants expires;
o whether the Debt Warrants represented by the debt warrant
certificates will be issued in registered or bearer form, and, if
registered, where they may be transferred and registered;
o any circumstances which will cause the Debt Warrants to be deemed
to be automatically exercised;
o any material risk factors relating to the Debt Warrants;
o the identity of the debt warrant agent; and
o any other terms of the Debt Warrants which are not inconsistent
with the provisions of the debt warrant agreement.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations. Holders may exercise Debt Warrants at
the corporate trust office of the debt warrant agent or any other office
indicated in the applicable prospectus supplement. Before the exercise of their
Debt Warrants, holders of Debt Warrants will not have any of the rights of
holders of the debt securities that may be purchased upon exercise of the Debt
Warrants and will not be entitled to payment or delivery of any amounts which
may be due on the debt securities purchasable upon exercise of the Debt
Warrants.
Prospective purchasers of Debt Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as Debt Warrants and to the debt securities purchasable upon
exercise of the Debt Warrants. The prospectus supplement relating to any issue
of Debt Warrants will describe these considerations.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Debt Warrants will be issued in the form of global debt warrant
certificates, registered in the name of a depositary or its nominee. Except as
may otherwise be provided in the applicable prospectus supplement, beneficial
owners will not be entitled to receive definitive certificates representing Debt
Warrants unless the depositary is unwilling or unable to continue as depositary
or ML&Co. decides to have the Debt Warrants represented by definitive
certificates. A beneficial owner's interest in a Debt Warrant will be recorded
on or through the records of the brokerage firm or other entity that maintains
the beneficial owner's account. In turn, the total number of Debt Warrants held
by an individual brokerage firm for its clients will be maintained on the
records of the depositary in the name of the brokerage firm or its agent.
Transfer of ownership of any Debt Warrant will be effected only through the
selling beneficial owner's brokerage firm.
EXERCISE OF DEBT WARRANTS
Each Debt Warrant will entitle the holder to purchase for cash a principal
amount of debt securities at the exercise price set forth in, or determined in
the manner set forth in, the applicable prospectus supplement. Holders may
exercise Debt Warrants at any time up to the close of business on the expiration
date set forth in the applicable prospectus supplement. After the close of
business on the expiration date, unexercised Debt Warrants will become void.
Holders may exercise Debt Warrants in the manner described in the
applicable prospectus supplement. Upon receipt of payment and properly completed
and duly executed debt warrant certificate at the corporate trust office of the
debt warrant agent or any other office indicated in the applicable prospectus
supplement, ML&Co. will, as soon as practicable, forward the debt securities
purchased. If less than all of the Debt Warrants represented by any debt
warrant certificate are exercised, a new debt warrant certificate will be issued
for the remaining amount of Debt Warrants.
LISTING
ML&Co. may list an issue of Debt Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
DESCRIPTION OF CURRENCY WARRANTS
ML&Co. may issue Currency Warrants either in the form of:
o Currency Put Warrants entitling the holders to receive from ML&Co. the
cash settlement value in U.S. dollars of the right to sell a specified
amount of a specified foreign currency or currency units for a
specified amount of U.S. dollars, or
o Currency Call Warrants entitling the holders to receive from ML&Co.
the cash settlement value in U.S. dollars of the right to purchase a
specified amount of a specified foreign currency or units of two or
more currencies for a specified amount of U.S. dollars.
ML&Co. may issue the Currency Warrants under a currency put warrant
agreement or a currency call warrant agreement, as applicable, to be entered
into between ML&Co. and a bank or trust company, as currency warrant agent as
set forth in the applicable prospectus supplement relating to Currency Warrants
being offered. Copies of the forms of currency put warrant agreement and
currency call warrant agreement, including the forms of certificates
representing the Currency Put Warrants and Currency Call Warrants, reflecting
the provisions to be included in the currency warrant agreements that will be
entered into with respect to particular offerings of Currency Warrants, are
filed as exhibits to the registration statement of which this prospectus is a
part. The following summaries of the material provisions of the currency warrant
agreements and the currency warrant certificates are not complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the currency warrant agreements and the currency warrant
certificates, respectively, including the definitions of terms.
TERMS OF THE CURRENCY WARRANTS
The applicable prospectus supplement will describe the terms of the
specific issue of Currency Warrants being offered, the currency warrant
agreement relating to the Currency Warrants and the currency warrant
certificates representing the Currency Warrants, including the following:
o whether the Currency Warrants are Currency Put Warrants, Currency Call
Warrants, or both;
o the formula for determining the cash settlement value of each Currency
Warrant;
o the procedures and conditions relating to the exercise of the Currency
Warrants;
o any circumstances that will cause the Currency Warrants to be deemed
to be automatically exercised;
o any minimum number of Currency Warrants which must be exercised at any
one time, other than upon automatic exercise;
o the date on which the right to exercise the Currency Warrants begins
and the date on which the right to exercise the Currency Warrants
expires, which may be the same date;
o any material risk factors relating to the Currency Warrants;
o the identity of the currency warrant agent; and
o any other terms of the Currency Warrants that are not inconsistent
with the provisions of the applicable currency warrant agreement.
Prospective purchasers of Currency Warrants should be aware that special
U.S. Federal income tax, accounting and other considerations may be applicable
to instruments such as Currency Warrants. The prospectus supplement relating to
any issue of Currency Warrants will describe these considerations, if they
apply.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Currency Warrants will be issued in the form of global currency
warrant certificates, registered in the name of a depositary or its nominee. In
that case, beneficial owners will not be entitled to receive definitive
certificates representing Currency Warrants unless the depositary is unwilling
or unable to continue as depositary or ML&Co. decides to have the Currency
Warrants represented by definitive certificates. A beneficial owner's interest
in a Currency Warrant will be recorded on or through the records of the
brokerage firm or other entity that maintains a beneficial owner's account. In
turn, the total number of Currency Warrants held by an individual brokerage firm
for its clients will be maintained on the records of the depositary in the name
of the brokerage firm or its agent. Transfer of ownership of any Currency
Warrant will be effected only through the selling beneficial owner's brokerage
firm.
EXERCISE OF CURRENCY WARRANTS
Each Currency Warrant will entitle the holder to the cash settlement value
of that Currency Warrant on the applicable exercise date as described in the
applicable prospectus supplement. If a Currency Warrant has more than one
exercise date and is not exercised before the time specified in the applicable
prospectus supplement, on the fifth business day preceding the expiration date,
the Currency Warrants will be deemed automatically exercised.
LISTING
ML&Co. will apply to list each issue of Currency Warrants on a national
securities exchange. In the event that the Currency Warrants are delisted from,
or permanently suspended from trading on, any exchange, the expiration date for
the exercise of the Currency Warrants will be the date the delisting or trading
suspension becomes effective and Currency Warrants not previously exercised will
be deemed automatically exercised on the business day immediately preceding the
expiration date. Under the applicable currency warrant agreement, ML&Co. will
agree not to seek delisting of the Currency Warrants, or suspension of their
trading, on any exchange.
<PAGE>
DESCRIPTION OF INDEX WARRANTS
ML&Co. may issue from time to time Index Warrants consisting of index put
warrants or index call warrants. Subject to applicable law, ML&Co. will pay or
deliver consideration on each Index Warrant in an amount determined by reference
to the level or value of an index such as:
o an equity or debt security, or a portfolio or basket of indices or
securities, which may include the price or yield of securities;
o any statistical measure of economic or financial performance, which
may include any currency or consumer price, or mortgage index; or
o the price or value of any commodity or any other item or index or any
combination.
The payment or delivery of any consideration on any index put warrant will
be determined by the decrease in the level or value of the applicable index and
the payment or delivery of any consideration on any index call warrant will be
determined by the increase in the level or value of the applicable Index.
The Index Warrants involve a high degree of risk, including the risk that
the Index Warrants will expire without value other than any Minimum Expiration
Value, as defined below. Investors should therefore be prepared to sustain a
total loss of the purchase price of the Index Warrants, other than any
applicable Minimum Expiration Value. Investors who consider purchasing Index
Warrants should be experienced with respect to options and option transactions
and reach an investment decision only after carefully considering the
suitability of the Index Warrants in light of their particular circumstances and
the information set forth below as well as additional information contained in
the prospectus supplement relating to the Index Warrants.
METHOD OF ISSUANCE
Index Warrants issued without a Minimum Expiration Value will be issued
under one or more index warrant agreements to be entered into between ML&Co. and
a bank or trust company, as index warrant agent, all as described in the
prospectus supplement relating to the specific issue of Index Warrants. The
index warrant agent will act solely as the agent of ML&Co. under the applicable
index warrant agreement and will not assume any obligation or relationship of
agency or trust for or with any index warrantholders. A single bank or trust
company may act as index warrant agent for more than one issue of Index
Warrants.
Index Warrants issued with a Minimum Expiration Value will be issued under
one or more index warrant trust indentures to be entered into between ML&Co. and
a corporation or other person permitted to so act by the Trust Indenture Act of
1939, as amended from time to time, to act as index warrant trustee, all as
described in the prospectus supplement relating to the Index Warrants. Any index
warrant trust indenture will be qualified under the Trust Indenture Act. To the
extent allowed by the Trust Indenture Act, a single qualified corporation may
act as index warrant trustee for more than one issue of Index Warrants.
ML&Co. has filed forms of index warrant agreement and index warrant trust
indenture and the related global index warrant certificates as exhibits to the
registration statement of which this prospectus is a part. The summaries set
forth in this section of the material provisions of the index warrant agreement,
the index warrant trust indenture and global index warrant certificates are not
complete, are subject to, and are qualified in their entirety by reference to,
all the provisions of the index warrant agreement, the index warrant trust
indenture and global index warrant certificates, respectively.
Unless otherwise specified in the accompanying prospectus supplement,
payments, if any, upon exercise of the Index Warrants will be made in U.S.
dollars. The Index Warrants will be offered on terms to be determined at the
time of sale. ML&Co. will have the right to reopen a previous issue of Index
Warrants and to issue additional Index Warrants of that issue without the
consent of any index warrantholder.
RANKING
The Index Warrants are unsecured contractual obligations of ML&Co. and will
rank equally with its other unsecured contractual obligations and with its
unsecured and unsubordinated debt. Because ML&Co. is a holding company, the
right of ML&Co. and its creditors, including the index warrantholders, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is 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 certain exchanges and other regulatory bodies.
TERMS OF THE INDEX WARRANTS
The applicable prospectus supplement will describe the specific issue of
Index Warrants being offered, the indenture or agreement under which the Index
Warrants will be issued, as the case may be, and the index warrant certificates
representing the Index Warrants, including the following:
o whether the Index Warrants to be issued will be Index Put Warrants,
Index Call Warrants or both;
o the aggregate number and initial public offering price or purchase
price;
o the applicable index;
o whether the Index Warrants will be deemed automatically exercised as
of a specified date or whether the Index Warrants may be exercised
during a period and the date on which the right to exercise the Index
Warrants commences and the date on which the exercise right expires;
o the manner in which the Index Warrants may be exercised and any
restrictions on, or other special provisions relating to, the exercise
of the Index Warrants;
o any minimum number of the Index Warrants exercisable at any one time;
o any maximum number of the Index Warrants that may, subject to ML&Co.'s
election, be exercised by all index warrantholders, or by any person
or entity, on any day;
o any provisions permitting an index warrantholder to condition an
exercise notice on the absence of certain specified changes in the
level of the applicable index after the exercise date, any provisions
permitting ML&Co. to suspend exercise of the Index Warrants based on
market conditions or other circumstances and any other special
provision relating to the exercise of the Index Warrants;
o any provisions for the automatic exercise of the Index Warrants other
than at the expiration date;
o any provisions permitting ML&Co. to cancel the Index Warrants upon the
occurrence of certain events;
o any additional circumstances that would constitute an Event of Default
under the Index Warrants;
o the method of determining:
o the payment or delivery, if any, to be made in connection with
the exercise or deemed exercise of the Index Warrants (the
"Settlement Value "),
o the minimum payment or delivery, if any, to be made upon
expiration of the Index Warrants (the "Minimum Expiration
Value"),
o the payment or delivery to be made upon the exercise of any right
which ML&Co. may have to cancel the Index Warrants, and
o the value of the index;
o in the case of Index Warrants relating to an index for which the
trading prices of underlying securities, commodities or rates are
expressed in a foreign currency, the method of converting amounts in
the relevant foreign currency or currencies into U.S. dollars, or any
other currency or composite currency in which the Index Warrants are
payable;
o any method of providing for a substitute index or otherwise
determining the payment or delivery to be made in connection with the
exercise of the Index Warrants if the index changes or ceases to be
made available by its publisher;
o any time or times at which ML&Co. will make payment or delivery on the
Index Warrants following exercise or automatic exercise;
o any provisions for issuing the Index Warrants in other than book-entry
form;
o if the Index Warrants are not issued in book-entry form, any place or
places at which ML&Co. will make payment or delivery on cancellation
and any Minimum Expiration Value of the Index Warrants;
o any circumstances that will cause the Index Warrants to be deemed to
be automatically exercised;
o any material risk factors relating to the Index Warrants;
o the identity of the Index Warrant Agent; and
o any other terms of the Index Warrants which are not inconsistent with
the provisions of the index warrant agreement.
Prospective purchasers of Index Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as the Index Warrants. The prospectus supplement relating to
any issue of Index Warrants will describe these considerations, if they apply.
PAYMENT AND DELIVERY
If specified, and under the circumstances described in the prospectus
supplement:
o ML&Co. will pay or deliver to each index warrantholder an amount equal
to the greater of the applicable Settlement Value and a Minimum
Expiration Value of the Index Warrants;
o upon cancellation of the Index Warrants by ML&Co. which may occur upon
specified events, ML&Co. will pay or deliver to each index
warrantholder an amount specified in the prospectus supplement; and
o following the occurrence of an extraordinary event, the Settlement
Value of an Index Warrant may, at the option of ML&Co., be determined
on a different basis, including in connection with automatic exercise
at expiration.
Unless otherwise specified in the related prospectus supplement, the Index
Warrants will be deemed to be automatically exercised upon expiration or any
earlier date that may be specified. Upon any automatic exercise, ML&Co. will
deliver or pay to each index warrantholder an amount equal to the Settlement
Value of the Index Warrants, except that holders of Index Warrants having a
Minimum Expiration Value will be entitled to receive a payment or delivery equal
to the greater of the Settlement Value and the applicable Minimum Expiration
Value. The Minimum Expiration Value may be either a predetermined payment or
delivery or a payment or delivery that varies during the term of the Index
Warrants in accordance with a schedule or formula. Any Minimum Expiration Value
applicable to an issue of Index Warrants, as well as any additional
circumstances resulting in the automatic exercise of the Index Warrants, will be
specified in the applicable prospectus supplement.
CANCELLATION OR POSTPONEMENT
If so specified in the applicable prospectus supplement, ML&Co. may cancel
the Index Warrants. In addition, ML&Co. may delay or postpone the exercise or
valuation of, or payment or delivery for, the Index Warrants upon the occurrence
of an extraordinary event. Any extraordinary events relating to an issue of
Index Warrants will be described in the applicable prospectus supplement. Upon
cancellation, the related index warrantholders will be entitled to receive only
the applicable payment or delivery on cancellation specified in the applicable
prospectus supplement. The amount payable or deliverable upon cancellation may
be either a predetermined amount or an amount that varies during the term of the
Index Warrants in accordance with a schedule or formula.
WAIVER OF DEFAULT
If ML&Co. defaults with respect to any of its obligations under any Index
Warrants issued with a Minimum Expiration Value under an index warrant trust
indenture, the index warrantholders of a majority in interest of all outstanding
Index Warrants may waive a default, except a default:
o in the payment or delivery of the Settlement Value, Minimum Expiration
Value or payment or delivery of any amount upon cancellation of the
Index Warrants; or
o in respect of a covenant or provision of the applicable index warrant
trust indenture which cannot be modified or amended without the
consent of each index warrantholder of each outstanding Index Warrant
affected.
MODIFICATION
ML&Co. and the index warrant agent or index warrant trustee, as the case
may be, may amend any index warrant agreement or index warrant indenture and the
terms of the related Index Warrants by a supplemental agreement or supplemental
indenture (each, a "Supplemental Agreement"), without the consent of the holders
of any Index Warrants, for the purpose of:
o curing any ambiguity, or of curing, correcting or supplementing any
defective or inconsistent provision, or of making any other provisions
with respect to matters or questions arising under the index warrant
agreement or index warrant trust indenture, as the case may be, which
are not inconsistent with the provisions of the respective agreement
or indenture or of the Index Warrants,
o evidencing the succession to ML&Co. and the assumption by the
successor of ML&Co.'s covenants contained in the index warrant
agreement or the index warrant trust indenture, as the case may be,
and the Index Warrants,
o appointing a successor depositary,
o evidencing and providing for the acceptance of appointment by a
successor index warrant agent or index warrant trustee with respect to
the Index Warrants, as the case may be,
o adding to the covenants of ML&Co., for the benefit of the index
warrantholders or surrendering any right or power conferred upon
ML&Co. under the index warrant agreement or index warrant trust
indenture, as the case may be,
o issuing Index Warrants in definitive form, or
o amending the index warrant agreement or index warrant trust indenture,
as the case may be, in any manner which ML&Co. may deem to be
necessary or desirable and which will not materially and adversely
affect the interests of the Index Warrantholders.
ML&Co. and the index warrant agent may also amend any index warrant
agreement or index warrant trust indenture, as the case may be, and the terms of
the related Index Warrants, by a Supplemental Agreement, with the consent of the
index warrantholders holding not less than 66 2/3% in number of the then
outstanding unexercised Index Warrants affected by the amendment, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the index warrant agreement or index warrant trust
indenture, as the case may be, or of modifying in any manner the rights of the
index warrantholders. However, without the consent of each index warrantholder
affected, no amendment may be made that:
o changes the determination, or any aspects of the determination, of the
Settlement Value or any payment or delivery to be made on
cancellation, or any Minimum Expiration Value of the Index Warrants so
as to reduce the payment or delivery to be made upon exercise or
deemed exercise,
o shortens the period of time during which the Index Warrants may be
exercised, or otherwise materially and adversely affects the exercise
rights of the index warrantholders, or
o reduces the number of outstanding Index Warrants, the consent of whose
holders is required for amendment of the index warrant agreement, the
index warrant trust indenture or the terms of the related Index
Warrants.
EVENTS OF DEFAULT
Specified events in bankruptcy, insolvency or reorganization of ML&Co. will
constitute Events of Default with respect to Index Warrants having a Minimum
Expiration Value which are issued under an index warrant trust indenture. Upon
the occurrence of an Event of Default, the holders of 25% of unexercised Index
Warrants may elect to receive a settlement payment or delivery for any
unexercised Index Warrants. Any settlement payment or delivery will immediately
become due to the index warrantholders upon any election. Assuming ML&Co. is
able to satisfy its obligations when due under the Index Warrants, the
settlement payment or delivery will be an amount equal to the market value of
the Index Warrants as of the date ML&Co. is notified of the intended
liquidation. The market value of the Index Warrants will be determined by a
nationally recognized securities broker-dealer unaffiliated with ML&Co. and
mutually selected by ML&Co. and the index warrant trustee.
MERGER, CONSOLIDATION, SALE, LEASE OR OTHER DISPOSITIONS
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 or deliver the Settlement Value, any Minimum Expiration Value
or any consideration payable or deliverable upon cancellation, if
applicable with respect to all the unexercised Index Warrants;
and
o perform and observe all of the obligations and conditions of the
index warrant agreement or index warrant trust indenture, as the
case may be, to be performed or observed by ML&Co.; and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any merger or consolidation, in default under the
index warrant agreement or index warrant trust indenture, as the case
may be.
ENFORCEABILITY OF RIGHTS BY INDEX WARRANTHOLDERS
Any index warrantholder may, without the consent of the related index
warrant agent, enforce by appropriate legal action, in and for its own behalf,
its right to exercise, and receive payment or delivery for, its Index Warrants.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Index Warrants will be issued in book-entry form and represented
by global Index Warrants, registered in the name of a depositary or its nominee.
In that case, index warrantholders will not be entitled to receive definitive
certificates representing Index Warrants, unless the depositary is unwilling or
unable to continue as depositary or ML&Co. decides to have the Index Warrants
represented by definitive certificates. A beneficial owner's interest in an
Index Warrant represented by a global Index Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains the
beneficial owner's account. In turn, the total number of Index Warrants held by
an individual brokerage firm or other entity for its clients will be maintained
on the records of the depositary in the name of the brokerage firm or other
entity or its agent. Transfer of ownership of any Index Warrant will be effected
only through the selling beneficial owner's brokerage firm.
LISTING
ML&Co. may list an issue of Index Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms of preferred
stock which ML&Co. may issue. The terms of any series of the preferred stock
will be described in the applicable prospectus supplement relating to the
preferred stock being offered. The description set forth below and in any
prospectus supplement is not complete, and is subject to, and qualified in its
entirety by reference to, ML&Co.'s restated certificate of incorporation, as
amended, which is filed as an exhibit to the registration statement of which
this prospectus is a part, and the certificate of designations relating to each
particular series of the preferred stock, which was or will be filed with the
SEC at or before the issuance of the series of preferred stock.
TERMS OF THE PREFERRED STOCK
Under ML&Co.'s restated certificate of incorporation, ML&Co. is authorized
to issue up to 25,000,000 shares of preferred stock, par value $1.00 per share.
The Board of Directors of ML&Co. has the authority, without approval of the
stockholders, to issue all of the shares of preferred stock which are currently
authorized in one or more series and to fix the number of shares and the rights,
preferences, privileges, qualifications, restrictions and limitations of each
series. As of December 25, 1998, ML&Co. had 24,957,500 shares of preferred stock
available for issuance.
ML&Co. has authorized the issuance of shares of Series A junior preferred
stock, par value $1.00 per share, of ML&Co. upon exercise of preferred share
purchase rights associated with each share of common stock outstanding. See
"Description of Common Stock--Rights to Purchase Series A Junior Preferred
Stock".
In addition, as described under "Description of Depositary Shares", ML&Co.,
at its option, instead of offering full shares of any series of preferred stock,
may offer depositary shares evidenced by depositary receipts, each representing
a fraction of a share of the particular series of preferred stock issued and
deposited with a depositary. The fraction of a share of preferred stock which
each depositary share represents will be set forth in the prospectus supplement
relating to the depositary shares.
The applicable prospectus supplement will describe the terms of each series
of preferred stock, including, where applicable, the following:
o the designation, stated value, liquidation preference and number of
shares offered;
o the offering price or prices;
o the dividend rate or rates, or method of calculation, the dividend
periods, the date on which dividends shall be payable and whether
dividends are cumulative or noncumulative and, if cumulative, the
dates from which dividends begin to cumulate;
o any redemption or sinking fund provisions;
o any conversion or exchange provisions;
o any voting rights;
o to the extent permitted by applicable law, whether the preferred stock
will be issued in certificated or book-entry form;
o whether the preferred stock will be listed on a national securities
exchange;
o information with respect to any book-entry procedures; and
o any additional rights, preferences, privileges, limitations and
restrictions of the preferred stock which are not inconsistent with
the provisions of the certificate of incorporation.
The preferred stock will be, when issued against payment, fully paid and
nonassessable. Holders will have no preemptive rights to subscribe for any
additional securities which ML&Co. may issue. Unless otherwise specified in the
applicable prospectus supplement, the shares of each series of preferred stock
will rank equally with all other outstanding series of preferred stock issued by
ML&Co. as to payment of dividends, other than with respect to cumulation of
dividends, and as to the distribution of assets upon liquidation, dissolution,
or winding up of ML&Co. As of December 25, 1998, there were 42,500 shares of
ML&Co.'s 9% Cumulative Preferred Stock, Series A (the "9% Preferred Stock")
represented by 17,000,000 depositary shares and one Special Voting Share
outstanding. See "--Outstanding Preferred Stock". Each series of preferred stock
will rank senior to the common stock, and any other stock of ML&Co. that is
expressly made junior to that series of preferred stock.
Unless otherwise specified in the applicable prospectus supplement,
Citibank, N.A., will be the transfer agent, dividend disbursing agent and
registrar for the shares of the preferred stock.
Because ML&Co. is a holding company, its rights and the rights of holders
of its securities, including the holders of preferred stock, to participate in
the distribution of assets of any subsidiary of ML&Co. upon its liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors and preferred stockholders, except to the extent ML&Co. may itself be
a creditor with recognized claims against the subsidiary or a holder of
preferred stock of the subsidiary.
DIVIDENDS AND DISTRIBUTIONS
Holders of shares of the preferred stock will be entitled to receive, as,
if and when declared by the Board of Directors of ML&Co., or a duly authorized
committee of the Board of Directors, out of funds legally available for the
payment of dividends, cash dividends at the rate set forth in, or calculated in
accordance with the formula set forth in, the prospectus supplement relating to
the preferred stock being offered.
Dividends on the preferred stock may be cumulative or noncumulative as
provided in the applicable prospectus supplement. Dividends on the cumulative
preferred stock will accumulate from the date of original issue and will be
payable quarterly in arrears on the dates specified in the applicable prospectus
supplement. If any date so specified as a dividend payment date is not a
business day, declared dividends on the preferred stock will be paid on the
immediately succeeding business day, without interest. The applicable prospectus
supplement will set forth the applicable dividend period with respect to a
dividend payment date. If the Board of Directors of ML&Co. or a duly authorized
committee of the Board of Directors, fails to declare a dividend on any series
of noncumulative preferred stock for any dividend period, ML&Co. will have no
obligation to pay a dividend for that period, whether or not dividends on that
series of noncumulative preferred stock are declared for any future dividend
period. Dividends on the preferred stock will be payable to record holders as
they appear on the stock books of ML&Co. on each record date, not more than 30
nor less than 15 days preceding the applicable payment date, as shall be fixed
by the Board of Directors of ML&Co. or a duly authorized committee of the Board
of Directors.
No dividends will be declared or paid or set apart for payment on the
preferred stock of any series ranking, as to dividends, equally with or junior
to any other series of preferred stock for any period unless dividends have been
or are contemporaneously declared and paid or declared and a sum sufficient for
the payment of those dividends has been set apart for,
o in the case of cumulative preferred stock, all dividend periods
terminating on or before the date of payment of full cumulative
dividends, or
o in the case of noncumulative preferred stock, the immediately
preceding dividend period.
When dividends are not paid in full upon any series of preferred stock, and
any other preferred stock ranking equally as to dividends with that series of
preferred stock, all dividends declared upon shares of that series of preferred
stock and any other preferred stock ranking equally as to dividends will be
declared pro rata so that the amount of dividends declared per share on that
series of preferred stock and any other preferred stock ranking equally as to
dividends will in all cases bear to each other the same ratio that accrued
dividends per share on the shares of that series of preferred stock and the
other preferred stock bear to each other. In the case of noncumulative preferred
stock, any accrued dividends described in the immediately preceding paragraph
will not include any cumulation in respect of unpaid dividends for prior
dividend periods.
Except as provided in the immediately preceding paragraph, unless full
dividends on all outstanding shares of any series of preferred stock have been
declared and paid,
o in the case of a series of cumulative preferred stock, for all past
dividend periods, or
o in the case of noncumulative preferred stock, for the immediately
preceding dividend period,
then:
o ML&Co. may not declare dividends or pay or set aside for payment or
other distribution on any of its capital stock ranking junior to or
equally with that series of preferred stock as to dividends or upon
liquidation, other than dividends or distributions paid in shares of,
or options, warrants or rights to subscribe for or purchase shares of,
the common stock of ML&Co. or other capital stock of ML&Co. ranking
junior to that series of preferred stock as to dividends and upon
liquidation, and
o other than in connection with the distribution or trading of any of
its capital stock, ML&Co. may not redeem, purchase or otherwise
acquire any of its capital stock ranking junior to or equally with
that series of preferred stock as to dividends or upon liquidation,
for any consideration or any moneys paid to or made available for a
sinking fund for the redemption of any shares of any of its capital
stock, except by conversion or exchange for capital stock of ML&Co.
ranking junior to that series of preferred stock as to dividends and
upon liquidation.
Unless otherwise specified in the applicable prospectus supplement, the
amount of dividends payable for any period shorter than a full dividend period
shall be computed on the basis of twelve 30-day months, a 360-day year and the
actual number of days elapsed in any period of less than one month.
As of the date of this prospectus, subsidiaries of ML&Co. have issued
$2.575 billion of perpetual Trust Originated Preferred Securities/SM/("TOPrS").
In connection with the issuance of the TOPrS, ML&Co. has agreed, among other
things, that if full distributions on the TOPrS have not been paid or set apart
for payment or if ML&Co. is in default of their related guarantee obligations,
ML&Co., with certain exceptions, will not declare or pay dividends, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to any of its capital stock, including the
preferred stock.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
ML&Co., the holders of the preferred stock will have preference and priority
over the common stock of ML&Co. and any other class of stock of ML&Co. ranking
junior to the preferred stock upon liquidation, dissolution or winding up, for
payments out of or distributions of the assets of ML&Co. or proceeds from any
liquidation, whether from capital or surplus, of the amount per share set forth
in the applicable prospectus supplement plus all accrued and unpaid dividends,
whether or not earned or declared, to the date of final distribution to such
holders. After any liquidating payment, the holders of preferred stock will be
entitled to no other payments. If, in the case of any liquidation, dissolution
______________
/SM/Service mark of Merrill Lynch & Co., Inc.
or winding up of ML&Co., the assets of ML&Co. or the proceeds from any
liquidation should be insufficient to make the full liquidation payment in the
amount per share set forth in the applicable prospectus supplement relating to a
series of preferred stock, plus all accrued and unpaid dividends on that
preferred stock, and liquidating payments on any other preferred stock ranking
as to liquidation, dissolution or winding up equally with that preferred stock,
then any assets and proceeds will be distributed among the holders of the
preferred stock and any other preferred stock ratably in accordance with the
respective amounts which would be payable on those shares of preferred stock and
any other preferred stock if all amounts payable were paid in full. In the case
of noncumulative preferred stock, accrued and unpaid dividends will not include
cumulation of unpaid dividends from prior dividend periods. A consolidation or
merger of ML&Co. with one or more corporations will not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of ML&Co.
REDEMPTION
If specified in the prospectus supplement relating to a series of preferred
stock being offered, ML&Co. may, at its option, at any time or from time to time
on not less than 30 nor more than 60 days notice, redeem that series of
preferred stock in whole or in part at the redemption prices and on the dates
set forth in the applicable prospectus supplement.
If less than all outstanding shares of a series of preferred stock are to
be redeemed, the selection of the shares to be redeemed shall be determined by
lot or pro rata as may be determined by the Board of Directors of ML&Co. or a
duly authorized committee of the Board of Directors to be equitable. From and
after the redemption date, unless ML&Co. is in default in providing for the
payment of the redemption price, dividends shall cease to accrue on the shares
of that series of preferred stock called for redemption and all rights of the
holders shall cease, other than the right to receive the redemption price.
VOTING RIGHTS
Unless otherwise described in the applicable prospectus supplement, holders
of the preferred stock will have no voting rights except as set forth below or
as otherwise required by law.
Whenever dividends payable on the preferred stock are in arrears for a
number of dividend periods, whether or not consecutive, which in the aggregate
is equivalent to six calendar quarters, the holders of outstanding shares of the
preferred stock, voting as a class with holders of shares of all other series of
preferred stock ranking equally with the preferred stock either as to dividends
or the distribution of assets upon liquidation, dissolution or winding up and
upon which like voting rights have been conferred and are exercisable, will be
entitled to vote for the election of two additional directors on the terms set
forth below. These voting rights will continue, in the case of any series of
cumulative preferred stock, until all past dividends accumulated on shares of
cumulative preferred stock are paid in full and, in the case of noncumulative
preferred stock, until all dividends on shares of noncumulative preferred stock
are paid in full for at least one calendar year. Upon payment in full of these
dividends, the voting rights will terminate except as expressly provided by law.
These voting rights are subject to re-vesting in the event of each and every
subsequent default in the payment of dividends. Holders of all series of
preferred stock which are granted these voting rights and which rank equally
with the preferred stock will vote as a class, and, unless otherwise specified
in the applicable prospectus supplement, each holder of shares of the preferred
stock will have one vote for each share of stock held and each other series will
have the number of votes, if any, for each share of stock held as may be granted
to them. In the event that the holders of shares of the preferred stock are
entitled to vote as described in this paragraph, the Board of Directors of
ML&Co. will be increased by two directors, and the holders of the preferred
stock will have the exclusive right as members of that class, as outlined above,
to elect two directors at the next annual meeting of stockholders.
Upon termination of the right of the holders of the preferred stock to vote
for directors as discussed in the preceding paragraph, the term of office of all
directors then in office elected by those holders will terminate immediately.
Whenever the term of office of the directors elected by those holders ends and
the related special voting rights expire, the number of directors will
automatically be decreased to the number of directors as would otherwise
prevail.
So long as any shares of preferred stock remain outstanding, ML&Co. shall
not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the preferred stock outstanding at the time, voting
as a class with all other series of preferred stock ranking equally with the
preferred stock either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up and upon which like voting rights have
been conferred and are exercisable, given in person or by proxy, either in
writing or at a meeting:
o authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking senior to the
preferred stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up of
ML&Co.; or
o amend, alter or repeal, whether by merger, consolidation or otherwise,
the provisions of ML&Co.'s restated certificate of incorporation or
the certificate of designations of the preferred stock so as to
materially and adversely affect any right, preference, privilege or
voting power of the preferred stock or the holders of the preferred
stock;
provided, however, that any increase in the amount of authorized preferred stock
or the creation and issuance, or an increase in the authorized or issued amount,
of other series of preferred stock, or any increase in the amount of authorized
shares of preferred stock, in each case ranking equally with or junior to the
preferred stock with respect to the payment of dividends and the distribution of
assets upon liquidation, dissolution or winding of ML&Co. up will not be deemed
to materially and adversely affect these rights, preferences, privileges or
voting powers.
The foregoing voting provisions will not apply if all outstanding shares of
preferred stock have been redeemed or sufficient funds have been deposited in
trust to effect such a redemption which is scheduled to be consummated within
three months after the time that such rights would otherwise be exercisable.
CONVERSION OR EXCHANGE RIGHTS
The prospectus supplement relating to a series of preferred stock that is
convertible or exchangeable will state the terms on which shares of that series
are convertible or exchangeable into common stock, another series of preferred
stock or debt securities.
OUTSTANDING PREFERRED STOCK
At December 25, 1998, there were 42,500 shares of 9% Preferred Stock
represented by 17,000,000 depositary shares and one Special Voting Share
outstanding.
9% PREFERRED STOCK
The 9% Preferred Stock has preference over ML&Co.'s common stock and the
Series A junior preferred stock issuable under the Rights Plan described under
"Description of Common Stock" with respect to the payment of dividends and the
distribution of assets in the event of liquidation, dissolution or winding up of
ML&Co. Holders of the 9% Preferred Stock do not have any preemptive rights to
subscribe for any additional securities which may be issued by ML&Co. Dividends
on the 9% Preferred Stock are cumulative and payable quarterly at the rate per
annum of 9% of the $10,000 liquidation preference per share. Holders of the 9%
Preferred Stock have no voting rights except as set forth above under "--Voting
Rights" above. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of ML&Co., the holders of outstanding shares of 9%
Preferred Stock are entitled to receive out of assets of ML&Co. available for
distribution to stockholders a distribution of $10,000 per share, plus
accumulated and unpaid dividends, if any. The 9% Preferred Stock is not
redeemable before December 30, 2004. On and after that date, the 9% Preferred
Stock is redeemable at the option of ML&Co., in whole at any time or from time
to time in part, upon not less than 30 nor more than 60 days notice, at a
redemption price of $10,000 per share, plus accumulated and unpaid dividends, if
any.
SPECIAL VOTING SHARE
In connection with the acquisition of Midland Walwyn Inc. by ML&Co. in
August 1998, ML&Co. issued a single share of preferred stock with special voting
rights (the "Special Voting Share"), under the terms of a Voting and Exchange
Trust Agreement entered into by Merrill Lynch & Co., Canada Ltd. ("ML Canada"),
ML&Co. and Montreal Trust Company of Canada, as trustee (the "Voting Trust
Agreement"). The Special Voting Share possesses a number of votes equal to the
number of exchangeable shares of ML Canada (the "Exchangeable Shares") issued
and outstanding from time to time that are not owned by ML&Co. or its
affiliates, which votes may be exercised for the election of directors and on
all other matters submitted to a vote of ML&Co.'s stockholders. The holders of
ML&Co.'s common stock and the holder of the Special Voting Share vote together
as a class on all matters. See "Description of Common Stock--Voting Rights". The
Special Voting Share was issued to the trustee under the Voting Trust Agreement.
The holder of the Special Voting Share is not entitled to receive dividends,
and, in the event of any liquidation, dissolution or winding up of ML&Co., will
receive an amount equal to the par value of the Special Voting Share. When the
Special Voting Share has no votes attached to it because there are no
Exchangeable Shares outstanding not owned by ML&Co. or any of its affiliates,
the Special Voting Share will cease to have any rights.
DESCRIPTION OF DEPOSITARY SHARES
ML&Co. may issue depositary receipts evidencing depositary shares, each of
which will represent a fraction of a share of preferred stock. ML&Co. will
deposit shares of preferred stock of each class or series represented by
depositary shares under deposit agreements to be entered into among ML&Co., a
bank or trust company, as depositary, and the holders from time to time of the
depositary receipts. A copy of the form of deposit agreement, including the form
of certificates representing the depositary receipts, is filed as an exhibit to
the registration statement of which this prospectus is a part. The following
summaries of the material provisions of the deposit agreements and the
depositary receipt certificates are not complete, are subject to, and are
qualified in their entirety by reference to, all the provisions of the deposit
agreement and the depositary receipt certificates, respectively, including the
definitions of terms.
TERMS OF THE DEPOSITARY SHARES
Depositary receipts issued under the applicable Deposit Agreement will
evidence the depositary shares. Immediately following the issuance and delivery
of the preferred stock by ML&Co. to the depositary, ML&Co. will cause the
depositary to issue, on behalf of ML&Co., the depositary receipts. Subject to
the terms of the applicable deposit agreement, each holder of a depositary
receipt will be entitled, in proportion to the fraction of a share of preferred
stock represented by the applicable depositary shares, to all the rights and
preferences of the preferred stock being represented, including dividend,
voting, conversion, redemption and liquidation rights, all as will be set forth
in the prospectus supplement relating to the depositary shares being offered.
The depositary shares will have the dividend, liquidation, redemption,
voting and conversion or exchange rights set forth below unless otherwise
specified in the applicable prospectus supplement. The applicable prospectus
supplement will describe the terms of the specific issue of the depositary
shares being offered, the deposit agreement relating to the depositary shares
and the depositary receipts evidencing the depositary shares, including the
following:
o the designation, stated value and liquidation preference of the
depositary shares and the number of shares offered;
o the offering price or prices;
o the dividend rate or rates, or method of calculation, the dividend
periods, the dates on which dividends will be payable and whether
dividends are cumulative or noncumulative and, if cumulative, the
dates from which dividends will begin to cumulate;
o any redemption or sinking fund provisions;
o any conversion or exchange provisions;
o any material risk factors relating to the depositary shares;
o the identity of the depositary; and
o any other terms of the depositary shares which are not inconsistent
with the provisions of the deposit agreement.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the depositary shares will be issued in the form of a global
depositary receipt certificates, registered in the name of a depositary or its
nominee. In that case, beneficial owners will not be entitled to receive
depositary receipts evidencing their depositary shares unless the depositary is
unwilling or unable to continue as depositary or ML&Co. decides to have the
depositary shares represented by separate depositary receipts. A beneficial
owner's interest in depositary shares will be recorded on or through the records
of the brokerage firm or other entity that maintains the beneficial owner's
account. In turn, the total number of depositary shares held by an individual
brokerage firm for its clients will be maintained on the records of the
depositary in the name of the brokerage firm or its agent. Transfer of ownership
of depositary shares will be effected only through the selling beneficial
owner's brokerage firm.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts in proportion to the number of depositary shares owned by
those holders, subject to the obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the depositary.
In the event of a distribution in respect of the preferred stock other than
in cash, the depositary will distribute property it receives to the record
holders of the depositary shares, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to the depositary, unless the depositary, after consultation with
ML&Co., determines that it is not feasible to make the distribution, in which
case the depositary may, with the approval of ML&Co., sell any property and
distribute the net proceeds from the sale to the holders.
WITHDRAWAL OF STOCK
Unless the related depositary shares have been previously called for
redemption, upon surrender of the depositary receipts at the corporate trust
office of the depositary, the holder of the depositary shares will be entitled
to delivery, at the corporate trust office of the depositary to or upon his or
her order, of the number of whole shares of the preferred stock and any money or
other property represented by the depositary shares. If the depositary receipts
delivered by the holder evidence a number of depositary shares in excess of the
number of depositary shares representing the number of whole shares of preferred
stock to be withdrawn, the depositary will deliver to the holder at the same
time a new depositary receipt evidencing the excess number of depositary shares.
In no event will the depositary deliver fractional shares of preferred stock
upon surrender of depositary receipts.
REDEMPTION OF DEPOSITARY SHARES
Whenever ML&Co. redeems shares of preferred stock held by the depositary,
the depositary will redeem as of the same redemption date the number of
depositary shares representing shares of the preferred stock so redeemed,
provided ML&Co. has paid in full to the depositary the redemption price of the
preferred stock to be redeemed plus an amount equal to any accumulated and
unpaid dividends on the preferred stock to the date fixed for redemption. The
redemption price per depositary share will be equal to the redemption price and
any other amounts per share payable with respect to the preferred stock
multiplied by the fraction of a share of preferred stock represented by one
depositary share. If less than all the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by the lot or pro rata as may
be determined by the depositary.
After the date fixed for redemption, depositary shares called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of depositary shares called for redemption will cease, except the right
to receive any moneys payable upon redemption and any money or other property to
which the holders of the depositary shares were entitled upon redemption upon
surrender to the depositary of the depositary receipts evidencing the depositary
shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
relating to that preferred stock. The record date for the depositary receipts
relating to the preferred stock will be the same date as the record date for the
preferred stock. Each record holder of the depositary shares on the record date
will be entitled to instruct the depositary as to the exercise of the voting
rights pertaining to the amount of preferred stock represented by that holder's
depositary shares. The depositary will endeavor, insofar as practicable, to vote
the amount of preferred stock represented by the depositary shares in accordance
with those instructions, and ML&Co. will agree to take all reasonable action
which may be deemed necessary by the depositary in order to enable the
depositary to do so. The depositary will not vote any shares of preferred stock
except to the extent it receives specific instructions from the holders of
depositary shares representing that number of shares of preferred stock.
EXCHANGE OF PREFERRED STOCK
Whenever ML&Co. exchanges all of the shares of a series of preferred stock
held by the depositary for debt securities, common stock or other shares of
preferred stock, the depositary will exchange as of the same exchange date the
number of depositary shares representing all of the shares of the preferred
stock so exchanged for debt securities, common stock or other shares of
preferred stock, provided ML&Co. has issued and deposited with the depositary,
debt securities, common stock or other shares of preferred stock, as applicable,
for all of the shares of the preferred stock to be exchanged. The exchange rate
per depositary share will be equal to the exchange rate per share of preferred
stock multiplied by the fraction of a share of preferred stock represented by
one depositary share, plus all money and other property, if any, represented by
those depositary shares, including all amounts paid by ML&Co. in respect of
dividends which on the exchange date have accumulated on the shares of preferred
stock to be so exchanged and have not already been paid.
CONVERSION OF PREFERRED STOCK
The depositary shares are not convertible or exchangeable into common stock
or any other securities or property of ML&Co. Nevertheless, if so specified in
the applicable prospectus supplement, each depositary receipt may be surrendered
by its holder to the depositary with written instructions to the depositary to
instruct ML&Co. to cause conversion or exchange of the preferred stock
represented by the depositary shares evidenced by that depositary receipt into
whole shares of common stock, other shares of preferred stock or debt securities
of ML&Co. ML&Co. has agreed that upon the receipt of any instructions to convert
or exchange any depositary shares and the payment of any fees or other amounts
applicable to any conversion or exchange, it will convert or exchange the
depositary shares using the same procedures as those provided for delivery of
preferred stock to effect conversions or exchange. If the depositary shares
represented by a depositary receipt are converted in part only, a new depositary
receipt or receipts will be issued for any depositary shares not converted or
exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between ML&Co. and the depositary. However, any amendment that materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless it has been approved by the holders of at least a majority of
the depositary shares then outstanding. No amendment to the form of depositary
receipt or any provision of the deposit agreement relating to or affecting
rights to receive dividends or distributions or voting, redemption or conversion
rights will be effective unless approved by the holders of at least two-thirds
of the depositary shares then outstanding.
ML&Co. may terminate the deposit agreement at any time upon 60 days prior
written notice to the depositary, in which case the depositary will deliver to
the record holders, upon surrender of the depositary receipts, the number of
whole or fractional shares of preferred stock as is represented by those
depositary receipts. The deposit agreement will automatically terminate if:
o all outstanding depositary shares have been redeemed,
o all shares of preferred stock deposited with the depositary in
accordance with the terms of the deposit agreement and all money and
other property relating to those shares of preferred stock have been
withdrawn in accordance with the terms of the deposit agreement, or
o there has been a final distribution in respect of the preferred stock
in connection with any liquidation, dissolution or winding up of
ML&Co. and the distribution has been distributed to the holders of
depositary receipts.
CHARGES OF DEPOSITARY
ML&Co. will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. ML&Co. will
pay the fees and expenses of the depositary in connection with the performance
of its duties under the deposit agreement. Holders of depositary receipts will
pay transfer and other taxes and governmental charges and any other charges that
are expressly provided in the deposit agreement to be for their accounts. The
depositary may refuse to effect any transfer of a depositary receipt or any
withdrawals of preferred stock evidenced by a depositary receipt until all taxes
and charges with respect to the depositary receipt or preferred stock are paid
by their holders.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to ML&Co. notice of its
election to do so, and ML&Co. may remove the depositary at any time. Any
resignation or removal of the depositary will take effect upon ML&Co.'s
appointment of a successor depositary, which must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
NOTICES
The depositary will forward to holders of depositary receipts all reports
and communications received from ML&Co. and the depositary and which ML&Co. is
required to furnish to holders of the related underlying preferred stock. The
depositary will also, promptly after its receipt, transmit to the holders of
depositary receipts, copies of all notices and reports required by law, the
rules of any national securities exchange or ML&Co.'s restated certificate of
incorporation to be furnished to the record holders of depositary receipts.
LIMITATION OF LIABILITY
Neither the depositary nor ML&Co. will assume any obligation or be subject
to any liability under the deposit agreement to holders of depositary receipts
other than for negligence, willful misconduct or bad faith. The depositary will
not be obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or any shares of preferred stock unless it is furnished with
satisfactory indemnification. ML&Co. and the depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of preferred stock for deposit, holders of depositary receipts or other
persons believed to be competent and on documents believed to be genuine.
Neither the depositary nor ML&Co. will be liable if it is prevented from or
delayed, by law, by provision of ML&Co.'s restated certificate of incorporation
or any circumstances beyond its control, in performing its obligations under the
deposit agreement.
DESCRIPTION OF PREFERRED STOCK WARRANTS
ML&Co. may issue warrants for the purchase of preferred stock ("Preferred
Stock Warrants"). Each series of Preferred Stock Warrants is to be issued under
a preferred stock warrant agreement to be entered into between ML&Co. and a bank
or trust company, as preferred stock warrant agent, as described in the
applicable prospectus supplement relating to the Preferred Stock Warrants being
offered. A copy of the form of preferred stock warrant agreement, including the
form of warrant certificates representing the Preferred Stock Warrants, is filed
as an exhibit to the registration statement of which this prospectus is a part.
The following summaries of the material provisions of the preferred stock
warrant agreement and preferred stock warrant certificates are not complete and
are subject to and are qualified in their entirety by reference to, all the
provisions of the preferred stock warrant agreement and the preferred stock
warrant certificates, respectively, including the definitions of terms.
TERMS OF THE PREFERRED STOCK WARRANTS
The applicable prospectus supplement will describe the terms of the
specific issue of Preferred Stock Warrants being offered, the preferred stock
warrant agreement relating to the Preferred Stock Warrants and the preferred
stock warrant certificates representing the Preferred Stock Warrants, including
the following:
o the offering price or prices;
o designation, aggregate number and terms of the series of preferred
stock that may be purchased upon exercise of the Preferred Stock
Warrants and the minimum number of Preferred Stock Warrants that are
exercisable;
o any designation and terms of the securities with which the Preferred
Stock Warrants are being offered and the number of Preferred Stock
Warrants being offered with each Security;
o any date on and after which the Preferred Stock Warrants and the
related securities will be transferable separately;
o the number and stated values of the series of preferred stock that may
be purchased upon exercise of each Preferred Stock Warrant and the
price at which the shares of preferred stock of that series may be
purchased upon exercise, and events or conditions under which the
number of shares that may be purchased may be adjusted;
o the date on which the right to exercise the Preferred Stock Warrants
will begin and the date on which the right to exercise will expire;
o any circumstances that will cause the Preferred Stock Warrants to be
deemed to be automatically exercised;
o any material risk factors relating to the Preferred Stock Warrants;
o the identity of the preferred stock warrant agent; and
o any other terms of the Preferred Stock Warrants which are not
inconsistent with the provisions of the preferred stock warrant
agreement.
Holders may exchange preferred stock warrant certificates for new preferred
stock warrant certificates of different denominations, may, if in registered
form, present for registration of transfer, and exercise the Preferred Stock
Warrants at the corporate trust office of the preferred stock warrant agent or
any other office indicated in the applicable prospectus supplement. Before the
exercise of any Preferred Stock Warrant, a holder will not have the rights of a
holder of shares of the preferred stock that may be purchased upon exercise of
the Preferred Stock Warrant, including the right to receive payment of
dividends, if any, on the underlying preferred stock or the right to vote the
underlying preferred stock.
Prospective purchasers of Preferred Stock Warrants should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to instruments such as Preferred Stock Warrants. The prospectus
supplement relating to any issue of Preferred Stock Warrants will describe these
considerations.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Preferred Stock Warrants will be issued in the form of global
preferred stock warrant certificates, registered in the name of a depositary or
its nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Preferred Stock Warrants unless the
depositary is unwilling or unable to continue as depositary, specified events of
bankruptcy or insolvency occur with respect to ML&Co. or ML&Co. decides to have
the Preferred Stock Warrants represented by definitive certificates. A
beneficial owner's interest in a Preferred Stock Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains the
beneficial owner's account. In turn, the total number of Preferred Stock
Warrants held by an individual brokerage firm for its clients will be maintained
on the records of the depositary in the name of the brokerage firm or its agent.
Transfer of ownership of any Preferred Stock Warrant will be effected only
through the selling beneficial owner's brokerage firm.
EXERCISE OF PREFERRED STOCK WARRANTS
Each Preferred Stock Warrant will entitle its holder to purchase a number
of shares of preferred stock at the exercise price described in the applicable
prospectus supplement. After the close of business on the date the right to
exercise the Preferred Stock Warrants expires, or any later date if extended by
ML&Co., unexercised Preferred Stock Warrants will become void.
Holders may exercise the Preferred Stock Warrants in the manner set forth
in the applicable prospectus supplement. Upon receipt of payment and a properly
completed and duly executed preferred stock warrant certificate at the corporate
trust office of the preferred stock warrant agent or any other office indicated
in the applicable prospectus supplement, ML&Co. will, as soon as practicable,
issue and deliver the shares of preferred stock purchased upon exercise. If less
than all of the Preferred Stock Warrants represented by any preferred stock
warrant certificate are exercised, ML&Co. will issue a new preferred stock
warrant certificate for the remaining number of Preferred Stock Warrants.
LISTING
ML&Co. may list an issue of Preferred Stock Warrants on a national
securities exchange. Any listing will be specified in the applicable prospectus
supplement.
MODIFICATIONS
ML&Co. and the preferred stock warrant agent may amend any preferred stock
warrant agreement and the terms of the related Preferred Stock Warrants, without
the consent of the holders of the Preferred Stock Warrants, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which ML&Co. may deem necessary
or desirable and which will not materially and adversely affect the interests of
the preferred stock warrantholders.
ML&Co. and the preferred stock warrant agent also may amend any preferred
stock warrant agreement and the terms of the related Preferred Stock Warrants,
with the consent of the holders of not less than a majority in number of the
then outstanding unexercised Preferred Stock Warrants affected by the amendment.
However, without the consent of each of the preferred stock warrantholders
affected, no amendment will be effective that:
o shortens the period of time during which the Preferred Stock Warrants
may be exercised;
o otherwise materially and adversely affects the exercise rights of the
preferred stock warrantholders; or
o reduces the number of outstanding Preferred Stock Warrants the consent
of whose holders is required to approve an amendment of the preferred
stock warrant agreement or the terms of the related Preferred Stock
Warrants.
ENFORCEABILITY OF RIGHTS BY PREFERRED STOCK WARRANTHOLDERS
Any preferred stock warrantholder may, without the consent of the related
preferred stock warrant agent, enforce by appropriate legal action, in and of
its own behalf, its right to exercise its Preferred Stock Warrants.
DESCRIPTION OF COMMON STOCK
The following description sets forth the general terms of common stock
which ML&Co. may issue. The description set forth below and in any prospectus
supplement is not complete, is subject to, and is qualified in its entirety by
reference to, ML&Co's restated certificate of incorporation which is filed as an
exhibit to the registration statement of which this prospectus is a part.
TERMS OF THE COMMON STOCK
Under ML&Co.'s restated certificate of incorporation, ML&Co. is authorized
to issue up to 1,000,000,000 shares of common stock, par value $1.331/3 per
share. As of February 24, 1999, there were 359,808,565 shares of common stock
and 4,414,794 Exchangeable Shares outstanding. The Exchangeable Shares are
exchangeable at any time into common stock on a one-for-one basis and entitle
holders to dividend, voting and other rights equivalent to common stock. The
common stock is traded on the New York Stock Exchange under the symbol "MER" and
also on the Chicago Stock Exchange, the Pacific Exchange, the Paris Bourse, the
London Stock Exchange and the Tokyo Stock Exchange.
The common stock has the dividend, voting, liquidation and preemptive
rights set forth below unless otherwise specified in the prospectus supplement
being used to offer the common stock. The applicable prospectus supplement will
describe the terms of the common stock including, where applicable, the
following:
o the number of shares to be offered;
o the offering price or prices;
o to the extent permitted by applicable law, whether the common stock
will be issued in certificated or book-entry form;
o information with respect to any book-entry procedures; and
o any additional terms of the common stock which are not inconsistent
with the provisions of ML&Co.'s restated certificate of incorporation.
The common stock will be, when issued against payment therefor, fully paid
and nonassessable. Holders of the common stock will have no preemptive rights to
subscribe for any additional securities which may be issued by ML&Co. The rights
of holders of common stock will be subject to, and may be adversely affected by,
the rights of holders of any preferred stock that has been issued and may be
issued in the future. As of December 25, 1998, 17,000,000 depositary shares,
each representing a one-four-hundredth interest in a share of 9% Preferred
Stock, and one Special Voting Share were outstanding. See "Description of
Preferred Stock--Outstanding Preferred Stock" for a description of that
preferred stock. The Board of Directors of ML&Co. may issue additional shares
of preferred stock to obtain additional financing, in connection with
acquisitions, to officers, directors and employees of ML&Co. and its
subsidiaries pursuant to benefit plans or otherwise and for other proper
corporate purposes.
ML&Co. is the principal transfer agent for the common stock.
Because ML&Co. is a holding company, its rights, and the rights of holders
of its securities, including the holders of common stock, to participate in the
distribution of assets of any subsidiary of ML&Co. upon the subsidiary's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors and preferred stockholders, except to the extent ML&Co.
may itself be a creditor with recognized claims against the subsidiary or a
holder of preferred stock of the subsidiary.
DIVIDENDS
ML&Co. may pay dividends on the common stock out of funds legally available
for the payment of dividends as, if and when declared by the Board of Directors
of ML&Co. or a duly authorized committee of the Board of Directors.
As of the date of this prospectus, subsidiaries of ML&Co. have issued
$2.575 billion of perpetual TOPrS. In connection with the issuance of the TOPrS,
ML&Co. has agreed, among other things, that if full distributions on the TOPrS
have not been paid or set apart for payment or ML&Co. is in default of its
related guarantee obligations, ML&Co., with certain exceptions, will not declare
or pay dividends, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to any of its capital stock,
including the common stock.
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of ML&Co., the holders of its common stock will be entitled to receive, after
payment of all of its debts, liabilities and of all sums to which holders of any
preferred stock may be entitled, all of the remaining assets of ML&Co.
VOTING RIGHTS
Except as described under "Description of Preferred Stock--Outstanding
Preferred Stock", the holders of the common stock currently possess exclusive
voting rights in ML&Co. The Board of Directors of ML&Co. may, however, give
voting power to any preferred stock which may be issued in the future. Each
holder of common stock is entitled to one vote per share with respect to all
matters. There is no cumulative voting in the election of directors. Actions
requiring approval of stockholders generally require approval by a majority vote
of outstanding shares.
The Board of Directors of ML&Co. is currently comprised of 14 directors,
divided into three classes, the precise number of members to be fixed from time
to time by the Board of Directors. The directors of the class elected at each
annual election hold office for a term of three years, with the term of each
class expiring at successive annual meetings of stockholders.
RIGHTS TO PURCHASE SERIES A JUNIOR PREFERRED STOCK
Under the Amended and Restated Rights Agreement, adopted on December 2,
1997 (the "Rights Agreement"), preferred purchase rights were distributed to
holders of common stock. The preferred purchase rights are attached to each
outstanding share of common stock and will attach to all subsequently issued
shares, including common stock that may be offered by ML&Co. pursuant to an
applicable prospectus supplement. The preferred purchase rights entitle the
holder to purchase fractions of a share ("Units") of Series A junior preferred
stock at an exercise price of $300 per Unit, subject to adjustment from time to
time as provided in the Rights Agreement. The exercise price and the number of
Units issuable are subject to adjustment to prevent dilution.
The preferred purchase rights will separate from the common stock ten days
following the earlier of:
o an announcement of an acquisition by a person or group of 15% or more
of the outstanding common stock of ML&Co.; or
o the commencement of a tender or exchange offer for 15% or more of the
shares of common stock of ML&Co. outstanding.
If, after the preferred purchase rights have separated from the common
stock,
o ML&Co. is the surviving corporation in a merger with an acquiring
party,
o a person becomes the beneficial owner of 15% or more of the common
stock,
o an acquiring party engages in one or more defined "self-dealing"
transactions, or
o an event occurs which results in such acquiring party's ownership
interest being increased by more than 1%,
then, in each case, each holder of a preferred purchase right will have the
right to purchase Units of Series A junior preferred stock having a value equal
to two times the exercise price of the preferred purchase right. In addition,
preferred purchase rights held by or transferred in certain circumstances by an
acquiring party may immediately become void.
In the event that, at any time,
o ML&Co. is acquired in a merger or other business combination
transaction and ML&Co. is not the surviving corporation, or
o any person consolidates or merges with ML&Co. and all or part of
ML&Co.'s common stock is converted or exchanged for securities, cash
or property of any other person or
o 50% or more of ML&Co.'s assets or earning power is sold or
transferred,
each holder of a right will have the right to purchase common stock of the
acquiring party having a value equal to two times the exercise price of the
preferred purchase right.
The preferred purchase rights expire on December 2, 2007. The preferred
purchase rights are redeemable at the option of a majority of the independent
directors of ML&Co. at $.01 per right at any time until the tenth day following
an announcement of the acquisition of 15% or more of the common stock.
The foregoing provisions of the Rights Agreement may have the effect of
delaying, deferring or preventing a change in control of ML&Co.
The certificate of designations of the Series A junior preferred stock
provides that the holders of Units of the Series A junior preferred stock will
be entitled to receive quarterly dividends in an amount to be determined in
accordance with the formula set forth in the certificate of designations. These
dividend rights are cumulative. The Series A junior preferred stock rank junior
in right of payment of dividends to the 9% Preferred Stock and to all other
preferred stock issued by ML&Co., unless the terms of any other preferred stock
provide otherwise. The holders of Units of the Series A junior preferred stock
will have one vote per Unit on all matters submitted to the stockholders of
ML&Co., subject to adjustment. If at any time dividends on any Units of the
Series A junior preferred stock are in arrears for a number of periods, whether
or not consecutive, which in the aggregate is equivalent to six calendar
quarters, then during that period of default, the holders of all Units, voting
separately as a class, will have the right to elect two directors to the Board
of Directors of ML&Co. Additionally, whenever quarterly dividends or other
dividends or distributions payable on the Series A junior preferred stock are in
arrears, ML&Co. shall not, among other things, declare or pay dividends on or
make any other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares or capital stock of ML&Co. which ranks junior in right
of payment to the Series A junior preferred stock, including the common stock.
In the event of any voluntary or involuntary liquidation, dissolution or winding
up of ML&Co., the holders of outstanding Units of the Series A junior preferred
stock will be entitled to receive a distribution in an amount to be determined
in accordance with the formula set forth in the certificate of designations
before the payment of any distribution to the holders of common stock. The Units
of Series A junior preferred stock are not redeemable. As of the date of this
prospectus, there are no shares of Series A junior preferred stock outstanding.
MATERIAL CHARTER PROVISIONS
ML&Co.'s restated certificate of incorporation provides that, except under
specified circumstances, ML&Co. may not merge or consolidate with any one or
more corporations, joint-stock associations or non-stock corporations; sell,
lease or exchange all or substantially all of its property and assets or
dissolve without the affirmative vote of two-thirds of the entire Board of
Directors of ML&Co. and the holders of a majority of the outstanding shares of
common stock entitled to vote. Additionally, ML&Co.'s restated certificate of
incorporation provides that specified business combinations involving ML&Co. and
an interested stockholder or an affiliate or associate of that stockholder must
be approved by 80% of the voting power of the outstanding shares of capital
stock of ML&Co. entitled to vote generally in the election of directors. The
vote of 80% of the voting power of the voting stock referred to in the
immediately preceding sentence is required for amendment of these provisions.
ML&Co.'s restated certificate of incorporation also provides that only the Board
of Directors of ML&Co. has the authority to call special stockholder meetings.
The foregoing provisions of ML&Co.'s restated certificate of incorporation
may have the effect of delaying, deferring or preventing a change in control of
ML&Co.
DESCRIPTION OF COMMON STOCK WARRANTS
ML&Co. may issue warrants for the purchase of common stock ("Common Stock
Warrants"). Each series of Common Stock Warrants will be issued under a common
stock warrant agreement to be entered into between ML&Co. and a bank or trust
company, as common stock warrant agent, all as set forth in the applicable
prospectus supplement. A copy of the form of common stock warrant agreement,
including the form of warrant certificates representing the Common Stock
Warrants, reflecting the provisions to be included in the common stock warrant
agreements that will be entered into with respect to particular offerings of
Common Stock Warrants, is filed as an exhibit to the registration statement of
which this prospectus is a part. The following summaries of the material
provisions of the common stock warrant agreement and common stock warrant
certificates are not complete, are subject to, and are qualified in their
entirety by reference to, all of the provisions of the common stock warrant
agreement and the common stock warrant certificates, including the definitions
of terms.
TERMS OF THE COMMON STOCK WARRANTS
The applicable prospectus supplement will describe the terms of the Common
Stock Warrants being offered, the common stock warrant agreement relating to the
Common Stock Warrants and the common stock warrant certificates, including the
following:
o the offering price or prices;
o the aggregate number of shares of common stock that may be purchased
upon exercise of the Common Stock Warrants and minimum number of
Common Stock Warrants that are exercisable;
o the number of securities, if any, with which the Common Stock Warrants
are being offered and the number of the Common Stock Warrants being
offered with each security;
o the date on and after which the Common Stock Warrants and the related
securities, if any, will be transferable separately;
o the number of shares of common stock purchasable upon exercise of each
Common Stock Warrant, the price at which the common stock may be
purchased, and events or conditions under which the number of shares
purchasable may be adjusted;
o the date on which the right to exercise the Common Stock Warrants will
begin and the date on which the right to exercise will expire;
o the circumstances, if any, which will cause the Common Stock Warrants
to be deemed to be automatically exercised;
o any material risk factors relating to the Common Stock Warrants;
o the identity of the common stock warrant agent; and
o any other terms of the Common Stock Warrants which are not
inconsistent with the provisions of the common stock warrant
agreement.
Holders may exchange common stock warrant certificates for new common stock
warrant certificates of different denominations, if in registered form, may
present for registration of transfer, and may exercise the Common Stock Warrants
at the corporate trust office of the common stock warrant agent or any other
office indicated in the applicable prospectus supplement. Before the exercise of
any Common Stock Warrants to purchase common stock, holders of the Common Stock
Warrants will not have any rights of holders of common stock purchasable upon
exercise of the Common Stock Warrants, including the right to receive payments
of dividends, if any, on the common stock purchasable upon any exercise or the
right to vote the underlying common stock.
Prospective purchasers of Common Stock Warrants should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to instruments such as Common Stock Warrants. The prospectus
supplement relating to any issue of Common Stock Warrants will describe these
considerations.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Common Stock Warrants will be issued in the form of global
common stock warrant certificates, registered in the name of a depositary or its
nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Common Stock Warrants unless the depositary
is unwilling or unable to continue as depositary, certain specified events of
bankruptcy or insolvency occur with respect to ML&Co. or ML&Co. decides to have
the Common Stock Warrants represented by definitive certificates. A beneficial
owner's interest in a Common Stock Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains a beneficial
owner's account. In turn, the total number of Common Stock Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depositary in the name of the brokerage firm or its agent. Transfer of
ownership of any Common Stock Warrant will be effected only through the selling
beneficial owner's brokerage firm.
EXERCISE OF COMMON STOCK WARRANTS
Each Common Stock Warrant will entitle its holder to purchase a specific
number of shares of common stock at the exercise price described in the
applicable prospectus supplement. After the close of business on the date the
right to exercise the Common Stock Warrants expires, or any later date if
extended by ML&Co., unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised as set forth in the applicable
prospectus supplement. Upon receipt of payment and a properly completed and duly
executed common stock warrant certificate at the corporate trust office of the
common stock warrant agent or any other office indicated in the applicable
prospectus supplement, ML&Co. will, as soon as practicable, issue and deliver
the shares of common stock purchased upon exercise. If less than all of the
Common Stock Warrants represented by any common stock warrant certificate are
exercised, a new common stock warrant certificate will be issued for the
remaining Common Stock Warrants.
LISTING
ML&Co. may list an issue of Common Stock Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
MODIFICATIONS
ML&Co. and the common stock warrant agent may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, without
the consent of the holders of the Common Stock Warrants, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which ML&Co. may deem necessary
or desirable and which will not materially and adversely affect the interests of
the common stock warrantholders.
ML&Co. and the common stock warrant agent also may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, with the
consent of the holders of not less than a majority in number of the then
outstanding unexercised Common Stock Warrants affected by amendment. However,
without the consent of each of the common stock warrantholders affected, no
amendment will be effective that:
o shortens the period of time during which the Common Stock Warrants may
be exercised;
o otherwise materially and adversely affects the exercise rights of the
common stock warrantholders; or
o reduces the number of outstanding Common Stock Warrants the consent of
whose holders is required to approve an amendment of the common stock
warrant agreement or the terms of the related Common Stock Warrants.
ENFORCEABILITY OF RIGHTS BY COMMON STOCK WARRANTHOLDERS
Any common stock warrantholder may, without the consent of the related
common stock warrant agent, enforce by appropriate legal action, in and for its
own behalf, its right to exercise its Common Stock Warrant.
<PAGE>
PLAN OF DISTRIBUTION
ML&Co. may sell securities:
o to the public through MLPF&S, or through a group of underwriters
managed or co-managed by, one or more underwriters, including MLPF&S,
o through MLPF&S as agent, or
o directly to purchasers.
The prospectus supplement with respect to the securities of a particular
series describes the terms of the offering of the securities, including the name
of the agent or the name or names of any underwriters, the public offering or
purchase price, any discounts and commissions to be allowed or paid to the agent
or underwriters, all other items constituting underwriting compensation, any
discounts and commissions to be allowed or paid to dealers and any exchanges on
which the securities will be listed. Only the agents or underwriters so named in
the prospectus supplement are agents or underwriters in connection with the
securities being offered. Under certain circumstances, ML&Co. may repurchase
securities and reoffer them to the public as set forth above. ML&Co. may also
arrange for repurchases and resales of the securities by dealers.
If so indicated in the prospectus supplement, ML&Co. will authorize
underwriters to solicit offers by certain institutions to purchase debt
securities from ML&Co. pursuant to delayed delivery contracts providing for
payment and delivery on the date stated in the prospectus supplement. Each
contract will be for an amount not less than, and, unless ML&Co. otherwise
agrees, the aggregate principal amount of debt securities sold pursuant to the
contracts shall not be more than, the respective amounts stated in the
prospectus supplement. Institutions with whom the contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions, and other
institutions, but shall in all cases be subject to the approval of ML&Co.
Delayed delivery contracts will not be subject to any conditions except that the
purchase by an institution of the debt securities covered under that contract
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which that institution is subject.
ML&Co. has agreed to indemnify the agent and the several underwriters
against certain civil liabilities, including liabilities under the Securities
Act or contribute to payments the agent or the underwriters may be required to
make.
The distribution of securities will conform to the requirements set forth
in the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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 securities and other securities. For further information on ML&Co. and the
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
- ----------
[LOGO]
MERRILL LYNCH & CO., INC.
STRUCTURED YIELD PRODUCT EXCHANGEABLE FOR STOCK/SM/
STRYPES/SM/
----------------------
OFFERING OF THE STRYPES: Distributions at Maturity:
o We will offer from time to time o On the stated maturity date of
our STRYPES, which are senior each series of STRYPES, or any
debt securities of ML&Co. that earlier date described in the
are exchangeable into the common applicable prospectus supplement,
stock or other securities of an we will pay and discharge the
unaffiliated company. STRYPES by delivering to you a
number of shares of common stock
o We will offer the STRYPES in or other securities of an
series and on terms determined by unaffiliated company or property
market conditions at the time of determined in accordance with a
sale. We will describe these payment formula all as described
terms in the prospectus in the prospectus supplement.
supplement used to offer the
specific series of STRYPES.
o Each series of STRYPES may be o Instead of delivering shares of
listed on a national securities common stock or other securities
exchange described in the or property, we may deliver cash,
prospectus supplement. or a combination of cash and the
common stock or other securities,
with an equal value.
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 date of this prospectus is , 199 .
______________
/SM/Service mark of Merrill Lynch & Co., Inc.
<PAGE>
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
STRYPES described in this prospectus.
<PAGE>
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the STRYPES for general
corporate purposes, unless otherwise specified in the prospectus supplement
relating to a specific issue of STRYPES. Our general corporate purposes may
include financing the activities of our subsidiaries, financing our assets and
those of our subsidiaries, lengthening the average maturity of our borrowings
and financing acquisitions. Until we use the net proceeds from the sale of any
of our securities for general corporate purposes, we will use the net proceeds
to reduce our short-term indebtedness or for temporary investments. We expect
that we will, on a recurrent basis, engage in additional financings as the need
arises to finance our growth, through acquisitions or otherwise, or to lengthen
the average maturity of our borrowings. To the extent that STRYPES being
purchased for resale by our subsidiary, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, referred to in this prospectus as MLPF&S, are not resold, the
aggregate proceeds that we and our subsidiaries would receive would be reduced.
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
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
</TABLE>
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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 STRYPES
Each issue of STRYPES will be a series of senior debt securities of ML&Co.
to be issued under an indenture (the "1983 Indenture"), dated as of April 1,
1983, as amended and restated, between ML&Co. and The Chase Manhattan Bank, as
trustee. For each series of STRYPES, ML&Co. and the trustee will enter into a
supplemental indenture which will further amend and supplement the 1983
Indenture. Any supplemental indenture relating to a specific series of STRYPES
and the 1983 Indenture are collectively referred to as the indenture. The
following summary of the material provisions of the indenture is not complete
and is qualified in its entirety by reference to the indenture.
<PAGE>
TERMS OF THE STRYPES
The supplemental indenture will provide that ML&Co. may issue STRYPES of
the related series from time to time under the indenture, up to a specified
aggregate issue price, upon the satisfaction of certain conditions before
issuance. The supplemental indenture will establish the terms of the related
series of STRYPES, including:
o the issue price per STRYPES;
o the date on which the STRYPES will mature;
o the consideration deliverable or payable with respect to each STRYPES,
whether at maturity or upon earlier acceleration, and the formula or
other method by which the amount of any consideration deliverable or
payable will be determined;
o any fixed or variable rate or rates per annum;
o the interest payment dates;
o any provisions for redemption, the redemption price and any
remarketing arrangements;
o any sinking fund requirements;
o whether the STRYPES are denominated or provide for payment in United
States dollars or a foreign currency or units of two or more foreign
currencies;
o whether and under what circumstances ML&Co. will pay additional
amounts ("Additional Amounts") under any STRYPES held by a person who
is not a U.S. person for specified taxes, assessments or other
governmental charges and whether ML&Co. has the option to redeem the
affected STRYPES rather than pay any Additional Amounts;
o the title and series designation;
o whether the STRYPES are to be issued in global form;
o the obligation of ML&Co. to pay and discharge the STRYPES at maturity
by delivery of a number of shares of common stock or other securities
or property (the "Underlying Securities") of an unaffiliated
corporation or cash or a combination of cash and Underlying Securities
with an equal value;
o the formula or other method by which the consideration deliverable or
payable at maturity of the STRYPES or any earlier date will be
determined and the terms and conditions upon which any payment and
discharge of the STRYPES will be effected.
The terms of the specific series of STRYPES being offered will be described
in the applicable prospectus supplement.
Under the indenture, ML&Co., without the consent of holders of any STRYPES,
is permitted to issue STRYPES with terms different from those of STRYPES
previously issued and to reopen a previous series of STRYPES and issue
additional STRYPES of that series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the indenture, the
applicable supplemental indenture, the form of the STRYPES and the applicable
prospectus supplement, provided that payment of any interest and any Additional
Amounts may be made at the option of ML&Co. by check mailed to the holders of
registered STRYPES at their registered addresses.
Holders may present the STRYPES for exchange, and may present registered
STRYPES for transfer, in the manner, at the places and subject to the
restrictions set forth in the indenture, the applicable supplemental indentures
the form of the STRYPES and the applicable prospectus supplement. There will be
no service charge for any transfer or exchange of STRYPES, but ML&Co. may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with a transfer or exchange.
RANKING
The STRYPES will be unsecured obligations and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. Because ML&Co. is a
holding company, the rights of ML&Co. and its creditors, including the holders
of the STRYPES, to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of the subsidiary, except to the extent
that a bankruptcy court may recognize the 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 Securities Exchange Act of 1934 and under rules of
exchanges and other regulatory bodies.
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 or deliver the Underlying Securities, cash with an equal
value or a combination of both in respect of, any interest and
Additional Amounts on, and any other amounts payable with respect
to, the STRYPES of each series; and
o perform and observe all of ML&Co.'s obligations under the
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
indenture.
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 any liens
specifically permitted by the 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 incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
STRYPES are secured equally and ratably with the secured indebtedness.
"Voting Stock" is defined in the 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 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.
<PAGE>
LIMITATIONS 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 the transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 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.
EVENTS OF DEFAULT
Unless otherwise specified in a prospectus supplement, each of the
following will be an Event of Default under the indenture with respect to each
series of STRYPES:
o failure to pay and discharge the STRYPES of that series with the
Underlying Securities or, if ML&Co. so elects, to pay an equivalent
amount in cash instead of Underlying Securities when due,
o failure to pay the redemption price or any redemption premium with
respect to any STRYPES of that series when due;
o failure to deposit any sinking fund payment, when and as due by the
terms of any STRYPES of that series;
o failure to pay any interest on or any Additional Amounts in respect of
any STRYPES of that series when due, and continuing for 30 days;
o failure to perform any other obligation of ML&Co. contained in the
indenture for the benefit of that series or in the STRYPES of that
series, continuing for 60 days after written notice has been given to
ML&Co. by the trustee, or to ML&Co. and the trustee by the holders of
at least 10% of the aggregate issue price of the outstanding STRYPES
of that series, as provided in the indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to STRYPES of that
series.
Unless otherwise specified in a prospectus supplement, if an Event of
Default occurs and is continuing for any series of STRYPES, the trustee or the
holders of at least 25% in aggregate issue price of the outstanding STRYPES of
that series, by notice as provided in the indenture, may declare an amount equal
to the aggregate issue price of all the STRYPES of that series, the accrued
interest on the STRYPES and all Additional Amounts payable with respect to the
STRYPES of that series immediately due and payable in cash. The trustee or the
holders of at least 25% in aggregate issue price of the outstanding STRYPES may
declare these amounts due immediately as described in the preceding sentence
without any other declaration or other action by the trustee or any holder. At
any time after a declaration of acceleration, but before the trustee has
obtained a judgment or decree based on acceleration, the holders of a majority
of the aggregate issue price of the outstanding STRYPES of that series may,
under certain circumstances, rescind and annul any acceleration if all Events of
Default, other than the non-payment of the amount equal to the aggregate issue
price of all the STRYPES of that series due by reason of acceleration, have been
cured or waived as provided in the indenture. See "Modification and Waiver"
below.
The holders of a majority in aggregate issue price of the outstanding
STRYPES 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 power
conferred on the trustee with respect to the STRYPES of that series, provided
that any direction is not in conflict with any rule of law or the indenture.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders of STRYPES of any
series, unless the holders of that series shall have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with any request or direction.
Unless otherwise described in the applicable prospectus supplement, the
STRYPES and other series of senior debt securities issued under the indenture
will not have the benefit of any cross-default provisions with other
indebtedness of ML&Co.
ML&Co. will be required to furnish to the trustee annually a statement as
to the fulfillment by ML& Co. of its obligations under the indenture.
MODIFICATION AND WAIVER
Unless otherwise specified in a prospectus supplement, ML&Co. and the
trustee may modify and amend provisions in the indenture affecting a series of
STRYPES with the consent of holders of at least 662/3% in aggregate issue price
of the series of STRYPES affected. However, without the consent of each holder
of any STRYPES affected, no amendment or modification to any indenture may:
o change the maturity date or the stated maturity date or any
installment of interest or Additional Amounts on any STRYPES or any
premium payable on redemption, or change the redemption price,
o reduce the amount of Underlying Securities payable with respect to any
STRYPES or reduce the amount of cash, or cash and Underlying
Securities, payable instead of Underlying Securities,
o reduce the amount of interest or Additional Amounts payable on any
STRYPES or reduce the amount of cash payable with respect to any
STRYPES upon acceleration,
o change the place or currency of payment of interest or Additional
Amounts on, or any amount of cash payable with respect to, any
STRYPES,
o impair the right to institute suit for the enforcement of any payment
on any STRYPES, including the payment of Underlying Securities with
respect to any STRYPES,
o reduce the percentage of the aggregate issue price of outstanding
STRYPES of that series, the consent of whose holders is required to
modify or amend the indenture,
o reduce the percentage of the aggregate issue price of outstanding
STRYPES of that series necessary for waiver of compliance with certain
provisions of the indenture or for waiver of certain defaults or
o modify the provisions with respect to modification and waiver.
Except as provided in the indenture, no modification of or amendment to the
indenture may adversely affect the rights of a holder of any other senior debt
security without the consent of each holder affected.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by ML&Co. with certain restrictive provisions of
the indenture. Any past default with respect to any series of STRYPES may be
waived by the holders of a majority in aggregate issue price of the outstanding
STRYPES of any series may waive any past default with respect to that series,
except a default:
o in the payment of the Underlying Securities or any other amounts due
and payable or deliverable under the STRYPES of that series; or
o in respect of an obligation of ML & Co. contained in, or a provision
of, the indenture which cannot be modified under the terms of that
indenture without the consent of each holder of each outstanding
series of STRYPES affected.
GOVERNING LAW
The indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
<PAGE>
PLAN OF DISTRIBUTION
ML&Co. may sell STRYPES to the public through MLPF&S. The accompanying
prospectus supplement describes the terms of the STRYPES being offered,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid, all other items constituting underwriting compensation,
the discounts and commissions to be allowed or paid to dealers, if any, and the
exchanges, if any, on which the STRYPES will be listed. Under certain
circumstances, ML&Co. may repurchase STRYPES and reoffer them to the public as
set forth above. ML&Co. may also arrange for repurchases and resales of the
STRYPES by dealers.
The underwriting of STRYPES will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
WHERE YOU CAN FIND MORE INFORMATION
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 STRYPES and other securities. For further information on ML&Co. and the
STRYPES, 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
- ----------
[LOGO]
%Trust Originated Preferred Securities
Merrill Lynch Preferred Capital Trust VI
Liquidation Amount $25 per TOPrS
guaranteed to the extent described in this prospectus by
Merrill Lynch & Co., Inc.
------------------------------
THE TOPrS: DISTRIBUTIONS ON THE TOPrS:
o TOPrS represent preferred ownership o Each TOPrS pays a quarterly
interests in the assets of ML distribution at the rate of ____%,
Trust. The sole assets of ML Trust or $__ per TOPrS per year, if ML
will be the partnership preferred Partnership pays distributions on
securities of ML Partnership which the partnership preferred
represent preferred ownership securities.
interests in the assets of ML
Partnership.
o The sole assets of ML Partnership o If ML Trust and ML Partnership
will be the debentures issued by redeem the TOPrS and the
ML&Co. and its affiliates and cash partnership preferred securities,
and other permitted securities you will receive $25 plus
described in this prospectus. accumulated distributions for each
TOPrS you own.
o The TOPrS and the partnership
preferred securities do not have
any stated maturity.
o If ML Trust redeems the TOPrS or is
o ML Trust will apply to have the liquidated, but ML Partnership does
TOPrS trade on the New York Stock not redeem the partnership
Exchange starting within 30 days preferred securities, you will
after the TOPrS are issued. receive the partnership preferred
securities rather than cash.
o Closing Date: [DATE]
o ML&Co. will guarantee the TOPrS to
the extent described in this
prospectus.
INVESTING IN THE TOPrS INVOLVES RISKS.
PLEASE SEE "RISK FACTORS" ON PAGE 6.
Per TOPrS Total
--------- -----
Public offering price.................... $25.00 $
Proceeds to ML Trust..................... $25.00 $
If you purchase the TOPrS and settlement occurs after _________, 1999, you
will be required to pay accumulated distributions on the aggregate liquidation
amount of your TOPrS at a rate of ___% per year from that date. Expenses of the
offering and underwriting commissions of $____ per TOPrS, or $_____ per TOPrS
for sales of more than 10,000 TOPrS to a single purchaser, will be paid by
ML&Co.
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.
------------------------------
Merrill Lynch & Co.
------------------------------
The date of this prospectus is , 199 .
/SM/"TOPrS" and "Trust Originated Preferred Securities" are service marks owned
by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY INFORMATION--Q&A.......................................................3
RISK FACTORS...................................................................6
MERRILL LYNCH & CO., INC......................................................10
USE OF PROCEEDS...............................................................10
RATIO OF EARNINGS TO FIXED CHARGES............................................11
MERRILL LYNCH PREFERRED CAPITAL TRUST VI......................................12
MERRILL LYNCH PREFERRED FUNDING VI, L.P......................................14
DESCRIPTION OF THE TOPrS......................................................16
DESCRIPTION OF THE TRUST GUARANTEE............................................28
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES...........................31
DESCRIPTION OF THE PARTNERSHIP GUARANTEE......................................44
UNITED STATES FEDERAL INCOME TAXATION.........................................47
UNDERWRITING..................................................................51
WHERE YOU CAN FIND MORE INFORMATION...........................................52
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.............................53
LEGAL MATTERS.................................................................53
EXPERTS.......................................................................54
INDEX OF CERTAIN DEFINED TERMS................................................55
INDEX TO FINANCIAL STATEMENTS................................................F-1
INDEPENDENT AUDITORS' REPORT.................................................F-2
NOTES TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING VI, L.P............F-3
INDEPENDENT AUDITORS' REPORT.................................................F-4
NOTES TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST VI...........F-5
<PAGE>
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand the TOPrS. This summary
may not contain all the information that may be important to you. You should
carefully read this prospectus to fully understand the terms of the TOPrS, as
well as the tax and other considerations that should be important to you in
making a decision about whether to invest in the TOPrS. You should pay special
attention to the "Risk Factors" section to determine whether an investment in
the TOPrS is appropriate for you.
In this prospectus:
o references to "ML&Co.", "we", "us" and "our" are to Merrill Lynch &
Co., Inc.,
o references to "ML Trust" are to Merrill Lynch Capital Preferred Trust
VI, and
o references to "ML Partnership" are to Merrill Lynch Preferred Funding
VI, L.P.
WHAT ARE THE TOPrS?
Each TOPrS is a preferred interest in the assets of ML Trust. We will own
all of the common securities of ML Trust. The sole assets of ML Trust will be
the partnership preferred securities issued by ML Partnership, which represent
preferred ownership interests in the assets of ML Partnership. ML Partnership
will use substantially all of the proceeds from the sale of its partnership
preferred securities and our capital contribution as general partner of ML
Partnership to purchase debentures from us and one or more of our affiliates.
WHAT IS THE ML TRUST?
ML Trust is a business trust established under Delaware law that exists for
the sole purpose of issuing the TOPrS and investing the proceeds and engaging in
incidental activities.
WHAT IS ML PARTNERSHIP?
ML Partnership is a limited partnership established under Delaware law. The
assets of ML Partnership will be:
o the debentures issued by us and our affiliates; and
o cash and securities not issued by us or our affiliates.
We are the general partner of ML Partnership.
WHAT DISTRIBUTIONS WILL I RECEIVE ON THE TOPrS?
The TOPrS provide for a quarterly cash distribution at the rate of % or
$___ per year for each TOPrS you own. Distributions are payable on each ,
, and , beginning , .
Distributions will accumulate from the date ML Trust originally issues the
TOPrS. Because the sole assets of ML Trust will be the partnership preferred
securities of ML Partnership and substantially all of ML Partnership's assets
will be the debentures issued by us and our affiliates, ML Trust's ability to
pay distributions on the TOPrS is ultimately dependent upon our and our
affiliates' ability to make interest payments on those debentures. If we or our
affiliates exercise our right to defer making an interest payment on our
debentures then held by ML Partnership, ML Partnership will not be able to pay
any distributions on its preferred partnership securities and ML Trust will not
be able to pay quarterly distributions to you until we resume making interest
payments on those debentures.
In addition, ML Partnership is required to pay dividends on its partnership
preferred securities only if they are declared by us as general partner of ML
Partnership. As a result, you may not receive any distributions on your TOPrS if
ML Trust does not receive dividends on the partnership preferred securities.
WHAT ARE THE DEBENTURES?
The debentures are long term loans made by ML Partnership to us or our
affiliates from time to time. These debentures will be substantially all of ML
Partnership's assets. The debentures that we issue to ML Partnership will be our
senior unsecured obligations and will rank equally with all of our other senior
unsecured obligations. The debentures issued by our affiliates to ML Partnership
will be unsecured obligations of our affiliates and we will guarantee those
obligations on a subordinated basis. We and our affiliates may exercise our
right to defer interest payments on the debentures for a period of not more than
six consecutive calendar quarters.
CAN THE TOPrS BE REDEEMED?
Yes. If ML Partnership redeems the partnership preferred securities, each
TOPrS will be redeemed for $25 plus any accumulated and unpaid distributions to
the date of redemption. ML Partnership can redeem the partnership preferred
securities in whole or in part from time to time on or after .
The trustees of ML Trust can elect to liquidate ML Trust and distribute the
partnership preferred securities to you if at any time the specified changes in
U.S. tax law or U.S. investment company law described in this prospectus occur.
Additionally, we, as general partner of ML Partnership, have the right to
redeem the partnership preferred securities and you will receive cash from the
subsequent automatic redemption of the TOPrS if at any time the specified
changes in U.S. tax law or U.S. investment company law described in this
prospectus occur.
Neither the partnership preferred securities nor the TOPrS can be redeemed
at any time at the option of their holders. Neither the TOPrS nor the
partnership preferred securities have any scheduled maturity.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, an investment in the TOPrS is subject to risk. Please refer to the
section entitled "Risk Factors" in this prospectus for a description of these
risks.
WHAT HAPPENS IF ML TRUST DOESN'T PAY DISTRIBUTIONS ON THE TOPrS?
If you have not received a distribution on the TOPrS for six consecutive
calendar quarters, during that period until all scheduled quarterly
distributions are paid or set aside for payment to you, we may not declare or
pay dividends on, acquire, or make a liquidation payment with respect to, any of
our outstanding capital stock. In addition, we will not permit any of our
finance subsidiaries to make any dividend payment on, any distribution with
respect to, any acquisition of or any liquidation payment with respect to, any
of their outstanding preferred securities.
This limitation prevents us from paying cash or other dividends to the
shareholders of our capital stock if payments are not being made on the TOPrS,
any debenture issued by us or our affiliates and held by ML Partnership or the
guarantees. However, these provisions will not restrict:
o our ability to pay dividends or distributions on our capital stock in
shares of, or options, warrants or rights to subscribe for or purchase
shares of our capital stock;
o our ability to convert or exchange our common stock of one class into
our common stock of another class;
o our ability to redeem or purchase any rights under a rights agreement
described in this prospectus or issue preferred stock under those
rights; and
o the ability of us and our affiliates to purchase our capital stock in
connection with transactions for the account of customers of ours or
our affiliates or in connection with the distribution or trading of
our capital stock.
WHAT ARE THE GUARANTEES?
We will guarantee, to the extent described in this prospectus:
o declared distributions by ML Partnership to ML Trust and distribution
of quarterly payments on the TOPrS by ML Trust to you to the extent ML
Trust receives distributions on the partnership preferred securities;
o the redemption amount due to you if ML Trust redeems the TOPrS;
o the liquidation amount of the TOPrS if ML Trust is liquidated; and
o interest payments on debentures issued by our affiliates and held by
ML Partnership.
However, these guarantees do not apply to either:
o current distributions on the partnership preferred securities unless
and until ML Partnership declares distributions out of funds legally
available for payment; or
o liquidating distributions on the partnership preferred securities
unless ML Partnership has assets available for payment.
If ML Partnership does not declare distributions on the partnership
preferred securities, ML Trust will not have sufficient funds to pay
distributions on the TOPrS. In that case, you will have no right to receive
those distributions because our guarantee does not cover the non-payment of
distributions on the partnership preferred securities unless the distributions
are declared.
Our obligations under the guarantees are subordinate and junior in right of
payment to all other of our liabilities and rank equally with our most senior
preferred stock and similar guarantees of ours with respect to previous and
future issues of TOPrS and other preferred stock by any other of our finance
subsidiaries.
WHAT HAPPENS IF ML TRUST IS LIQUIDATED?
If ML Trust is liquidated, other than in connection with any change in U.S.
tax or investment company law described above, for each TOPrS you own, you will
be entitled to receive $25 plus any accumulated and unpaid distributions per
TOPrS.
DO I HAVE VOTING RIGHTS?
Generally, you will not have any voting rights, except under the limited
circumstances described below. The holders of a majority of the TOPrS, however,
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the property trustee, or direct the exercise of any
trust or power conferred upon the property trustee.
IN WHAT FORM WILL THE TOPrS BE ISSUED?
The TOPrS will be issued in the form of a global certificate or
certificates registered in the name of Cede & Co., as nominee for The Depository
Trust Company also known as DTC. This means you will not receive a certificate
for your TOPrS. Your interests in the TOPrS will be evidenced by, and transfers
of the TOPrS will be effected only through, records maintained by the
participants in DTC.
CAN YOU TELL ME MORE ABOUT ML&CO.?
Merrill Lynch & Co., Inc. is a holding company. Our subsidiary and
affiliated companies provide investment, financing, insurance and related
products on a global basis. Our principal executive offices are located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281. Our
telephone number is (212) 449-1000. For information about us, see the section
"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 entitled "Where You Can Find More Information" in this prospectus.
WILL THE TOPrS BE LISTED ON AN EXCHANGE?
ML Trust has applied to list the TOPrS on the NYSE under the trading symbol
" ". If approved for listing, trading on the NYSE will begin within 30 days
after ML Trust issues the TOPrS. The listing of the TOPrS will not necessarily
ensure that a liquid trading market will be available for the TOPrS.
<PAGE>
RISK FACTORS
Your investment in the TOPrS will involve risks. You should carefully
consider the following discussion of risks before deciding whether an investment
in the TOPrS is suitable for you.
YOU WILL ONLY RECEIVE DISTRIBUTIONS IF DISTRIBUTIONS ON THE PARTNERSHIP
PREFERRED SECURITIES ARE DECLARED
ML Trust's ability to pay distributions on the TOPrS to you is dependent
upon its receipt of distributions on the partnership preferred securities. If we
or our affiliates defer or fail to make interest or principal payments on the
debentures and we fail to make guarantee payments on the guarantees, ML
Partnership will lack the funds necessary to pay distributions on the
partnership preferred securities. If ML Partnership does not pay current
distributions on the partnership preferred securities, either because we, as the
general partner, did not declare distributions to be made or because ML
Partnership lacks sufficient funds, ML Trust will not have funds to make current
distributions on the TOPrS. If ML Trust does not make payments to you on the
TOPrS, we will be restricted from, among other things, paying cash or certain
other dividends on our capital stock.
THERE MAY BE TAX CONSEQUENCES TO YOU IF WE FAIL TO PAY YOU DISTRIBUTIONS
As a holder of the TOPrS, each of which represents a preferred ownership
interest in the assets of ML Trust, even if ML Partnership fails to pay current
distributions on the partnership preferred securities, you will be required to
accrue income, for U.S. federal income tax purposes, on the cumulative deferred
distributions and accumulated interest allocable to your proportionate share of
the partnership preferred securities held by ML Trust. As a result, you will
recognize income for U.S. federal income tax purposes in advance of the receipt
of cash and will not receive the cash from ML Trust related to that distribution
if you dispose of your TOPrS before the record date for the date on which those
distributions are made.
YOU MAY NOT RECEIVE FULL DISTRIBUTIONS IF ML PARTNERSHIP HAS INSUFFICIENT INCOME
OR ASSETS
You are subject to the risk that the quarterly or liquidating distributions
paid on the TOPrS will not match the rate paid on the assets held by ML
Partnership, including the debentures and any other securities acquired by ML
Partnership in the future.
This mismatch could occur if:
o we, as the general partner of ML Partnership, in our sole discretion,
do not declare distributions on the partnership preferred securities
or if ML Partnership receives insufficient amounts from its
investments to pay the additional compounded distributions that will
accumulate on any unpaid distributions,
o ML Partnership reinvests the proceeds received from the assets it
initially holds upon their retirement or at their maturities in other
assets which do not generate income sufficient to pay full dividends
in respect of the partnership preferred securities at a rate of % per
annum, or
o ML Partnership invests in assets that are not guaranteed by us and
that cannot be liquidated by ML Partnership for an amount sufficient
to pay any distributions on the partnership preferred securities in
full or if ML Partnership does not make any distributions.
ML Trust will not have sufficient funds available to pay you full quarterly
or liquidating distributions on the TOPrS if ML Partnership lacks sufficient
funds to make quarterly or liquidating distributions on the partnership
preferred securities in full.
OUR OBLIGATIONS UNDER THE GUARANTEES AND OUR DEBENTURES ARE SUBORDINATED
Our obligations under the guarantees are unsecured and will rank in
priority of payment:
o subordinate and junior in right of payment to all of our other
liabilities; and
o equally with:
o any of our most senior preferred stock issued from time to time, and
o similar guarantees of ours with respect to previous and future issues
of TOPrS and other series of preferred stock by any of our finance
subsidiaries.
This means that our obligations under the guarantees will not be paid unless we
can satisfy in full all of our other obligations ranking senior to the
guarantees.
Our obligations under our debentures issued to ML Partnership are
subordinate and junior in right of payment to all of our senior indebtedness. At
December 25, 1998, we had outstanding senior indebtedness aggregating
approximately $75.4 billion which would have ranked senior to our obligations
under the guarantees and our debentures.
There are no terms in the TOPrS, the partnership preferred securities, the
guarantees or the debentures that limit our ability to incur additional
indebtedness, including indebtedness that ranks senior to the guarantees.
ML TRUST'S AND ML PARTNERSHIP'S INVESTMENTS ARE NOT DIVERSIFIED
Because the investments of ML Trust and ML Partnership are not diversified,
you are subject to a greater risk that their assets will not generate sufficient
income to pay current and liquidating distributions on the TOPrS and the
partnership preferred securities than you would with a vehicle whose investments
were diversified and less exposed to the risk that non-payment on any particular
investment asset would impair its ability to pay distributions to holders of its
capital stock.
REDEMPTION OF THE TOPrS OR THE PARTNERSHIP PREFERRED SECURITIES MAY AFFECT YOUR
RETURN
If your TOPrS are exchanged for the partnership preferred securities,
o the trading value of the partnership preferred securities may be lower
than the trading value of the TOPrS which may result in a lower return
upon your sale of the partnership preferred securities; and
o you may incur an additional tax liability in excess of what you
originally contemplated.
Your TOPrS may be redeemed for cash or you may receive the partnership
preferred securities in exchange for your TOPrS in the event that:
(1) a change in U.S. tax law occurs which causes:
o ML Trust to be subject to U.S. federal income tax on the
distributions it receives or accrues on the partnership preferred
securities;
o ML Partnership to be subject to U.S. federal income tax on the
income or interest payments it receives or accrues on the
investments it holds;
o ML Trust or ML Partnership to be subject to more than a minimal
amount of other taxes, duties or governmental charges; or
o interest payable by us or any of our affiliates on the debentures
then held by ML Partnership to not be deductible for U.S. federal
income tax purposes; or
(2) a change in U.S. investment company law occurs which requires ML Trust
or ML Partnership to register as an investment company.
Because you may receive partnership preferred securities upon the
occurrence of one of the events described above, in connection with your
investment decision with regard to the TOPrS, you are also making an investment
decision with regard to the partnership preferred securities. You should
carefully review all the information regarding the partnership preferred
securities contained in this prospectus.
ENFORCEMENT OF CERTAIN RIGHTS BY OR ON YOUR BEHALF IS LIMITED
The special representative's ability to take action on your behalf under
our guarantee of the partnership preferred securities is limited, and it is
uncertain that you would receive a distribution on the TOPrS even if the special
representative took any action or was successful in recovering funds under our
guarantee. This is because under no circumstances will the special
representative have authority to cause the general partner to declare
distributions on the partnership preferred securities. As a result, although the
special representative may be able to enforce ML Partnership's creditors' rights
to accelerate and receive payments in respect of our and our affiliates'
debenture and our guarantee of those debentures, rather than being required to
declare and make distributions on the partnership preferred securities, ML
Partnership would be entitled to reinvest those payments in additional
debentures of ours and our affiliates, subject to satisfying the reinvestment
criteria.
If at any time:
o you have not received a distribution on the TOPrS for six consecutive
calendar quarters;
o an event of default occurs and is continuing on any debenture issued
by us or our affiliates and then held by ML Partnership; and
o we default on our obligations under our guarantee of the TOPrS or the
partnership preferred securities;
then:
o you would rely on the enforcement by the property trustee of its
rights, as a holder of the partnership preferred securities, against
us, as guarantor of the partnership preferred securities, including
the right to direct the special representative to enforce
(1) ML Partnership's creditors' rights and other rights with respect
to our and our affiliate's debentures and our guarantee of those
debentures,
(2) the rights of the holders of the partnership preferred securities
under our guarantee of the partnership preferred securities, and
(3) the rights of the holders of the partnership preferred securities
to receive distributions, only if and to the extent declared out
of funds legally available for payment, on the partnership
preferred securities, and
o ML Trustee under our guarantee of the TOPrS will have the right to
enforce the terms of the guarantee.
YOU HAVE LIMITED VOTING RIGHTS
As a holder of the TOPrS you will have limited voting rights and will not
be entitled to vote to appoint, change, or to increase or decrease the number of
trustees of ML Trust. As holder of all of ML Trust's common securities, those
rights are ours exclusively.
THERE IS NO PRIOR MARKET FOR THE TOPrS
This series of TOPrS constitutes a new issue of securities with no
established trading market. ML Trust has applied to list the TOPrS on the NYSE.
There can be no assurance that an active market for the TOPrS will develop or be
sustained in the future on the NYSE. Although the underwriters have indicated to
us that they intend to make a market in the TOPrS, as permitted by applicable
laws and regulations, they are not obligated to do so and may discontinue any
market-making activities at any time without notice. Accordingly, there is no
assurance that a trading market for the TOPrS will exist and no assurance as to
the liquidity of any trading market.
We will only sell the TOPrS to those investors for whom the TOPrS are
considered suitable in light of their particular circumstances.
<PAGE>
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.
USE OF PROCEEDS
ML Trust will use the proceeds that it receives from the sale of the TOPrS
and its common securities to purchase the partnership preferred securities, and
those proceeds will be used by ML Partnership to invest in debentures and other
permitted investments. See "Description of the Partnership Preferred
Securities--Partnership Investments". We and our affiliates, the issuers of the
debentures, intend to use the net proceeds from the sale of the debentures for
general corporate purposes. Our general corporate purposes may include financing
the activities of our subsidiaries, financing our assets and those of our
subsidiaries, lengthening the average maturity of our borrowings and financing
acquisitions. Until we use the net proceeds from the sale of any of our
securities for general corporate purposes, we will use the net proceeds to
reduce our short-term indebtedness or for temporary investments. We expect that
we will, on a recurrent basis, engage in additional financings as the need
arises to finance our growth, through acquisitions or otherwise, or to lengthen
the average maturity of our borrowings. To the extent that TOPrS being purchased
for resale by MLPF&S are not resold, the aggregate proceeds that we and our
subsidiaries would receive would be reduced.
<PAGE>
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
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
</TABLE>
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI is a statutory business trust
formed under the Delaware Business Trust Act, as amended, pursuant to a
declaration of trust and the filing of a certificate of trust with the Secretary
of State of the State of Delaware on December 7, 1998; the declaration will be
amended and restated in its entirety substantially in the form filed as an
exhibit to the registration statement of which this prospectus is a part. The
declaration will be qualified as an indenture under the Trust Indenture Act of
1939, as amended. Upon issuance of the TOPrS, the purchasers of the TOPrS will
own all the TOPrS issued by ML Trust. See "Description of the TOPrS". ML&Co.
will acquire ML Trust's common securities in an amount equal to at least 3% of
the total capital of ML Trust. ML Trust will use all the proceeds derived from
the issuance of the TOPrS and the common securities (collectively, the "Trust
Securities") to purchase the partnership preferred securities from ML
Partnership and, accordingly, the assets of ML Trust will consist solely of the
partnership preferred securities. ML Trust exists for the exclusive purpose of:
o issuing the Trust Securities representing undivided beneficial
ownership interests in the assets of ML Trust,
o investing the gross proceeds of the Trust Securities in the
partnership preferred securities, and
o engaging in only those other activities necessary or incidental to the
foregoing purposes.
Under the declaration, there will initially be four trustees for ML Trust.
o Two regular trustees who will be individuals who are employees or
officers of or who are affiliated with ML&Co.
o A property trustee who will be a financial institution that is
unaffiliated with ML&Co. and is the indenture trustee for purposes of
compliance with the provisions of the Trust Indenture Act.
o The Delaware trustee who will be an entity that maintains its
principal place of business in the State of Delaware.
Initially, The Chase Manhattan Bank, a New York banking corporation, will
act as property trustee, and its affiliate, Chase Manhattan Bank Delaware, a
Delaware corporation, will act as Delaware trustee until, in each case, removed
or replaced by the holder of the common securities. For purposes of compliance
with the Trust Indenture Act, The Chase Manhattan Bank will also act as trustee
under the Trust Guarantee, as defined in this prospectus, as property trustee
under the declaration and as trustee under the indenture under which the ML&Co.
Debenture, as defined in this prospectus, is issued.
The property trustee will hold title to the partnership preferred
securities for the benefit of the holders of the Trust Securities, and the
property trustee will have the power to exercise all rights, powers and
privileges with respect to the partnership preferred securities under the
Amended and Restated Agreement of Limited Partnership to be entered into by
ML&Co. and ML Trust as the holder of the partnership preferred securities. In
addition, the property trustee will maintain exclusive control of the property
account which is a segregated non-interest bearing bank account to hold all
payments made in respect of the partnership preferred securities for the benefit
of the holders of the Trust Securities. The trust guarantee trustee will hold
the Trust Guarantee for the benefit of the holders of the TOPrS. ML&Co., as the
holder of all the common securities, will have the right to appoint, remove or
replace any of the trustees and to increase or decrease the number of trustees,
provided that at least one trustee shall be a Delaware trustee, at least one
trustee shall be the property trustee and at least one trustee shall be a
regular trustee. ML&Co. will pay all fees and expenses related to the
organization and operations of ML Trust, including any taxes, duties,
assessments or governmental charges of whatever nature imposed by the United
States or any other domestic taxing authority upon ML Trust, other than
withholding taxes, and the offering of the TOPrS and be responsible for all
debts and obligations of ML Trust, other than those obligations with respect to
the Trust Securities.
For so long as the TOPrS remain outstanding, ML&Co. will be obligated to:
o maintain 100% direct ownership of the common securities,
o cause ML Trust to remain a statutory business trust and not to
voluntarily dissolve, wind-up, liquidate or be terminated, except as
permitted by the declaration, and
o use its commercially reasonable efforts to ensure that ML Trust will
not be
(A) an investment company for purposes of the Investment Company Act
of 1940, as amended, or
(B) classified as other than a grantor trust for United States
Federal income tax purposes.
The rights of the holders of the TOPrS, including economic rights, rights
to information and voting rights, are as set forth in the declaration and the
Delaware Trust Act. See "Description of the TOPrS". The declaration and the
Trust Guarantee also incorporate by reference the terms of the Trust Indenture
Act.
The location of the principal executive office of ML Trust is c/o Merrill
Lynch & Co., Inc., World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281, and its telephone number is (212) 449-1000.
<PAGE>
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. is a limited partnership that was
formed under the Delaware Revised Uniform Limited Partnership Act, as amended,
on December 7, 1998 for the exclusive purposes of purchasing debt securities of
ML&Co. and wholly-owned subsidiaries of ML&Co. (the "Affiliate Investment
Instruments") and other permitted investments, with the proceeds from the sale
of partnership preferred securities to ML Trust and a capital contribution from
ML&Co. in exchange for the general partner interest in ML Partnership. Under the
certificate of limited partnership, as amended, and the limited partnership
agreement, ML&Co. is the sole general partner of ML Partnership. Upon the
issuance of the partnership preferred securities, which securities represent
limited partner interests in ML Partnership, ML Trust will be the sole limited
partner of ML Partnership. Contemporaneously with the issuance of the
partnership preferred securities, ML&Co. as general partner will contribute
capital to ML Partnership in an amount sufficient to establish its initial
capital account at an amount equal to at least 15% of the total capital of ML
Partnership.
ML Partnership is managed by ML&Co. as general partner and exists for the
sole purpose of:
o issuing its partnership interests,
o investing the proceeds from the sale of the partnership preferred
securities in Affiliate Investment Instruments and other eligible debt
securities, as described in this prospectus, and
o engaging in only those other activities necessary or incidental for
these purposes.
To the extent that aggregate payments to ML Partnership on its investments
exceed distributions accumulated or payable with respect to the partnership
preferred securities, ML Partnership may at times have excess funds which shall
be allocated to and may, in ML&Co.'s sole discretion, be distributed to ML&Co.
For so long as the partnership preferred securities remain outstanding,
ML&Co. will be obligated under the limited partnership agreement:
o to remain the sole general partner of ML Partnership and to maintain
100% direct ownership of the general partner's interest in ML
Partnership, which interest will at all times represent at least 1% of
the total capital of ML Partnership,
o to cause ML Partnership to remain a limited partnership and not to
voluntarily dissolve, liquidate, wind-up or be terminated, except as
permitted by the limited partnership agreement, and
o to use its commercially reasonable efforts to ensure that ML
Partnership will not be,
o an investment company for purposes of the Investment Company Act
or
o an association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes.
ML&Co. or the then general partner may transfer its obligations as general
partner to a wholly-owned direct or indirect subsidiary of ML&Co. provided that:
o the successor entity expressly accepts the transfer of the obligations
as general partner, and
o before any transfer, ML&Co. has received an opinion of nationally
recognized independent counsel to ML Partnership experienced in these
matters to the effect that:
(A) ML Partnership will be treated as a partnership for United States
Federal income tax purposes;
(B) any transfer would not cause ML Trust to be classified as an
association taxable as a corporation for United States Federal
income tax purposes;
(C) following any transfer, ML&Co. and the successor entity will be
in compliance with the Investment Company Act without being
subject to registration as an investment company; and
(D) any transfer will not adversely affect the limited liability of
the holders of the partnership preferred securities.
The rights of the holders of the partnership preferred securities,
including economic rights, rights to information and voting rights, are set
forth in the limited partnership agreement and the Delaware Limited Partnership
Act. See "Description of the Partnership Preferred Securities".
The limited partnership agreement provides that the general partner will
have liability for the fees and expenses of ML Partnership, including any taxes,
duties, assessments or governmental charges of whatever nature imposed by the
United States or any other domestic taxing authority upon ML Partnership, other
than withholding taxes, and be responsible for all debts and obligations of ML
Partnership, other than with respect to the partnership preferred securities.
Under Delaware law, assuming a limited partner in a Delaware limited partnership
such as ML Partnership, i.e., a holder of the partnership preferred securities,
does not participate in the control of the business of the limited partnership,
that limited partner will not be personally liable for the debts, obligations
and liabilities of the limited partnership, whether arising in contract, tort or
otherwise, solely by reason of being a limited partner of the limited
partnership, subject to any obligation such limited partner may have to repay
any funds that may have been wrongfully distributed to it. ML Partnership's
business and affairs will be conducted by ML&Co. as general partner.
The location of the principal executive offices of ML Partnership is c/o
Merrill Lynch & Co., Inc., World Financial Center, North Tower, 250 Vesey
Street, New York, New York 10281 and its telephone number is (212) 449-1000.
<PAGE>
DESCRIPTION OF THE TOPrS
The TOPrS will be issued under the terms of the declaration. The
declaration will be qualified as an indenture under the Trust Indenture Act. The
property trustee, The Chase Manhattan Bank, will act as trustee for the TOPrS
under the declaration for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the TOPrS will include those stated in the
declaration and those made part of the declaration by the Trust Indenture Act.
The following summary of the material terms and provisions of the TOPrS is not
complete and is subject to, and qualified in its entirety by reference to, the
declaration, a copy of which is filed as an exhibit to the registration
statement of which this prospectus is a part, the Delaware Trust Act and the
Trust Indenture Act.
The TOPrS will be issued in fully registered form without coupons. The
TOPrS will not be issued in bearer form. See "--Book-Entry Only Issuance--The
Depository Trust Company".
The declaration authorizes the regular trustees of ML Trust to issue the
Trust Securities, which represent undivided beneficial ownership interests in
the assets of ML Trust. Title to the partnership preferred securities will be
held by the property trustee for the benefit of the holders of the Trust
Securities.
The declaration does not permit ML Trust to:
o acquire any assets other than the partnership preferred securities,
o issue any securities other than the Trust Securities, or
o incur any indebtedness.
The payment of distributions out of money held by ML Trust, and payments out of
money held by ML Trust upon redemption of the TOPrS or liquidation of ML Trust,
are guaranteed by ML&Co. to the extent described under "Description of the Trust
Guarantee".
The Trust Guarantee will be held by The Chase Manhattan Bank, the trust
guarantee trustee, for the benefit of the holders of the TOPrS. The Trust
Guarantee does not cover payment of distributions when ML Trust does not have
sufficient available funds to pay such distributions. In any event of
non-payment, holders of the TOPrS will have the remedies described below under
"--Trust Enforcement Events".
DISTRIBUTIONS
The distribution rate on the TOPrS will be fixed at a rate per annum of %
of the stated liquidation amount of $25 per TOPrS and will be paid if, as and
when ML Trust has funds available for distribution. Distributions not paid on
the scheduled payment date will accumulate and compound quarterly at a rate per
annum equal to %. The term "distribution" as used in this prospectus includes
any compounded amounts unless otherwise stated or the context otherwise
requires. The amount of distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months.
Distributions on the TOPrS will be cumulative, will accumulate from the
date of initial issuance and will be payable quarterly in arrears on each
, , and , commencing , 199
if, as and when available for payment, by the property trustee, except as
otherwise described below. If distributions are not paid when scheduled, the
accumulated distributions shall be paid to the holders of record of the TOPrS as
they appear on the books and records of ML Trust on the record date with respect
to the payment date for the TOPrS which corresponds to the payment date fixed by
ML Partnership with respect to the payment of cumulative distributions on the
partnership preferred securities.
Distributions on the TOPrS will be made to the extent that ML Trust has
funds available for the payment of the distributions in the property account.
Amounts available to ML Trust for distribution to the holders of the TOPrS will
be limited to payments received by ML Trust from ML Partnership with respect to
the partnership preferred securities or from ML&Co. on ML&Co.'s guarantee on the
TOPrS (the "Trust Guarantee") or its guarantee on the partnership preferred
securities (the "Partnership Guarantee") as described in this prospectus.
Distributions on the partnership preferred securities will be paid only if, as
and when declared in the sole discretion of ML&Co., as the general partner of ML
Partnership. Under the limited partnership agreement, ML&Co. is not obligated to
declare distributions on the partnership preferred securities at any time,
including upon or following a Partnership Enforcement Event. See "Description of
Partnership Preferred Securities--Partnership Enforcement Events".
The assets of ML Partnership will consist only of Affiliate Investment
Instruments, which initially will be the debentures issued by ML&Co. and another
wholly-owned subsidiary of ML&Co., and other eligible debt securities. To the
extent that the issuers and, where applicable, ML&Co., as guarantor, of the
securities in which ML Partnership invests defer or fail to make any payment in
respect of the securities or, if applicable, the guarantees, ML Partnership will
not have sufficient funds to pay and will not declare or pay distributions on
the partnership preferred securities. If ML Partnership does not declare and pay
distributions on the partnership preferred securities out of funds legally
available for distribution, ML Trust will not have sufficient funds to make
distributions on the TOPrS, in which event the Trust Guarantee will not apply to
those distributions until ML Trust has sufficient funds available to pay those
distributions. See "Description of the Partnership Preferred
Securities--Distributions" and "Description of The Trust Guarantee". In
addition, ML Partnership may not have sufficient funds to pay current or
liquidating distributions on the partnership preferred securities if:
o at any time that ML Partnership is receiving current payments in
respect of the securities held by ML Partnership, including the
debentures, ML&Co, in its sole discretion, does not declare
distributions on the partnership preferred securities and ML
Partnership receives insufficient amounts to pay the additional
compounded distributions that will accumulate in respect of the
partnership preferred securities,
o ML Partnership reinvests the proceeds received in respect of the
debentures upon their retirement or at their maturities in Affiliate
Investment Instruments that do not generate income in an amount that
is sufficient to pay full distributions in respect of the partnership
preferred securities, or
o ML Partnership invests in debt securities of Investment Affiliates, as
defined below, that are not guaranteed by ML&Co. and that cannot be
liquidated by ML Partnership for an amount sufficient to pay the
distributions in full.
Distributions on the TOPrS will be payable to their holders as they appear
on the books and records of ML Trust on the relevant record dates, which will be
one Business Day, as defined below, before the relevant payment dates. These
distributions will be paid through the property trustee who will hold amounts
received in respect of the partnership preferred securities in the property
account for the benefit of the holders of the Trust Securities. Subject to any
applicable laws and regulations and the provisions of the declaration, each
payment will be made as described under "--Book-Entry Only Issuance--The
Depository Trust Company" below. In the event that the TOPrS do not remain in
book-entry only form, the relevant record dates shall be the 15th day of the
month of the relevant payment dates. In the event that any date on which
distributions are payable on the TOPrS is not a Business Day, payment of the
distribution payable on that date will be made on the next succeeding day which
is a Business Day, without any interest or other payment in respect of the
distribution subject to delay, except that, if that Business Day falls in the
next succeeding calendar year, the relevant payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on that date. A "Business Day" shall mean any day other than a day on
which banking institutions in The City of New York are authorized or required by
law to close.
TRUST ENFORCEMENT EVENTS
The occurrence, at any time, of:
o the non-payment of distributions on the TOPrS for six consecutive
quarterly distribution periods,
o a default by ML&Co. in respect of any of its obligations under the
Trust Guarantee, or
o a Partnership Enforcement Event under the limited partnership
agreement,
will constitute an enforcement event under the declaration with respect to the
Trust Securities (a "Trust Enforcement Event"); provided, that under the
declaration, the holder of the common securities will be deemed to have waived
any Trust Enforcement Event with respect to the common securities until all
Trust Enforcement Events with respect to the TOPrS have been cured, waived or
otherwise eliminated. Until any Trust Enforcement Event with respect to the
TOPrS have been so cured, waived or otherwise eliminated, the property trustee
will be deemed to be acting solely on behalf of the holders of the TOPrS and
only the holders of the TOPrS will have the right to direct the property trustee
with respect to certain matters under the declaration and, in the case of a
Partnership Enforcement Event, the special representative with respect to
certain matters under the limited partnership agreement. See "Description of the
Partnership Preferred Securities--Partnership Enforcement Events" for a
description of the events which will trigger the occurrence of a Partnership
Enforcement Event.
Upon the occurrence of a Trust Enforcement Event,
o the property trustee, as the holder of the partnership preferred
securities, shall have the right to enforce the terms of the
partnership preferred securities, including the right to direct the
special representative to enforce:
o ML Partnership's creditors' rights and other rights with respect to
the Affiliate Investment Instruments and ML&Co.'s guarantee of the
Affiliate Investment Instruments (the "Investment Guarantees", and
together with the Trust Guarantee and the Partnership Guarantee, the
"Guarantees"),
o the rights of the holders of the partnership preferred securities
under the Partnership Guarantee, and
o the rights of the holders of the partnership preferred securities to
receive distributions on the partnership preferred securities, only if
and to the extent declared out of funds legally available for the
payment of distributions, and
o the trust guarantee trustee shall have the right to enforce the terms
of the Trust Guarantee, including the right to enforce the restriction
on the payment of distributions by ML&Co. and its finance subsidiaries
on its securities as described in the Trust Guarantee.
If the property trustee fails to enforce its rights under the partnership
preferred securities after a holder of the TOPrS has made a written request,
that holder may directly institute a legal proceeding against ML Partnership and
the special representative to enforce the property trustee's rights under the
partnership preferred securities without first instituting any legal proceeding
against the property trustee, ML Trust or any other person or entity. In
addition, for so long as ML Trust holds any partnership preferred securities, if
the special representative fails to enforce its rights on behalf of ML
Partnership under the Affiliate Investment Instruments after a holder of the
TOPrS has made a written request, any holder may on behalf of ML Partnership
directly institute a legal proceeding against the Investment Affiliates under
the Affiliate Investment Instruments, without first instituting any legal
proceeding against the property trustee, ML Trust, the special representative or
ML Partnership. In any event, for so long as ML Trust is the holder of any
partnership preferred securities, if a Trust Enforcement Event has occurred and
is continuing and such event is attributable to the failure of an Investment
Affiliate to make any required payment when due on any Affiliate Investment
Instrument or the failure of ML&Co. to make any required payment when due on any
Investment Guarantee, then a holder of the TOPrS may on behalf of ML Partnership
directly institute a proceeding against the Investment Affiliate with respect to
any Affiliate Investment Instrument or against ML&Co. with respect to any the
Investment Guarantee, in each case for enforcement of payment.
Under no circumstances, however, shall the special representative have
authority to cause ML&Co to declare distributions on the partnership preferred
securities. As a result, although the special representative may be able to
enforce ML Partnership's creditors' rights to accelerate and receive payments in
respect of the Affiliate Investment Instruments and the Investment Guarantees,
subject to satisfying the reinvestment criteria described under "Description of
the Partnership Preferred Securities--Partnership Investments", ML Partnership
would be entitled to reinvest any payments in additional Affiliate Investment
Instruments and other eligible debt securities, rather than declaring and making
distributions on the partnership preferred securities.
ML&Co. and ML Trust are each required to file annually with the property
trustee an officer's certificate as to its compliance with all conditions and
obligations under the declaration.
MANDATORY REDEMPTION
At the option of ML&Co., ML Partnership may redeem the partnership
preferred securities, in whole or in part, at any time on or after ,
or at any time in certain circumstances upon the occurrence of a Partnership
Special Event. Upon the redemption of the partnership preferred securities
either at the option of ML&Co. or under to a Partnership Special Event, the
proceeds from the repayment shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the partnership
preferred securities so redeemed at an amount per Trust Security equal to $25
plus accumulated and unpaid distributions; provided, that holders of the Trust
Securities shall be given not less than 30 nor more than 60 days notice of any
redemption. See "Description of the Partnership Preferred Securities--General"
and "--Optional Redemption".
TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Trust Tax Event or a Trust Investment Company Event
(each as defined below, and each, a "Trust Special Event") occurs and is
continuing, the regular trustees shall, unless the partnership preferred
securities are redeemed in the limited circumstances described below, within 90
days following the occurrence of such Trust Special Event elect to either:
(1) dissolve ML Trust upon not less than 30 nor more than 60 days
notice with the result that, after satisfaction of creditors of
ML Trust, if any, partnership preferred securities would be
distributed on a pro rata basis to the holders of the TOPrS and
the common securities in liquidation of the holders' interests in
ML Trust; provided, however, that if at the time there is
available to ML Trust the opportunity to eliminate, within the
90-day period, the Trust Special Event by taking some ministerial
action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which in the sole judgment
of ML&Co. has or will cause no adverse effect on ML Trust, ML
Partnership, ML&Co. or the holders of the Trust Securities and
will involve no material cost, ML Trust will pursue that measure
in lieu of dissolution or
(2) cause the TOPrS to remain outstanding, provided that in the case
of this clause (2), ML&Co. shall pay any and all expenses
incurred by or payable by ML Trust attributable to ML Trust
Special Event.
Furthermore, if in the case of the occurrence of a Trust Tax Event, the regular
trustees have received an opinion of nationally recognized independent tax
counsel experienced in these matters that there is more than an insubstantial
risk that interest payable by one or more of the Investment Affiliates with
respect to the debentures issued by any Investment Affiliate is not, or will not
be, deductible by any Investment Affiliate for United States Federal income tax
purposes even if the partnership preferred securities were distributed to the
holders of the Trust Securities in liquidation of the holders' interests in ML
Trust as described above, then ML&Co. shall have the right, within 90 days
following the occurrence of the Trust Tax Event, to elect to cause ML
Partnership to redeem the partnership preferred securities in whole, but not in
part, for cash upon not less than 30 nor more than 60 days notice and promptly
following any redemption, the Trust Securities will be redeemed by ML Trust at
the redemption price.
"Trust Tax Event" means that ML&Co. shall have requested and received and
shall have delivered to the Regular Trustees an opinion of nationally recognized
independent tax counsel experienced in these matters to the effect that there
has been:
o an amendment to, change in or announced proposed change in the laws,
or any regulations under those laws of the United States or any
political subdivision or taxing authority of that jurisdiction,
o a judicial decision interpreting, applying, or clarifying these laws
or regulations,
o an administrative pronouncement or action that represents an official
position, including a clarification of an official position, of the
governmental authority or regulatory body making the administrative
pronouncement or taking any action, or
o a threatened challenge asserted in connection with an audit of ML&Co.
or any of its subsidiaries, ML Partnership, or ML Trust, or a
threatened challenge asserted in writing against any other taxpayer
that has raised capital through the issuance of securities that are
substantially similar to the debentures, the partnership preferred
securities, or the TOPrS, which amendment or change is adopted or
which proposed change, decision or pronouncement is announced or which
action, clarification or challenge occurs on or after the date of this
prospectus (collectively a "Tax Action"), which Tax Action relates to
any of the items described in (1) through (3) below, and that
following the occurrence of any Tax Action there is more than an
insubstantial risk that:
(1) ML Trust is, or will be, subject to United States federal income
tax with respect to income accrued or received on the partnership
preferred securities,
(2) ML Trust is, or will be, subject to more than a minimal amount of
other taxes, duties or other governmental charges or
(3) interest payable by an Investment Affiliate with respect to the
Affiliate Investment Instrument issued by the Investment
Affiliate is not, or will not be, deductible by the Investment
Affiliate for United States Federal income tax purposes.
Recently, the Internal Revenue Service asserted that the interest payable
on a security issued in circumstances with certain similarities to the issuance
of the debentures issued by the Investment Affiliates to ML Partnership was not
deductible for United States Federal income tax purposes. The taxpayer in that
case has filed a petition in the United States Tax Court challenging the IRS's
position on this matter. If this matter were to be litigated and the Tax Court
were to sustain the IRS's position on this matter, the judicial decision could
constitute a Trust Tax Event, which could result in an early redemption of the
TOPrS.
"Trust Investment Company Event" means that ML&Co. shall have requested and
received and shall have delivered to the regular trustees an opinion of
nationally recognized independent legal counsel experienced in these matters to
the effect that as a result of the occurrence on or after the date of this
prospectus of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in Investment Company Act Law"), ML
Trust is or will be considered an investment company which is required to be
registered under the Investment Company Act.
If the partnership preferred securities are distributed to the holders of
the TOPrS, ML&Co. will use its best efforts to cause the partnership preferred
securities to be listed on the NYSE or on any other national securities exchange
or similar organization as the TOPrS are then listed or quoted.
On the date fixed for any distribution of partnership preferred securities,
upon dissolution of ML Trust,
o the Trust Securities will no longer be deemed to be outstanding, and
o certificates representing the Trust Securities will be deemed to
represent the partnership preferred securities having a liquidation
preference equal to the stated liquidation amount of the Trust
Securities until the certificates are presented to ML&Co. or its agent
for transfer or reissuance.
There can be no assurance as to the market price for the partnership
preferred securities which may be distributed in exchange for TOPrS if a
dissolution and liquidation of ML Trust were to occur. Accordingly, the
partnership preferred securities which an investor may subsequently receive on
dissolution and liquidation of ML Trust may trade at a discount to the price of
the TOPrS exchanged.
REDEMPTION PROCEDURES
ML Trust may not redeem fewer than all of the outstanding TOPrS unless all
accumulated and unpaid distributions have been paid on all TOPrS for all
quarterly distribution periods terminating on or before the date of redemption.
If ML Trust gives a notice of redemption in respect of the TOPrS, which
notice will be irrevocable, and if ML&Co. has paid to the property trustee a
sufficient amount of cash in connection with the related redemption of the
partnership preferred securities, then, by 12:00 noon, New York City time, on
the redemption date, ML Trust will irrevocably deposit with DTC funds sufficient
to pay the amount payable on redemption of all book-entry certificates and will
give DTC irrevocable instructions and authority to pay the redemption amount to
holders of the TOPrS. See "--Book-Entry Only Issuance--The Depository Trust
Company". If notice of redemption shall have been given and funds are deposited
as required, then upon the date of deposit, all rights of holders of any TOPrS
so called for redemption will cease, except the right of the holders of those
TOPrS to receive the redemption price, but without interest. In the event that
any date fixed for redemption of the TOPrS is not a Business Day, then payment
of the amount payable on that date will be made on the next succeeding day which
is a Business Day, without any interest or other payment in respect of the
amount payable subject to delay, except that, if that Business Day falls in the
next calendar year, the payment will be made on the immediately preceding
Business Day. In the event that payment of the redemption price in respect of
the TOPrS is improperly withheld or refused and not paid either by ML Trust or
by ML&Co. under the Trust Guarantee described under "Description of the Trust
Guarantee", distributions on the TOPrS will continue to accumulate from the
original redemption date to the date of payment.
In the event that fewer than all of the outstanding TOPrS are to be
redeemed, the TOPrS will be redeemed in accordance with the procedures of DTC.
See "--Book-Entry Only Issuance--The Depository Trust Company". In the event
that the TOPrS do not remain in book-entry only form and fewer than all of the
outstanding TOPrS are to be redeemed, the TOPrS shall be redeemed on a pro rata
basis or pursuant to the rules of any securities exchange on which the TOPrS are
listed.
Subject to the foregoing and applicable law, including, without limitation,
United States Federal securities laws, ML&Co. or its subsidiaries may at any
time and from time to time purchase outstanding TOPrS by tender, in the open
market or by private agreement.
SUBORDINATION OF THE COMMON SECURITIES
Payment of amounts upon liquidation of the Trust Securities shall be made
pro rata based on the liquidation amount of the Trust Securities; provided,
however, that upon:
o the occurrence of an event of default by an Investment Affiliate,
including ML&Co., under any Affiliate Investment Instrument, or
o default by ML&Co. on any of its obligations under any guarantee
described in this prospectus, the holders of the TOPrS will have a
preference over the holders of the common securities with respect to
payments upon liquidation of ML Trust.
In the case of any Trust Enforcement Event, the holder of the common
securities will be deemed to have waived the Trust Enforcement Event until all
Trust Enforcement Events with respect to the TOPrS have been cured, waived or
otherwise eliminated. Until all Trust Enforcement Events with respect to the
TOPrS have been so cured, waived or otherwise eliminated, the property trustee
shall act solely on behalf of the holders of the TOPrS and not on behalf of the
holder of the common securities, and only the holders of the TOPrS will have the
right to direct the property trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of ML Trust, the holders of the TOPrS will be entitled
to receive out of the assets of ML Trust, after satisfaction of liabilities to
creditors, distributions in cash or other immediately available funds in an
amount equal to the aggregate of the stated liquidation amount of $25 per TOPrS
plus accumulated and unpaid distributions to the date of payment, unless, in
connection with ML Trust's liquidation, partnership preferred securities have
been distributed on a pro rata basis to the holders of the Trust Securities.
If, upon ML Trust's liquidation, the liquidation distribution can be paid
only in part because ML Trust has insufficient assets available to pay in full
the aggregate liquidation distribution, then the amounts payable directly by ML
Trust on the TOPrS shall be paid on a pro rata basis. The holders of the common
securities will be entitled to receive distributions upon liquidation pro rata
with the holders of the TOPrS, except in the limited circumstances described
above under "--Subordination of the Common Securities".
Under to the declaration, ML Trust shall terminate:
(1) upon the bankruptcy of ML&Co.,
(2) upon the filing of a certificate of dissolution or the equivalent with
respect to ML&Co., the filing of a certificate of cancellation with
respect to ML Trust after having obtained the consent of at least a
majority in liquidation amount of the Trust Securities, voting
together as a single class, to file such certificate of cancellation,
or the revocation of the charter of ML&Co. and the expiration of 90
days after the date of revocation without reinstatement,
(3) upon the distribution of all of the partnership preferred securities
upon the occurrence of a Trust Special Event,
(4) upon the entry of a decree of a judicial dissolution of ML&Co. or ML
Trust, or
(5) upon the redemption of all the Trust Securities.
VOTING RIGHTS
Except as described in this prospectus, under the Delaware Trust Act, the
Trust Indenture Act and under "Description of The Trust Guarantee--Amendments
and Assignment", and as otherwise required by law and the declaration, the
holders of the TOPrS will have no voting rights.
Subject to the requirement of the property trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in liquidation amount of the TOPrS have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the property
trustee, or direct the exercise of any trust or power conferred upon the
property trustee under the declaration, including the right to direct the
property trustee, as holder of the partnership preferred securities, to:
o exercise the remedies available to it under the limited partnership
agreement as a holder of the partnership preferred securities,
including the right to direct the special representative to exercise
its rights in the manner described above under "--Trust Enforcement
Events", and
o consent to any amendment, modification, or termination of the limited
partnership agreement or the partnership preferred securities where
consent is required; provided, however, that where a consent or action
under the limited partnership agreement would require the consent or
act of the holders of more than a majority of the aggregate
liquidation preference of partnership preferred securities affected,
only the holders of the percentage of the aggregate stated liquidation
amount of the Trust Securities which is at least equal to the
percentage required under the limited partnership agreement may direct
the property trustee to give consent or take action on behalf of ML
Trust. See "Description of the Partnership Preferred
Securities--Voting Rights".
The property trustee shall notify all holders of the TOPrS of any notice of
any Partnership Enforcement Event received from ML&Co., as general partner with
respect to the partnership preferred securities and the Affiliate Investment
Instruments. The notice shall state that the Partnership Enforcement Event also
constitutes a Trust Enforcement Event. Except with respect to directing the
time, method, and place of conducting a proceeding for a remedy as described
above, the property trustee shall be under no obligation to take any of the
actions described in immediately preceding clauses above unless the property
trustee has obtained an opinion of independent tax counsel to the effect that as
a result of that action, ML Trust will not fail to be classified as a grantor
trust for United States Federal income tax purposes and that after that action
each holder of Trust Securities will continue to be treated as owning an
undivided beneficial ownership interest in the partnership preferred securities.
A waiver of a Partnership Enforcement Event with respect to the partnership
preferred securities held by the property trustee will constitute a waiver of
the corresponding Trust Enforcement Event.
Any required approval or direction of holders of the TOPrS may be given at
a separate meeting of holders of the TOPrS convened for that purpose, at a
meeting of all of the holders of Trust Securities or pursuant to written
consent. The regular trustees will cause a notice of any meeting at which
holders of the TOPrS are entitled to vote, or of any matter upon which action by
written consent of the holders is to be taken, to be mailed to each holder of
record of the TOPrS. Each notice will include a statement setting forth the
following information:
(1) the date of the meeting or the date by which any action is to be
taken;
(2) a description of any resolution proposed for adoption at the meeting
on which the holders are entitled to vote or of the matter upon which
written consent is sought; and
(3) instructions for the delivery of proxies or consents.
No vote or consent of the holders of the TOPrS will be required for ML Trust to
redeem and cancel the TOPrS or distribute partnership preferred securities in
accordance with the declaration.
Notwithstanding that holders of the TOPrS are entitled to vote or consent
under any of the circumstances described above, any of the Trust Securities that
are beneficially owned at that time by ML&Co. or any entity directly or
indirectly controlled by, or under direct or indirect common control with,
ML&Co., except for TOPrS purchased or acquired by ML&Co. or its affiliates in
connection with transactions effected by or for the account of customers of
ML&Co. or any of its subsidiaries or in connection with the distribution or
trading of the TOPrS, shall not be entitled to vote or consent and shall, for
purposes of any vote or consent, be treated as if the Trust Securities were not
outstanding; provided, however, that persons, other than affiliates of ML&Co.,
to whom ML&Co. or any of its subsidiaries have pledged the TOPrS may vote or
consent with respect to the pledged TOPrS pursuant to the terms of the pledge.
The procedures by which holders of the TOPrS represented by the global
certificates may exercise their voting rights are described below. See
"--Book-Entry Only Issuance--The Depository Trust Company".
Holders of the TOPrS will have no rights to appoint or remove the regular
trustees, who may be appointed, removed or replaced solely by ML&Co., as the
holder of all of the common securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF ML TRUST
ML Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. ML Trust may, with the consent of a majority of the regular
trustees and without the consent of the holders of the Trust Securities, the
property trustee or the Delaware trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; provided, that:
(1) if ML Trust is not the surviving entity, the successor entity either:
o expressly assumes all of the obligations of ML Trust under the
Trust Securities, or
o substitutes for the TOPrS other securities having substantially
the same terms as the TOPrS, so long as the successor securities
rank the same as the Trust Securities rank with respect to
distributions, assets and payments,
(2) ML&Co. expressly acknowledges a trustee of the successor entity
possessing the same powers and duties as the property trustee as the
holder of the partnership preferred securities,
(3) the TOPrS or any successor securities are listed, or any successor
securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which the
TOPrS are then listed or quoted,
(4) any merger, consolidation, amalgamation or replacement does not cause
the TOPrS, including any successor securities, to be downgraded by any
nationally recognized statistical rating organization,
(5) any merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the holders
of the TOPrS, including any successor securities, in any material
respect,
(6) the successor entity has a purpose substantially identical to that of
ML Trust,
(7) ML&Co. guarantees the obligations of the successor entity under the
successor securities to the same extent as provided by the Trust
Guarantee and
(8) before any merger, consolidation, amalgamation or replacement, ML&Co.
has received an opinion of a nationally recognized independent counsel
to ML Trust experienced in these matters to the effect that:
o any merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the
holders of the TOPrS, including any successor securities, in any
material respect, other than with respect to any dilution of the
holders' interest in the new entity,
o following any merger, consolidation, amalgamation or replacement,
neither ML Trust nor the successor entity will be required to
register as an investment company under the Investment Company
Act,
o following any merger, consolidation, amalgamation or replacement,
ML Trust, or any successor trust, will not be classified as an
association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes, and
o following any merger, consolidation, amalgamation or replacement,
ML Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United
States Federal income tax purposes.
Notwithstanding the foregoing, ML Trust shall not, except with the consent of
holders of 100% in liquidation amount of the TOPrS, consolidate, amalgamate,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it, if any
consolidation, amalgamation, merger or replacement would cause ML Trust or the
successor entity to be classified as an association or a publicly traded
partnership taxable as a corporation for United States Federal income tax
purposes.
MODIFICATION OF THE DECLARATION
The declaration may be modified and amended if approved by a majority of
the regular trustees, and in the circumstances described in the declaration, the
property trustee and the Delaware trustee. However, if any proposed amendment
provides for, or the regular trustees otherwise propose to effect,
(1) any action that would adversely affect the powers, preferences or
special rights of the Trust Securities, whether by way of amendment to
the declaration or otherwise, or
(2) the dissolution, winding-up or termination of ML Trust other than
under the terms of the declaration,
then, in each case, the holders of the Trust Securities voting together as a
single class will be entitled to vote on the amendment or proposal and the
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected;
provided, further that if any amendment or proposal referred to in clause (2)
above would adversely affect only the TOPrS or the common securities, then only
the affected class will be entitled to vote on the amendment or proposal and the
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of that class of Trust Securities.
The declaration may be amended without the consent of the holders of the
Trust Securities to:
o cure any ambiguity,
o correct or supplement any provision in the declaration that may be
defective or inconsistent with any other provision of the declaration,
o add to the restrictions or obligations of the sponsor,
o conform to any change in the Investment Company Act, the Trust
Indenture Act or the rules or regulations under either law and
o modify, eliminate and add to any provision of the declaration to the
extent as may be necessary or desirable;
provided that no amendment shall have a material adverse effect on the rights,
preferences or privileges of the holders of the Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the declaration if the amendment or modification would
o cause ML Trust to fail to be classified as a grantor trust for United
States Federal income tax purposes,
o cause ML Partnership to be classified as an association or publicly
traded partnership taxable as a corporation for those purposes,
o reduce or otherwise adversely affect the powers of the property
trustee, or
o cause ML Trust or ML Partnership to be deemed an investment company
which is required to be registered under the Investment Company Act.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DESCRIPTION OF THE GLOBAL CERTIFICATES
DTC will act as securities depository for the TOPrS and, to the extent
distributed to the holders of the TOPrS, the partnership preferred securities.
The TOPrS will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates, representing the total aggregate number of TOPrS, will be issued
and will be deposited with DTC.
DTC PROCEDURES
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants deposit with
DTC. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its participants and by the NYSE, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the DTC
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 participant, either directly or indirectly. The rules applicable to DTC and
its participants are on file with the SEC.
Purchases of the TOPrS within the DTC system must be made by or through
participants, which will receive a credit for the TOPrS on DTC's records. The
ownership interest of each beneficial owner of the TOPrS is in turn to be
recorded on the participants' and indirect participants' records. Beneficial
owners will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the participants or indirect participants through which the beneficial
owners purchased TOPrS. Transfers of ownership interests in the TOPrS are to be
accomplished by entries made on the books of participants and indirect
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in the TOPrS, except
in the event that use of the book-entry system for the TOPrS is discontinued.
DTC has no knowledge of the actual beneficial owners of the TOPrS; DTC's
records reflect only the identity of the participants to whose accounts the
TOPrS are credited, which may or may not be the beneficial owners. The
participants and indirect participants will remain responsible for keeping
account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
global certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the TOPrS being represented for all purposes under
the declaration and the TOPrS. No beneficial owner of an interest in a global
certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
declaration.
DTC has advised ML&Co. that it will take any action permitted to be taken
by a holder of the TOPrS, including the presentation of the TOPrS for exchange
as described below, only at the direction of one or more participants to whose
account the DTC interests in the global certificates are credited and only in
respect of such portion of the aggregate liquidation amount of the TOPrS as to
which the participant or participants has or have given the direction. Also, if
there is a Trust Enforcement Event under the TOPrS, DTC will exchange the global
certificates for certificated securities, which it will distribute to its
participants in accordance with its customary procedures.
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.
Redemption notices in respect of the TOPrS held in book-entry form will be
sent to Cede & Co. If less than all of the TOPrS are being redeemed, DTC will
determine the amount of the interest of each participant to be redeemed in
accordance with its procedures.
Although voting with respect to the TOPrS is limited, in those cases where
a vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to the TOPrS. Under its usual procedures, DTC would mail an omnibus
proxy to ML Trust as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those participants to whose
accounts the TOPrS are allocated on the record date identified in a listing
attached to the omnibus proxy.
Distributions on the TOPrS held in book-entry form will be made to DTC in
immediately available funds. DTC's practice is to credit participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payments on the payment date. Payments by participants and indirect participants
to beneficial owners will be governed by standing instructions and customary
practices and will be the responsibility of the participants and indirect
participants and not of DTC, ML Trust or ML&Co., subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of any
distributions to DTC is the responsibility of ML Trust, disbursement of those
payments to participants is the responsibility of DTC, and disbursement of those
payments to the beneficial owners is the responsibility of participants and
indirect participants.
Except as described, a beneficial owner of an interest in a global
certificate will not be entitled to receive physical delivery of the TOPrS.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the TOPrS.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global certificates among participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither ML&Co. nor ML Trust
will have any responsibility for the performance by DTC or its participants or
indirect participants under the rules and procedures governing DTC. DTC may
discontinue providing its services as securities depository with respect to the
TOPrS at any time by giving notice to ML Trust. Under these circumstances, in
the event that a successor securities depository is not obtained, the TOPrS
certificates are required to be printed and delivered to the property trustee.
Additionally, ML Trust, with the consent of ML&Co., may decide to discontinue
use of the system of book-entry transfers through DTC or any successor
depository. In that event, certificates for the TOPrS will be printed and
delivered to the property trustee. In each of the above circumstances, ML&Co.
will appoint a paying agent with respect to the TOPrS.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer beneficial interests in the global TOPrS as
represented by a global certificate.
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 the accuracy of the information.
PAYMENT
Payments in respect of the TOPrS represented by the global certificates
shall be made to DTC, which shall credit the relevant accounts at DTC on the
scheduled payment dates or, in the case of certificated securities, if any,
payments shall be made by check mailed to the address of the holder entitled to
receive the payment as the holder's address shall appear on the register. The
paying agent shall be permitted to resign as paying agent upon 30 days written
notice to the regular trustees. In the event that The Chase Manhattan Bank shall
no longer be the paying agent, the regular trustees shall appoint a successor to
act as paying Agent which shall be a bank or trust company.
REGISTRAR, TRANSFER AGENT, AND PAYING AGENT
The property trustee will act as registrar, transfer Agent and paying agent
for the TOPrS.
Registration of transfers of the TOPrS will be effected without charge by
or on behalf of ML Trust, but upon payment and with the giving of any indemnity
as ML Trust or ML&Co. may require, in respect of any tax or other government
charges which may be imposed in relation to it.
ML Trust will not be required to register or cause to be registered the
transfer of the TOPrS after the TOPrS have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, before the occurrence of a default with respect to
the Trust Securities, undertakes to perform only the duties as are specifically
set forth in the declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to these provisions, the property trustee is under no
obligation to exercise any of the powers vested in it by the declaration at the
request of any holder of the TOPrS, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred in
connection with the exercise of any powers. The holders of the TOPrS will not be
required to offer any indemnity in the event the holders, by exercising their
voting rights, direct the property trustee to take any action following a Trust
Enforcement Event.
GOVERNING LAW
The declaration and the TOPrS will be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The regular trustees are authorized and directed to conduct the affairs of
and to operate ML Trust in such a way that ML Trust will not be deemed to be an
investment company required to be registered under the Investment Company Act or
characterized as other than a grantor trust for United States Federal income tax
purposes. In this connection, the regular trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
declaration that the regular trustees determine in their discretion to be
necessary or desirable for those purposes as long as such action does not
adversely affect the interests of the holders of the TOPrS.
Holders of the TOPrS have no preemptive rights.
DESCRIPTION OF THE TRUST GUARANTEE
Set forth below is a summary of material information concerning the Trust
Guarantee which will be executed and delivered by ML&Co. for the benefit of the
holders from time to time of the TOPrS. The summary is not complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Trust Guarantee, which is filed as an exhibit to the
registration statement of which this prospectus is a part. The Trust Guarantee
incorporates by reference the terms of, and will be qualified as an indenture
under, the Trust Indenture Act. The Chase Manhattan Bank, as the trust guarantee
trustee, will hold the Trust Guarantee for the benefit of the holders of the
TOPrS and will act as indenture trustee for the purposes of compliance with the
Trust Indenture Act.
Under the Trust Guarantee, ML&Co. will irrevocably agree, on a subordinated
basis and to the extent set forth in the Trust Guarantee, to pay in full to the
holders of the TOPrS, except to the extent paid by ML Trust, as and when due,
regardless of any defense, right of set off or counterclaim which ML Trust may
have or assert, the following payments (the "Trust Guarantee Payments"), without
duplication:
o any accumulated and unpaid distributions on the TOPrS to the extent ML
Trust has funds available for distribution,
o the redemption price with respect to any TOPrS called for redemption
by ML Trust, to the extent ML Trust has funds available for payment,
and
o upon a voluntary or involuntary dissolution, winding-up or termination
of ML Trust, other than in connection with the distribution of
partnership preferred securities to the holders of the TOPrS or the
redemption of all of the TOPrS, the lesser of:
(1) the aggregate of the liquidation amount and all accumulated and
unpaid distributions on the TOPrS and
(2) the amount of assets of ML Trust remaining available for
distribution to holders of the TOPrS upon the liquidation of ML
Trust.
ML&Co.'s obligation to make a Trust Guarantee Payment may be satisfied by direct
payment of the required amounts by ML&Co. to the holders of the TOPrS or by
causing ML Trust to pay these amounts to holders.
The Trust Guarantee will be a guarantee on a subordinated basis with
respect to the TOPrS from the time of issuance of the TOPrS but will only apply
to any payment of distributions or the redemption price, or to payments upon the
dissolution, winding-up or termination of ML Trust, to the extent ML Trust shall
have funds available. If ML Partnership fails to declare distributions on the
partnership preferred securities, ML Trust would lack available funds for the
payment of distributions or amounts payable on redemption of the TOPrS or
otherwise, and in such event holders of the TOPrS would not be able to rely upon
the Trust Guarantee for payment of these amounts. Instead, holders of the TOPrS
will have the remedies described under "Description of the TOPrS--Trust
Enforcement Events", including the right to direct the trust guarantee trustee
to enforce the restriction of payments by ML&Co. and its finance subsidiaries on
its capital stock. See "-- Obligations of ML&Co." below.
The Guarantees, when taken together with the debentures issued by ML&Co.
and ML&Co.'s obligations to pay all fees and expenses of ML Trust and ML
Partnership, constitute a guarantee to the extent set forth in this prospectus
by ML&Co. of the distribution, redemption and liquidation payments payable to
the holders of the TOPrS. The Guarantees do not apply, however, to current
distributions by ML Partnership unless and until these distributions are
declared by ML Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in ML
Partnership, each as more fully described under "Risk Factors--Insufficient
Income or Assets Available to Partnership".
OBLIGATIONS OF ML&CO.
Under the Trust Guarantee, ML&Co. will agree that, if
o for any distribution period, full distributions on a cumulative basis
on any TOPrS have not been paid,
o an event of default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing, or
o it is in default of its obligations under the Trust Guarantee, the
Partnership Guarantee or any Investment Guarantee,
then, during that period:
o it may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock or comparable equity
interest, except for:
(1) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
and conversions or exchanges of common stock of one class into
common stock of another class,
(2) redemptions or purchases of any rights pursuant to the rights
agreement dated as of December 2, 1997 between ML&Co. and The
Chase Manhattan Bank (the "Rights Agreement") and the issuance of
preferred stock under those rights and
(3) purchases or acquisitions by ML&Co. or its affiliates in
connection with transactions effected by or for the account of
customers of ML&Co. or any of its subsidiaries or in connection
with the distribution or trading of its capital stock or
comparable equity interest; and
o it may not make, permit any finance subsidiary to make, or make any
payments that would enable any finance subsidiary to make, any payment
of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation
payment with respect to, any preferred security or comparable equity
interest of any finance subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE
An event of default under the Trust Guarantee will occur upon the failure
of ML&Co. to perform any of its payment or other obligations set forth in the
Trust Guarantee.
The holders of a majority in liquidation amount of the TOPrS have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the trust guarantee trustee or to direct the exercise of any trust
or power conferred upon the trust guarantee trustee under the trust guarantee.
If the trust guarantee trustee fails to enforce its rights under the Trust
Guarantee after a holder of the TOPrS has made a written request, the holder may
institute a legal proceeding directly against ML&Co. to enforce the trust
guarantee trustee's rights under the Trust Guarantee, without first instituting
a legal proceeding against ML Trust, the trust guarantee trustee or any other
person or entity. In any event, if ML&Co. has failed to make a guarantee payment
under the Trust Guarantee, a holder of the TOPrS may directly institute a
proceeding in the holder's own name against ML&Co. for enforcement of the Trust
Guarantee for payment.
STATUS OF THE TRUST GUARANTEE; SUBORDINATION
The Trust Guarantee will constitute an unsecured obligation of ML&Co. and
will rank subordinate and junior in right of payment to all other liabilities of
ML&Co. and will rank equally with the most senior preferred stock, if any,
issued from time to time by ML&Co., with similar guarantees issued by ML&Co. in
connection with:
o the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
o the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
o the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
o the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
o the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V, and
o with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
"Finance Subsidiary" means Merrill Lynch Preferred Capital Trust I, Merrill
Lynch Preferred Capital Trust II, Merrill Lynch Preferred Capital Trust III,
Merrill Lynch Preferred Capital Trust IV, Merrill Lynch Preferred Capital Trust
V and any other wholly-owned subsidiary of ML&Co. the principal purpose of which
is to raise capital for ML&Co. by issuing securities that are guaranteed by
ML&Co. and the proceeds of which are loaned to or invested in ML&Co. or one or
more of its affiliates.
Accordingly, the rights of the holders of the TOPrS to receive payments
under the Trust Guarantee will be subject to the rights of the holders of any
obligations of ML&Co. that are senior in priority to the obligations under the
Trust Guarantee. Furthermore, the holders of obligations of ML&Co. that are
senior to the obligations under the Trust Guarantee, including, but not limited
to, obligations constituting senior indebtedness of ML&Co., will be entitled to
the same rights upon payment default or dissolution, liquidation and
reorganization in respect of the Trust Guarantee that inure to the holders of
senior indebtedness as against the holders of the ML&Co. Debenture. The terms of
the TOPrS that each holder of the TOPrS, by acceptance, agrees to the
subordination provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the TOPrS, in which case no vote will be required, the
Trust Guarantee may be amended only with the prior approval of the holders of at
least a majority in liquidation amount of all the outstanding TOPrS. The manner
of obtaining any approval of holders of the TOPrS will be as set forth under
"Description of the TOPrS--Voting Rights". All guarantees and agreements
contained in the Trust Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of ML&Co. and shall inure to the benefit of the
holders of the TOPrS then outstanding. Except in connection with permitted
merger or consolidation of ML&Co. with or into another entity or permitted sale,
transfer or lease of ML&Co.'s assets to another entity in which the surviving
corporation, if other than ML&Co., assumes ML&Co.'s obligations under the Trust
Guarantee, ML&Co. may not assign its rights or delegate its obligations under
the Trust Guarantee without the prior approval of the holders of at least a
majority of the aggregate stated liquidation amount of the TOPrS then
outstanding.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to each holder of the TOPrS upon:
o full payment of the redemption price of all the TOPrS,
o distribution of the partnership preferred securities held by ML Trust
to the holders of the TOPrS or
o full payment of the amounts payable in accordance with the declaration
upon liquidation of ML Trust.
The Trust Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the TOPrS must restore payment of
any sum paid under the TOPrS or the Trust Guarantee.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The trust guarantee trustee, before the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only those duties as are
specifically set forth in the Trust Guarantee and, after default with respect to
the Trust Guarantee, shall exercise the same degree of care as a prudent man
would exercise in the conduct of his own affairs. Subject to that provision, the
trust guarantee trustee is under no obligation to exercise any of the powers
vested in it by the Trust Guarantee at the request of any holder of TOPrS unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred in connection with the exercise of those powers.
GOVERNING LAW
The Trust Guarantee will be governed by, and construed in accordance with,
the internal laws of the State of New York.
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES
All of the partnership interests in ML Partnership, other than the
partnership preferred securities acquired by ML Trust, are owned directly by
ML&Co.. Initially, ML&Co. will be the sole general partner of ML Partnership.
The limited partnership agreement authorizes and creates the partnership
preferred securities, which represent limited partner interests in ML
Partnership. The limited partner interests represented by the partnership
preferred securities will have a preference with respect to distributions and
amounts payable on redemption or liquidation over ML&Co.'s interest in ML
Partnership.
Except as otherwise described in this prospectus or provided in the limited
partnership agreement, the limited partnership agreement does not permit ML
Partnership to issue any additional partnership interests or to incur any
indebtedness.
The summary of certain material terms and provisions of the partnership
preferred securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the limited
partnership agreement, which is filed as an exhibit to the registration
statement of which this prospectus is a part, and the Delaware Limited
Partnership Act.
DISTRIBUTIONS
Holders of partnership preferred securities will be entitled to receive
cumulative cash distributions, if, as and when declared by ML&Co., as general
partner, in its sole discretion out of assets of ML Partnership legally
available for payment. The distributions payable on each partnership preferred
security will be fixed at a rate per annum of % of the stated liquidation
preference of $25 per partnership preferred security. Distributions not paid on
the scheduled payment date will accumulate and compound quarterly at the rate
per annum equal to %. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the partnership preferred securities will be payable
quarterly in arrears on , , , and
of each year, commencing , 199 . If distributions are not declared
and paid when scheduled, the accumulated distributions shall be paid to the
holders of record of partnership preferred securities as they appear on the
books and records of ML Partnership on the record date with respect to the
payment date for the partnership preferred securities.
ML Partnership's earnings available for distribution to the holders of the
partnership preferred securities will be limited to payments made on the
Affiliate Investment Instruments and Investment Guarantees and payments on other
eligible debt securities in which ML Partnership has invested from time to time.
See "--Partnership Investments". To the extent that the issuers and, where
applicable, ML&Co., as guarantor, of the securities in which ML Partnership
invests fail to make any payment in respect of the securities or, if applicable,
the guarantees, ML Partnership will not have sufficient funds to pay and will
not declare or pay distributions on the partnership preferred securities, in
which event the Partnership Guarantee will not apply to those distributions
until ML Partnership has sufficient funds available for distribution. See
"Description of the Partnership Guarantee". In addition, distributions on the
partnership preferred securities may be declared and paid only as determined in
the sole discretion of ML&Co. as general partner of ML Partnership. If ML
Partnership fails to declare and pay distributions on the partnership preferred
securities out of funds legally available for distribution, ML Trust will not
have sufficient funds to make distributions on the TOPrS, in which event the
Trust Guarantee will not apply to those distributions until ML Trust has
sufficient funds available. In addition, ML Partnership may not have sufficient
funds to pay current or liquidating distributions on the partnership preferred
securities if:
o at any time that ML Partnership is receiving current payments in
respect of the securities held by ML Partnership including the
debentures, ML&Co., in its sole discretion, does not declare
distributions on the partnership preferred securities and ML
Partnership receives insufficient amounts to pay the additional
compounded distributions that will accumulate in respect of the
partnership preferred securities,
o ML Partnership reinvests the proceeds received in respect of the
debentures upon their retirement or at their maturities in Affiliate
Investment Instruments that do not generate income in an amount that
is sufficient to pay full distributions in respect of the partnership
preferred securities, or
o ML Partnership invests in debt securities of Investment Affiliates
that are not guaranteed by ML&Co. and that cannot be liquidated by ML
Partnership for an amount sufficient to pay any distributions in full.
Distributions on the partnership preferred securities will be payable to
holders as they appear on the books and records of ML Partnership on the
relevant record dates, which, as long as the TOPrS remain or, in the event that
ML Trust is liquidated in connection with a Trust Special Event, as long as the
partnership preferred securities remain, in book-entry only form, will be one
Business Day before the relevant payment dates. In the event the TOPrS, or in
the event that ML Trust is liquidated in connection with a Trust Special Event,
the partnership preferred securities, shall not continue to remain in book-entry
only form, the relevant record dates shall be the 15th day of the month of the
relevant payment dates. In the event that any date on which distributions are
payable on the partnership preferred securities is not a Business Day, then
payment of the distribution payable on that date will be made on the next
succeeding day that is a Business Day and without any interest or other payment
in respect of any delay, except that, if that Business Day is in the next
succeeding calendar year, that payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on that date.
PARTNERSHIP ENFORCEMENT EVENTS
If one or more of the following events shall occur and be continuing (each
a "Partnership Enforcement Event"):
o The non-payment of distributions on the partnership preferred
securities for six consecutive quarterly periods,
o ML&Co. is in default on any of its obligations under the Partnership
Guarantee or any Investment Guarantee or
o an Investment Event of Default occurs and is continuing on any
Affiliate Investment Instrument,
then the property trustee, for so long as the partnership preferred securities
are held by the property trustee, will have the right, or holders of the
partnership preferred securities will be entitled by the vote of a majority in
aggregate liquidation preference of the holders:
o under the limited partnership agreement to enforce the terms of the
partnership preferred securities, including the right to appoint and
authorize a special representative of ML Partnership and the limited
partners to enforce:
(1) ML Partnership's creditors' rights and other rights with respect
to the Affiliate Investment Instruments and the Investment
Guarantees,
(2) the rights of the holders of the partnership preferred securities
under the Partnership Guarantee and
(3) the rights of the holders of the partnership preferred securities
to receive distributions on the partnership preferred securities,
only if and to the extent declared out of funds legally available
for distribution, and
o under the Partnership Guarantee to enforce the terms of the
Partnership Guarantee, including the right to enforce the covenant
restricting certain payments by ML&Co. and Finance Subsidiaries.
If the special representative fails to enforce its rights under the
Affiliate Investment Instruments after a holder of partnership preferred
securities has made a written request, the holder of record of partnership
preferred securities may directly institute a legal proceeding against ML&Co. to
enforce the rights of the special representative and ML Partnership under the
Affiliate Investment Instruments without first instituting any legal proceeding
against the special representative, ML Partnership or any other person or
entity. In any event, if a Partnership Enforcement Event has occurred and is
continuing and this event is attributable to the failure of an Investment
Affiliate to make any required payment when due on any Affiliate Investment
Instrument, then a holder of partnership preferred securities may on behalf of
ML Partnership directly institute a proceeding against the Investment Affiliate
with respect to the Affiliate Investment Instrument for enforcement of payment.
A holder of partnership preferred securities may also bring a direct action
against ML&Co. to enforce the holder's right under the Partnership Guarantee.
See "Description of the Partnership Guarantee--Events of Default; Enforcement of
Partnership Guarantee".
Under no circumstances, however, shall the special representative have
authority to cause ML&Co. to declare distributions on the partnership preferred
securities. As a result, although the special representative may be able to
enforce ML Partnership's creditors' rights to accelerate and receive payments in
respect of the Affiliate Investment Instruments and the Investment Guarantees,
ML Partnership would be entitled to reinvest those payments in additional
Affiliate Investment Instruments, subject to satisfying the reinvestment
criteria described under "--Partnership Investments", and Eligible Debt
Securities, rather than declaring and making distributions on the partnership
preferred securities. The special representative shall not, by virtue of acting
in such capacity, be admitted as a general partner in ML Partnership or
otherwise be deemed to be a general partner in ML Partnership and shall have no
liability for the debts, obligations or liabilities of ML Partnership.
PARTNERSHIP INVESTMENTS
ML Partnership will use approximately 99% of the proceeds from the issuance
of the partnership preferred securities and ML&Co.'s contemporaneous capital
contribution to purchase the debentures and the remaining 1% of the initial
partnership proceeds will be used to purchase Eligible Debt Securities. ML
Partnership's purchase of the debentures will occur contemporaneously with the
issuance of the partnership preferred securities.
The initial Affiliate Investment Instruments purchased by the Partnership
will consist of two or more debt instruments. ML&Co. anticipates that
approximately 85% of the Initial Partnership Proceeds will be used to purchase a
debenture of ML&Co. (the "ML&Co. Debenture"), and approximately 14% of the
initial partnership proceeds will be used to purchase debentures of one or more
eligible controlled affiliates of ML&Co. Each debenture is expected to have a
term of 20 years and to provide for interest payable on , ,
and of each year, commencing , at market rates for the debentures. The
debentures will be general unsecured debt obligations of the relevant issuer,
except that the ML&Co. Debenture will rank subordinate and junior to all senior
indebtedness of ML&Co.
The payment of interest on each of the debentures may be deferred at any
time, and from time to time, by the relevant issuer for a period not exceeding
six consecutive quarters. If an issuer were to defer the payment of interest,
interest would continue to accrue and compound at the stated interest rate on
the applicable debenture. The debentures will contain covenants appropriate for
unsecured debt securities issued or guaranteed by similar borrowers pursuant to
a public offering or private placement under Rule 144A of the Securities Act of
a comparable debt security, including a limitation on consolidation, merger and
sale or conveyance of assets. The debentures will contain redemption provisions
that correspond to the redemption provisions applicable to the partnership
preferred securities, including an option to redeem the debentures by the
relevant issuer, in whole or in part, from time to time, on or after ,
, and following the occurrence of a Partnership Special Event,
in each case, in the same manner described under "Optional Redemption" and
"Partnership Special Event Redemption". The debentures, and any other Affiliate
Investment Instruments that are debt instruments acquired by ML Partnership in
the future, will also contain customary events of default, including:
o events of default for defaults in payments on the securities when due,
provided that no default shall occur upon a valid deferral of an
interest payment by an issuer,
o defaults in the performance of the relevant issuer's obligations under
its debenture or Affiliate Investment Instruments, as the case may be,
and
o certain bankruptcy, insolvency or reorganization events, subject to
customary exceptions and grace periods.
The payment of interest and principal when due and other payment terms of
the debentures other than ML&Co. Debenture, will be guaranteed to the extent
described in this prospectus (each, an "Investment Guarantee") by ML&Co. for the
benefit of the holders of partnership preferred securities. See "--Investment
Guarantees".
ML Partnership will invest approximately 1% of the initial partnership
proceeds in eligible debt securities. These eligible debt securities will
comprise cash or book-entry securities, negotiable instruments, or other
securities of entities not affiliated with ML&Co. which evidence any of the
following:
o any security issued or guaranteed as to principal or interest by the
United States, or by a person controlled or supervised by and acting
as an instrumentality of the Government of the United States pursuant
to authority granted by the Congress of the United States, or any
certificate of deposit for any of the foregoing;
o commercial paper issued pursuant to Section 3(a)(3) of the Securities
Act and having, at the time of the investment or contractual
commitment to invest therein, a rating from each of Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc.
("S&P") and Moody's Investors Service, Inc. ("Moody's") in the highest
investment rating category granted by such rating agency and having a
maturity not in excess of nine months;
o demand deposits, time deposits and certificates of deposit which are
fully insured by the Federal Deposit Insurance Corporation;
o repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the Government of the United
States of America or any agency or instrumentality thereof, the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a
depository institution or trust company which is an Eligible
Institution and the deposits of which are insured by the FDIC; and
o any other security which is identified as a permitted investment of a
finance subsidiary pursuant to Rule 3a-5 under the Investment Company
Act at the time it is acquired by ML Partnership.
"Eligible Institution" means, a depository institution organized under the
laws of the United States or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank, which has either:
o a long-term unsecured debt rating of AA or better by S&P and Aa or
better by Moody's or
o a short-term unsecured debt rating or a certificate of deposit rating
of A-1+ by S&P and P-1 by Moody's,
and whose deposits are insured by the FDIC or whose the parent has a long-term
or short-term unsecured debt rating which signifies investment grade and whose
deposits are insured by the FDIC.
ML Partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the Affiliate
Investment Instruments and the eligible debt securities in additional Affiliate
Investment Instruments and eligible debt securities. As of the date of this
prospectus, ML&Co., as the General Partner, does not intend to cause ML
Partnership to reinvest regularly scheduled, periodic payments of interest or
dividends received by ML Partnership in the manner described below, although
there can be no assurance that ML&Co.'s intention in respect of any
reinvestments will not change in the future.
The fairness of specific terms of all Affiliate Investment Instruments will
be passed upon by an independent financial advisor which will be a nationally
recognized accounting firm, bank or investment banking firm that does not, and
whose directors, officers, employees and affiliates do not, have a direct or
indirect material equity interest in ML&Co. or any of its subsidiaries.
ML Partnership may reinvest in additional Affiliate Investment Instruments
only if certain procedures and criteria are satisfied with respect to each
Affiliate Investment Instrument, including the satisfaction of the following
conditions:
(1) ML Partnership did not hold debt securities of the issuer of the
proposed Affiliate Investment Instrument within the three-year period
ending on the date of proposed investment;
(2) there was never a default on any debt obligation of, or arrearages of
dividends on preferred stock issued by, the issuer of the proposed
Affiliate Investment Instrument that was previously or is currently
owned by ML Partnership;
(3) the applicable terms and provisions with respect to the proposed
Affiliate Investment Instrument have been determined by the
independent financial advisor to be at least as favorable as terms
which could be obtained by ML Partnership in a public offering or
private placement under Rule 144A of the Securities Act of a
comparable security issued by the relevant Investment Affiliate and
guarantees, if any; and
(4) the requesting Investment Affiliate shall not be deemed to be an
investment company by reason of Section 3(a) or 3(b) of the Investment
Company Act or is otherwise an eligible recipient of funds directly or
indirectly from ML Trust pursuant to an order issued by the SEC.
The term "Investment Affiliate" means ML&Co. or any corporation,
partnership, limited liability company or other entity that is controlled by
ML&Co., other than ML Partnership or ML Trust. If ML Partnership is unable to
reinvest payments and proceeds from Affiliate Investment Instruments in
additional Affiliate Investment Instruments meeting the above criteria, ML
Partnership may only invest those funds in eligible debt securities, subject to
restrictions of applicable law, including the Investment Company Act.
INVESTMENT GUARANTEES
ML&Co. will agree to execute and deliver an Investment Guarantee, on a
subordinated basis, for the benefit of the holders of partnership preferred
securities with respect to each debenture issued by an Investment Affiliate,
other than the ML&Co. Debenture, to the extent set forth below. The Investment
Guarantees shall be enforceable regardless of any defense, right of set-off or
counterclaim that ML&Co. may have or assert. The Investment Guarantees will be
full and unconditional guarantees, to the extent set forth in this prospectus,
with respect to the applicable Debentures from the time of issuance. To the
extent that, as described above, ML Partnership invests in additional Affiliate
Investment Instruments, the determination as to whether the Affiliate Investment
Instrument will contain an Investment Guarantee will be made at the date of its
issuance and will be based, among other things, upon its approval by the
independent financial advisor in accordance with the reinvestment criteria
described above.
The Investment Guarantees will constitute guarantees of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the applicable Investment
Guarantee without instituting a legal proceeding against any other person or
entity. If no special representative has been appointed to enforce any
Investment Guarantee, ML&Co. as general partner has the right to enforce the
Investment Guarantee on behalf of the holders of the partnership preferred
securities. The holders of not less than a majority in aggregate liquidation
preference of the partnership preferred securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available in
respect of any Investment Guarantee, including the giving of directions to
ML&Co. as general partner or the special representative, as the case may be. If
ML&Co. or the special representative fails to enforce any Investment Guarantee
as above provided, any holder of the TOPrS may institute its own legal
proceeding to enforce that Investment Guarantee. No Investment Guarantee will be
discharged except by payment in full of all amounts guaranteed by such
Investment Guarantee, without duplication of amounts previously paid by the
relevant Investment Affiliate.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of partnership preferred securities, in which case no consent will be
required, the Investment Guarantees may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding partnership preferred securities, provided that for so long as the
property trustee of ML Trust is the holder of the partnership preferred
securities, no amendment will be effective without the prior written approval of
a majority in liquidation amount of the outstanding TOPrS. All guarantees and
agreements contained in the Investment Guarantees shall bind the successors,
assigns, receivers, trustees and representatives of ML&Co. and shall inure to
the benefit of the holders of partnership preferred securities. Except in
connection with any permitted merger or consolidation of ML&Co. with or into
another entity or any permitted sale, transfer or lease of ML&Co.'s assets to
another entity in which the surviving corporation, if other than ML&Co., assumes
ML&Co.'s obligations under the Investment Guarantees, ML&Co. may not assign its
rights or delegate its obligations under the Investment Guarantees without the
prior approval of the holders of at least a majority of the aggregate stated
liquidation preference of the partnership preferred securities then outstanding.
STATUS OF THE INVESTMENT GUARANTEES
ML&Co.'s obligations under the Investment Guarantees will constitute
unsecured obligations of ML&Co. and will rank subordinate and junior in right of
payment to all other liabilities of ML&Co. and will rank equally with the most
senior preferred stock, if any, issued from time to time by ML&Co., with similar
guarantees issued by ML&Co. in connection with:
o the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
o the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
o the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
o the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
o the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V and
o with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
Accordingly, the rights of the holders of the debentures to receive
payments under the Investment Guarantees will be subject to the rights of the
holders of any obligations that are senior in priority to the obligations under
the Investment Guarantees. Furthermore, the holders of obligations of ML&Co.
that are senior to the obligations under the Investment Guarantees, including,
but not limited to, obligations constituting Senior Indebtedness, will be
entitled to the same rights upon payment default or dissolution, liquidation and
reorganization in respect of the Investment Guarantees that inure to the holders
of senior indebtedness as against the holders of the ML&Co. Debenture. The terms
of the debentures provide that each holder of debentures, by acceptance thereof,
agrees to the subordination provisions and other terms of the Investment
Guarantees.
GOVERNING LAW
The Investment Guarantees will be governed by and construed in accordance
with the internal laws of the State of New York.
OPTIONAL REDEMPTION
The partnership preferred securities are redeemable, at the option of
ML&Co., as general partner, in whole or in part, from time to time, on or after
, , upon not less than 30 nor more than
60 days notice, at an amount per partnership preferred security equal to $25
plus accumulated and unpaid distributions. If ML Partnership redeems
partnership preferred securities in accordance with their terms, ML Trust will
redeem the Trust Securities at the redemption price. If:
o a partial redemption would result in the delisting of the TOPrS,
o ML Trust is liquidated in connection with a Trust Special Event, or
o a partial redemption would result in the delisting of the partnership
preferred securities,
then, in each case, ML Partnership may only redeem the partnership preferred
securities in whole.
PARTNERSHIP SPECIAL EVENT REDEMPTION
If, at any time, a Partnership Tax Event or a Partnership Investment
Company Event (each as defined below, and each a "Partnership Special Event")
occurs and is continuing, ML&Co. shall, within 90 days following the occurrence
of such Partnership Special Event, elect to either:
o redeem the partnership preferred securities in whole, but not in part,
upon not less than 30 or more than 60 days notice at the redemption
price, provided that, if at the time there is available to ML
Partnership the opportunity to eliminate, within the 90-day period,
the Partnership Special Event by taking some ministerial action, such
as filing a form or making an election, or pursuing some other similar
reasonable measure that in the sole judgment of ML&Co. has or will
cause no adverse effect on ML Partnership, ML Trust or ML&Co., ML&Co.
will pursue that measure in lieu of redemption; or
o cause the partnership preferred securities to remain outstanding,
provided that in the case of this clause, the ML&Co. shall pay any and
all costs and expenses incurred by or payable by ML Partnership
attributable to the Partnership Special Event.
"Partnership Tax Event" means that ML&Co. shall have requested and received
an opinion of nationally recognized independent tax counsel experienced in these
matters to the effect that there has been a Tax Action which affects any of the
events described in (1) through (3) below and that there is more than an
insubstantial risk that:
(1) ML Partnership is, or will be, subject to United States Federal income
tax with respect to income accrued or received on the Affiliate
Investment Instruments or the eligible debt securities,
(2) ML Partnership is, or will be, subject to more than a minimal amount
of other taxes, duties or other governmental charges or
(3) interest payable by an Investment Affiliate with respect to the
Affiliate Investment Instrument issued by that Investment Affiliate to
ML Partnership is not, or will not be, deductible by the Investment
Affiliate for United States Federal income tax purposes.
Recently, the IRS asserted that the interest payable on a security issued
in similar circumstances as the issuance of the debentures by the Investment
Affiliates to ML Partnership was not deductible for United States Federal income
tax purposes. The taxpayer in that case has filed a petition in the United
States Tax Court challenging the IRS's position on this matter. If this matter
were to be litigated and the Tax Court were to sustain the IRS's position on
this matter, the judicial decision could constitute a Partnership Tax Event,
which could result in an early redemption of the partnership preferred
securities.
"Partnership Investment Company Event" means that ML&Co. shall have
requested and received an opinion of nationally recognized independent legal
counsel experienced in these matters to the effect that as a result of the
occurrence on or after the date of this prospectus of a Change in Investment
Company Act Law, ML Partnership is or will be considered an investment company
which is required to be registered under the Investment Company Act.
REDEMPTION PROCEDURES
ML Partnership may not redeem fewer than all the outstanding partnership
preferred securities unless all accumulated and unpaid distributions have been
paid on all partnership preferred securities for all quarterly distribution
periods terminating on or before the date of redemption.
If ML Partnership gives a notice of redemption in respect of partnership
preferred securities, which notice will be irrevocable, then, by 12:00 noon, New
York City time, on the redemption date, ML Partnership:
o if the partnership preferred securities are in book entry form with
DTC, will deposit irrevocably with DTC funds sufficient to pay the
applicable redemption price and will give DTC irrevocable instructions
and authority to pay the redemption price in respect of the
partnership preferred securities held through DTC in global form, or
o if the partnership preferred securities are held in certificated form,
will deposit with the paying agent for the partnership preferred
securities funds sufficient to pay any amount in respect of any
partnership preferred securities in certificated form and will give
the paying agent irrevocable instructions and authority to pay these
amounts to the holders of partnership preferred securities upon
surrender of their certificates.
See "Description of the TOPrS--Book-Entry Only Issuance--The Depository Trust
Company".
If notice of redemption shall have been given and funds deposited as
required, then upon the date of the deposit, all rights of holders of such
partnership preferred securities so called for redemption will cease, except the
right of the holders of such partnership preferred securities to receive the
redemption price, but without interest on that redemption price. In the event
that any date fixed for redemption of partnership preferred securities is not a
Business Day, then payment of the redemption price payable on that date will be
made on the next succeeding day that is a Business Day, and without any interest
or other payment in respect of any delay, except that, if that Business Day
falls in the next calendar year, the payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date fixed for redemption. In the event that payment of the redemption
price in respect of partnership preferred securities is improperly withheld or
refused and not paid either by ML Partnership or by ML&Co. under the Partnership
Guarantee described under "Description of the Partnership Guarantee,"
distributions on the partnership preferred securities will continue to
accumulate, from the original redemption date to the date of payment.
Subject to the foregoing and applicable law, including, without limitation,
United States Federal securities laws, ML&Co. or any of its subsidiaries may at
any time and from time to time purchase outstanding partnership preferred
securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of ML Partnership, the holders of the partnership preferred
securities at the time will be entitled to receive out of the assets of ML
Partnership available for distribution to partners after satisfaction of
liabilities of creditors as required by the Delaware Partnership Act, before any
distribution of assets is made to ML&Co. as General Partner, an amount equal to,
in the case of holders of partnership preferred securities, the aggregate of the
stated liquidation preference of $25 per partnership preferred security plus
accumulated and unpaid distributions on the partnership preferred securities to
the date of payment.
Under the Limited Partnership Agreement, ML Partnership shall be dissolved
and its affairs shall be wound up:
o upon the bankruptcy of ML&Co.,
o upon the assignment by ML&Co. of its entire interest in ML Partnership
when the assignee is not admitted to ML Partnership as a general
partner of ML Partnership in accordance with the limited partnership
agreement, or the filing of a certificate of dissolution or its
equivalent with respect to ML&Co., or the revocation of ML&Co.'s
charter and the expiration of 90 days after the date of notice to
ML&Co. of revocation without a reinstatement of its charter, or if any
other event occurs that causes the General Partner to cease to be a
general partner of ML Partnership under the Delaware Limited
Partnership Act, unless the business of ML Partnership is continued in
accordance with the Delaware Limited Partnership Act,
o if ML Partnership has redeemed or otherwise purchased all the
partnership preferred securities,
o upon the entry of a decree of judicial dissolution or
o upon the written consent of all partners of ML Partnership.
VOTING RIGHTS
Except as provided below and under "Description of the Partnership
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Limited Partnership Agreement, the holders of the partnership preferred
securities will have no voting rights.
Not later than 30 days after any Partnership Enforcement Event occurs,
ML&Co. will convene a meeting for the purpose of appointing a special
representative. If ML&Co. fails to convene a meeting within the 30-day period,
the holders of 10% in liquidation preference of the outstanding partnership
preferred securities will be entitled to convene a meeting. The provisions of
the limited partnership agreement relating to the convening and conduct of the
meetings of the partners will apply with respect to any meeting. In the event
that, at any meeting, holders of less than a majority in aggregate liquidation
preference of partnership preferred securities entitled to vote for the
appointment of a special representative vote for the appointment, no special
representative shall be appointed. Any special representative appointed shall
cease to be a special representative of ML Partnership and the limited partners
if:
o ML Partnership, or ML&Co. pursuant to the Partnership Guarantee, shall
have paid in full all accumulated and unpaid distributions on the
partnership preferred securities,
o any event of default under any Affiliate Investment Instruments shall
have been cured, and
o ML&Co. is in compliance with all its obligations under the Partnership
Guarantee and ML&Co., in its capacity as the general partner, shall
continue the business of ML Partnership without dissolution.
o Notwithstanding the appointment of the special representative, ML&Co.
shall continue as General Partner and shall retain all rights under
the limited partnership agreement, including the right to declare, in
its sole discretion, the payment of distributions on the partnership
preferred securities for which the failure to declare distributions
would not constitute a default under the limited partnership
agreement.
If any proposed amendment to the limited partnership agreement provides
for, or ML&Co. otherwise proposes to effect,
o any action that would adversely affect the powers, preferences or
special rights of the partnership preferred securities, whether by way
of amendment to the limited partnership agreement or otherwise,
including, without limitation, the authorization or issuance of any
limited partner interests in ML Partnership ranking, as to
participation in the profits or distributions or in the assets of ML
Partnership, senior to the partnership preferred securities, or
o the dissolution, winding-up or termination of ML Partnership, other
than:
(A) in connection with the occurrence of a Partnership Special Event
or
(B) as described under "Merger, Consolidation or Amalgamation of the
Partnership" below,
then the holders of outstanding partnership preferred securities will be
entitled to vote on any amendment or proposal of ML&Co., but not on any other
amendment or proposal, as a class, and no amendment or proposal shall be
effective without the approval of the holders of a majority in liquidation
preference of the outstanding partnership preferred securities having a right to
vote on the matter; provided, however, that if the property trustee on behalf of
ML Trust is the holder of the partnership preferred securities, any amendment or
proposal not excepted by clauses (A) and (B) above shall not be effective
without the prior or concurrent approval of the holders of a majority in
liquidation amount of the outstanding TOPrS having a right to vote on the
matters.
The ML&Co. shall not
o direct the time, method and place of conducting any proceeding for any
remedy available,
o waive any event of default that is waivable under the Affiliate
Investment Instruments,
o exercise any right to rescind or annul a declaration that the
principal of any Affiliate Investment Instruments shall be due and
payable,
o waive the breach of the obligation by ML&Co. to restrict certain
payments by ML&Co., or
o consent to any amendment, modification or termination of any Affiliate
Investment Instrument, where such consent shall be required from the
investor,
without, in each case, obtaining the prior approval of the holders of at least a
majority in liquidation preference of the partnership preferred securities;
provided, however, that if the property trustee on behalf of ML Trust is the
holder of the partnership preferred securities, any waiver, consent or amendment
or other action shall not be effective without the prior or concurrent approval
of at least a majority in liquidation amount of the outstanding TOPrS having a
right to vote on these matters. ML&Co. shall not revoke any action previously
authorized or approved by a vote of the holders of the partnership preferred
securities without the approval of the revocation by a majority in liquidation
preference of the outstanding partnership preferred securities. ML&Co. shall
notify all holders of the partnership preferred securities of any notice of an
event of default received with respect to any Affiliate Investment Instrument.
Any required approval of holders of partnership preferred securities may be
given at a separate meeting of holders of partnership preferred securities
convened for that purpose, at a meeting of all of the partners in ML Partnership
or pursuant to written consent. ML Partnership will cause a notice of any
meeting at which holders of partnership preferred securities are entitled to
vote, or of any matter upon which action by written consent of the holders is to
be taken, to be mailed to each holder of record of partnership preferred
securities. Each notice will include a statement setting forth
o the date of the meeting or the date by which action is to be taken,
o a description of any resolution proposed for adoption at the meeting
on which holders are entitled to vote or of the matters upon which
written consent is sought and
o instruction for the delivery of proxies or consents.
No vote or consent of the holders of partnership preferred securities will
be required for ML Partnership to redeem and cancel partnership preferred
securities in accordance with the limited partnership agreement.
Notwithstanding that holders of partnership preferred securities are
entitled to vote or consent under any of the circumstances described above, any
of the partnership preferred securities at such time that are beneficially owned
by ML&Co. or by any entity directly or indirectly controlled by, or under direct
or indirect common control with, ML&Co., except for partnership preferred
securities purchased or acquired by ML&Co. or its affiliates in connection with
transactions effected by or for the account of customers of ML&Co. or any of its
subsidiaries or in connection with the distribution or trading of such
partnership preferred securities; shall not be entitled to vote or consent and
shall, for purposes of any vote or consent, be treated as if they were not
outstanding, provided, however, that persons, other than affiliates of ML&Co.,
to whom ML&Co. or any of its subsidiaries have pledged partnership preferred
securities may vote or consent with respect to the pledged partnership preferred
securities under the terms of the pledge.
Holders of the partnership preferred securities will have no rights to
remove or replace ML&Co. as general partner.
MERGER, CONSOLIDATION OR AMALGAMATION OF ML PARTNERSHIP
ML Partnership may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. ML Partnership may, without the consent of the holders of the
partnership preferred securities, consolidate, amalgamate, merge with or into,
or be replaced by a limited partnership, limited liability company or trust
organized as such under the laws of any state of the United States of America,
provided that:
o the successor entity either:
(A) expressly assumes all of the obligations of ML Partnership under
the partnership preferred securities or
(B) substitutes for the partnership preferred securities other
securities having substantially the same terms as the partnership
preferred securities so long as the partnership successor
securities are not junior to any other equity securities of the
successor entity, with respect to participation in the profits
and distributions, and in the assets, of the successor entity,
o the Investment Affiliates expressly acknowledge the successor entity
as the holder of the Affiliate Investment Instruments,
o the partnership preferred securities or any partnership successor
securities are listed, or any partnership successor securities will be
listed upon notification of issuance, on any national securities
exchange or other organization on which the partnership preferred
securities, if so listed, are then listed,
o the merger, consolidation, amalgamation or replacement does not cause
the TOPrS or, in the event that ML Trust is liquidated in connection
with a Trust Special Event, the partnership preferred securities or
any partnership successor securities, to be downgraded by any
nationally recognized statistical rating organization,
o the merger, consolidation, amalgamation or replacement does not
adversely affect the powers, preferences and other special rights of
the holders of the TOPrS or partnership preferred securities,
including any partnership successor securities, in any material
respect, other than, in the case of the partnership preferred
securities, with respect to any dilution of the holders' interest in
the new resulting entity,
o the successor entity has a purpose substantially identical to that of
ML Partnership,
o before the merger, consolidation, amalgamation or replacement, ML&Co.
has received an opinion of nationally recognized independent counsel
to ML Partnership experienced in these matters to the effect that:
(A) the successor entity will be treated as a partnership for United
States Federal income tax purposes,
(B) the merger, consolidation, amalgamation or replacement would not
cause ML Trust to be classified as an association taxable as a
corporation for United States Federal income tax purposes,
(C) following the merger, consolidation, amalgamation or replacement,
ML&Co. and such successor entity will be in compliance with the
Investment Company Act without registering as an investment
company, and
(D) the merger, consolidation, amalgamation or replacement will not
adversely affect the limited liability of the holders of the
partnership preferred securities and
o ML&Co. guarantees the obligations of the successor entity under the
partnership successor securities at least to the extent provided by
the Partnership Guarantee.
BOOK-ENTRY AND SETTLEMENT
If the partnership preferred securities are distributed to holders of the
TOPrS in connection with the involuntary or voluntary dissolution, winding-up or
liquidation of ML Trust as a result of the occurrence of a Trust Special Event,
the partnership preferred securities will be issued in the form of one or more
global partnership securities registered in the name of DTC as the depository or
its nominee. For a description of DTC and the specific terms of the Depository
arrangements, see "Description of the TOPrS--Book-Entry Only Issuance--The
Depository Trust Company". As of the date of this prospectus, the description
therein of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments with respect to the TOPrS apply in
all material respects to any partnership preferred securities represented by one
or more global partnership securities.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
ML&Co. will act as registrar, transfer agent and paying agent for the
partnership preferred securities for so long as the partnership preferred
securities are held by ML Trust or, if ML Trust is liquidated in connection with
a Trust Special Event, for so long as the partnership preferred securities
remain in book-entry only form. In the event the partnership preferred
securities are distributed in connection with a Trust Special Event and the
book-entry system for the partnership preferred securities is discontinued, it
is anticipated that The Chase Manhattan Bank or one of its affiliates will act
as registrar, transfer agent and paying agent for the partnership preferred
securities.
Registration of transfers of partnership preferred securities will be
effected without charge by or on behalf of ML Partnership, but upon payment,
with the giving of such indemnity as ML Partnership or ML&Co. may require, in
respect of any tax or other governmental charges that may be imposed in relation
to it.
ML Partnership will not be required to register or cause to be registered
the transfer of partnership preferred securities after such partnership
preferred securities have been called for redemption.
MISCELLANEOUS
ML&Co. is authorized and directed to conduct its affairs and to operate ML
Partnership in such a way that:
o ML Partnership will not be deemed to be an investment company required
to be registered under the Investment Company Act or characterized as
an association taxable as a corporation for United States Federal
income tax purposes,
o the Affiliate Investment Instruments will be treated as indebtedness
of their respective issuers for United States Federal income tax
purposes and
o ML Partnership will not be treated as an association or as a publicly
traded partnership, within the meaning of Section 7704 of the Code,
taxable as a corporation.
In this connection, ML&Co. as general partner is authorized to take any action,
not inconsistent with applicable law, the certificate of limited partnership of
ML Partnership or the limited partnership agreement, that it determines in its
discretion to be necessary or desirable for the foregoing purposes as long as
any action does not adversely affect the interests of the holders of the
partnership preferred securities.
<PAGE>
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Set forth below is a summary of the material information concerning the
Partnership Guarantee (the "Partnership Guarantee") that will be executed and
delivered by ML&Co. for the benefit of the holders from time to time of
partnership preferred securities. The summary is not complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Partnership Guarantee, which is filed as an exhibit to the registration
statement of which this prospectus is a part. ML&Co. will hold the Partnership
Guarantee for the benefit of the holders of the partnership preferred
securities.
TERMS OF THE PARTNERSHIP GUARANTEE
Under the Partnership Guarantee, ML&Co. will irrevocably agree, on a
subordinated basis to the extent set forth in this prospectus, to pay in full to
the holders of the partnership preferred securities, without duplication of
amounts previously paid by ML Partnership, as and when due, regardless of any
defense, right of set-off or counterclaim that ML Partnership may have or
assert, the following payments (the "Partnership Guarantee Payments"):
o any accumulated and unpaid distributions that previously have been
declared on ML Partnership preferred securities out of funds legally
available for distribution,
o the redemption price with respect to any partnership preferred
securities called for redemption by ML Partnership out of funds
legally available for that purpose, and
o upon a liquidation of ML Partnership, the lesser of:
(A) the aggregate of the liquidation preference and all accumulated
and unpaid distributions on the partnership preferred securities
to the date of payment and
(B) the amount of assets of ML Partnership, after satisfaction of all
liabilities, remaining available for distribution to holders of
partnership preferred securities in liquidation of ML
Partnership.
ML&Co.'s obligation to make a Partnership Guarantee Payment may be satisfied by
direct payment of the required amounts by ML&Co. to the holders of partnership
preferred securities or by causing ML Partnership to pay these amounts to
holders.
The Partnership Guarantee will be a guarantee on a subordinated basis with
respect to the partnership preferred securities from the time of issuance of the
partnership preferred securities but will not apply to any payment of
distributions or the redemption price, or to payments upon the dissolution,
winding-up or termination of ML Trust, except to the extent ML Partnership shall
have funds available for these purposes. If Investment Affiliates, including,
where applicable, ML&Co., as guarantor, of the Affiliate Investment Instruments
in which ML Partnership invests fail to make any payment in respect of the
securities or, if applicable, guarantees, ML Partnership may not declare or pay
dividends on the partnership preferred securities. In such event, holders of the
partnership preferred securities would not be able to rely upon the Partnership
Guarantee for payment of these amounts. Instead, holders of the partnership
preferred securities will have the remedies described in this prospectus under
"Description of the Partnership Preferred Securities--Partnership Enforcement
Events", including the right to direct ML&Co. or the special representative, as
the case may be, to enforce the covenant restricting certain payments by ML&Co.
and Finance Subsidiaries. See "--Covenants of ML&Co." below.
The Guarantees, when taken together with ML&Co. Debenture and ML&Co.'s
obligations to pay all fees and expenses of ML Trust and ML Partnership,
constitute a guarantee to the extent set forth in this prospectus by ML&Co. of
the distribution, redemption and liquidation payments payable to the holders of
the TOPrS. The Guarantees do not apply, however, to current distributions by ML
Partnership unless and until distributions are declared by ML Partnership out of
funds legally available for payment or to liquidating distributions unless there
are assets available for payment in ML Partnership.
OBLIGATIONS OF ML&CO.
Under the Partnership Guarantee, ML&Co. will agree that if:
o for any distribution period, full distributions on a cumulative basis
on any partnership preferred securities have not been paid or declared
and set apart for payment,
o an event of default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing, or
o ML&Co. is in default of its obligations under any Guarantee,
then, during that period,
o ML&Co. may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock or comparable equity
interest, except for:
o dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
and conversions or exchanges of common stock of one class into
common stock of another class,
o redemptions or purchases of any rights under the Rights Agreement
and the issuance of preferred stock pursuant to those rights and
o purchases or acquisitions by ML&Co. or its affiliates in
connection with transactions effected by or for the account of
customers of ML&Co. or any of its subsidiaries or in connection
with the distribution or trading of such capital stock or
comparable equity interest and
o ML&Co. may not make, permit any Finance Subsidiary to make, or make
any payments that would enable any Finance Subsidiary to make, any
payment of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation
payment with respect to, any preferred security or comparable equity
interest of any Finance Subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE
An event of default under the Partnership Guarantee will occur upon the
failure of ML&Co. to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the partnership
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the special representative
in respect of the Partnership Guarantee or to direct the exercise of any trust
or power conferred upon the special representative under the Partnership
Guarantee. If the special representative fails to enforce its rights under the
Partnership Guarantee, after a holder of partnership preferred securities has
made a written request, such holder of partnership preferred securities may
institute a legal proceeding directly against ML&Co. to enforce the special
representative's rights under the Partnership Guarantee without first
instituting a legal proceeding against ML Partnership, the special
representative or any other person or entity. Notwithstanding the foregoing, if
ML&Co. has failed to make a guarantee payment, a holder of partnership preferred
securities may directly institute a proceeding against ML&Co. for enforcement of
the Partnership Guarantee for the payment.
STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION
The Partnership Guarantee will constitute an unsecured obligation of ML&Co.
and will rank subordinate and junior in right of payment to all other
liabilities of ML&Co. and will rank equally with the most senior preferred stock
issued from time to time by ML&Co., with similar guarantees issued by ML&Co. in
connection with
o the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
o the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
o the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
o the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
o the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V and
o with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
Accordingly, the rights of the holders of partnership preferred securities
to receive payments under the Partnership Guarantee will be subject to the
rights of the holders of any obligations of ML&Co. that are senior in priority
to the obligations under the Partnership Guarantee. Furthermore, the holders of
obligations of ML&Co. that are senior to the obligations under the Partnership
Guarantee, including, but not limited to, obligations constituting senior
indebtedness, will be entitled to the same rights upon payment default or
dissolution, liquidation and reorganization in respect of the Partnership
Guarantee that inure to the holders of senior indebtedness as against the
holders of the ML&Co. Debenture. The limited partnership agreement provides that
each holder of partnership preferred securities, by their acceptance, agrees to
the subordination provisions and other terms of the Partnership Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the Partnership Guarantee
without instituting a legal proceeding against any other person or entity.
The Partnership Guarantee will be deposited with ML&Co. to be held for the
benefit of the holders of the partnership preferred securities. In the event of
the appointment of a special representative to, among other things, enforce the
Partnership Guarantee, the special representative may take possession of the
Partnership Guarantee for that purpose. If no special representative has been
appointed to enforce the Partnership Guarantee, ML&Co. has the right to enforce
the Partnership Guarantee on behalf of the holders of the partnership preferred
securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of partnership preferred securities, in which case no consent will be
required, the Partnership Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding partnership preferred securities. All guarantees and agreements
contained in the Partnership Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of ML&Co. and shall inure to the benefit
of the holders of the partnership preferred securities then outstanding. Except
in connection with any permitted merger or consolidation of ML&Co. with or into
another entity or any permitted sale, transfer or lease of ML&Co.'s assets to
another entity in which the surviving corporation, if other than ML&Co., assumes
ML&Co.'s obligations under the Partnership Guarantee, ML&Co. may not assign its
rights or delegate its obligations under the Partnership Guarantee without the
prior approval of the holders of at least a majority of the aggregate stated
liquidation preference of the partnership preferred securities then outstanding.
TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the partnership preferred securities upon:
o full payment of the redemption price of all partnership preferred
securities, or
o full payment of the amounts payable in accordance with the Limited
Partnership Agreement upon liquidation of ML Partnership.
The Partnership Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of partnership preferred
securities must in accordance with the Delaware Limited Partnership Act restore
payment of any sums paid under the partnership preferred securities or the
Partnership Guarantee. The Delaware Limited Partnership Act provides that a
limited partner of a limited partnership who wrongfully receives a distribution
may be liable to the limited partnership for the amount of such distribution.
GOVERNING LAW
The Partnership Guarantee will be governed by and construed in accordance
with the internal laws of the State of New York.
UNITED STATES FEDERAL INCOME TAXATION
In the opinion of Brown & Wood LLP, tax counsel to ML&Co., ML Trust and ML
Partnership ("Tax Counsel"), the following summary accurately describes the
material United States Federal income tax consequences that may be relevant to
the purchase, ownership and disposition of the TOPrS. Unless otherwise stated,
this summary deals only with the TOPrS held as capital assets by United States
Persons who purchase the TOPrS upon original issuance. As used in this
prospectus, a "United States Person" means a person that is a (1) citizen or
resident of the United States, (2) a corporation or a partnership (including an
entity treated as a corporation or partnership for United States Federal income
tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise), (3) an
estate whose income is subject to United States federal income tax regardless of
its source, or (4) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. Notwithstanding clause (4) of the previous sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be a United
States Person. The tax treatment of a holder may vary depending on its
particular situation.
This summary does not address all the tax consequences that may be relevant
to holders who may be subject to special tax treatment, such as banks, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or foreign investors.
This summary does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the TOPrS. This summary is based on the
Internal Revenue Code of 1986 as amended (the "Code"), the Treasury regulations
promulgated under the Code and administrative and judicial interpretations of
the Code, as of the date of this prospectus, all of which are subject to change,
possibly on a retroactive basis.
The TOPrS are not being marketed to persons that are not United States
Persons ("non-United States Persons") and, consequently, the following
discussion does not discuss the tax consequences that might be relevant to
non-United States Persons. Moreover, in order to protect ML Trust and ML
Partnership from potential adverse consequences, non-United States Persons will
be subject to withholding on distributions on the TOPrS at a rate of 30%. In
determining a holder's status, the United States entity otherwise required to
withhold taxes may rely on an IRS form W-8, an IRS form W-9, or a holder's
certification of its non-foreign status signed under penalty of perjury.
Non-United States Persons should consult their tax advisors as to the specific
United States Federal income tax consequences of the purchase, ownership, and
disposition of TOPrS.
Tax Counsel has advised that there is no authority directly on point
dealing with securities similar to the TOPrS or transactions of the type
described in this prospectus and that the opinions of Tax Counsel are not
binding on the IRS or the courts, either of which could take a contrary
position. No rulings have been or will be sought from the IRS. Accordingly,
there can be no assurance that the IRS will not challenge the opinions expressed
in this tax section or that a court would not sustain a challenge to these
opinions. Nevertheless, Tax Counsel has advised that it is of the view that, if
challenged, the opinions expressed in this tax section would be sustained by a
court with jurisdiction in a properly presented case.
Holders should consult their tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the TOPrS,
including the tax consequences under state, local, foreign, and other tax laws
and the possible effects of changes in United States federal or other tax laws.
For a discussion of the possible redemption of the TOPrS or redemption of the
partnership preferred securities upon the occurrence of certain tax events see
"Description of the TOPrS--Trust Special Event Redemption or Distribution" and
"Description of the Partnership Preferred Securities--Partnership Special Event
Redemption" respectively.
CLASSIFICATION OF ML TRUST
Tax Counsel is of the opinion that, under current law, and based on certain
representations made by ML Trust as well as certain facts and assumptions with
respect to the transaction described in this prospectus, ML Trust will be
classified for United States Federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. Accordingly, for United States
Federal income tax purposes, each holder of the TOPrS will be considered the
owner of an undivided interest in the partnership preferred securities held by
ML Trust. As a result of this treatment, each holder of the TOPrS will be
required to include in its gross income its distributive share of income
attributable to ML Partnership. This amount will generally be equal to a
holder's allocable share of amounts accrued on the partnership preferred
securities. No amount included in income with respect to the TOPrS will be
eligible for the corporate dividends-received deduction.
CLASSIFICATION OF THE PARTNERSHIP
Tax Counsel is of the opinion that, under current law, and based on certain
representations made by the ML Trust as well as certain facts and assumptions
with respect to the transaction described in this prospectus, ML Partnership
will be classified for United States Federal income tax purposes as a
partnership and not as an association or publicly traded partnership taxable as
a corporation.
Tax Counsel's opinion is based on certain factual assumptions relating to
the organization and operation of ML Partnership and is conditioned upon certain
representations made by ML&Co. as General Partner and ML Partnership as to
factual matters, including the organization and the operation of ML Partnership
and the type and frequency of investments made by ML Partnership.
ML&Co. as general partner has represented that it intends to operate ML
Partnership in a manner that will enable ML Partnership to be classified as a
partnership for all future taxable periods in which any partnership preferred
securities remain outstanding. In particular, under the limited partnership
agreement, the general partner cannot take any action that would cause ML
Partnership to constitute a "publicly traded partnership" taxable as a
corporation. Accordingly, it is expected that ML Partnership will continue to
qualify as a partnership and, therefore, will not constitute a publicly traded
partnership taxable as a corporation for all taxable years in which any
partnership preferred securities remain outstanding.
CLASSIFICATION OF THE DEBENTURES
ML Partnership, ML&Co., the relevant Investment Affiliates and the holders
of the Trust Securities (by acceptance of a beneficial interest in a Trust
Security) will agree to treat the Debentures as indebtedness of the relevant
issuer for all United States tax purposes. In connection with the issuance of
the Debentures, Tax Counsel will issue its opinion that, under current law, and
based on certain representations, facts and assumptions to be set forth in such
opinion, the Debentures will be classified as indebtedness of the relevant
issuer for United States Federal income tax purposes.
INCOME AND DEDUCTIONS
Because ML Trust will be classified as a grantor trust for United States
federal income tax purposes, holders of TOPrS will be considered to own an
undivided interest in the partnership preferred securities held by ML Trust. As
a result of this treatment, a holder of TOPrS will be required to take into
income their proportionate share of income attributable to ML Partnership. A
holder's distributive share of income attributable to ML Partnership generally
will be substantially equal to the amount of the cash distributions that
accumulate with respect to the TOPrS. Accordingly, if quarterly distributions on
the TOPrS are paid currently, the amount of income recognized by a holder during
a taxable year generally will be substantially equal to the cash distributions
received by the holder of the TOPrS.
The nature and timing of the income that is allocated to holders of the
TOPrS will, however, depend on the United States Federal income tax
characterization of the investments held by ML Partnership during the relevant
period. Because ML Partnership will be an accrual basis taxpayer for United
States Federal income tax purposes, income will accrue on the TOPrS and will be
allocated to holders of the TOPrS on a daily accrual basis, generally at a rate
that is expected to be equal to (and that will not be greater than) the
distribution rate on the TOPrS, regardless of the holders' method of accounting.
Actual cash distributions on the TOPrS will not, however, be separately reported
as taxable income to the holders at the time they are received.
If distributions on the partnership preferred securities are not made
currently, the corresponding distributions on the TOPrS will not be made
currently. Because ML Partnership is an accrual basis taxpayer it can be
expected that during a period in which interest payments on the Debentures or
distributions on ML Partnership preferred securities are deferred (for whatever
reason), holders will generally recognize income in advance of their receipt of
any cash distributions with respect to their TOPrS. The amount of income that
will be allocated to holders of TOPrS during any such deferral period will equal
their pro rata share of the amount of distributions accruing on the partnership
preferred securities during the deferral period.
ML Partnership does not presently intend to make a Section 754 election.
Accordingly, a subsequent purchaser of the TOPrS who does not purchase the TOPrS
at initial issuance will not be permitted to adjust the tax basis in his
allocable share of ML Partnership's assets so as to reflect any difference
between his purchase price for the TOPrS and his share of ML Partnership's
underlying tax basis in its assets. As a result, a holder of the TOPrS may be
required to report a larger or smaller amount of income from holding the TOPrS
than would otherwise be appropriate based upon the holder's purchase price for
the TOPrS.
RECEIPT OF PARTNERSHIP PREFERRED SECURITIES UPON LIQUIDATION OF ML TRUST
Under certain circumstances, as described under the caption "Description of
the TOPrS--Trust Special Event Redemption or Distribution", partnership
preferred securities may be distributed to holders of The TOPrS in exchange for
their TOPrS and in liquidation of ML Trust. Unless the liquidation of ML Trust
occurs as a result of ML Trust being subject to United States Federal income tax
with respect to income accrued or received on the partnership preferred
securities, a distribution to holders under these circumstances would, for
United States Federal income tax purposes, be treated as a nontaxable event to
each holder. Each holder would receives an aggregate tax basis in the
partnership preferred securities equal to the holder's aggregate tax basis in
its TOPrS with a holding period in the partnership preferred securities so
received in liquidation of ML Trust that would include the period during which
the TOPrS were held. If, however, the liquidation of ML Trust were to occur
because ML Trust is subject to United States Federal income tax with respect to
income accrued or received on the partnership preferred securities, the
distribution of partnership preferred securities to holders by ML Trust would
likely be a taxable event to each holder, and a holder would recognize gain or
loss as if the holder had exchanged its TOPrS for the partnership preferred
securities it received upon the liquidation of ML Trust. Gain or loss to each
holder would be equal to the difference between the holder's aggregate tax basis
in its TOPrS surrendered in the exchange and the aggregate fair market value of
the partnership preferred securities received in the exchange.
REDEMPTION OF TOPrS FOR CASH
Under certain circumstances, as described under the caption "Description of
the TOPrS--Mandatory Redemption", "Description of the TOPrS--Trust Special Event
Redemption or Distribution" and "Description of the Partnership Preferred
Securities--Partnership Special Event Redemption", the General Partner may cause
ML Partnership to redeem the partnership preferred securities for cash, in which
event ML Trust shall simultaneously apply the cash received to redeem the TOPrS.
Under current law, this redemption of the TOPrS would constitute, for United
States Federal income tax purposes, a taxable disposition, and a holder would
recognize gain or loss as if it sold the holder's proportionate interest in the
redeemed partnership preferred securities for an amount of cash equal to the
proceeds received upon redemption. See "--Disposition of TOPrS".
DISPOSITION OF TOPrS
A holder that sells TOPrS will recognize gain or loss equal to the
difference between the amount realized on the sale of the TOPrS and the holder's
adjusted tax basis in the TOPrS sold. Gain or loss to the seller will be a
capital gain or loss and will be a long-term capital gain or loss if the TOPrS
have been held for more than one year at the time of the sale. A holder will be
required to include accumulated but unpaid distributions on the partnership
preferred securities through the date of disposition in income as ordinary
income, and to add this amount to the adjusted tax basis of its TOPrS.
A holder's tax basis in its TOPrS generally will equal
o the amount paid by the holder for its TOPrS,
o increased by the amount includible in income by the holder with
respect to its TOPrS, and
o reduced by the amount of cash or other property distributed to the
holder with respect to its TOPrS.
A holder who acquires TOPrS at different prices may be required to maintain a
single aggregate adjusted tax basis in all of his TOPrS and, upon sale or other
disposition of some of his TOPrS, to allocate a pro rata portion of such
aggregate tax basis to the TOPrS sold, rather than maintaining a separate tax
basis in each TOPrS for purposes of computing gain or loss on a sale of that
TOPrS.
OTHER PARTNERSHIP PROVISIONS
SECTION 708. Under Section 708 of the Code, ML Partnership will be deemed
to terminate for United States Federal income tax purposes if 50% or more of the
capital and profits interests in ML Trust are sold or exchanged within a
12-month period. Pursuant to final Treasury regulations issued on May 9, 1997,
if a deemed termination under Section 708 were to occur, ML Partnership would be
considered to have contributed its assets to a new partnership in return for
partnership interests therein and then to have distributed those new partnership
interests to the partners of the old partnership in liquidation thereof.
SECTION 701. The Department of Treasury has promulgated regulations under
Section 701 of the Code that generally permit it to recast a transaction or
disregard a partnership if a partnership is formed or availed of in connection
with a transaction a principal purpose of which is to reduce substantially the
present value of the partners' aggregate federal tax liability in a manner that
is inconsistent with the intent of the partnership provisions of the Code or to
treat a partnership as an aggregate of its partners as appropriate to carry out
the purpose of any provision of the Code or the Treasury regulations thereunder.
ML Partnership has been formed for, and will engage in, activities typical for
partnerships. Although there is no precedent that applies to the transactions
contemplated herein, Tax Counsel believes that ML Partnership is not of the type
intended to fall within the scope of these regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the TOPrS will be reported to holders on an IRS Form 1099, which
form should be mailed to holders of TOPrS by January 31 following each calendar
year. Payments made on and proceeds from the sale of TOPrS may be subject to a
"back-up" withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amount generally will be allowed as a
credit against the holder's United States Federal income tax, provided the
required information is timely filed with the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the back-up withholding
and information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement, ML
Trust has agreed to sell to each of the underwriters named below, and each of
the underwriters, for whom MLPF&S and are acting as representatives, has
severally agreed to purchase the number of TOPrS set forth opposite its name
below. In the purchase agreement, the several underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the TOPrS offered
by this prospectus if any of the TOPrS are purchased. In the event of default by
an underwriter, the purchase agreement provides that, in certain circumstances,
the purchase commitments of the non-defaulting underwriters may be increased or
the purchase agreement may be terminated.
Number of Trust
Underwriters Preferred Securities
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................ ______________
Total ==============
COMMISSION AND DISCOUNTS
The underwriters propose to offer the TOPrS to the public at the public
offering price set forth on the cover page of this prospectus, and, to certain
dealers at that price less a concession not in excess of $ per TOPrS; provided,
that the concession for sales of 10,000 or more TOPrS to any single purchaser
will be $ per TOPrS. The underwriters may allow, and such dealers may reallow, a
discount not in excess of $ per TOPrS to certain brokers and dealers. After the
TOPrS are released for sale to the public, the offering price, concession and
discount may be changed. Proceeds to be received by ML&Co. will be net of the
underwriting discount and expenses payable by ML&Co.
In view of the fact that the proceeds of the sale of the TOPrS will
ultimately be used to purchase the investment instruments of ML&Co. and its
subsidiaries, the purchase agreement provides that ML&Co. will pay as
compensation to the underwriters, an amount in immediately available funds of $
per TOPrS (or $ in the aggregate) for the accounts of the several underwriters;
provided that, such compensation for sales of 10,000 or more TOPrS to any single
purchaser will be $ per TOPrS. Therefore, to the extent of any sales, the actual
amount of underwriters' compensation will be less than the aggregate amount
specified in the preceding sentence.
LISTING
Application will be made to list the TOPrS on the NYSE. Trading of the
TOPrS on the NYSE is expected to commence within a 30-day period after the
initial delivery of the TOPrS. The representatives have advised ML Trust that
they intend to make a market in the TOPrS prior to the commencement of trading
on the NYSE. The representatives will have no obligation to make a market in the
TOPrS, however, and may cease market making activities, if commenced, at any
time.
Before this offering there has been no public market for the TOPrS. In
order to meet one of the requirements for listing the TOPrS on the NYSE, the
underwriters will undertake to sell lots of 100 or more TOPrS to a minimum of
400 beneficial holders, that there will be at least one million units of TOPrS
outstanding and that the TOPrS will have a minimum market value of $4,000,000.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
In connection with the offering, the underwriters are permitted to engage
in certain transactions that stabilize the market price of the TOPrS. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the market price of the TOPrS. If an underwriter creates a short
position in the TOPrS in connection with the offering, i.e., if it sells more
TOPrS than are set forth on the cover page of this prospectus, the underwriter
may reduce that short position by purchasing TOPrS in the open market. In
general, purchases of a security for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it might
be in the absence of such purchases.
The underwriters may also impose a penalty bid on certain underwriters and
selling group members. This means that if an underwriter purchases TOPrS in the
open market to reduce the underwriter's short position or to stabilize the price
of the TOPrS, they may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those TOPrS as part of the
offering. The imposition of a penalty bid might have an effect on the price of a
security to the extent that it were to discourage resales of the security.
Neither ML&Co. nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the TOPrS. In addition, neither ML&Co.
nor any of the underwriters makes any representation that the underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
MISCELLANEOUS
ML Trust, ML&Co., and ML Partnership have agreed to indemnify the
underwriters against, or contribute to payments that the underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act.
Because MLPF&S, one of the underwriters in the offering, is an affiliate of
ML&Co. and a member of the National Association of Securities Dealers, Inc., the
offering of TOPrS will be conducted pursuant to the applicable sections of Rule
2810 of the Conduct Rules of the NASD. The underwriters may not confirm sales to
any discretionary account without the prior specific written approval of the
customer.
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, ML&Co. in the ordinary course of business and
have engaged, and may in the future engage, in commercial banking and investment
banking transactions with ML&Co. MLPF&S may use this prospectus for offers and
sales related to market-making transactions in the TOPrS. MLPF&S may act as
principal or agent in these transactions, and the sales will be made at prices
related to prevailing market prices at the time of sale.
WHERE YOU CAN FIND MORE INFORMATION
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 TOPrS and other securities. For further information on ML&Co. and the TOPrS,
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
LEGAL MATTERS
Certain matters of Delaware law relating to the legality of the TOPrS, the
validity of ML Trust Agreement, the formation of ML Trust and ML Partnership and
the legality under state law of the TOPrS and the partnership preferred
securities are being passed upon by Skadden, Arps, Slate, Meagher & Flom
(Delaware), special Delaware counsel to ML Trust, the Partnership and ML&Co..
The legality under state law of The Trust Guarantee, the Partnership Guarantee,
the ML&Co. Debenture and the Investment Guarantees with respect to the Affiliate
Debentures will be passed upon on behalf of ML Trust, ML Partnership and ML&Co.
by Brown & Wood LLP, New York, New York. The validity of the TOPrS, the
partnership preferred securities and the Trust Guarantee and the Partnership
Guarantee will be passed upon on behalf of the underwriters by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York, counsel to the underwriters.
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.
The balance sheets of Merrill Lynch Preferred Funding VI, L.P. and Merrill Lynch
Preferred Capital Trust VI as of December 25, 1998 included in this prospectus
have also been audited by Deloitte & Touche LLP and have been included in
reliance upon such reports of Deloitte & Touche LLP given upon their authority
as experts in accounting and auditing.
<PAGE>
INDEX OF DEFINED TERMS
DEFINED TERMS PAGE NO.
- ------------- --------
Affiliate Debentures...................................................
Affiliate Investment Instruments.......................................
Business Day...........................................................
Change in Investment Company Act Law...................................
Code...................................................................
Eligible Institution...................................................
Finance Subsidiary.....................................................
Investment Affiliate...................................................
Investment Company Act.................................................
Investment Guarantee...................................................
ML&Co................................................................
ML&Co. Debenture.......................................................
ML Partnership.........................................................
MLPF&S.................................................................
Moody's................................................................
Partnership Enforcement Event..........................................
Partnership Guarantee..................................................
Partnership Guarantee Payments.........................................
Partnership Investment Company Event...................................
Partnership Special Event..............................................
Partnership Tax Event..................................................
Rights Agreement.......................................................
S&P....................................................................
Special Event..........................................................
Tax Action.............................................................
Tax Counsel............................................................
TOPrS..................................................................
Trust Enforcement Event................................................
Trust Guarantee........................................................
Trust Guarantee Payments...............................................
Trust Investment Company Event.........................................
Trust Securities.......................................................
Trust Special Event....................................................
Trust Tax Event........................................................
United States Person...................................................
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Independent Auditors' Report....................................... F-2
Balance Sheet...................................................... F-3
Note to Balance Sheet.............................................. F-3
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Independent Auditors' Report....................................... F-4
Balance Sheet...................................................... F-5
Note to Balance Sheet.............................................. F-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the General Partner and Initial Limited Partner of
Merrill Lynch Preferred Funding VI, L.P.
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Funding VI, L.P. (the "Partnership") as of December 25, 1998. This balance sheet
is the responsibility of the Partnership's management. Our responsibility is to
express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Partnership as of December 25,
1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
January 28, 1999
<PAGE>
BALANCE SHEET
OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
December 25, 1998
Assets.................................................................$ --
=========
Partnership Securities
Limited partner interest............................................ $ 85
General partner interest............................................ 15
100
Less: Receivables from partners for subscribed partnership interests... (100)
=========
$ --
=========
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on December 7, 1998 for the exclusive purposes of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. ("ML&Co.") and
wholly owned subsidiaries of ML&Co. (the "Affiliate Investment Instruments")
with the proceeds from the sale of Partnership Preferred Securities (the
"Partnership Preferred Securities") to Merrill Lynch Preferred Capital Trust VI
(the "Trust") and a capital contribution from ML&Co. in exchange for the general
partnership interest in the Partnership (collectively, the "Partnership
Proceeds").
The Partnership Preferred Securities will be redeemable for cash, at the
option of the Partnership, in whole or in part, from time to time, after a
certain date to be determined. Except as provided in the Limited Partnership
Agreement and Partnership Preferred Securities Guarantee Agreement, and as
otherwise provided by law, the holders of the Partnership Preferred Securities
will have no voting rights.
The Partnership Proceeds will be used initially to purchase debt
instruments from ML&Co. and certain domestic wholly owned subsidiaries of
ML&Co., retaining 1% in unaffiliated debt securities. The Partnership shall have
a perpetual existence subject to certain termination events. ML&Co. serves as
the sole general partner of the Partnership. ML&Co., in its capacity as General
Partner of the Partnership, has agreed to pay all fees and expenses related to
the organization and operations of the Partnership (including any taxes, duties,
assessments or government charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Partnership) and the offering of the Partnership Preferred Securities and be
responsible for all debts and other obligations of the Partnership (other than
with respect to the Partnership Preferred Securities). The General Partner has
agreed to indemnify certain officers and agents of the Partnership.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Merrill Lynch Preferred Capital Trust VI
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Capital Trust VI (the "Trust") as of December 25, 1998. This balance sheet is
the responsibility of the Trust's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Trust as of December 25, 1998,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
January 28, 1999
<PAGE>
BALANCE SHEET OF
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
December 25, 1998
Assets.................................................................. $ 0
----
Trust securities........................................................ $ 0
----
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI (the "Trust") is a statutory
business trust formed on December 7, 1998 under the laws of the State of
Delaware for the exclusive purposes of (i) issuing the Trust Originated
Preferred Securities (the "TOPrS") and the common securities (together with the
TOPrS, the "Trust Securities") representing undivided beneficial ownership
interests in the assets of the Trust, (ii) purchasing Partnership Preferred
Securities (the "Partnership Preferred Securities") representing the limited
partnership interests of Merrill Lynch Preferred Funding VI, L.P. (the
"Partnership") with the proceeds from the sale of the Trust Securities, and
(iii) engaging in only those other activities necessary or incidental thereto.
The Trust has a perpetual existence, subject to certain termination events as
provided in the Declaration of Trust under which it was formed. Subsequent to
December 25, 1998, the Trust intends to issue and sell its TOPrS in a public
offering and to issue and sell its common securities to Merrill Lynch & Co.,
Inc. ("ML&Co"). No TOPrS have been issued as of December 25, 1998.
The proceeds from the Trust's sale of the Trust Securities will be used to
purchase the Partnership Preferred Securities from the Partnership. The
Partnership Preferred Securities will be redeemable for cash, at the option of
the Partnership, in whole or in part, from time to time, after a certain date to
be determined. Upon any redemption of the Partnership Preferred Securities, the
TOPrS will be redeemed, in whole or in part, as applicable. Holders of the TOPrS
will have limited voting rights and will not be entitled to vote to appoint,
remove or replace, or to increase or decrease the number of, trustees, which
voting rights are vested exclusively in the holder of the common securities.
ML&Co. will be obligated to pay compensation to the underwriters of the
offering of the TOPrS. ML&Co. will pay all fees and expenses related to the
organization and operations of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Trust) and the offering of the TOPrS and be responsible for all debts and
other obligations of the Trust (other than the Trust Securities). ML&Co. has
also agreed to indemnify the Trustees and certain other persons.
<PAGE>
================================================================================
[LOGO]
Merrill Lynch Preferred Capital Trust VI
% Trust Originated Preferred Securities
"TOPrS"
Liquidation Amount $25 per TOPrS
guaranteed to the extent described in this prospectus by
Merrill Lynch & Co., Inc.
----------------
PROSPECTUS
----------------
Merrill Lynch & Co.
, 199
================================================================================
<PAGE>
Information contained in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus
supplement and the accompanying prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus Supplement dated March 29, 1999
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED , 1999)
$
[LOGO]
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-------------------------------
THE NOTES:
o We will offer notes from time to o The notes may bear interest at
time and specify the terms and fixed or floating rates or may
conditions of each issue of notes not bear any interest. If the
in a pricing supplement. notes bear interest at a
floating rate, the floating
o The notes will be senior unsecured rate may be based on one or
debt securities of ML&Co. more indices or formulas plus
or minus a fixed amount or
o The notes will have stated maturities multiplied by a factor.
of nine months or more from the date
they are originally issued. o We will specify whether the
notes can be redeemed or repaid
o We will pay amounts due on the notes before their maturity and
in U.S. dollars or any other whether they are subject to
consideration described in the mandatory redemption,
applicable pricing supplement. redemption at the option of
ML&Co. or repayment at the
option of the holder of the
notes.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE S-3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement, the accompanying prospectus or any pricing supplement is
truthful or complete. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Agent's Discounts Proceeds, before expenses, to
Public Offering Price And Commissions Merrill Lynch & Co., Inc.
--------------------- ----------------- -----------------------------
<S> <C> <C> <C>
Per note................... 100% .05%-.60% 99.95%-99.40%
Total(1)................... $_00,000,000 $ -$ $ -$
</TABLE>
(1) Or the equivalent in one or more foreign or composite currencies.
We may sell notes to the agent referred to below as principal for resale at
varying or fixed offering prices or through the agent as agent using its
reasonable efforts on our behalf. We may also sell notes without the assistance
of the agent, whether acting as principal or as agent.
If we sell other securities referred to in the accompanying prospectus, the
amount of notes that we may offer and sell under this prospectus supplement may
be reduced.
-------------------------------
Merrill Lynch & Co.
-------------------------------
The date of this prospectus supplement is , 1999.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Risk Factors............................................................ S-3
Description of the Notes................................................ S-5
United States Federal Income Taxation................................... S-25
Plan of Distribution.................................................... S-32
Validity of the Notes................................................... S-33
PROSPECTUS
PAGE
----
Merrill Lynch & Co., Inc................................................
Use of Proceeds.........................................................
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.........................................
The Securities..........................................................
Description of Debt Securities..........................................
Description of Debt Warrants............................................
Description of Currency Warrants........................................
Description of Index Warrants...........................................
Description of Preferred Stock..........................................
Description of Depositary Shares........................................
Description of Preferred Stock Warrants.................................
Description of Common Stock.............................................
Description of Common Stock Warrants....................................
Plan of Distribution....................................................
Where You Can Find More Information.....................................
Incorporation of Information We File With the SEC.......................
Experts.................................................................
References in this prospectus supplement to "ML&Co.", "we", "us" and "our"
are to Merrill Lynch & Co., Inc.
References in this prospectus supplement to "MLPF&S" are to the agent,
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
<PAGE>
RISK FACTORS
Your investment in the notes involves certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the notes is suitable for you. The notes are not an appropriate
investment for you if you are unsophisticated with respect to the significant
components of their relationships.
STRUCTURE RISKS OF NOTES INDEXED TO INTEREST RATE, CURRENCY OR OTHER INDICES OR
FORMULAS
If you invest in notes indexed to one or more interest rate, currency or
other indices or formulas, there will be significant risks not associated with a
conventional fixed rate or floating rate debt security. These risks include
fluctuation of the indices or formulas and the possibility that you will receive
a lower, or no, amount of principal, premium or interest and at different times
than you expected. We have no control over a number of matters, including
economic, financial and political events, that are important in determining the
existence, magnitude and longevity of these risks and their results. In
addition, if an index or formula used to determine any amounts payable in
respect of the notes contains a multiplier or leverage factor, the effect of any
change in that index or formula will be magnified. In recent years, values of
certain indices and formulas have been volatile and volatility in those and
other indices and formulas may be expected in the future. However, past
experience is not necessarily indicative of what may occur in the future.
REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES
If your notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may, in the case of optional redemption, or must, in
the case of mandatory redemption, choose to redeem your notes at times when
prevailing interest rates may be relatively low. Accordingly, you generally will
not be able to reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as that of the notes.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR YOUR NOTES; MANY FACTORS AFFECT THE
TRADING VALUE OF YOUR NOTES
We cannot assure you a trading market for your notes will ever develop or
be maintained. Many factors independent of our creditworthiness may affect the
trading market of your notes. These factors include:
o the complexity and volatility of the index or formula applicable to
the notes,
o the method of calculating the principal, premium and interest in
respect of the notes,
o the time remaining to the maturity of the notes,
o the outstanding amount of the notes,
o the redemption features of the notes,
o the amount of other securities linked to the index or formula
applicable to the notes, and
o the level, direction and volatility of market interest rates
generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market
and experience more price volatility. There may be a limited number of buyers
for these notes. This may affect the price you receive for these notes or your
ability to sell these notes at all. You should not purchase notes unless you
understand and know you can bear the related investment risks.
OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES
Our credit ratings are an assessment of our ability to pay our obligations.
Consequently, real or anticipated changes in our credit ratings will generally
affect the market value of your notes. Our credit ratings, however, may not
reflect the potential impact of risks related to structure, market or other
factors discussed above on the value of your notes.
<PAGE>
DESCRIPTION OF THE NOTES
The notes will be issued as a series of debt securities under a senior
indenture, dated as of October 1, 1993, as amended (the "1993 Indenture"),
between ML&Co. and The Chase Manhattan Bank, as trustee. The term "senior debt
securities," as used in this prospectus supplement, refers to all securities
issued and issuable from time to time under ML&Co.'s senior indentures and
includes the notes. The senior debt securities and ML&Co.'s senior indentures
are more fully described in the accompanying prospectus. The following summary
of the material provisions of the notes and of the 1993 Indenture is not
complete and is qualified in its entirety by reference to the 1993 Indenture, a
copy of which has been filed as an exhibit to the registration statement of
which this prospectus supplement and the accompanying prospectus are a part.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor MLPF&S has authorized any other person to
provide you with different or additional information. If anyone provides you
with different or additional information, you should not rely on it. Neither we
nor MLPF&S is making an offer to sell these securities in any jurisdiction where
the offer or sale is not permitted. You should assume that the information
contained or incorporated by reference in this prospectus supplement, the
accompanying prospectus and any pricing supplement is accurate only as of the
date on the front cover of the applicable pricing supplement.
The following description of notes will apply unless otherwise specified in
an applicable pricing supplement.
TERMS OF THE NOTES
All senior debt securities, including the notes, issued and to be issued
under ML&Co.'s senior indentures will be unsecured general obligations of ML&Co.
and will rank equally with all other unsecured and unsubordinated indebtedness
of ML&Co. from time to time outstanding. Because ML&Co. is a holding company,
the right of ML&Co. and its creditors, including the holders of the notes, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of that subsidiary, except to the extent that a bankruptcy
court may recognize the claims of ML&Co. itself as a creditor of that
subsidiary. In addition, dividends, loans and advances to ML&Co. from certain
subsidiaries, including MLPF&S, are restricted by net capital requirements under
the Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
ML&Co.'s senior indentures do not limit the aggregate principal amount of
senior debt securities which ML&Co. may issue. ML&Co. may issue its senior debt
securities from time to time as a single series or in two or more separate
series up to the aggregate principal amount from time to time authorized by
ML&Co. for each series. ML&Co. may, from time to time, without the consent of
the holders of the notes, provide for the issuance of notes or other senior debt
securities under its senior indentures in addition to the $ aggregate principal
amount of notes offered by this prospectus supplement. As of December 25, 1998,
ML&Co. had $ billion aggregate principal amount of notes issued and outstanding.
The aggregate principal amount of notes which may be offered and sold by this
prospectus supplement may be reduced by the sale by ML&Co. of other securities
under the registration statement of which this prospectus supplement and the
accompanying prospectus are a part.
The notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by ML&Co. Interest-bearing notes will bear interest at either fixed or
floating rates as specified in the applicable pricing supplement. Notes may be
issued at significant discounts from their principal amount payable at stated
maturity, or on any date before the stated maturity date on which the principal
or an installment of principal of a note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of ML&Co.,
repayment at the option of the holder or otherwise (the stated maturity date or
such prior date, as the case may be, is referred to as, a "Maturity"). Some
notes may not bear interest.
Unless otherwise indicated in a note and in the applicable pricing
supplement, the notes will be denominated in United States dollars and ML&Co.
will make payments of principal of, and premium, if any, and interest on, the
notes in United States dollars.
Interest rates, interest rate formulae and other variable terms of the
notes are subject to change by ML&Co. from time to time, but no change will
affect any note already issued or as to which ML&Co. has accepted an offer to
purchase.
Each note will be issued in fully registered book-entry form or
certificated form, in denominations of $1,000 and integral multiples of
$1,000, unless otherwise specified in the applicable pricing supplement. Notes
in book-entry form may be transferred or exchanged only through a
participating member of The Depository Trust Company, also known as DTC, or
any other depository as is identified in an applicable pricing supplement. See
"-Book-Entry Notes". Registration of transfer of notes in certificated form
will be made at the corporate trust office of the trustee. There will be no
service charge for any registration of transfer or exchange of notes, but
ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with any transfer or exchange, other
than exchanges pursuant to the 1993 Indenture not involving any transfer.
ML&Co. will make payments of principal of, and premium and interest, if
any, on notes in book-entry form through the trustee to the depository or its
nominee. See "Notes in Book-Entry Form". Unless otherwise specified in the
applicable pricing supplement, a beneficial owner of notes in book-entry form
that are denominated in a currency other than United States dollars (a
"Specified Currency") electing to receive payments of principal or any premium
or interest in that Specified Currency must notify the participant of DTC
through which its interest is held on or before the applicable regular record
date, in the case of a payment of interest, and on or before the sixteenth day,
whether or not a Business Day, as defined below, before its stated maturity, in
the case of principal or premium, of the beneficial owner's election to receive
all or a portion of any payment in a Specified Currency. The participant must
notify the depository of any election on or before the third Business Day after
the regular record date. The depository will notify the paying agent of the
election on or before the fifth Business Day after the regular record date. If
complete instructions are received by the participant and forwarded to the
depository, and forwarded by the depository to the paying agent, on or before
the relevant dates, the beneficial owner of the notes in book-entry form will
receive payments in the Specified Currency.
In the case of notes in certificated form, ML&Co. will make payment of
principal or premium, if any, at the Maturity of each note in immediately
available funds upon presentation of the note and, in the case of any repayment
on an optional repayment date, upon submission of a duly completed election form
if and as required by the provisions described below, at the corporate trust
office of the trustee in the Borough of Manhattan, The City of New York, or at
any other place as ML&Co. may designate. Payment of interest due at Maturity
will be made to the person to whom payment of the principal of the note in
certificated form will be made. Payment of interest due on notes in certificated
form other than at Maturity will be made at the corporate trust office of the
trustee or, at the option of ML&Co., may be made by check mailed to the address
of the person entitled to receive payment as the address shall appear in the
security register. Notwithstanding the immediately preceding sentence, a holder
of $1,000,000 or more in aggregate principal amount of notes in certificated
form, whether having identical or different terms and provisions, having the
same interest payment dates will, at the option of ML&Co., be entitled to
receive interest payments, other than at Maturity, by wire transfer of
immediately available funds if appropriate wire transfer instructions have been
received in writing by the trustee not less than 15 days prior to the applicable
interest payment date. Any wire instructions received by the trustee shall
remain in effect until revoked by the holder.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York;
provided, however, that, with respect to non-United States dollar-denominated
notes, the day is also not a day on which commercial banks are authorized or
required by law, regulation or executive order to close in the Principal
Financial Center, as defined below, of the country issuing the Specified
Currency or, if the Specified Currency is Euro, the day is also a day on which
the Trans-European Automated Real-time Gross Settlement Express Transfer
(TARGET) System is open; provided, further, that, with respect to notes as to
which LIBOR is an applicable Interest Rate Basis, the day is also a London
Business Day. "London Business Day" means a day on which commercial banks are
open for business, including dealings in the Index Currency, as defined below,
in London.
"Principal Financial Center" means, unless otherwise specified in the
applicable pricing supplement,
(1) the capital city of the country issuing the Specified Currency, except
that with respect to United States dollars, Australian dollars,
Canadian dollars, Deutsche marks, Dutch guilders, South African rand
and Swiss francs, the "Principal Financial Center" will be The City of
New York, Sydney and Melbourne, Toronto, Frankfurt, Amsterdam,
Johannesburg and Zurich, respectively, or
(2) the capital city of the country to which the LIBOR Currency relates,
except that with respect to United States dollars, Canadian dollars,
Deutsche marks, Dutch guilders, Portuguese escudos, South African rand
and Swiss francs, the "Principal Financial Center" will be The City of
New York, Toronto, Frankfurt, Amsterdam, London, Johannesburg and
Zurich, respectively.
TRANSACTION AMOUNT
Interest rates offered by ML&Co. with respect to the notes may differ
depending upon, among other things, the aggregate principal amount of notes
purchased in any transaction. ML&Co. may offer notes with similar variable terms
but different interest rates concurrently at any time. ML&Co. may also
concurrently offer notes having different variable terms to different investors.
REDEMPTION AT THE OPTION OF ML&CO.
The notes will not be subject to any sinking fund. ML&Co. may redeem the
notes at its option prior to their stated maturity only if an initial redemption
date is specified in the applicable notes and in the applicable pricing
supplement. If so indicated in the applicable pricing supplement, ML&Co. may
redeem the notes at its option on any date on and after the applicable initial
redemption date specified in the applicable pricing supplement. On and after the
initial redemption date, if any, ML&Co. may redeem the related note at any time
in whole or from time to time in part at its option at the applicable redemption
price referred to below together with interest on the principal of the
applicable note payable to the redemption date, on notice given, unless
otherwise specified in the applicable pricing supplement, not more than 60 nor
less than 30 days before the redemption date. ML&Co. will redeem the notes in
increments of $1,000, provided that any remaining principal amount will be an
authorized denomination of the applicable note. Unless otherwise specified in
the applicable pricing supplement, the redemption price with respect to a note
will initially mean a percentage, the initial redemption percentage, of the
principal amount of the note to be redeemed specified in the applicable pricing
supplement and shall decline at each anniversary of the initial redemption date
by a percentage specified in the applicable pricing supplement, of the principal
amount to be redeemed until the redemption price is 100% of the principal
amount.
REPAYMENT AT THE OPTION OF THE HOLDER
If so indicated in an applicable pricing supplement, ML&Co. will repay the
notes in whole or in part at the option of the holders of the notes on any
optional repayment date specified in the applicable pricing supplement. If no
optional repayment date is indicated with respect to a note, it will not be
repayable at the option of the holder before its stated maturity. Any repayment
in part will be in an amount equal to $1,000 or integral multiples of $1,000,
provided that any remaining principal amount will be an authorized denomination
of the applicable note. The repurchase price for any note so repurchased will be
100% of the principal amount to be repaid, together with interest on the
principal of the applicable note payable to the date of repayment. For any note
to be repaid, the trustee must receive, at its office maintained for such
purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the trustee, not more than 60 nor less than 30 days
before the optional repayment date:
o in the case of a note in certificated form, the note and the form
entitled "Option to Elect Repayment" duly completed, or
o in the case of a note in book-entry form, instructions to that effect
from the applicable beneficial owner of the notes to the depository
and forwarded by the depository.
Notices of elections from a holder to exercise the repayment option must be
received by the trustee by 5:00 p.m., New York City time, on the last day for
giving such notice. Exercise of the repayment option by the holder of a note
will be irrevocable.
Only the depository may exercise the repayment option in respect of global
securities representing notes in book-entry form. Accordingly, beneficial owners
of global securities that desire to have all or any portion of the notes in
book-entry form represented by global securities repaid must instruct the
participant through which they own their interest to direct the depository to
exercise the repayment option on their behalf by forwarding the repayment
instructions to the trustee as discussed above. In order to ensure that the
instructions are received by the trustee on a particular day, the applicable
beneficial owner must so instruct the participant through which it owns its
interest before that participant's deadline for accepting instructions for that
day. Different firms may have different deadlines for accepting instructions
from their customers. Accordingly, beneficial owners of notes in book-entry form
should consult the participants through which they own their interest for the
respective deadlines. All instructions given to participants from beneficial
owners of notes in book-entry form relating to the option to elect repayment
will be irrevocable. In addition, at the time instructions are given, each
beneficial owner will cause the participant through which it owns its interest
to transfer its interest in the global security or securities representing the
related notes in book-entry form, on the depository's records, to the trustee.
See "-Book-Entry Notes".
If applicable, ML&Co. will comply with the requirements of Section 14(e) of
the Exchange Act and the rules promulgated thereunder and any other securities
laws or regulations in connection with any repayment at the option of the
holder.
ML&Co. may at any time purchase notes at any price or prices in the open
market or otherwise. Notes so purchased by ML&Co. may, at the discretion of
ML&Co., be held, resold or surrendered to the trustee for cancellation.
INTEREST
Each note will bear interest from the date of issue at the rate per annum
or, in the case of a floating rate note, pursuant to the interest rate formula
stated in the applicable note and in the applicable pricing supplement until the
principal of the note is paid or made available for payment. Interest will be
payable in arrears on each interest payment date specified in the applicable
pricing supplement on which an installment of interest is due and payable and at
Maturity. The first payment of interest on any note originally issued between a
regular record date and the related interest payment date will be made on the
interest payment date immediately following the next succeeding regular record
date to the registered holder on the next succeeding regular record date. The
regular record date will be the fifteenth calendar day, whether or not a
Business Day, immediately preceding the related interest payment date.
FIXED RATE NOTES
Unless otherwise specified in an applicable pricing supplement, each fixed
rate note will bear interest from, and including, the date of issue, at the rate
per annum stated on the face of the note until the principal amount of the note
is paid or made available for payment. Interest payments on fixed rate notes
will equal the amount of interest accrued from and including the immediately
preceding interest payment date in respect of which interest has been paid or
from and including the date of issue, if no interest has been paid with respect
to the applicable fixed rate notes, to, but excluding, the related interest
payment date or Maturity, as the case may be. Unless otherwise specified in the
applicable pricing supplement, interest on fixed rate notes will be computed on
the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable pricing supplement, interest
on fixed rate notes will be payable semiannually on May 15 and November 15 of
each year and at Maturity. If any interest payment date or the Maturity of a
fixed rate note falls on a day that is not a Business Day, the related payment
of principal, premium, if any, or interest will be made on the next succeeding
Business Day as if made on the date the applicable payment was due, and no
interest will accrue on the amount payable for the period from and after the
interest payment date or Maturity, as the case may be.
FLOATING RATE NOTES
Interest on floating rate notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may be one or more
of:
o the CD Rate,
o the CMT Rate,
o the Commercial Paper Rate,
o the Eleventh District Cost of Funds Rate,
o the Federal Funds Rate,
o LIBOR,
o the Prime Rate,
o the Treasury Rate, or
o any other Interest Rate Basis or interest rate formula that is
specified in the applicable pricing supplement.
A floating rate note may bear interest with respect to two or more Interest
Rate Bases.
TERMS. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including:
o whether the floating rate note is
o a "Regular Floating Rate Note",
o a "Inverse Floating Rate Note" or
o a "Floating Rate/Fixed Rate Note",
o the Interest Rate Basis or Bases,
o the Initial Interest Rate,
o the Interest Reset Dates,
o the interest payment dates,
o the period to maturity of the instrument or obligation with respect to
which the Interest Rate Basis or Bases will be calculated (the "Index
Maturity"),
o the Maximum Interest Rate and Minimum Interest Rate, if any,
o the number of basis points to be added to or subtracted from the
related Interest Rate Basis or Bases (the "Spread"),
o the percentage of the related Interest Rate Basis or Bases by which
the Interest Rate Basis or Bases will be multiplied to determine the
applicable interest rate (the "Spread Multiplier"),
o if one or more of the specified Interest Rate Bases is LIBOR, the
LIBOR Currency, the Index Maturity and the Designated LIBOR Page, and
o if one or more of the specified Interest Rate Bases is the CMT Rate,
the Designated CMT Telerate Page and Designated CMT Maturity Index.
The interest rate borne by the floating rate Notes will be determined as
follows:
Regular Floating Rate Notes. Unless a floating rate note is designated as a
Floating Rate/Fixed Rate Note, an Inverse Floating Rate Note or as having an
Addendum attached or as having "Other Provisions" apply relating to a different
interest rate formula, it will be a "Regular Floating Rate Note" and, except as
described below or in an applicable pricing supplement, will bear interest at
the rate determined by reference to the applicable Interest Rate Basis or Bases:
o plus or minus the applicable Spread, if any, and/or
o multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on the
Regular Floating Rate Note will be payable will be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the period
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.
Floating Rate/Fixed Rate Notes. If a floating rate note is designated as a
"Floating Rate/Fixed Rate Note", it will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases:
o plus or minus the applicable Spread, if any, and/or
o multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on the
applicable Floating Rate/Fixed Rate Note will be payable will be reset as of
each Interest Reset Date; provided, however, that:
o the interest rate in effect for the period from the date of issue
to the first Interest Reset Date will be the Initial Interest
Rate, and
o the interest rate in effect commencing on, and including, the
date on which interest begins to accrue on a fixed rate basis to
Maturity will be the Fixed Interest Rate, if the rate is
specified in the applicable pricing supplement, or if no Fixed
Interest Rate is specified, the interest rate in effect on the
Floating Rate/Fixed Rate Note on the day immediately preceding
the date on which interest begins to accrue on a fixed rate
basis.
Inverse Floating Rate Notes. If a floating rate note is designated as
an "Inverse Floating Rate Note", except as described below, it will bear
interest equal to the Fixed Interest Rate specified in the related pricing
supplement minus the rate determined by reference to the applicable Interest
Rate Basis or Bases:
o plus or minus the applicable Spread, if any, and/or
o multiplied by the applicable Spread Multiplier, if any;
provided, however, that unless otherwise specified in the applicable pricing
supplement, the interest rate on the applicable Inverse Floating Rate Note will
not be less than zero percent. Commencing on the first Interest Reset Date, the
rate at which interest on the applicable Inverse Floating Rate Note is payable
will be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
Each Interest Rate Basis shall be the rate determined in accordance with
the applicable provisions below. Except as set forth above, the interest rate in
effect on each day will be:
o if the day is an Interest Reset Date, the interest rate determined as
of the Interest Determination Date (as defined below) immediately
preceding the applicable Interest Reset Date or
o if the day is not an Interest Reset Date, the interest rate determined
as of the Interest Determination Date immediately preceding the
applicable Interest Reset Date.
Interest Reset Dates. The applicable pricing supplement will specify the
dates on which the interest rate on the related floating rate note will be reset
(each, an "Interest Reset Date"). Unless otherwise specified in the applicable
pricing supplement, the Interest Reset Date will be, in the case of floating
rate notes which reset:
o daily - each Business Day;
o weekly - the Wednesday of each week, with the exception of weekly
reset Floating Rate Notes as to which the Treasury Rate is an
applicable Interest Rate Basis, which will reset the Tuesday of each
week, except as described below;
o monthly - the third Wednesday of each month, with the exception of
monthly reset Floating Rate Notes as to which the Eleventh District
Cost of Funds Rate is an applicable Interest Rate Basis, which will
reset on the first calendar day of the month;
o quarterly - the third Wednesday of March, June, September and December
of each year;
o semiannually - the third Wednesday of the two months specified in the
applicable pricing supplement; and
o annually - the third Wednesday of the month specified in the
applicable pricing supplement;
provided, however, that with respect to Floating Rate/Fixed Rate Notes, the rate
of interest will not reset after the applicable date on which interest on a
fixed rate basis begins to accrue.
If any Interest Reset Date for any floating rate note would otherwise be a
day that is not a Business Day, the applicable Interest Reset Date will be
postponed to the next succeeding day that is a Business Day, except that in the
case of a floating rate note as to which LIBOR is an applicable Interest Rate
Basis, if the Business Day falls in the next succeeding calendar month, then the
Interest Reset Date will be the immediately preceding Business Day. In addition,
in the case of a floating rate note for which the Treasury Rate is an applicable
Interest Rate Basis if the Interest Determination Date would otherwise fall on
an Interest Reset Date, then the applicable Interest Reset Date will be
postponed to the next succeeding Business Day.
Maximum and Minimum Interest Rates. A floating rate note may also have
either or both of the following:
o a maximum numerical limitation, or ceiling, on the rate at which
interest may accrue during any interest period (a "Maximum Interest
Rate"), and
o a minimum numerical limitation, or floor, on the rate at which
interest may accrue during any period (a "Minimum Interest Rate").
The 1993 Indenture is, and any notes issued under the 1993 Indenture will
be, governed by and construed in accordance with the laws of the State of New
York. 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 securities in which
$2,500,000 or more has been invested. While ML&Co. believes that New York law
would be given effect by a state or federal court sitting outside of New York,
state laws frequently regulate the amount of interest that may be charged to and
paid by a borrower, including, in some cases, corporate borrowers. It is
suggested that prospective investors consult their personal advisors with
respect to the applicability of these laws. ML&Co. has agreed for the benefit of
the beneficial owners of the notes, to the extent permitted by law, not to claim
voluntarily the benefits of any laws concerning usurious rates of interest
against a beneficial owner of the notes.
Interest Payments. Each applicable pricing supplement will specify the
dates on which interest will be payable. Each floating rate note will bear
interest from the date of issue at the rates specified in the applicable
floating rate note until the principal of the applicable note is paid or
otherwise made available for payment. Except as provided below or in the
applicable pricing supplement, the interest payment dates with respect to
floating rate notes will be, in the case of floating rate notes which reset:
o daily, weekly or monthly - the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year,
as specified in the applicable pricing supplement;
o quarterly - the third Wednesday of March, June, September and December
of each year;
o semiannually - the third Wednesday of the two months of each year
specified in the applicable pricing supplement;
o annually - the third Wednesday of the month of each year specified in
the applicable pricing supplement; and
o at Maturity.
If any interest payment date for any floating rate note, other than an
interest payment date at Maturity, would otherwise be a day that is not a
Business Day, the interest payment date will be postponed to the next succeeding
day that is a Business Day except that in the case of a floating rate note as to
which LIBOR is an applicable Interest Rate Basis, if the Business Day falls in
the next succeeding calendar month, the applicable interest payment date will be
the immediately preceding Business Day. If the Maturity of a floating rate note
falls on a day that is not a Business Day, the payment of principal, premium, if
any, and interest will be made on the next succeeding Business Day, and no
interest on such payment will accrue for the period from and after the Maturity.
All percentages resulting from any calculation on floating rate notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All dollar
amounts used in or resulting from any calculation on floating rate notes will be
rounded to the nearest cent with one-half cent being rounded upward.
Interest payments on floating rate notes will equal the amount of interest
accrued from and including the immediately preceding interest payment date in
respect of which interest has been paid or from and including the date of issue,
if no interest has been paid, to but excluding the related interest payment date
or Maturity.
With respect to each floating rate note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. The accrued interest
factor is computed by adding the interest factor calculated for each day in the
period for which accrued interest is being calculated.
o In the case of notes for which the Interest Rate Basis is the CD Rate,
the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, the interest factor
for each day will be computed by dividing the interest rate applicable
to each day by 360.
o In the case of notes for which the Interest Rate Basis is the CMT Rate
or the Treasury Rate, the interest factor for each day will be
computed by dividing the interest rate applicable to each day by the
actual number of days in the year.
o The interest factor for notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be
calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied.
Interest Determination Dates. The interest rate applicable to each interest
reset period commencing on the Interest Reset Date with respect to that interest
reset period will be the rate determined as of the applicable "Interest
Determination Date."
o The Interest Determination Date with respect to the CD Rate, the CMT
Rate and the Commercial Paper Rate will be the second Business Day
preceding each Interest Reset Date for the related note.
o The Interest Determination Date with respect to the Federal Funds Rate
and the Prime Rate, will be the Business Day immediately preceding
each Interest Reset Date.
o The Interest Determination Date with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month
immediately preceding each Interest Reset Date on which the Federal
Home Loan Bank of San Francisco publishes the Index, as defined below.
o The Interest Determination Date with respect to LIBOR will be the
second London Business Day preceding each Interest Reset Date.
o The Interest Determination Date with respect to the Treasury Rate will
be the day in the week in which the related Interest Reset Date falls
on which day Treasury Bills, as defined below, are normally auctioned.
Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that the auction may be
held on the preceding Friday; provided, however, that if an auction is
held on the Friday of the week preceding the related Interest Reset
Date, the related Interest Determination Date will be the preceding
Friday; and provided, further, that if an auction falls on any
Interest Reset Date, then the related Interest Reset Date will instead
be the first Business Day following the auction.
o The Interest Determination Date pertaining to a floating rate note the
interest rate of which is determined with reference to two or more
Interest Rate Bases will be the latest Business Day which is at least
two Business Days before the applicable Interest Reset Date for the
applicable floating rate note on which each Interest Reset Basis is
determinable. Each Interest Rate Basis will be determined on the
Interest Determination Date, and the applicable interest rate will
take effect on the related Interest Reset Date.
Calculation Date. Unless otherwise provided in the applicable pricing
supplement, MLPF&S will be the calculation agent. Upon the request of the holder
of any floating rate note, the calculation agent will provide the interest rate
then in effect and, if determined, the interest rate that will become effective
as a result of a determination made for the next Interest Reset Date with
respect to that floating rate note. Unless otherwise specified in the applicable
pricing supplement, the calculation date, if applicable, pertaining to any
Interest Determination Date will be the earlier of:
o the tenth calendar day after the applicable Interest Determination
Date, or, if the tenth calendar day is not a Business Day, the next
succeeding Business Day or
o the Business Day preceding the applicable Interest Payment Date or
Maturity, as the case may be.
CD RATE. CD Rate Notes will bear interest at the rates, calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable CD Rate Notes and in any applicable pricing
supplement.
"CD Rate" means:
(1) the rate on the applicable Interest Determination Date for negotiable
United States dollar certificates of deposit having the Index Maturity
specified in the applicable pricing supplement published in H.15(519)
under the heading "CDs (secondary market)", or
(2) if the rate referred to in clause (1) above is not so published by
3:00 P.M., New York City time, on the related calculation date, the
rate on the applicable Interest Determination Date for negotiable
United States dollar certificates of deposit of the Index Maturity
specified in the applicable pricing supplement as published in H.15
Daily Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "CDs
(secondary market)", or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on the applicable
Interest Determination Date, of three leading non-bank dealers in
negotiable United States dollar certificates of deposit in The City of
New York selected by the calculation agent for negotiable United
States dollar certificates of deposit of major United States money
center banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified in the applicable
pricing supplement in an amount that is representative for a single
transaction in that market at that time, or
(4) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (3) above, the CD rate in effect on the applicable
Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
CMT Rate. CMT Rate Notes will bear interest at the rates, calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable CMT Rate Notes and in any applicable pricing
supplement.
"CMT Rate" means:
(1) the rate displayed on the Designated CMT Telerate Page under the
caption "...Treasury Constant Maturities... Federal Reserve Board
Release H.15... Mondays Approximately 3:45 P.M.", under the column for
the Designated CMT Maturity Index for:
(a) if the Designated CMT Telerate Page is 7051, the rate on the
applicable Interest Determination Date, and
(b) if the Designated CMT Telerate Page is 7052, the weekly or the
monthly average, as specified in the applicable pricing
supplement, for the week or the month, as applicable, ended
immediately preceding the week or the month, as applicable, in
which the related Interest Determination Date falls, or
(2) if the rate referred to in clause (1) is no longer displayed on the
relevant page or is not so displayed by 3:00 P.M., New York City time,
on the related calculation date, the treasury constant maturity rate
for the Designated CMT Maturity Index published in H.15(519), or
(3) if the rate referred to in clause (2) is no longer published or is not
published by 3:00 P.M., New York City time, on the related calculation
date, the treasury constant maturity rate for the Designated CMT
Maturity Index, or other United States Treasury rate for the
Designated CMT Maturity Index, for the applicable Interest
Determination Date with respect to the applicable Interest Reset Date
as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury
that the calculation agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published
in H.15(519), or
(4) if the rate referred to in clause (4) applicable information is not
so published by 3:00 P.M., New York City time, on the applicable
calculation date, the rate on the applicable Interest Determination
Date calculated by the calculation agent as a yield to maturity,
based on the arithmetic mean of the secondary market offered rates
as of approximately 3:30 P.M., New York City time, on the applicable
Interest Determination Date reported, according to their written
records, by three leading primary United States government
securities dealers in The City of New York, which may include the
agent or its affiliates (each, a "Reference Dealer"), selected by
the calculation agent from five Reference Dealers selected by the
calculation agent after eliminating the highest quotation, or, in
the event of equality, one of the highest, and the lowest quotation
or, in the event of equality, one of the lowest, for the most
recently issued direct noncallable fixed rate obligations of the
United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index
minus one year, or
(5) if the calculation agent is unable to obtain three applicable Treasury
Note quotations as referred to in clause (4), the rate on the
applicable Interest Determination Date calculated by the calculation
agent as a yield to maturity based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M., New York
City time, on the applicable Interest Determination Date of three
Reference Dealers in The City of New York selected by the calculation
agent from five Reference Dealers selected by the calculation agent
after eliminating the highest quotation or, in the event of equality,
one of the highest and the lowest quotation or, in the event of
equality, one of the lowest, for Treasury Notes with an original
maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest
to the Designated CMT Maturity Index and in an amount of at least $100
million, or
(6) if three or four and not five of Reference Dealers are quoting as
referred to in clause (5) above, the rate will be calculated by the
calculation agent as the arithmetic mean of the offered rates obtained
and neither the highest nor the lowest of quotes will be eliminated,
or
(7) if fewer than three Reference Dealers selected by the calculation
agent are quoting as mentioned in clause (6), the rate in effect on
the applicable Interest Determination Date.
If two Treasury Notes with an original maturity as described in
clause (6) have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the calculation agent will obtain from
five Reference Dealers quotations for the Treasury Notes with the
shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.
or any successor service on the page specified in the applicable pricing
supplement or any other page as may replace the specified page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519), or, if no page is specified in the applicable pricing supplement,
page 7052.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities, either 1, 2, 3, 5, 7, 10, 20 or 30 years,
specified in the applicable pricing supplement with respect to which the CMT
Rate will be calculated or, if no maturity is specified in the applicable
pricing supplement, 2 years.
COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest at
the rates, calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any, specified in the applicable Commercial Paper
Rate Notes and in any applicable pricing supplement.
"Commercial Paper Rate" means:
(1) the Money Market Yield on the applicable Interest Determination Date
of the rate for commercial paper having the Index Maturity specified
in the applicable pricing supplement published in H.15(519) under the
caption "Commercial Paper-Nonfinancial", or
(2) if the rate described in clause (1) is not so published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable pricing supplement
published in H.15 Daily Update, or other recognized electronic source
used for the purpose of displaying the applicable rate, under the
caption "Commercial Paper-Nonfinancial", or
(3) if the rate is referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on
the applicable Interest Determination Date of three leading dealers of
United States dollar commercial paper in The City of New York, which
may include the agent and its affiliates, selected by the calculation
agent for commercial paper having the Index Maturity specified in the
applicable pricing supplement placed for industrial issuers whose bond
rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization, or
(4) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (3), the rate in effect on the applicable Interest
Determination Date.
"Money Market Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
D x 360
Money Market Yield = ---------------------- x 100
360 - ( D x M )
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
ELEVENTH DISTRICT COST OF FUNDS RATE. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates, calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable Eleventh District Cost of Funds Rate Notes and in
any applicable pricing supplement.
"Eleventh District Cost of Funds Rate" means:
(1) the rate equal to the monthly weighted average cost of funds for the
calendar month immediately preceding the month in which the applicable
Interest Determination Date falls as set forth under the caption "11th
District" on the display on Bridge Telerate, Inc. or any successor
service on page 7058 or any other page as may replace the specified
page on that service ("Telerate Page 7058") as of 11:00 A.M., San
Francisco time, on the applicable Interest Determination Date, or
(2) if the rate referred to in clause (1) does not appear on Telerate Page
7058 on the related Interest Determination Date, the monthly weighted
average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District that was most recently announced (the
"Index") by the Federal Home Loan Bank of San Francisco as the cost of
funds for the calendar month immediately preceding the applicable
Interest Determination Date, or
(3) if the Federal Home Loan Bank of San Francisco fails to announce the
Index on or before the applicable Interest Determination Date for the
calendar month immediately preceding the applicable Interest
Determination Date, the rate in effect on the applicable Interest
Determination Date.
FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the
rates, calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, specified in the applicable Federal Funds Rate Notes
and in any applicable pricing supplement.
"Federal Funds Rate" means:
(1) the rate on the applicable Interest Determination Date for United
States dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)", as displayed on Bridge Telerate,
Inc. or any successor service on page 120 or any other page as may
replace the applicable page on that service ("Telerate Page 120"), or
(2) if the rate referred to in clause (1) does not appear on Telerate Page
120 or is not so published by 3:00 P.M., New York City time, on the
related calculation date, the rate on the applicable Interest
Determination Date for United States dollar federal funds published in
H.15 Daily Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "Federal
Funds/Effective Rate", or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged
by three leading brokers of United States dollar federal funds
transactions in The City of New York, which may include the agent or
its affiliates, selected by the calculation agent before 9:00 A.M.,
New York City time, on the applicable Interest Determination Date, or
(4) if the brokers selected by the calculation agent are not quoting as
mentioned in clause (3), the rate in effect on the applicable Interest
Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates, calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, specified in
the applicable LIBOR Notes and in any applicable pricing supplement.
"LIBOR" means:
(1) if "LIBOR Telerate" is specified in the applicable pricing supplement
or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR,
LIBOR will be the rate for deposits in the LIBOR Currency, as defined
below, having the Index Maturity specified in the applicable pricing
supplement, commencing on the second London Business Day immediately
following that Interest Determination Date that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on the applicable
Interest Determination Date, or
(2) if "LIBOR Reuters" is specified in the applicable pricing supplement,
LIBOR will be the arithmetic mean of the offered rates for deposits in
the LIBOR Currency having the Index Maturity specified in the
applicable pricing supplement, commencing on the second London
Business Day immediately following that Interest Determination Date,
that appear, on the Designated LIBOR Page specified in the applicable
pricing supplement as of 11:00 A.M., London time, on the applicable
Interest Determination Date. If the Designated LIBOR Page by its terms
provides only for a single rate, then the single rate will be used, or
(3) with respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may
be, on the designated LIBOR Page as specified in clauses (1) and
(2), respectively, the rate calculated by the calculation agent as
the arithmetic mean of at least two quotations obtained by the
calculation agent after requesting the principal London offices of
each of four major reference banks, which may include affiliates of
the agent, in the London interbank market to provide the calculation
agent with its offered quotation for deposits in the LIBOR Currency
for the period of the Index Maturity specified in the applicable
pricing supplement, commencing on the second London Business Day
immediately following the applicable Interest Determination Date, to
prime banks in the London interbank market at approximately 11:00
A.M., London time, on the applicable Interest Determination Date and
in a principal amount that is representative for a single
transaction in the applicable LIBOR Currency in that market at that
time, or
(4) if fewer than two quotations referred to in clause (3) are so
provided, the rate on the applicable Interest Determination Date
calculated by the calculation agent as the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in the applicable Principal
Financial Center(s), on the applicable Interest Determination Date by
three major banks, which may include affiliates of the agent, in the
applicable Principal Financial Center selected by the calculation
agent for loans in the LIBOR Currency to leading European banks,
having the Index Maturity specified designated in the applicable
pricing supplement and in a principal amount that is representative
for a single transaction in the applicable LIBOR Currency in that
market at that time, or
(5) if the banks so selected by the calculation agent are not quoting as
mentioned in clause (4), the rate in effect on the applicable Interest
Determination Date.
"LIBOR Currency" means the currency specified in the
applicable pricing supplement as to which LIBOR will be
calculated or, if no currency is specified in the applicable
pricing supplement, United States dollars.
"Designated LIBOR Page" means either:
o if "LIBOR Telerate" is designated in the applicable pricing supplement
or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. or any successor service on the page
specified in such pricing supplement or any page as may replace the
specified page on that service for the purpose of displaying the
London interbank rates of major banks for the applicable LIBOR
Currency, or
o if "LIBOR Reuters" is specified in the applicable pricing supplement,
the display on the Reuter Monitor Money Rates Service or any successor
service on the page specified in the applicable pricing supplement or
any other page as may replace the specified page on that service for
the purpose of displaying the London interbank rates of major banks
for the applicable LIBOR Currency.
PRIME RATE. Prime Rate Notes will bear interest at the rates, calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any, specified in the applicable Prime Rate Notes and any applicable pricing
supplement.
"Prime Rate" means:
(1) the rate on the applicable Interest Determination Date as published in
H.15(519) under the heading "Bank Prime Loan", or
(2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date published in H.15 Daily
Update, or such other recognized electronic source used for the
purpose of displaying the applicable rate under the caption "Bank
Prime Loan", or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate
calculated by the calculation agent as the arithmetic mean of the
rates of interest publicly announced by at least four banks that
appear on the Reuters Screen US PRIME 1 Page as the particular bank's
prime rate or base lending rate as of 11:00 A.M., New York City time,
on the applicable Interest Determination Date, or
(4) if fewer than four rates described in clause (3) by 3:00 P.M., New
York City time, on the related calculation date as shown on Reuters
Screen vs Prime 1, the rate on the applicable Interest Determination
Date calculated by the calculation agent as the arithmetic mean of
the prime rates or base lending rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of
the close of business on the applicable Interest Determination Date
by three major banks, which may include affiliates of the agent, in
The City of New York selected by the calculation agent, or
(5) if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), the rate in effect on the applicable Interest
Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service or any successor service on the "US PRIME 1" Page or other
page as may replace the US PRIME 1 Page on such service for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Treasury Rate Notes will bear interest at the rates,
calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any, specified in the applicable Treasury Rate Notes and in any
applicable pricing supplement.
"Treasury Rate" means:
(1) the rate from the auction held on the applicable Interest
Determination Date (the "Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified in the
applicable pricing supplement under the caption "INVESTMENT RATE" on
the display on Bridge Telerate, Inc. or any successor service on page
56 or any other page as may replace page 56 on that service ("Telerate
Page 56") or page 57 or any other page as may replace page 57 on that
service ("Telerate Page 57"), or
(2) if the rate described in clause (1) is not so published by 3:00 P.M.,
New York City time, on the related calculation date, the Bond
Equivalent Yield of the rate for the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic source
used for the purpose of displaying the applicable rate, under the
caption "U.S. Government Securities/Treasury Bills/Auction High", or
(3) if the rate described in clause (2) is not so published by 3:00 P.M.,
New York City time, on the related calculation date, the Bond
Equivalent Yield of the auction rate of the applicable Treasury Bills
announced by the United States Department of the Treasury, or
(4) in the event that the rate referred to in clause (3) is not announced
by the United States Department of the Treasury, or if the Auction is
not held, the Bond Equivalent Yield of the rate on the applicable
Interest Determination Date of Treasury Bills having the Index
Maturity specified in the applicable Pricing Supplement published in
H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market", or
(5) if the rate referred to in clause (4) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date of the applicable Treasury
Bills as published in H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying the applicable
rate, under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market", or
(6) if the rate referred to in clause (5) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the Bond Equivalent Yield of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New
York City time, on the applicable Interest Determination Date, of
three primary United States government securities dealers, which may
include the agent or its affiliates, selected by the calculation
agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable pricing
supplement, or
(7) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (6), the rate in effect on the applicable Interest
Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
D x N
Bond Equivalent Yield = -------------------- x 100
360 - ( D x M )
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to an issue of notes, including the
determination of one or more Interest Rate Bases, the specification of one or
more Interest Rate Bases, the calculation of the interest rate applicable to a
floating rate note, the applicable interest payment dates, the stated maturity
date, any redemption or repayment provisions or any other matter relating to the
applicable notes may be modified by the terms as specified under "Other
Provisions" on the face of the applicable notes or in an Addendum relating to
the applicable notes, if so specified on the face of the applicable notes and in
the applicable pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
ML&Co. may from time to time offer notes at a price less than their
redemption price at Maturity, resulting in the applicable notes being treated as
if they were issued with original issue discount for federal income tax purposes
("Original Issue Discount Notes"). Original Issue Discount Notes may currently
pay no interest or interest at a rate which at the time of issuance is below
market rates. Additional considerations relating to any Original Issue Discount
Notes will be described in the applicable pricing supplement.
AMORTIZING NOTES
ML&Co. may from time to time offer notes ("Amortizing Notes"), with amounts
of principal and interest payable in installments over the term of the notes.
Unless otherwise specified in the applicable pricing supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable on the Amortizing Notes and then to the reduction of
the unpaid principal amount of the Amortizing Notes. Further information
concerning additional terms and conditions of any issue of Amortizing Notes will
be provided in the applicable pricing supplement. A table setting forth
repayment information in respect of each Amortizing Note will be included in the
applicable note and the applicable pricing supplement.
LINKED NOTES
ML&Co. may from time to time offer notes ("Linked Notes") the principal
value of which at Maturity will be determined by reference to:
(a) one or more equity or debt securities, including, but not limited to,
the price or yield of such securities,
(b) any statistical measure of economic or financial performance,
including, but not limited to, any currency, consumer price or
mortgage index, or
(c) the price or value of any commodity or any other item or index or any
combination,
(collectively, the "Linked Securities"). The payment or delivery of any
consideration on any Linked Note at Maturity will be determined by the decrease
or increase, as applicable, in the price or value of the applicable Linked
Securities. The terms of and any additional considerations, including any
material tax consequences, relating to any Linked Notes will be described in the
applicable pricing supplement.
BOOK-ENTRY NOTES
DESCRIPTION OF THE GLOBAL SECURITIES
Upon issuance, all notes in book-entry form having the same date of issue,
Maturity and otherwise having identical terms and provisions will be represented
by one or more fully registered global notes (the "Global Notes"). Each Global
Note will be deposited with, or on behalf of, The Depository Trust Company as
depository registered in the name of the depository or a nominee of the
depository. Unless and until it is exchanged in whole or in part for notes in
certificated form, no Global Note may be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor of the depository or a nominee of the successor.
DTC PROCEDURES
The following is based on information furnished by the depository:
The depository will act as securities depository for the notes in
book-entry form. The notes in book-entry form will be issued as fully registered
securities registered in the name of Cede & Co., the depository's partnership
nominee. One fully registered Global Note will be issued for each issue of notes
in book-entry form, each in the aggregate principal amount of the issue, and
will be deposited with the depository. If, however, the aggregate principal
amount of any issue exceeds $200,000,000, one Global Note will be issued with
respect to each $200,000,000 of principal amount and an additional Global Note
will be issued with respect to any remaining principal amount of the issue.
The depository is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The depository holds securities that its participants deposit with the
depository. The depository 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 the depository include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
The depository is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the depository'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 the
depository and its participants are on file with the SEC.
Purchasers of notes in book-entry form under the depository's system must
be made by or through direct participants, which will receive a credit for those
notes in book-entry form on the depository's records. The ownership interest of
each actual purchaser of each note in book-entry form represented by a Global
Note is, in turn, to be recorded on the records of direct participants and
indirect participants. Beneficial owners in book-entry form will not receive
written confirmation from the depository 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 a Global Note
representing notes in book-entry form are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners. Beneficial
owners of a Global Note representing notes in book-entry form will not receive
notes in certificated form representing their ownership interests therein,
except in the event that use of the book-entry system for such notes in
book-entry form is discontinued.
To facilitate subsequent transfers, all Global Notes representing notes in
book-entry form which are deposited with, or on behalf of, the depository are
registered in the name of the depository's nominee, Cede & Co. The deposit of
Global Notes with, or on behalf of, the depository and their registration in the
name of Cede & Co. effect no change in beneficial ownership. The depository has
no knowledge of the actual beneficial owners of the Global Notes representing
the notes in book-entry form; the depository's records reflect only the identity
of the direct participants to whose accounts such notes in book-entry form 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 the depository to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the depository nor Cede & Co. will consent or vote with respect to
the Global Notes representing the notes in book-entry form. Under its usual
procedures, the depository 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 notes in book-entry
form are credited on the applicable record date.
ML&Co. will make principal, premium, if any, and/or interest, if any,
payments on the Global Notes representing the notes in book-entry form in
immediately available funds to the depository. The depository's practice is to
credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the depository's records
unless the depository has reason to believe that it will not receive payment on
the applicable payment 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 applicable participant
and not of the depository, 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 the depository is the
responsibility of ML&Co. and the trustee, disbursement of payments to direct
participants will be the responsibility of the depository, and disbursement of
payments to the beneficial owners will be the responsibility of direct
participants and indirect participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the notes in book-entry form of like tenor and terms are being redeemed,
the depository's practice is to determine by lot the amount of the interest of
each direct participant in the issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its
notes in book-entry form repaid by ML&Co., through its participant, to the
trustee, and will effect delivery of the applicable notes in book-entry form by
causing the direct participant to transfer the participant's interest in the
Global Note notes in book-entry form, on the depository's records, to the
trustee.
The depository may discontinue providing its services as securities
depository with respect to the notes in book-entry form at any time by giving
reasonable notice to ML&Co. or the trustee. In the event that a successor
securities depository is not obtained, notes in certificated form are required
to be printed and delivered.
ML&Co. may decide to discontinue use of the system of book-entry transfers
through the depository or a successor securities depository. In that event,
notes in certificated form will be printed and delivered.
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in
Global Notes.
So long as the depository, or its nominee, is the registered owner of a
Global Note, the depository or its nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by such Global Note
for all purposes under the 1993 Indenture. Except as provided below, beneficial
owners of a Global Note will not be entitled to have the notes represented by a
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of the notes in definitive form and will not be
considered the owners or holders thereof under the 1993 Indenture. Accordingly,
each person owning a beneficial interest in a Global Note must rely on the
procedures of the depository and, if that person is not a participant, on the
procedures of the participant through which that person owns its interest, to
exercise any rights of a holder under the 1993 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 Note
desires to give or take any action which a holder is entitled to give or take
under the 1993 Indenture, the depository would authorize the participants
holding the relevant beneficial interests to give or take the desired action,
and the participants would authorize beneficial owners owning through the
participants to give or take the desired action or would otherwise act upon the
instructions of beneficial owners.
Exchange for Notes in Certificated Form
If:
(a) the depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by ML&Co.
within 60 days,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the Global Notes shall be exchangeable, or
(c) an Event of Default has occurred and is continuing with respect to the
notes,
the Global Note or Global Notes will be exchangeable for notes in certificated
form of like tenor and of an equal aggregate principal amount, in denominations
of $1,000 and integral multiples of $1,000. The certificated notes will be
registered in the name or names as the depository instructs the trustee. It is
expected that instructions may be based upon directions received by the
depository from participants with respect to ownership of beneficial interests
in Global Notes.
The information in this section concerning the depository and the
depository's system has been obtained from sources that ML&Co. believes to be
reliable, but ML&Co. takes no responsibility for the accuracy of the
information.
UNITED STATES FEDERAL INCOME TAXATION
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change, including changes in effective dates, or possible differing
interpretations. It deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers, except where otherwise specifically
noted. Persons considering the purchase of the notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the notes arising under the laws of any other
taxing jurisdiction.
As used in this prospectus, the term "U.S. Holder" means a beneficial owner
of a note that is for United States Federal income tax purposes:
(1) a citizen or resident of the United States,
(2) a corporation or a partnership (including an entity treated as a
corporation or a partnership for United States Federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia (unless, in the
case of a partnership, Treasury regulations are adopted that provide
otherwise),
(3) an estate whose income is subject to United States Federal income tax
regardless of its source,
(4) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust, or
(5) any other person whose income or gain in respect of a note is
effectively connected with the conduct of a United States trade or
business.
Certain trusts not described in clause (4) above in existence on August 20, 1996
that elect to be treated as a United States person will also be a U.S. Holder
for purposes of the following discussion. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service on
January 27, 1994, as amended on June 11, 1996, under the original issue discount
provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
the note). The issue price of each note of an issue of notes equals the first
price at which a substantial amount of the notes has been sold (ignoring sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a note is the sum of all payments provided by
the note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. In addition, under the OID Regulations, if a
note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of the note (e.g., notes with teaser rates or
interest holidays), and if the greater of either the resulting foregone interest
on the note or any "true" discount on the note (i.e., the excess of the note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then the stated interest on the note would be treated as
original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of the U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to the
Discount Note for each day during the taxable year (or portion of the taxable
year) on which the U.S. Holder held the Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between
o the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined
on the basis of compounding at the close of each accrual period and
appropriately adjusted to take into account the length of the
particular accrual period) and
o the amount of any qualified stated interest payments allocable to such
accrual period.
The "adjusted issue price" of a Discount Note at the beginning of any accrual
period is the sum of the issue price of the Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Discount Note that were not qualified stated
interest payments. Under these rules, U.S. Holders generally will have to
include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium". Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes
(hereinafter "Variable Notes") are subject to special rules whereby a Variable
Note will qualify as a "variable rate debt instrument" if
o its issue price does not exceed the total noncontingent principal
payments due under the Variable Note by more than a specified de
minimis amount and
o it provides for stated interest, paid or compounded at least annually,
at current values of:
o one or more qualified floating rates,
o a single fixed rate and one or more qualified floating rates,
o a single objective rate, or
o a single fixed rate and a single objective rate that is a
qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations unless such cap or floor is fixed
throughout the term of the note. An "objective rate" is a rate that is not
itself a qualified floating rate but which is determined using a single fixed
formula that is based on objective financial or economic information. A rate
will not qualify as an objective rate if it is based on information that is
within the control of the issuer (or a related party) or that is unique to the
circumstances of the issuer (or a related party), such as dividends, profits, or
the value of the issuer's stock (although a rate does not fail to be an
objective rate merely because it is based on the credit quality of the issuer).
A "qualified inverse floating rate" is any objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate. The OID Regulations also provide that
if a Variable Note provides for stated interest at a fixed rate for an initial
period of one year or less followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, and if
the interest on a Variable Note is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually, then all stated
interest on the Variable Note will constitute qualified stated interest and will
be taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true" discount
(i.e., at a price below the Variable Note's stated principal amount) in excess
of a specified de minimis amount. The amount of qualified stated interest and
the amount of original issue discount, if any, that accrues during an accrual
period on such a Variable Note is determined under the rules applicable to fixed
rate debt instruments by assuming that the variable rate is a fixed rate equal
to
(1) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate
or qualified inverse floating rate, or
(2) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is
reasonably expected for the Variable Note.
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or is
less than) the interest assumed to be paid during the accrual period pursuant to
the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. On June 11, 1996, the Treasury Department
issued final regulations (the "CPDI Regulations") concerning the proper United
States Federal income tax treatment of contingent payment debt instruments. In
general, the CPDI Regulations would cause the timing and character of income,
gain or loss reported on a contingent payment debt instrument to substantially
differ from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current United
States Federal income tax law. Specifically, the CPDI Regulations generally
require a U.S. Holder of such an instrument to include future contingent and
noncontingent interest payments in income as such interest accrues based upon a
projected payment schedule. Moreover, in general, under the CPDI Regulations,
any gain recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument will be treated as ordinary income and all or
a portion of any loss realized could be treated as ordinary loss as opposed to
capital loss (depending upon the circumstances). The CPDI Regulations apply to
debt instruments issued on or after August 13, 1996. The proper United States
Federal income tax treatment of Variable Notes that are treated as contingent
payment debt obligations will be more fully described in the applicable pricing
supplement. Furthermore, any other special United States Federal income tax
considerations, not otherwise discussed herein, which are applicable to any
particular issue of notes will be discussed in the applicable pricing
supplement.
ML&Co. may issue notes which;
o may be redeemable at the option of ML&Co. prior to their stated
maturity (a "call option") and/or
o may be repayable at the option of the holder prior to their stated
maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and features
of the purchased notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
FOREIGN-CURRENCY NOTES. The United States Federal income tax consequences
of the purchase, ownership and disposition of notes providing for payments
denominated in a currency other than U.S. dollars will be more fully described
in the applicable pricing supplement.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased the
note at a "market discount", unless such market discount is less than a
specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a note as ordinary
income to the extent of the lesser of:
o the amount of such payment or realized gain or
o the market discount which has not previously been included in income
and is treated as having accrued on the note at the time of such
payment or disposition.
Market discount will be considered to accrue ratably during the period from the
date of acquisition to the maturity date of the note, unless the U.S. Holder
elects to accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
PREMIUM. If a U.S. Holder purchases a note for an amount that is greater
than the sum of all amounts payable on the note after the purchase date other
than payments of qualified stated interest, the U.S. Holder will be considered
to have purchased the note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the note and may offset interest
otherwise required to be included in respect of the note during any taxable year
by the amortized amount of such excess for the taxable year. However, if the
note may be optionally redeemed after the U.S. Holder acquires it at a price in
excess of its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond premium until
later in the term of the note. Any election to amortize bond premium applies to
all taxable debt obligations then owned and thereafter acquired by the U.S.
Holder and may be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
the U.S. Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax
basis in a note generally will equal the U.S. Holder's initial investment in the
note increased by any original issue discount included in income (and accrued
market discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
the note. Such gain or loss generally will be long-term capital gain or loss if
the note were held for more than one year. Long-term capital gains of
individuals are subject to reduced capital gain rates while short-term capital
gains are subject to ordinary income rates. The deductibility of capital losses
is subject to certain limitations. Prospective investors should consult their
own tax advisors concerning these tax law provisions.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of ML&Co., a controlled foreign corporation related
to ML&Co. or a bank receiving interest described in section 881(c)(3)(A) of the
Code. To qualify for the exemption from taxation, the last United States payor
in the chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (1) is signed by the beneficial owner of the note under penalties of
perjury, (2) certifies that such owner is not a U.S. Holder and (3) provides the
name and address of the beneficial owner. The statement may be made on an IRS
Form W-8 or a substantially similar form, and the beneficial owner must inform
the Withholding Agent of any change in the information on the statement within
30 days of such change. If a note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
On October 6, 1997, the Treasury issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should consult
its tax advisor in this regard.
The notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of ML&Co. or,
at the time of such individual's death, payments in respect of the notes would
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
,such as the registered owner's taxpayer identification number, in the required
manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in respect
of the notes to a U.S. Holder must be reported to the IRS, unless the U.S.
Holder is an exempt recipient or establishes an exemption. Compliance with the
identification procedures described in the preceding section would establish an
exemption from backup withholding for those non-U.S. Holders who are not exempt
recipients.
In addition, upon the sale of a note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either:
o the broker determines that the seller is a corporation or other exempt
recipient or
o the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such
seller is a non-U.S. Holder (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either:
o the broker determines that the seller is an exempt recipient or
o the seller certifies its non-U.S. status (and certain other conditions
are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence. In addition, prospective U.S.
Holders are strongly urged to consult their own tax advisors with respect to the
New Withholding Regulations. See "United States Federal Income Taxation-Non-U.S.
Holders".
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
ML&Co. is offering the notes for sale on a continuing basis through the
agent, MLPF&S, who will purchase the notes, as principal, from ML&Co., for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the agent, or,
if so specified in an applicable pricing supplement, for resale at a fixed
public offering price. Unless otherwise specified in an applicable pricing
supplement, any note sold to the agent as principal will be purchased by the
agent at a price equal to 100% of the principal amount of the note less a
percentage of the principal amount equal to the commission applicable to an
agency sale as described below of a note of identical maturity. If agreed to by
ML&Co. and the agent, the agent may utilize its reasonable efforts on an agency
basis to solicit offers to purchase the notes at 100% of the principal amount of
the notes, unless otherwise specified in an applicable pricing supplement.
ML&Co. will pay a commission to the agent, ranging from .050% to .600% of the
principal amount of a note, depending upon its stated maturity or, with respect
to a note for which the stated maturity is in excess of 30 years, a commission
as agreed upon by ML&Co. and the agent at the time of sale, sold through the
agent.
The agent may sell notes it has purchased from ML&Co. as principal to other
dealers for resale to investors, and may allow any portion of the discount
received in connection with such purchases from ML&Co. to such dealers. After
the initial public offering of notes, the public offering price, in the case of
notes to be resold at a fixed public offering price, the concession and the
discount allowed to dealers may be changed.
ML&Co. reserves the right to withdraw, cancel or modify the offer made by
this prospectus supplement without notice and may reject orders, in whole or in
part, whether placed directly with ML&Co. or through the agent. The agent will
have the right, in its discretion reasonably exercised, to reject in whole or in
part any offer to purchase notes received by the agent.
Unless otherwise specified in an applicable pricing supplement, payment of
the purchase price of the notes will be required to be made in immediately
available funds in U.S. dollars or the Specified Currency, as the case may be,
in New York City on the date of settlement.
No Note will have an established trading market when issued. Unless
specified in the applicable pricing supplement, ML&Co. will not list the notes
on any securities exchange. The agent may from time to time purchase and sell
notes in the secondary market, but the agent is not obligated to do so, and
there can be no assurance that there will be a secondary market for the notes or
liquidity in the secondary market if one develops. From time to time, the agent
may make a market in the notes.
The agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended. ML&Co. has agreed to indemnify the agent
against or to make contributions relating to certain civil liabilities,
including liabilities under the Securities Act, or to contribute to payments the
agent may be required to make in respect thereof. ML&Co. has agreed to reimburse
the agent for certain expenses.
From time to time, ML&Co. may issue and sell other securities described in
the accompanying prospectus, and the amount of notes that ML&Co. may offer and
sell under this prospectus supplement may be reduced as a result of such sales.
In connection with the offering of notes purchased by the agent as
principal on a fixed price basis, the agent is permitted to engage in certain
transactions that stabilize the price of the notes. These transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the agent creates a short position in the notes in
connection with the offering, i.e., if it sells notes in an aggregate principal
amount exceeding that set forth in the applicable pricing supplement, then the
agent may reduce that short position by purchasing notes in the open market. In
general, purchases of notes for the purpose of stabilization or to reduce a
short position could cause the price of the notes to be higher than in the
absence of these purchases.
Neither ML&Co. nor the agent make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither ML&Co. nor the agent
makes any representation that the agent will engage in any such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The distribution of the notes will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the NASD.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for ML&Co. and the agent by
Brown & Wood LLP, New York, New York.
<PAGE>
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[LOGO]
$
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES,
SERIES B
--------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------
Merrill Lynch & Co.
, 199
- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
SENIOR DEBT SECURITIES
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 our outstanding senior
debt securities listed below and the senior debt securities that we will issue
in the future.
<TABLE>
Redeemable Notes
<CAPTION>
<S> <C>
$1,650,000,000 of 6% Notes due February 12, 2003; $125,000,000 of 6 3/8% Notes due September 8, 2006;
$150,000,000 of 7.05% Notes due April 15, 2003; $700,000,000 6 1/2% Notes due July 15, 2018;
$750,000,000 Floating Rate Notes due June 24, 2003; $1,000,000,000 6 7/8% Notes due November 15, 2018; and
$500,000,000 6% Notes due November 15, 2004; $33,015,000 of 8.40% Notes due November 1, 2019.
$500,000,000 6% Notes due July 15, 2005;
</TABLE>
<TABLE>
Non-Redeemable Notes
<CAPTION>
<S> <C>
$200,000,000 of 6 3/8% Notes due March 30, 1999; $500,000,000 of 6.55% Notes due August 1, 2004;
$300,000,000 of 8 1/4% Notes due November 15, 1999; $200,000,000 of 6 1/4% Notes due January 15, 2006;
$150,000,000 of 8 3/8% Notes due February 9, 2000; $200,000,000 of 7% Notes due March 15, 2006;
$150,000,000 of 6.70% Notes due August 1, 2000; $350,000,000 of 7 3/8% Notes due May 15, 2006;
$500,000,000 of 6% Notes due January 15, 2001; $500,000,000 of 7% Notes due January 15, 2007;
$250,000,000 of 6% Notes due March 1, 2001; $150,000,000 of 8% Notes due June 1, 2007;
$300,000,000 of 6 1/2% Notes due April 1, 2001; $250,000,000 of 6.56% Notes due December 16, 2007;
$225,000,000 of 8% Notes due February 1, 2002; $250,000,000 of 7% Notes due April 27, 2008;
$150,000,000 of 7 3/8% Notes due August 17, 2002; $150,000,000 of 6 1/4% Notes due October 15, 2008;
$250,000,000 of 6.64% Notes due September 19, 2002; $500,000,000 of 6 3/8% Notes due October 15, 2008;
$300,000,000 of Floating Rate Notes due February 4, 2003; $250,000,000 of 6 3/4% Notes due June 1, 2028; and
$200,000,000 of 6 7/8% Notes due March 1, 2003; $2,000,000,000 of 6% Notes due February 17, 2009.
</TABLE>
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.
--------------------
Merrill Lynch & Co.
--------------------
The date of this prospectus is , 199 .
<PAGE>
TABLE OF CONTENTS
MERRILL LYNCH & CO., INC.....................................................3
RATIO OF EARNINGS TO FIXED CHARGES...........................................4
DESCRIPTION OF SENIOR DEBT SECURITIES........................................4
Redeemable Notes.........................................................11
Non-Redeemable Notes.....................................................16
Non-Redeemable Fixed Rate Notes..........................................16
OTHER TERMS.................................................................18
Limitations Upon Liens...................................................18
Limitation on Disposition of Voting Stock of, and
Merger and Sale of Assets by, MLPF&S...................................18
Merger and Consolidation.................................................18
Modification and Waiver..................................................19
Events of Default........................................................19
WHERE YOU CAN FIND MORE INFORMATION.........................................21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................22
PLAN OF DISTRIBUTION........................................................22
EXPERTS.....................................................................23
<PAGE>
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
senior debt securities described in this prospectus.
<PAGE>
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:
YEAR ENDED LAST FRIDAY IN DECEMBER
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)...... 1.2 1.2 1.2 1.2 1.1
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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 SENIOR DEBT SECURITIES
The senior debt securities were issued 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 senior debt securities of which this prospectus is a part. The following
summaries of certain 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.
Series of senior debt securities may from time to time be issued 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 each series of the senior debt securities are
governed by and construed in accordance with the laws of the State of New York.
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 senior debt securities in
which $2,500,000 or more has been invested. While ML&Co. believes that New York
law would be given effect by a state or Federal court sitting outside of New
York, state laws frequently regulate the amount of interest that may be charged
to and paid by a borrower, including, in some cases, corporate borrowers. ML&Co.
agrees for the benefit of the holders of its senior debt securities, to the
extent permitted by law, not to claim voluntarily the benefits of any laws
concerning usurious rates of interest against a holder of senior debt
securities.
Outstanding senior debt securities are issuable only in fully registered
form without coupons, in denominations of $1,000 and integral multiples of
$1,000, unless otherwise indicated. No service charge will be made for any
registration of transfer or exchange of senior debt securities, but ML&Co. may
require payment of a sum sufficient to cover any tax or other governmental
charges that may be imposed in connection with any registration, transfer or
exchange.
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 is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of ML&Co. itself as a creditor of the subsidiary may
be recognized. 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.
Principal, premium and interest on the senior debt securities will be
payable at the office of the trustee in New York City so designated, provided
that, unless otherwise set forth below, payment of interest may be made at the
option of ML&Co. by check mailed to the address of the person entitled to that
payment as shown on the security register. In addition, the transfer of the
senior debt securities is and will be registrable, and senior debt securities
are and will be exchangeable at the trustee's designated office.
Unless otherwise specified with respect to a particular series of senior
debt securities, the senior debt securities are not subject to any sinking fund
and are not redeemable before maturity.
BOOK-ENTRY SECURITIES
Specified series of the senior debt securities have been issued in global
form and are considered book-entry securities. Beneficial owners of these senior
debt securities will not receive physical delivery of these securities nor may
they be entitled to have these securities registered in their name. These
book-entry securities are represented by one or more fully registered global
securities. Each global security has been deposited with, or on behalf of, The
Depository Trust Company, also known as DTC, as depositary, registered in the
name of DTC or its nominee. Unless and until it is exchanged in whole or in
part for senior debt 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.
In some cases, investors of outstanding senior debt securities have elected
to hold interests in the global notes through either the depositary in the
United States or Cedelbank, societe anonyme, and Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear System, if they are
participants in these systems, or indirectly through organizations which are
participants in these systems. Cedelbank and Euroclear hold interests on behalf
of their participants through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositaries, which in turn
will hold these interests in customers' securities accounts in the depositaries'
names on the books of the depositary. Citibank, N.A. acts as depositary for
Cedelbank and The Chase Manhattan Bank acts as depositary for Euroclear.
DTC PROCEDURES
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. 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 certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange Inc. and the National Association of Securities Dealers, Inc. Access to
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 securities under DTC's system must be made by or through
direct participants, which will receive a credit for the 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 securities are to
be accomplished by entries made on the books of participants acting on behalf of
beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the direct
participants to whose accounts the securities are credited, which may or may not
be the beneficial owners. The participants are 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 are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
securities. Under its usual procedures, DTC mails an omnibus proxy to 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 securities are
credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the senior
debt 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 that 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 these payments to direct participants is the responsibility of
DTC, and disbursement of these payments to the beneficial owners is the
responsibility of direct and indirect participants.
EXCHANGE FOR CERTIFICATED SECURITIES
If the depositary is at any time unwilling or unable to continue as
depositary and
(a) a successor depositary is not appointed by ML&Co. within 60 days,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global notes shall be exchangeable, and
(c) an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the senior debt securities,
the global notes will be exchangeable for senior debt securities in definitive
form of like tenor and of an equal aggregate principal amount, in denominations
of $1,000 and integral multiples of $1,000. The definitive securities will be
registered in the name or names as the depositary shall instruct the trustee. It
is expected that these instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global notes.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, senior debt
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.
CEDELBANK
Cedelbank has advised ML&Co. that it is incorporated under the laws of
Luxembourg as a professional depositary. Cedelbank holds securities for its
participating organizations and facilities the clearance and settlement of
securities transactions between Cedelbank participants through electronic
book-entry changes in accounts of Cedelbank participants, thereby eliminating
the need for physical movement of certificates. Cedelbank provides to its
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedelbank interfaces with domestic markets in several
countries. As a professional depositary, Cedelbank is subject to regulation by
the Luxembourg Monetary Institute. Cedelbank participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Cedelbank is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Cedelbank participant either directly
or indirectly.
Distributions with respect to the book-entry securities held beneficially
through Cedelbank are credited to cash accounts of Cedelbank participants in
accordance with its rules and procedures, to the extent received by the U.S.
depositary for Cedelbank.
EUROCLEAR
Euroclear has advised ML&Co. that it was created in 1968 to hold securities
for participants of Euroclear and to clear and settle transactions between
Euroclear participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries.
Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust
Company of New York (the "Euroclear Operator"), under contract with Euro-clear
Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear participants. Euroclear participants include
banks, central banks, securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
Distributions with respect to book-entry securities held beneficially
through Euroclear are credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent received by the U.S.
depositary for Euroclear.
CLEARANCE AND SETTLEMENT PROCEDURES
Secondary market trading between DTC participants will occur in the
ordinary way in accordance with the depositary's rules and will be settled in
immediately available funds using the depositary's Same-Day Funds Settlement
System. Secondary market trading between Cedelbank participants and/or Euroclear
participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Cedelbank and Euroclear and will be settled
using the procedures applicable to conventional eurobonds in immediately
available funds.
Cross-market transfers between persons holding directly or indirectly
through the depositary on the one hand, and directly or indirectly through
Cedelbank or Euroclear participants, on the other, will be effected in the
depositary in accordance with the depositary's rules on behalf of the relevant
European international clearing system by its U.S. depositary; however, any
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines.
The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions to its U.S. depositary
to take action to effect final settlement on its behalf by delivering or
receiving book-entry securities in the depositary, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to the depositary. Cedelbank and Euroclear participants may not
deliver instructions directly to the depositary.
Because of time-zone differences, credits of book-entry securities received
in Cedelbank or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and will be
credited on the business day following the depositary settlement date. Any
credits or transactions in book-entry securities settled during processing will
be reported to the relevant Euroclear or Cedelbank participants on that business
day. Cash received in Cedelbank or Euroclear as a result of sales of securities
by or through a Cedelbank participant or a Euroclear participant to a DTC
participant will be received with value on the depositary settlement date but
will be available in the relevant Cedelbank or Euroclear cash account only as of
the business day following settlement in the depositary.
Although the depositary, Cedelbank and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of book-entry securities
among participants of the depositary, Cedelbank and Euroclear, they are under no
obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
NOTICES
Notices to holders of outstanding senior debt securities will be sent by
mail to the registered holders and will be published, whether the securities are
in global or definitive form, and so long as the securities are listed on the
Luxembourg Stock Exchange, in a daily newspaper of general circulation in
Luxembourg. It is expected that publication will be made in Luxembourg in the
Luxembourg Wort. Any notice shall be deemed to have been given on the date of
publication or, if published more than once, on the date of the first
publication. So long as senior debt securities are listed on the Luxembourg
Stock Exchange, any change in the Luxembourg Paying Agent and Transfer Agent
will be published in Luxembourg in the manner set forth above.
FURTHER ISSUES
ML&Co. may from time to time, without notice to or the consent of the
registered holders of any series of outstanding senior debt securities, create
and issue additional senior debt securities ranking equally with the original
series of senior debt securities in all respects other than the payment of
interest accruing before the originally issue date of the additional senior debt
securities. The new issue of senior debt securities may be consolidated and form
a single series with the original issue of the securities of that series and
have the same terms as to status, redemption or otherwise as the senior debt
securities of the original series.
PAYMENT OF ADDITIONAL AMOUNTS
Unless otherwise stated, ML&Co. will, subject to the exceptions and
limitations set forth below, pay as additional interest on the senior debt
securities, additional amounts in order for the net payment of the principal of
and interest on the senior debt securities to a holder who is a non-United
States person, after deduction for any present or future tax, assessment or
other governmental charge of the United States of a political subdivision or
taxing authority in or of any United States political subdivision, imposed by
withholding with respect to the payment, will not be less than the amount
provided in the senior debt securities to be then due and payable; provided,
however, that the foregoing obligation to pay additional amounts shall not
apply:
(1) to any tax, assessment, or other governmental charge that is imposed
or withheld solely by reason of the holder, or a fiduciary, settlor,
beneficiary, member or shareholder of the holder if the holder is an
estate, trust, partnership or corporation, or a person holding a power
over an estate or trust administered by a fiduciary holder, being
considered as:
(a) being or having been present or engaged in a trade or business in
the United States or having had a permanent establishment in the
United States;
(b) having a current or former relationship with the Untied States,
including a relationship as a citizen or resident of the United
States;
(c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled
foreign corporation with respect to the United States or a
corporation that has accumulated earnings to avoid United States
federal income tax;
(d) being or having been present a "10-percent shareholder" of ML&Co.
as defined in section 871 (h)(3) of the United States Internal
Revenue Code or any successor provisions; or
(e) being a bank receiving payments on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course
of its trade or business.
(2) to any holder that is not the sole beneficial owner of the securities,
or any portion of the securities, or that is a fiduciary or
partnership, but only to the extent that a beneficiary or settlor with
respect to the fiduciary, a beneficial owner or member of the
partnership would not have been entitled to the payment of an
additional amount had the beneficiary, settlor, beneficial owner or
member received directly its beneficial or distributive share of the
payment;
(3) to any tax, assessment, or other governmental charge that is imposed
or withheld solely by reason of the failure of the holder or any other
person to comply with certification, identification or information
reporting requirements concerning the nationality, residence, identity
or connection with the United States of the holder or beneficial owner
of the security, if compliance is required by statute, by regulation
of the United States Treasury Department or by an applicable income
tax treaty to which the United States is a party as a precondition to
exemption from tax, assessment or other governmental charge;
(4) to any tax, assessment or other governmental charge that is imposed
otherwise than by withholding by ML&Co. or a paying agent from the
payment;
(5) to any tax, assessment or other governmental charge that is imposed or
withheld solely by reason of a change in law, regulation, or
administrative or judicial interpretation that becomes effective more
than 15 days after the payment becomes due or is duly provided for,
whichever occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or similar tax, assessment or other governmental
charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any payment agent from any payment of principal of or
interest on any senior debt security, if that payment can be made
without any withholding by any other payment agent; or
(8) in the case of any combination of items (1), (2), (3), (4), (5), (6)
and (7).
Some of the outstanding senior debt securities are subject in all cases to
any tax, fiscal or other law or regulation or administrative or judicial
interpretation applicable to the payments due and payable. Except as
specifically provided under this heading "--Payment of Additional Amounts" and
under the heading "--Redemption for Tax Reasons", ML&Co. will not be required to
make any payment with respect to any tax, assessment or other governmental
charge imposed by any government or a political subdivision or taxing authority.
As used under this heading "--Payment of Additional Amounts" and
"--Redemption for Tax Reasons", the term "United States" means the United States
of America, including the States and the District of Columbia, and its
territories, its possessions and other areas subject to its jurisdiction.
"United States person" means any individual who is a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States, any state of the United
States or the District of Columbia, other than a partnership that is not treated
as a United States person under any applicable Treasury regulations, any estate
the income of which is subject to United States federal income taxation
regardless of its source, or any trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decision of the trust. Notwithstanding the preceding sentence, to the extent
provided in the Treasury regulations, certain trusts in existence on August 20,
1996, and treated as United States persons before that date that elect to
continue to be treated as United States persons will also be a United States
person.
"Non-United States person" means a person who is not a United States
person.
REDEMPTION FOR TAX REASONS
As designated, some of the outstanding senior debt securities provide that,
if, as a result of any change in, or amendment to, the laws, or any regulations
or rulings promulgated under those laws, of the United States or any political
subdivision or taxing authority in or of the United States, or any change in, or
amendments to, an official position regarding the applicable or interpretation
of those laws, regulations or rulings, which change or amendment is announced or
becomes effective on or after the date the applicable series of senior debt
securities were initially issued, ML&Co. becomes or, based upon a written
opinion of independent counsel selected by ML&Co., will become obligated to pay
additional amounts as described in this prospectus under the heading "--Payment
of Additional Amounts" with respect to those securities, then ML&Co. may, at its
option redeem, as a whole, but not in part, the securities on not less than 30
nor more than 60 days prior notice, at a redemption price equal to 100% of their
principal amount, together with interest accrued but unpaid to the date fixed
for redemption.
TAX CONSIDERATIONS
It is suggested that you should reach an investment decision regarding the
senior debt securities only after carefully considering the suitability of the
senior debt securities in the light of your particular circumstances.
You should also consider the tax consequences, if any, of investing in the
Securities and should consult your tax advisor.
REDEEMABLE NOTES
TERMS AND PROVISIONS APPLICABLE TO EACH SERIES OF REDEEMABLE NOTES
The specific terms and provisions applicable to each series of redeemable
notes of ML&Co. are described below. The title of each series of the redeemable
notes designates the interest rate and maturity date of that series of notes.
Each series of redeemable notes bears interest at a specified rate payable
through their stated maturity date to the persons in whose names the notes are
registered on the record date preceding each interest payment date as indicated
below. If any interest payment date or the stated maturity date falls on a day
that is not a Business Day, as defined below, the related payment of principal
or interest will be made on the next succeeding Business Day as if made on the
date the payment was due, and no interest will accrue on the amount so payable
for the period from and after that interest payment date or stated maturity
date, as the case may be. Unless otherwise stated below, "Business Day" with
respect to any place of payment means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in that place of
payment are authorized or obligated by law to close.
The redeemable notes are subject to redemption by ML&Co. or repayment at
the option of their holders before their stated maturity dates as indicated
below. Beneficial interests in any redeemable notes that are book-entry
securities may be acquired, or subsequently transferred, only in denominations
of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 6% NOTES DUE FEBRUARY 12, 2003
The stated maturity date for the 6% Notes due February 12, 2003 is February
12, 2003.
These notes of this series bear interest from February 12, 1998 and are
payable semiannually on February 12 and August 12 of each year and at maturity,
to the persons in whose names the notes are registered on the preceding July 29
and January 29, respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described under the section entitled "--Redemption
for Tax Reasons" occur.
In the event definitive notes are issued, the holders of these notes will
be able to receive payments on the notes and effect transfers of the notes at
the offices of Chase Manhattan Bank Luxembourg S.A. or its successor as paying
agent in Luxembourg.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to this series of notes, and as long as these notes
are listed on the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent
in Luxembourg and any change in the Luxembourg paying agent and transfer agent
will be published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 7.05% NOTES DUE APRIL 15, 2003
The 7.05% Notes due April 15, 2003 will mature on April 15, 2003 unless
redeemed earlier as provided below.
The note of this series bear interest and are payable semiannually on each
October 15 and April 15 to the persons in whose names the notes are registered
on the next preceding October 1 and April 1, respectively.
The notes are subject to redemption at the option of ML&Co. on or after
April 15, 1998, in whole or in part in increments of $1,000, at a redemption
price of 100% of the principal amount of the notes to be redeemed plus accrued
interest to but excluding the date of redemption. Notice of redemption will be
given not less than 30 or more than 60 days before the date of redemption to
each holder of notes to be redeemed.
TERMS AND PROVISIONS OF FLOATING RATE NOTES DUE JUNE 24, 2003
The Floating Rate Notes due June 24, 2003 will mature on June 24, 2003.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders of these notes will
be able to receive payments on the notes and effect transfers of the notes at
the offices of Chase Manhattan Bank Luxembourg S.A. or its successor as paying
agent in Luxembourg.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to notes, and as long as the notes are listed on the
Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg and
any change in the Luxembourg paying agent and transfer agent will be published
in Luxembourg. See "--Notices".
This series of notes bear interest from June 24, 1998 until their maturity,
payable in arrears on March 24, June 24, September 24 and December 24 of each
year and at maturity, to the persons in whose names the Notes are registered on
the preceding March 9, June 9, September 9 and December 9, respectively;
provided, however, that interest payable at maturity will be payable to the
person to whom principal shall be payable. Interest payable on each interest
payment date will include interest accrued from and including the first day of
the interest period relating to that interest payment date to and including the
last day of that interest period. Each interest period comprises the period
beginning on and including June 24, 1998 and ending on and including the day
preceding the first interest payment date, and, thereafter, each successive
period beginning on and including each interest payment date and ending on and
including the day preceding the next succeeding interest payment date.
With respect to this series of notes, "Business Day", with respect to any
place of payment, means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in that place of
payment are authorized or required by law, regulation or executive order to
close, and which day is also a London Business Day.
"London Business Day" means any day, other than a Saturday or a Sunday, on
which commercial banks and foreign exchange markets settle payments in London,
England.
The per annum rate of interest with respect to this series of notes will be
reset on each interest reset date and will be LIBOR plus 0.15%. Each interest
payment date will be an interest reset date.
The interest rate applicable to each interest period will be the rate
determined on the interest determination date applicable to that interest
period. The interest determination date applicable to any interest reset date
will be the second London Business Day preceding that interest reset date.
With respect to each interest reset date, "LIBOR" will be determined by
MLPF&S as the calculation agent for an interest determination date and will be
the rate for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date that appears on Telerate Page 3750 as of 11:00 A.M., London
time, on that interest determination date.
If fewer than two offered rates appear, or no rate appears, as applicable,
the calculation agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
calculation agent, to provide the Calculation Agent with its offered quotation
for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on that interest determination date and
in a principal amount that is representative for a single transaction in United
States dollars in that market at that time. If at least two quotations are
provided, LIBOR determined on that interest determination date will be the
arithmetic mean of those quotations. If fewer than two quotations are provided,
LIBOR determined on that interest determination date will be the arithmetic mean
of the rates quoted at approximately 11:00 A.M., in The City of New York, on
that interest determination date by three major banks in The City of New York
selected by the calculation agent for loans in United States dollars to leading
European banks, having a maturity of three months and in a principal amount that
is representative for a single transaction in United States dollars in that
market at that time; provided, however, that if the banks so selected by the
calculation agent are not quoting as mentioned in this sentence, LIBOR
determined on that interest determination date will be LIBOR in effect on that
interest determination date.
"Telerate Page 3750" means page 3750 on the Bridge Telerate, or any other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for United States
dollars, for the purpose of displaying the London interbank rates of major banks
for United States dollars.
Interest on this series of notes will be computed and paid on the basis of
the actual number of days for which interest accrues in each interest period
divided by 360.
All percentages resulting from any calculation on the notes will be rounded
to the nearest one hundred-thousandth of a percentage point, with five one
millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545)) would be rounded to 9.87655% (or .0987655), and all dollar amounts
used in or resulting from any calculation on the notes will be rounded to the
nearest cent, with one-half cent being rounded upward.
ML&Co. will notify the Luxembourg Stock Exchange or will cause the
Luxembourg Stock Exchange to be notified of the interest rate, the interest
amount that will accrue, and commencement and ending dates for each interest
period as soon as practicable after the determination is made.
TERMS AND PROVISIONS OF 6% NOTES DUE NOVEMBER 15, 2004
The 6% Notes due November 15, 2004 will mature on November 15, 2004.
The notes of this series bear interest and are payable semiannually on May
15 and November 15 of each year and at maturity, to the persons in whose names
the notes are registered on the preceding May 1 and November 1, respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 6% NOTES DUE JULY 15, 2005
The 6% Notes due July 15, 2005 will mature at par on July 15, 2005.
The notes of this series bear interest and are payable semiannually on
January 15 and July 15 of each year and at maturity, to the persons in whose
names the notes are registered on the preceding December 31 and June 30,
respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 6 3/8% NOTES DUE SEPTEMBER 8, 2006
The 6 3/8% Notes due September 8, 2006 will mature on September 8, 2006
unless redeemed earlier as provided below.
The notes of this series bear interest and are payable semiannually on each
March 8 and September 8 to the persons in whose names the notes are registered
on the preceding February 23 and August 23, respectively.
The notes are subject to redemption at the option of ML&Co. on or after
September 8, 2003, in whole or in part in increments of $1,000, at a redemption
price of 100% of the principal amount of the notes to be redeemed plus accrued
interest to but excluding the date of redemption. Notice of redemption of the
notes shall be given not less than 30 or more than 60 days before the date of
redemption to each holder of the notes to be redeemed.
TERMS AND PROVISIONS OF 6 1/2% NOTES DUE JULY 15, 2018
The 6 1/2% Notes due July 15, 2018 will mature on July 15, 2018.
The notes of this series bear interest and are payable semiannually on
January 15 and July 15 of each year and at maturity, to the persons in whose
names the notes are registered on the preceding December 31 and June 30,
respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 6 7/8% NOTES DUE NOVEMBER 15, 2018
The 6 7/8% Notes due November 15, 2018 will mature on November 15, 2018.
The notes of this series bear interest and are payable semiannually on May
15 and November 15 of each year and at maturity, to the persons in whose names
the notes are registered on the preceding May 1 and November 1, respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 8.40% NOTES DUE NOVEMBER 1, 2019
The 8.40% Notes due November 1, 2019 will mature on November 1, 2019.
The notes of this series bear interest and are payable semiannually on each
May 1 and November 1 to the persons in whose names the notes are registered on
the preceding April 15 and October 15, respectively.
The notes are not redeemable by ML&Co. before maturity unless $20,000,000
or less of aggregate principal amount of the notes are outstanding, in which
case the notes are redeemable at any time on or after November 1, 1994, in whole
but not in part, on at least 15 days and not more than 60 days prior notice at a
redemption price of 100% of principal amount of the notes plus accrued interest
to the date of redemption.
<PAGE>
NON-REDEEMABLE NOTES
Each series of Non-Redeemable Notes bears interest at a specified rate
payable semiannually through maturity to the persons in whose names the notes
are registered on the regular record date preceding each interest payment date.
The Non-Redeemable Notes are not subject to redemption by ML&Co. or repayment at
the option of their holders before their stated maturity dates, and are issuable
and transferable in denominations of $1,000 and any integral multiple of $1,000.
Beneficial interests in Non-Redeemable Notes that are book-entry securities may
be acquired, or subsequently transferred, only in denominations of $1,000 and
integral multiples of $1,000. The title of each series of Non-Redeemable Notes
designates the interest rate or interest rate basis and maturity date of that
series of notes.
NON-REDEEMABLE FIXED RATE NOTES
<TABLE>
<CAPTION>
Series Interest Payment Dates Regular Record Dates
-------- ---------------------- --------------------
<S> <C> <C>
6 3/8% Notes due March 30, 1999* March 30 and September 30 March 15 and September 15
8 1/4% Notes due November 15, 1999 May 15 and November 15 May 1 and November 1
8 3/8% Notes due February 9, 2000* February 9 and August 9 January 25 and July 25
6.70% Notes due August 1, 2000* February 1 and August 1 January 15 and July 15
6% Notes due January 15, 2001* January 15 and July 15 January 1 and July 1
6% Notes due March 1, 2001* March 1 and September 1 February 15 and August 15
6 1/2% Notes due April 1, 2001* April 1 and October 1 March 15 and September 15
8% Notes due February 1, 2002 February 1 and August 1 January 15 and July 15
7 3/8% Notes due August 17, 2002* February 17 and August 17 February 2 and August 2
6.64% Notes due September 19, 2002* March 19 and September 19 March 4 and September 4
8.30% Notes due November 1, 2002 May 1 and November 1 April 15 and October 15
6% Notes due February 12, 2003* February 12 and August 12 January 29 and July 29
6 7/8% Notes due March 1, 2003* March 1 and September 1 February 15 and August 15
6.55% Notes due August 1, 2004* February 1 and August 1 January 15 and July 15
6 1/4% Notes due January 15, 2006* January 15 and July 15 January 1 and July 1
7% Notes due March 15, 2006* March 15 and September 15 March 1 and September 1
7 3/8% Notes due May 15, 2006* May 15 and November 15 May 1 and November 1
7% Notes due January 15, 2007* January 15 and July 15 January 1 and July 1
8% Notes due June 1, 2007 June 1 and December 1 May 15 and November 15
6.56% Notes due December 16, 2007* June 16 and December 16 June 1 and December 1
7% Notes due April 27, 2008* April 27 and October 27 April 12 and October 12
6 1/4% Notes due October 15, 2008* April 15 and October 15 March 31 and September 30
6 3/8% Notes due October 15, 2008* April 15 and October 15 April 1 and October 1
6 3/4% Notes due June 1, 2028* June 1 and December 1 May 15 and November 15
6% Notes due February 17, 2009* February 1 and August 1 February 17 and August 17
</TABLE>
______________
*Book-Entry Securities
NON-REDEEMABLE FLOATING RATE NOTES DUE FEBRUARY 4, 2003
The Floating Rate Notes due February 4, 2003 will mature on February 4,
2003.
The notes of this series are not subject to redemption by ML&Co. before
their maturity.
The notes bear interest payable in arrears on February 4, May 4, August 4
and November 4 of each year until maturity. Interest payable on each interest
payment date will include interest accrued from and including the first day of
the interest period relating to that interest payment date to and including the
last day of that interest period. Each interest period comprises the period
beginning on and including the original issue date of the notes and ending on
and including the day preceding the first interest payment date, and,
thereafter, each successive period beginning on and including each interest
payment date and ending on and including the day preceding the next succeeding
interest payment date.
With respect to this series of notes, "Business Day", with respect to any
place of payment, means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in that place of
payment are authorized or required by law, regulation or executive order to
close, and which day is also a London Business Day.
"London Business Day" means any day, other than a Saturday or a Sunday, on
which commercial banks and foreign exchange markets settle payments in London,
England.
The per annum rate of interest with respect to this series of notes will be
reset on each interest reset date and will be LIBOR plus 0.2%. Each interest
payment date will be an interest reset date.
The interest rate applicable to each interest period will be the rate
determined on the interest determination date applicable to that interest
period. The interest determination date applicable to any interest reset date
will be the second London Business Day preceding that interest reset date.
With respect to each interest reset date, "LIBOR" will be determined by
MLPF&S as the calculation agent for an interest determination date and will be
the rate for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date that appears on Telerate Page 3750 as of 11:00 A.M., London
time, on that interest determination date.
If fewer than two offered rates appear, or no rate appears, as applicable,
the calculation agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
calculation agent, to provide the Calculation Agent with its offered quotation
for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on that interest determination date and
in a principal amount that is representative for a single transaction in United
States dollars in that market at that time. If at least two quotations are
provided, LIBOR determined on that interest determination date will be the
arithmetic mean of those quotations. If fewer than two quotations are provided,
LIBOR determined on that interest determination date will be the arithmetic mean
of the rates quoted at approximately 11:00 A.M., in The City of New York, on
that interest determination date by three major banks in The City of New York
selected by the calculation agent for loans in United States dollars to leading
European banks, having a maturity of three months and in a principal amount that
is representative for a single transaction in United States dollars in that
market at that time; provided, however, that if the banks so selected by the
calculation agent are not quoting as mentioned in this sentence, LIBOR
determined on that interest determination date will be LIBOR in effect on that
interest determination date.
"Telerate Page 3750" means page 3750 on the Bridge Telerate, or any other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for United States
dollars, for the purpose of displaying the London interbank rates of major banks
for United States dollars.
Interest on this series of notes will be computed and paid on the basis of
the actual number of days for which interest accrues in each interest period
divided by the actual number of days in the relevant year.
All percentages resulting from any calculation on the notes will be rounded
to the nearest one hundred-thousandth of a percentage point, with five one
millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545)) would be rounded to 9.87655% (or .0987655), and all dollar amounts
used in or resulting from any calculation on the notes will be rounded to the
nearest cent, with one-half cent being rounded upward.
OTHER TERMS
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 of 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.
Any Event of Default with respect to any series of debt securities may be
waived by the holders of a majority in principal amount or aggregate issue price
of the outstanding senior debt securities of 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 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.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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 senior debt securities. For further information on ML&Co. and the senior
debt 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.
<PAGE>
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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
senior debt securities and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the senior debt securities.
MLPF&S may act as principal or agent in these market-making transactions.
The distribution of the senior debt securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
<PAGE>
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, our wholly-owned subsidiary, will use this prospectus when making
offers and sales related to market-making transactions in the following
securities.
o The final terms and conditions o The notes bear interest at
of each issue of notes are fixed or floating rates or may
specified in the applicable not bear any interest. If the
pricing supplement. notes bear interest at a
floating rate, the floating
o The notes are senior unsecured rate is based on one or more
debt securities of ML&Co. indices or formulas plus or
minus a fixed amount or
o The notes have stated multiplied by a factor.
maturities of nine months or
more from the date they were o Whether the notes are
originally issued. redeemable or repayable before
their maturity and whether
o We will pay amounts due on the they are subject to mandatory
notes in U.S. dollars or any redemption, redemption at the
other consideration described option of ML&Co. or repayment
in the applicable pricing at the option of the holder of
supplement. the notes is specified in the
applicable pricing supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE 3.
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 notes will be the prevailing market price at the
time of sale.
-------------------
MERRILL LYNCH & CO.
-------------------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
RISK FACTORS................................................................. 3
MERRILL LYNCH & CO., INC..................................................... 4
RATIO OF EARNINGS TO FIXED CHARGES........................................... 5
DESCRIPTION OF NOTES......................................................... 5
OTHER TERMS.................................................................. 13
WHERE YOU CAN FIND MORE INFORMATION.......................................... 17
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................ 17
PLAN OF DISTRIBUTION......................................................... 18
EXPERTS...................................................................... 18
<PAGE>
RISK FACTORS
Your investment in the notes will include certain risks. In
consultation with your own financial and legal advisers, you should carefully
consider, among other matters, the following discussion of risks before
deciding whether an investment in the notes is suitable for you. The notes are
not an appropriate investment for you if you are unsophisticated with respect
to the significant components of their relationship.
Structure Risks of Notes Indexed to Interest Rate, Currency or Other Indices
or Formulas
If you invest in notes indexed to one or more interest rate, currency
or other indices or formulas, there will be significant risks not associated
with a conventional fixed rate or floating rate debt security. These risks
include fluctuation of the indices or formulas and the possibility that you
will receive a lower, or no, amount of principal, premium or interest and at
different times than you expected. We have no control over a number of matters,
including economic, financial and political events, that are important in
determining the existence, magnitude and longevity of these risks and their
results. In addition, if an index or formula used to determine any amounts
payable in respect of the notes contains a multiplier or leverage factor, the
effect of any change in that index or formula will be magnified. In recent
years, values of certain indices and formulas have been volatile and volatility
in those and other indices and formulas may be expected in the future. However,
past experience is not necessarily indicative of what may occur in the future.
Redemption May Adversely Affect Your Return on the Notes
If your notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may, in the case of optional redemption, or must, in
the case of mandatory redemption, choose to redeem your notes at times when
prevailing interest rates may be relatively low. Accordingly, you generally
will not be able to reinvest the redemption proceeds in a comparable security
at an effective interest rate as high as that of the notes.
There May Be an Uncertain Trading Market for Your Notes; Many Factors Affect
the Trading Value of Your Notes
We cannot assure you a trading market for your notes will continue to
exist. Many factors independent of our creditworthiness may affect the trading
market of your notes. These factors include:
o the complexity and volatility of the index or formula applicable to
the notes,
o the method of calculating the principal, premium and interest in
respect of the notes,
o the time remaining to the maturity of the notes,
o the outstanding amount of the notes,
o the redemption features of the notes,
o the amount of other securities linked to the index or formula
applicable to the notes, and
o the level, direction and volatility of market interest rates
generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market
and experience more price volatility. There may be a limited number of buyers
for these notes. This may affect the price you receive for these notes or your
ability to sell these notes at all. You should not purchase notes unless you
understand and know you can bear the related investment risks.
Our Credit Ratings May Not Reflect All Risks of an Investment in the Notes
Our credit ratings are an assessment of our ability to pay our
obligations. Consequently, real or anticipated changes in our credit ratings
will generally affect the market value of your notes. Our credit ratings,
however, may not reflect the potential impact of risks related to structure,
market or other factors discussed above on the value of your notes.
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
notes described in this prospectus.
<PAGE>
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
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)..... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios
reported for the fiscal years 1994 through 1997.
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. "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.
</TABLE>
DESCRIPTION OF NOTES
Terms of the Notes
"Pricing supplement", as used herein, means a prospectus supplement
relating to an individual issue of the notes, as filed with the SEC
The terms and conditions described below apply to each note unless
otherwise specified in the applicable pricing supplement.
Except as provided in the applicable pricing supplement, the notes are
denominated in U.S. dollars. If provided in the applicable pricing supplement,
notes may be denominated in a foreign currency or in units of two or more
currencies ("Multi-Currency Notes").
Except as provided in the applicable pricing supplement:
o the notes were issued only in fully registered form without coupons;
o floating rate notes and Zero Coupon Notes, as defined, were issued in
denominations of $25,000 or any amount in excess of $25,000 which is
an integral multiple of $1,000; and
o fixed rate notes were issued in denominations of $1,000 or any
integral multiple in excess of $1,000.
Unless otherwise specified in the applicable pricing supplement:
o principal and interest, if any, is payable;
o the transfer of the notes is registrable, and
o the notes are exchangeable for notes bearing identical terms and
provisions,
at the office of the trustee in The City of New York designated for such
purpose, provided that ML&Co., at its option, may pay interest, other than
interest payable at maturity or on any date of redemption or repayment, by
check mailed to the address of the person entitled to receive payment as shown
on the security register. ML&Co. will pay the principal and interest payable at
maturity or the date of redemption or repayment on each note upon maturity,
redemption or repayment, as the case may be, in immediately available funds
against presentation of the note at the office of the trustee maintained for
that purpose.
Notwithstanding the preceding two sentences, ML&Co. may pay interest
on a note which bears interest at a floating rate at maturity or earlier
redemption or repayment by wire transfer of immediately available funds to a
designated account maintained in the United States upon:
(1) receipt of written notice by the trustee from the holder of
the applicable note not less than one Business Day before the
due date of the relevant principal payment; and
(2) presentation of the note at the corporate trust office of the
trustee in the Borough of Manhattan, The City of New York, or
at any other place as ML&Co. may designate.
A holder of not less than $1,000,000 aggregate principal amount of floating
rate notes may by written notice to the trustee at the corporate trust office
or at such other address as ML&Co. will give notice in writing not less than 15
days before an interest payment date, arrange to have the interest payable on
all notes held by that holder on the relevant interest payment date, and all
subsequent interest payment dates until written notice to the contrary is given
to the trustee, made by wire transfer of immediately available funds to a
designated account maintained in the United States.
Except as provided in the applicable pricing supplement, "Business
Day" means any day that is not a Saturday or Sunday and that, in The City of
New York, is neither a legal holiday nor a day on which banking institutions
are authorized or obligated by law or regulation to close.
REPAYMENT AT OPTION OF HOLDER
If so indicated in an applicable pricing supplement, notes are
repayable by ML&Co. in whole or in part at the option of the holders of the
notes on their respective optional repayment dates specified in the applicable
pricing supplement. If no optional repayment date is indicated with respect to
a note, that note is not repayable at the option of the holder before maturity.
Any repayment in part will be in increments of $1,000 provided that any
remaining principal amount of the applicable note will be an authorized
denomination of the applicable note. The repurchase price for any note
repurchased is 100% of the principal amount to be repaid, together with
interest payable to the date of repayment.
Notwithstanding anything to the contrary in this prospectus, if
repayable at the option of the holder, a note is repayable only on an interest
payment date. If any optional repayment date specified with respect to a note
is not an interest payment date, whether because the payment date is not a
Business Day or otherwise, the applicable repayment date will, instead of being
the date specified, be the interest payment date nearest the specified optional
repayment date whether the applicable interest payment date precedes or
succeeds the specified optional repayment date. In the event that an equal
number of days separates a specified optional repayment date and the preceding
interest payment date, on the one hand, and the succeeding interest payment
date, on the other hand, the optional repayment date will be the succeeding
interest payment date.
In order for a note which is by its terms repayable at the option of
the holder to be repaid before maturity, ML&Co. must receive at the corporate
trust office of the trustee, or at any other address of which ML&Co. will from
time to time notify the holders of the notes, during the period from and
including the 20th Business Day preceding the applicable optional repayment
date up to and including the close of business on the 16th Business Day
preceding the applicable optional repayment date:
(1) the applicable note with the information under the caption
"option to elect repayment" duly completed, or
(2) a telegram, telex, facsimile transmission or letter from a member
of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or a trust company in
the United States of America dated no later than the 16th Business Day
preceding the applicable optional repayment date and setting forth the
name of the holder of the note, the principal amount of the note, the
amount of the note to be repaid, a statement that the option to elect
repayment is being exercised and a guarantee that the note with the
information required under the caption "option to elect repayment"
duly completed will be received at the above-mentioned office of the
trustee, not later than the 5th Business Day after the date of the
telegram, telex, facsimile transmission or letter and note, duly
completed, is received at the office of the trustee by the 5th
Business Day.
A holder's effective exercise of the repayment option will be
irrevocable. A holder of a note will not be permitted to transfer or exchange
that note or, in the event that a note is to be repaid in part, that portion of
the note to be repaid, after exercise of the repayment option. ML&Co. will make
all determinations with respect to all questions as to the validity,
eligibility, including time of receipt and acceptance of any note for repayment
. All such determinations will be final, binding and non-appealable. ML&Co. has
the right to offer for resale any note acquired by it pursuant to the foregoing
arrangements. Accordingly, ML&Co. may not satisfy the indebtedness evidenced by
any note repurchased by it by such repurchase.
REDEMPTION AT OPTION OF ML&CO.
The notes do not have a sinking fund but are redeemable at the option
of ML&Co. if a redemption date is specified in the applicable notes and in the
applicable pricing supplement. If indicated in an applicable pricing
supplement, the notes are subject to redemption by ML&Co. on and after their
respective redemption dates specified in the applicable pricing supplement. On
and after the redemption date, if any, the related note is redeemable in whole
or in part at the option of ML&Co. on notice given not more than 60 nor less
than 30 days before the date of redemption in the case of fixed rate notes, or
on notice given not more than 30 nor less than 15 days before the date of
redemption in the case of floating rate notes. Any redemption in part will be
in increments of $1,000 provided that any remaining principal amount of the
applicable note will be an authorized denomination of the applicable note. The
redemption price is equal to 100% of the principal amount to be redeemed,
together with interest payable to the date of redemption. Notwithstanding the
above, however, floating rate notes, if redeemable at the option of ML&Co., are
redeemable only on interest payment dates occurring on or after the applicable
redemption dates.
INTEREST RATE
Each note bears interest at the rate per annum, or pursuant to the
interest rate formula, stated in the applicable note and in the applicable
pricing supplement until the principal of the note is paid or made available
for payment. Interest is payable on each interest payment date and at maturity
or, if applicable, upon redemption or repayment. Interest is payable to the
person in whose name a note is registered at the close of business on the
regular record date next preceding each interest payment date; provided,
however, interest payable at maturity or, if applicable, upon redemption or
repayment will be payable to the person to whom principal will be payable.
Except as provided in the applicable pricing supplement, Merrill Lynch, Pierce,
Fenner & Smith Incorporated , referred to in this prospectus as MLPF&S, is the
calculation agent with respect to floating rate notes.
Each floating rate note bears interest at rates determined by
reference to an interest rate formula, which may be adjusted by a Spread or
Spread Multiplier , each as defined below, unless otherwise specified in the
applicable note. A floating rate note may also have either or both of the
following:
o a maximum limitation, or ceiling, on the rate at which interest which
may accrue during any interest period; and
o a minimum limitation, or floor, on the rate at which interest which
may accrue during any interest period.
The applicable pricing supplement designates either a fixed rate of
interest per annum payable on the applicable note, in which case the note is a
fixed rate note, or one of the following base rates, as applicable to the
relevant floating rate note:
o the commercial paper index rate, in which case the note is a
Commercial Paper Index Rate Note,
o the federal funds rate, in which case the note is a Federal Funds Rate
Note,
o the prime rate, in which case the note is a Prime Rate Note,
o the treasury index rate, in which case the note is a Treasury Index
Rate Note,
o LIBOR, in which case the note is a LIBOR Note, or
o such other interest rate formula as is set forth in the applicable
pricing supplement.
Except as specified in the applicable pricing supplement, floating
rate notes have daily, weekly, monthly, quarterly, semiannual or annual resets
of the rate of interest.
FIXED RATE NOTES
Each fixed rate note bears interest at the rate per annum stated on the
face of the applicable note until the principal of the note is paid or made
available for payment. Except as provided in the applicable pricing supplement,
interest is payable semi-annually on May 15 and November 15 of each year and at
maturity, or on the date of redemption or repayment if a fixed rate note is
redeemed by ML&Co. or repaid at the holder's option prior to maturity. Interest
is computed on the basis of a 360-day year of twelve 30-day months. Interest is
payable to the person in whose name a fixed rate note is registered at the close
of business on the May 1 or November 1 regular record date next preceding the
May 15 or November 15 interest payment date. Interest rates are subject to
change by ML&Co. from time to time, but no change will affect any fixed rate
note previously issued or as to which ML&Co. has accepted an offer to purchase.
Any payment of principal or interest required to be made on an
interest payment date, at maturity or earlier redemption or repayment of a
fixed rate note which is not a Business Day need not be made on that day, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the interest payment date, maturity date or date of redemption or
repayment, as the case may be. No interest will accrue with respect to the
payment for the period from and after the applicable interest payment date,
maturity date or date of redemption or repayment.
FLOATING RATE NOTES
The applicable pricing supplement specifies:
o the base rate or other interest rate formula ,
o the Spread, or Spread Multiplier, if any, and
o the maximum or minimum interest rate limitation, if any, applicable to
each floating rate note.
In addition, the pricing supplement specifies for each floating rate note the
following terms, if applicable: the initial interest rate, the interest payment
dates, the Index Maturity, Interest Reset Dates, optional repayment dates,
redemption date and any other variable term applicable to the note.
The interest rate on each floating rate note is calculated by
reference to the specified interest rate formula:
(1) plus or minus the number of basis points specified in the applicable
pricing supplement as being applicable to the interest rate for the
relevant floating rate note (the "Spread"), if any, or
(2) multiplied by the percentage of the base rate applicable to the
interest rate for the applicable floating rate note (the "Spread
Multiplier"), if any.
"Index Maturity" means, the period to maturity of the instrument or
obligation on which the interest rate formula is based, as specified in the
applicable pricing supplement.
"Regular record date" with respect to floating rate notes means the
15th day, whether or not a Business Day, before the applicable interest payment
date.
The "calculation date", if applicable, with respect to any Interest
Determination Date as specified with respect to each base rate is the earlier
of:
o the tenth calendar day after the Interest Determination Date or, if
the tenth calendar day is not a Business Day, the next succeeding
Business Day, or
o the Business Day before the interest payment date on which the accrued
interest will be payable.
Except as otherwise provided herein with respect to LIBOR Notes or in
the applicable pricing supplement, if any Interest Reset Date for any floating
rate note would otherwise be a day that is not a Business Day, that Interest
Reset Date will be postponed to the next succeeding day that is a Business Day.
Each floating rate note bears interest from the date of issue at the
rates determined as described below until the principal of the note is paid or
otherwise made available for payment. The rate of interest on a floating rate
note is reset each Interest Reset Date applicable to the note; provided,
however, that except in the case of floating rate notes which reset daily, the
interest rate in effect for the ten days immediately before maturity,
redemption or repayment, as the case may be, will be the interest rate in
effect on the tenth day preceding such maturity, redemption or repayment, as
the case may be. Except as otherwise provided herein or in the applicable
pricing supplement, the rate of interest determined on an Interest Reset Date
with respect to a floating rate note will be applicable on and after the
applicable Interest Reset Date to, but not including, the next succeeding
Interest Reset Date, or until the date of maturity or date of redemption or
repayment, as the case may be.
If an interest payment date with respect to any floating rate note
falls on a day that is not a Business Day with respect to the note, that
interest payment date will be the following day that is a Business Day, except
that in the case of a LIBOR Note, if such day falls in the next calendar month,
the interest payment date will be the preceding day that is a Business Day. If
the maturity date or date of redemption or repayment of any floating rate note
falls on a day that is not a Business Day, the payment of interest and
principal may be made on the next succeeding Business Day, and no interest on
that payment will accrue for the period from and after the maturity date or the
date of redemption or repayment.
Except as provided in the applicable pricing supplement, interest
payments on floating rate notes will be the amount of interest accrued from,
and including, the next preceding interest payment date in respect of which
interest has been paid to, but excluding, the interest payment date. With
respect to a floating rate note, accrued interest from the last date to which
interest has been paid is calculated by multiplying the principal amount of the
applicable floating rate note by an accrued interest factor. The accrued
interest factor is computed by adding the interest factors, calculated for each
day, from the last date to which interest has been paid, to the date for which
accrued interest is being calculated. The interest factor for each day is
computed by dividing the interest rate applicable to each day by 360, in the
case of Commercial Paper Index Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes and LIBOR Notes, or by the actual number of days in the year, in the case
of Treasury Index Rate Notes.
All percentages resulting from any calculation on floating rate notes
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one- millionths of a percentage point rounded
upward. For example, 9.876545% or .09876545 would be rounded to 9.87655% or
.0987655. All dollar amounts used in or resulting from calculations on floating
rate notes will be rounded to the nearest cent with one-half cent being rounded
upward.
Upon the request of the holder of any floating rate note, the
calculation agent will provide the interest rate then in effect and, if
determined, the interest rate which will become effective as a result of a
determination made with respect to the most recent Interest Determination Date
with respect to the applicable note.
COMMERCIAL PAPER INDEX RATE NOTES
Commercial Paper Index Rate Notes bear interest at the interest rates,
calculated with reference to the Commercial Paper Index Rate and the Spread or
Spread Multiplier, if any, specified in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
"Commercial Paper Index Rate" means, with respect to any Interest Determination
Date relating to a Commercial Paper Index Rate Note, the Money Market Yield
calculated as described below of the rate on that date for commercial paper
having the Index Maturity specified in the applicable pricing supplement as
such rate is published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"), under the heading "Commercial Paper". In the event that such
rate is not published by 9:00 A.M. New York City time on the calculation date
pertaining to the applicable Interest Determination Date, then the Commercial
Paper Index Rate will be the Money Market Yield of the rate on that Interest
Determination Date for commercial paper having the Index Maturity as published
by the Federal Reserve Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government Securities" ("Composite
Quotations") under the heading "Commercial Paper". If by 3:00 P.M., New York
City time, on the applicable calculation date such rate is not yet published in
either H.15(519) or Composite Quotations, the Commercial Paper Index Rate for
that Interest Determination Date will be calculated by the calculation agent
and will be the Money Market Yield of the arithmetic mean of the offered rates
of three leading dealers of commercial paper in The City of New York selected
by the calculation agent as of 11:00 A.M., New York City time, on that Interest
Determination Date for commercial paper having the specified Index Maturity
placed for an industrial issuer whose bond rating is "AA" or the equivalent
from a nationally recognized rating agency. If the dealers selected by the
calculation agent are not quoting as mentioned in the preceding sentence, the
Commercial Paper Index Rate will be the Commercial Paper Index Rate in effect
on such Interest Determination Date.
"Money Market Yield" means the yield calculated in accordance with the
following formula and expressed as a percentage:
Money Market Yield = D X 360 X 100
--------------
360-- (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
The Interest Determination Date pertaining to an Interest Reset Date
on a Commercial Paper Index Rate Note is the Business Day before the Interest
Reset Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes bear interest at the interest rates,
calculated with reference to the Federal Funds Rate and the Spread, or Spread
Multiplier, if any, specified in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note, the rate on that date for Federal Funds
as published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" ("H.15(519)") or any
successor publication under the heading "Federal Funds (Effective)" or, if not
so published by 9:00 A.M., New York City time, on the calculation date
pertaining to the applicable Interest Determination Date, the Federal Funds
Rate will be the interest rate on the Interest Determination Date as published
by the Federal Reserve Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government Securities" ("Composite
Quotations") under the heading "Federal Funds/Effective Rate". If such rate is
not yet published by 9:00 A.M. on the calculation date pertaining to the
applicable Interest Determination Date, the Federal Funds Rate for the
applicable Interest Determination Date will be the rate on the applicable
Interest Determination Date made publicly available by the Federal Reserve Bank
of New York which is equivalent to the rate which appears in H.15(519) under
the heading "Federal Funds (Effective)". If the rate described in the preceding
sentence is not made publicly available by the Federal Reserve Bank of New York
by 9:00 A.M. on the calculation date, the Federal Funds Rate will be the last
Federal Funds Rate in effect before the applicable Interest Determination Date.
The rate of interest on a Federal Funds Rate Note is reset on each
Interest Reset Date applicable to the note. Unless otherwise specified in the
applicable pricing supplement, with respect to Federal Funds Rate Notes, each
Business Day is an Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date on a Federal Funds Rate Note is the
Business Day before the applicable Interest Reset Date.
PRIME RATE NOTES
Prime Rate Notes bear interest at the interest rates, calculated with
reference to the Prime Rate and the Spread, or Spread Multiplier, if any,
specified in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Prime Rate Note, the arithmetic mean of the prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on the Interest Determination Date by three major money
center banks in The City of New York selected by the calculation agent. If
fewer than three quotations are provided, the Prime Rate will be calculated by
the calculation agent and will be determined as the arithmetic mean on the
basis of the prime rates quoted in The City of New York on the calculation date
by three substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, and unaffiliated with
ML&Co., having total equity capital of at least $500 million and being subject
to supervision or examination by a Federal or State authority, selected by the
calculation agent. If the substitute banks or trust companies selected by the
calculation agent are not quoting as mentioned in the preceding sentence, the
Prime Rate will be the Prime Rate in effect on such Interest Determination Date
relating to a Prime Rate Note.
The Interest Determination Date pertaining to an Interest Reset Date
on a Prime Rate Note is the Business Day before the applicable Interest Reset
Date.
LIBOR NOTES
LIBOR Notes bear interest at the interest rates calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
LIBOR, with respect to any Interest Determination Date relating to a LIBOR Note
will equal the arithmetic mean as determined by the calculation agent of the
offered rates which appear as of 11:00 A.M., London time, on the Reuters Screen
LIBOR Page on the Reuter Monitor Money Rates Service for deposits in United
States dollars for the period of the Index Maturity specified in the applicable
pricing supplement commencing on the second day on which dealings in deposits
in United States dollars are transacted in the London interbank market (a
"London Banking Day") immediately following the applicable Interest
Determination Date; provided, however, that if fewer than two quotations
appear, the calculation agent will request the principal London office of four
major banks in the London interbank market selected by the calculation agent to
provide the calculation agent with a quotation of their offered rates at
approximately 11:00 A.M., London time, on the applicable Interest Determination
Date for deposits in United States dollars for the period of the applicable
Index Maturity and in a principal amount equal to an amount that is
representative for a single transaction in such market at such time commencing
on the second London Banking Day immediately following the applicable Interest
Determination Date. If at least two quotations are provided, LIBOR for the
applicable Interest Determination Date will equal the arithmetic mean of the
quotations. If fewer than two quotations are provided, LIBOR for the applicable
Interest Determination Date will equal the arithmetic mean of the rates quoted
by three major banks in The City of New York, as selected by the calculation
agent, at approximately 11:00 A.M., New York City time, on the applicable
Interest Determination Date for loans to leading European banks in United
States dollars for the period of the applicable Index Maturity and in a
principal amount equal to an amount that is representative for a single
transaction in such market at such time commencing on the second London Banking
Day following the Interest Determination Date. If the banks selected by the
calculation agent are not quoting as mentioned in the preceding sentence, LIBOR
for the applicable Interest Determination Date will be LIBOR in effect on such
Interest Determination Date.
The Interest Determination Date pertaining to an Interest Reset Date
on a LIBOR Note is the second London Banking Day next preceding the applicable
Interest Reset Date.
TREASURY INDEX RATE NOTES
Treasury Index Rate Notes bear interest at the interest rates,
calculated with reference to the Treasury Index Rate and the Spread or Spread
Multiplier, if any, specified in the applicable pricing supplement.
Unless otherwise indicated in the pricing supplement, "Treasury Index
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Index Rate Note, the per annum discount rate for direct obligations of
the United States with a maturity of thirteen weeks ("91-day Treasury bills"),
expressed as a bond equivalent on the basis of a year of 365 or 366 days, at
the 91-day Treasury bill auction occurring on the applicable Interest
Determination Date as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates", or
any successor publication, under the heading "Treasury bills--auction average
(investment)" or if not published by 9:00 A.M. New York City time on the
calculation date as reported by the United States Department of the Treasury.
Treasury bills are usually sold at auction on Monday of each week unless that
day is a legal holiday in which case the auction is usually held on the
following Tuesday, except that the auction may be held on the preceding Friday.
The day of each auction of 91-day Treasury bills, unless otherwise
specified in the pricing supplement, is an Interest Determination Date provided
that the results of the auction are published or reported, and each Business
Day following such an Interest Determination Date is a Treasury Index Rate Note
Interest Reset Date. The rate of interest applicable to Treasury Index Rate
Notes will therefore not be reset during any period in which auctions are not
held or the results of auctions are not so published or reported.
ZERO COUPON NOTES
Notes which do not bear interest ("Zero Coupon Notes") were initially
offered at a substantial discount from their principal amount at maturity.
There are no periodic payments of interest. The calculation of the accrual of
Original Issue Discount, as defined below, in the period during which a Zero
Coupon Note remains outstanding, is on a semiannual bond equivalent basis using
a year composed of twelve 30-day months. Upon maturity, Original Issue Discount
will cease to accrue on a Zero Coupon Note.
Limitation of Claims in Bankruptcy: If a bankruptcy proceeding is
commenced in respect of ML&Co., the claim of the holder of a Zero Coupon Note
with respect to the principal amount thereof may, under Section 502(b)(2) of
Title 11 of the United States Code, be limited to the issue price of the Zero
Coupon Note plus that portion of the Original Issue Discount that is amortized
from the date of issue to the commencement of the proceeding.
OTHER TERMS
ML&Co. issued the notes as a series of securities under an Indenture,
dated as of April 1, 1983, as amended and restated (the "1983 Indenture"),
between ML&Co. and The Chase Manhattan Bank, as trustee. All of the securities
issued under the 1983 Indenture are referred to in this prospectus as the
"senior debt securities". A copy of the 1983 Indenture is filed as an exhibit
to the registration statement relating to the notes 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 definition
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 such terms as ML&Co. may establish under to the
provisions of the 1983 Indenture .
The 1983 Indenture and the notes 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 reopen a previously
issued series of senior debt securities 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, since
ML&Co. is a holding company, the right 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 Securities Exchange Act of
1934, as amended, and under rules of certain 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 such 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 of 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 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 the 1983 Indenture without the
consent of each holder of each outstanding security of each series of
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 notes 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.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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 more information
on the public reference rooms and their copy charges. You may also inspect our
SEC reports and other information at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the notes. For further information on ML&Co. and the notes, 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.
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; 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 and March 26, 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 or after the date of the initial registration statement and prior
to effectiveness of the registration statement:
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 notes 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 notes and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the notes.
MLPF&S may act as principal or agent in these market-making
transactions.
The distribution of the notes 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
MAJOR 11 INTERNATIONAL MARKET INDEX TARGET-TERM MITTS SECURITIES(R) DUE
DECEMBER 6, 2002
"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: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities
o No payments before maturity you own, we will pay you an
date amount equal to the sum of the
o Senior unsecured debt principal amount of each unit
securities of Merrill Lynch & and an additional amount based
Co., Inc. on the percentage increase, if
o Linked to the value of the any, in the value of the Major
Major 11 International Index 11 International Index as
o The MITTS Securities are listed described in this prospectus.
on the American Stock Exchange
under the symbol "EEM". o You will receive no less than
the principal amount of your
MITTS Securities.
INVESTING IN THE MITTS SECURITIES INVOLVE RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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.
----------------
MERRILL LYNCH & CO.
----------------
The date of this prospectus is , 199 .
"MITTS" and "Market Index Target-Term Securities" are registered service marks
of Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS..................................................................3
MERRILL LYNCH & CO., INC......................................................7
RATIO OF EARNINGS TO FIXED CHARGES............................................8
DESCRIPTION OF MITTS SECURITIES...............................................9
THE INDEX....................................................................17
OTHER TERMS..................................................................23
PROJECTED PAYMENT SCHEDULE...................................................27
WHERE YOU CAN FIND MORE INFORMATION..........................................28
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................28
PLAN OF DISTRIBUTION.........................................................29
EXPERTS......................................................................29
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT
You should be aware that if the average value of the index over five
trading days shortly before the maturity date is less than 100, the value of
the index on the date the MITTS Securities were priced, we will pay you only
$10 for each unit of the MITTS Securities you own. This will be true even if ,
at some time during the life of the MITTS Securities, the value of the index
was higher than 100 but later falls below 100 .
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you take into account factors
that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX
The AMEX calculates the index by reference to the sub-indices
comprising eleven major international market indices that reflect the prices of
the common stocks included in those sub-indices without taking into
consideration the value of dividends paid on those stocks, except in the case
of the Deutscher Aktienindex Sub-Index which reflects dividends paid on its
underlying common stocks. Your return on your MITTS Securities will not reflect
the return you would realize if you actually owned all of the stocks underlying
the index and received the dividends paid on those stocks because, except as
noted above, the value of the index is calculated by reference to the prices of
the stocks included in the index without taking into consideration the value of
dividends paid on those stocks.
YOUR RETURN MAY BE AFFECTED BY CURRENCY EXCHANGE RATES
Although the stocks comprising the sub-indices are traded in
currencies other than U.S. dollars and the MITTS Securities are denominated in
U.S. dollars, we will not adjust the amount payable at maturity for currency
exchange rates in effect at the maturity of the MITTS Securities. Any amount in
addition to the principal amount of each unit payable to you at maturity is
based solely upon the percentage increase in the index. Changes in exchange
rates, however, may reflect changes in the relevant European, Australian and
Asian economies which in turn may affect the value of the sub-indices and the
MITTS Securities.
YOUR RETURN MAY BE AFFECTED BY FACTORS AFFECTING INTERNATIONAL SECURITIES
MARKETS.
The underlying stocks that constitute the sub-indices have been issued
by companies listed on European, Australian and Asian exchanges. You should be
aware that investments in securities indexed to the value of European,
Australian and Asian securities involve risks. The European, Australian and
Asian securities markets may be more volatile than U.S. or other securities
markets and may be affected by market developments in different ways than U.S.
or other securities markets. Direct or indirect government intervention to
stabilize a particular non-U.S. securities market and cross-shareholdings in
European, Australian and Asian companies on these markets may affect prices and
volume of trading on those markets. Also, there is generally less publicly
available information about non-U.S. companies than about U.S. companies that
are subject to the reporting requirements of the SEC and non-U.S. companies are
subject to accounting, auditing and financial reporting standards and
requirements that differ from those applicable to U.S. reporting companies.
Securities prices in Europe, Australia and Asia may be affected by
political, economic, financial and social factors in those regions. In
addition, recent or future changes in a country's government, economic and
fiscal policies, the possible imposition of, or changes in, currency exchange
laws or other laws or restrictions applicable to non-U.S. companies or
investments in non-U.S. equity securities, and possible fluctuations in the
rate of exchange between currencies are factors that could negatively affect
the international securities markets. Moreover, the relevant European,
Australian and Asian economies may differ favorably or unfavorably from the
U.S. economy in economic factors such as growth of gross national product, rate
of inflation, capital reinvestment, resources and self-sufficiency. Because
some sub-indices have a greater weighting than others in calculating the value
of the index, fluctuations in the securities markets relating to those
sub-indices will have a greater effect on the value of the index than
fluctuations in securities markets relating to sub-indices with a lesser
weighting.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE FUTURE
Although the MITTS Securities are listed on the AMEX under the symbol
"EEM", 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
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited, there may
be a limited number of buyers for your MITTS Securities if you do not wish to
hold your investment until maturity. This may affect the price you receive.
There are many factors affecting the trading value of the MITTS Securities
We believe that the trading value of the MITTS Securities will be
affected by the value of the index and by a number of other factors. Some of
these factors are interrelated in complex ways; as a result, the effect of any
one factor may be offset or magnified by the effect of another factor. The
following paragraphs describe the expected impact on the market value of the
MITTS Securities given a change in a specific factor, assuming all other
conditions remain constant.
o The value of the index. The trading value of the MITTS Securities will
depend substantially on the amount by which the index exceeds or does not
exceed 100, the value of the index on the date the MITTS Securities were
priced for sale to the public. If you choose to sell your MITTS Securities
at a time when the value of the index exceeds 100, you may receive
substantially less than the amount that would be payable at maturity based
on that index value because of the expectation that the index will continue
to fluctuate until shortly before the maturity date when the average value
of the index over five trading days is determined. If you choose to sell
your MITTS Securities when the value of the index is below , or not
sufficiently above, 100, you may receive less than $10 per unit of your
MITTS Securities. In general, rising dividend rates or dividends per share
in the respective home countries related to the common stocks underlying
the sub-indices may increase the value of the index while falling dividend
rates in these countries may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying the index
may also affect the value of the index and the value of the MITTS
Securities.
o Interest rates. Because the MITTS Securities repay, at a minimum, the
principal amount at maturity, we expect that the trading value of the MITTS
Securities will be affected by changes in interest rates. In general, if
U.S. interest rates increase, we expect that the trading value of the MITTS
Securities will decrease. If U.S. interest rates decrease, we expect the
trading value of the MITTS Securities will increase. In general, if
interest rates in the applicable home countries increase, we expect that
the trading value of the MITTS Securities will increase. If interest rates
in the applicable home countries decrease, we expect the trading value of
the MITTS Securities will decrease. However, interest rates in the
applicable home countries may also affect the relevant economies and, in
turn, the value of the sub-indices. Rising interest rates in the applicable
home countries may lower the value of the sub-indices and the MITTS
Securities. Falling interest rates in the applicable home countries may
increase the value of the index and the value of the MITTS Securities.
o Volatility of the Index. Volatility is the term used to describe the size
and frequency of market fluctuations. If the volatility of the index
increases, we expect that the trading value of the MITTS Securities will
increase. If the volatility of the index decreases, we expect that the
trading value of the MITTS Securities will decrease.
o Time Remaining to Maturity. We anticipate that before their maturity the
MITTS Securities may trade at a value above that which would be expected
based on the level of interest rates and the index. This difference will
reflect a "time premium" due to expectations concerning the value of the
index during the period before their maturity of the MITTS Securities.
However, as the time remaining to maturity of the MITTS Securities
decreases, we expect that this time premium will decrease, lowering the
trading value of the MITTS Securities.
o Dividend Yields. If dividend yields on the stocks comprising the
sub-indices increase, we expect that the value of the MITTS Securities will
decrease, and conversely, if dividend yields on the underlying stock
comprising the sub-indices decrease, we expect that the value of the MITTS
Securities will increase.
o Changes in our credit ratings. 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
other factors in addition to our ability to pay our obligations under the
MITTS Securities, an improvement in our credit ratings will not reduce
other investment risks related to an investment in the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset some
or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the value of the index.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 except that we expect that the effect on the trading value of the
MITTS Securities of a given increase in the value of the index 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.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW.
New York State laws govern the 1983 Indenture under which the MITTS
Securities were issued. New York has certain usury laws that limit the amount
of interest that can be charged and paid on loans, which includes debt
securities like the 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 MITTS Securities holders, to
the extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We and our affiliates may from time to time buy or sell the stocks
underlying the index for their own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
POTENTIAL CONFLICTS OF INTERESTS.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index and
the amount payable to you at maturity . Under certain 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with such arrangement. We did not seek competitive bids for such an
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax advisor.
<PAGE>
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.
<PAGE>
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
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)..... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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.
<PAGE>
DESCRIPTION OF MITTS SECURITIES
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture, which is more fully described in this prospectus.
The MITTS Securities will mature on December 6, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of that MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "--Payment at Maturity" below.
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 "Events of Default and Acceleration" and "Other
Terms Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
PAYMENT AT MATURITY
At maturity, a beneficial owner of a MITTS Security will be entitled
to receive the principal amount of that MITTS Security plus a Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<S> <C> <C>
principal amount per MITTS Security ($10 per unit) x Ending Index Value - Starting Index Value
-----------------------------------------
Starting Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Index Value" equals 100.
The "Participation Rate" equals 115%.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the
index in New York determined on each of the first five Calculation Days during
the Calculation Period. If there are fewer than five Calculation Days, then the
Ending Index Value will equal the average or arithmetic mean of the closing
values of the index on those Calculation Days, and if there is only one
Calculation Day, then the Ending Index Value will equal the closing value of
the index on that Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
The "Calculation Day" means any Index Business Day during the
Calculation Period on which a Market Disruption Event has not occurred.
The "Index Business Day" is a day on which the New York Stock Exchange
and the AMEX are open for trading and the index or any successor index is
calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the total amount payable at maturity for each $10 principal amount of
MITTS Securities,
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 the stocks
underlying the index, which includes an assumed aggregate dividend
yield of 2.36% per annum, as more fully described below.
<TABLE>
<CAPTION>
Total Amount Pretax
Payable at Total Rate Annualized Pretax Annualized
Maturity per $10 of Rate Rate of Return of
Percentage Change Principal Return on of Return on Stocks Underlying
Hypothetical Ending Over the Starting Amount of Securities Securities(1) the
Index Value Index Value Securities Index(1)(2)
----------- ----------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
40 -60% $10.00 0.00% 0.00% -15.48%
50 -50% $10.00 0.00% 0.00% -11.24%
60 -40% $10.00 0.00% 0.00% -7.73%
70 -30% $10.00 0.00% 0.00% -4.72%
80 -20% $10.00 0.00% 0.00% -2.09%
90 -10% $10.00 0.00% 0.00% 0.25%
100(3) 0% $10.00 0.00% 0.00% 2.36%
110 10% $11.15 11.50% 2.18% 4.28%
120 20% $12.30 23.00% 4.16% 6.04%
130 30% $13.45 34.50% 5.98% 7.68%
140 40% $14.60 46.00% 7.67% 9.20%
150 50% $15.75 57.50% 9.24% 10.62%
160 60% $16.90 69.00% 10.71% 11.96%
170 70% $18.05 80.50% 12.09% 13.22%
180 80% $19.20 92.00% 13.40% 14.41%
190 90% $20.35 103.50% 14.64% 15.55%
200 100% $21.50 115.00% 15.81% 16.63%
210 110% $22.65 126.50% 16.93% 17.66%
220 120% $23.80 138.00% 18.00% 18.64%
230 130% $24.95 149.50% 19.03% 19.59%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the
sub-indices with the allocation of this amount reflecting the current
relative weights of these stocks in the sub-indices;
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the index from the Starting Index Value to
the relevant hypothetical Ending Index Value;
(c) a constant dividend yield of 2.36% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the index at the end of each quarter assuming this value increases or
decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value;
(d) no transaction fees or expenses;
(e) a term for the MITTS Securities from November 26, 1997 to December 6,
2002; and
(f) a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Sub-Indices as of the close
of business on November 20, 1997 was approximately 2.36%.
(3) The Starting Index Value equals 100.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this prospectus.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the index, or its value , is
changed in any material respect, or if the index is in any other way modified
so that such index does not, in the opinion of the calculation agent, fairly
represent the value of the index had any changes or modifications not been
made, then, from and after such time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Index Value is to be calculated, make any adjustments as,
in the good faith judgment of the calculation agent, may be necessary in order
to arrive at a calculation of a value of a stock index comparable to the index
as if no changes or modifications had been made, and calculate the closing
value with reference to the index, as adjusted. Accordingly, if the method of
calculating the index is modified so that the value of the index is a fraction
or a multiple of what it would have been if it had not been modified, e.g., due
to a split in the index, then the calculation agent shall adjust the index in
order to arrive at a value of the index as if it had not been modified, e.g.,
as if a split had not occurred.
"MARKET DISRUPTION EVENT" means the occurrence or existence on any
Overseas Index Business Day with respect to a sub-index during the one-half
hour period that ends at the regular official weekday time at which trading on
the Index Exchange related to that sub-index occurs of any suspension of, or
limitation imposed on, trading (by reason of movements in price exceeding
limits permitted by the relevant exchange or otherwise) on (1) the Index
Exchange in securities that comprise 20% or more of the value of such sub-index
or (2) any exchanges on which futures or options on such sub-index are traded
in such options or futures if, in the determination of the calculation agent,
such suspension or limitation is material.
For the purpose of the foregoing definition, (1) a limitation on the
hours and number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular hours of the
relevant exchange and (2) a limitation on trading imposed during the course of
a day by reason of movements in price otherwise exceeding levels permitted by
the relevant exchange will constitute a Market Disruption Event.
"OVERSEAS INDEX BUSINESS DAY" means, with respect to any sub-index,
any day that is, or, but for the occurrence of a Market Disruption Event, would
have been, a trading day on the relevant Index Exchange or on any exchanges on
which futures or options on the sub-index are traded, other than a day on which
trading on any exchange is scheduled to close before its regular weekday
closing time.
"INDEX EXCHANGE" means, with respect to any sub-index, the principal
exchange on which the shares comprising that sub-index are traded.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the index and the AMEX or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the index (a
"Successor Index"), then, upon the calculation agent's notification of any
determination to the Trustee and ML&Co., the calculation agent will substitute
the Successor Index as calculated by the AMEX or any other entity for the index
and calculate the Ending Index Value as described above under "Payment at
Maturity". Upon any selection by the calculation agent of a Successor Index,
ML&Co. shall cause notice to be given to holders of the MITTS Securities.
If the AMEX discontinues publication of the index and a Successor
Index is not selected by the calculation agent or is no longer published on any
of the Calculation Days, the value to be substituted for the index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each Calculation
Day in accordance with the procedures last used to calculate the index before
any discontinuance. If a Successor Index is selected or the calculation agent
calculates a value as a substitute for the Index as described below, the
Successor Index or value shall be substituted for the index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the index before the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at such time,
then on each Business Day until the earlier to occur of
o the determination of the Ending Index Value and
o a determination by the Calculation Agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in computing
the Supplemental Redemption Amount as described in the preceding paragraph as
if that day were a Calculation Day. 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 these values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the 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 shall
have occurred and be 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 of each unit, will be equal to the
principal amount and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "Description of MITTS Securities-Payment 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 6.25% 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 that 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
such 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 such
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 are to 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 PAYMENT
All payments of principal and the Supplemental Redemption Amount, if
any, will be made by ML&Co. in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
<PAGE>
THE INDEX
The value of the Major 11 International Index on any Index Business Day
is calculated and disseminated by the AMEX. The AMEX generally calculates and
disseminates the value of the index based on the most recently reported values
of the sub-indices, at approximately 15-second intervals during the AMEX's
business hours and the end of each Index Business Day via the Consolidated Tape
Association's Network B. The index is reported on the AMEX and Bloomberg under
the symbol "EUX" and on Reuters under the symbol ".EUX". The Starting Index
Value was set to 100 on the date the MITTS Securities were priced for initial
sale to the public (the "Pricing Date").
DETERMINATION OF INDEX MULTIPLIER FOR EACH SUB-INDEX
The initial weighting of each sub-index was determined at the close of
business on the Pricing Date based on its relative market capitalization. The
market capitalization of a stock equals the product of the total number of
shares outstanding and the price per share of that stock. The total market
capitalization of the stocks comprising each sub-index was determined using the
most recently available information concerning the number of shares outstanding
for each stock contained in a sub-index and the most recently available price
for each share of that stock. Current exchange rates were used to translate this
market capitalization information into U.S. dollars. The market capitalizations
expressed in U.S. dollars of each sub-index were totaled (the "Total Market
Capitalization"). The weighting of each sub-index was then determined and equals
the percentage of the market capitalization for such sub-index relative to the
Total Market Capitalization. The Index Multiplier for each sub-index was then
calculated and equals:
o the weighting for such sub-index multiplied by 100, divided by
o the most recently available value of such sub-index.
The Index Multipliers were calculated in this way so that the index would equal
100.00 on the Pricing Date.
The Index Multiplier for each sub-index will remain fixed, except that
the AMEX may adjust the Index Multiplier in the event of a significant change
in how a sub-index is calculated. There will be no periodic rebalancing of the
index to reflect changes in the relative market capitalizations of the
sub-indices.
COMPUTATION OF THE INDEX
The index is calculated by totaling the products of the most recently
available value of each sub-index and the Index Multiplier applicable to each
sub-index. Because the sub-indices are based on stocks traded on stock
exchanges in Europe, Asia and Australia, once the applicable stock exchanges
close and the values of the sub-indices become fixed until the stock exchanges
reopen, the value of the index will be fixed.
SUB-INDICES
The following is a list of the sub-indices and certain information
concerning each sub-index. All disclosure contained in this prospectus
regarding the sub-indices is derived from publicly available information.
NIKKEI STOCK AVERAGE, "NIKKEI 225"
Description of Nikkei 225: The Nikkei 225 is intended to provide an
indication of the pattern of common stock price movement of the 225
most actively traded common stocks on the Tokyo Stock Exchange. The
Nikkei 225 is a modified price-weighted index which means that an
underlying stock's weight in the Nikkei 225 is based on its price per
share rather than the total market capitalization of the issuer.
PUBLISHER: Nihon Keizai Shimbun, Inc. or also known as NKS
Required Disclosure: NKS is under no obligation to continue the
calculation and dissemination of the Nikkei 225. The MITTS Securities
are not sponsored, endorsed, sold or promoted by NKS. No inference
should be drawn from the information contained in this prospectus that
NKS makes any representation or warranty, implied or express, to ML &
Co., 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 in particular or the ability of the Nikkei 225 to
track general stock market performance. NKS has no obligation to take
the needs of ML & Co. or the holders of the MITTS Securities into
consideration in determining, composing or calculating the Nikkei 225.
NKS is not responsible for, and has not participated in the
determination of the timing of, prices for, or quantities of, the
MITTS Securities to be issued or in the determination or calculation
of the equation by which the MITTS Securities are to be settled in
cash. NKS has no obligation or liability in connection with the
administration, marketing or trading of the MITTS Securities.
NKS has consented to the use of and reference to the Nikkei 225 in
connection with the MITTS Securities.
FINANCIAL TIMES SE 100 INDEX "FTSE 100"
DESCRIPTION OF FTSE 100: The FTSE 100 is intended to provide an
indication of the pattern of common stock price movement of the 100
common stocks with the largest market capitalization on the London
Stock Exchange.
PUBLISHER: The Financial Times and London Stock Exchange
REQUIRED DISCLOSURE: The FTSE 100 is calculated by FTSE International
Limited in conjunction with the Institute of Actuaries and the Faculty
of Actuaries. ML&Co. has obtained full license from FTSE International
Limited to use its trademark and copyright in the creation of this
MITTS Security. FTSE International Limited does not sponsor, endorse
or promote this MITTS Security.
DEUTSCHER AKTIENINDEX, "DAX(R)"
DESCRIPTION OF DAX: The DAX is a total rate of return index measuring
the performance of 30 common stocks on the Frankfurt Stock Exchange
selected on the basis of their market capitalization and trading
volume. A total rate of return index reflects both the price
performance of the relevant common stocks as well as the dividends
paid on such common stocks.
PUBLISHER: Deutsche Borse AG
"DAX" is a registered trademark of Deutsche Borse AG.
COMPAGNIE DES AGENTS DE CHANGE 40 INDEX, "CAC 40"
DESCRIPTION OF CAC 40: The CAC 40 is intended to provide an indication
of the pattern of common stock price movement of the 40 common stocks
with the largest market capitalization on the Paris Bourse.
PUBLISHER: SBF-Paris Bourse
REQUIRED DISCLOSURE: "CAC-40" is a registered trademark of the Societe
des Bourses Francaises-Paris Bourse, which designates the index that
the SBF-Paris Bourse calculates and publishes. Authorization to use
the index and the "CAC-40" trademark in connection with the MITTS
Securities has been granted by license.
The SBF-Paris Bourse, owner of the trademark and of the CAC-40, does
not sponsor, endorse or participate in the marketing of the MITTS
Securities. The SBF-Paris Bourse makes no warranty or representation
to any person, express or implied, as to the figure at which the
CAC-40 stands at any particular time, nor as to the results or
performance of the MITTS Securities. Neither shall the SBF-Paris
Bourse be under any obligation to advise any person of any error in
the published CAC-40.
SWISS MARKET INDEX, "SMI(R)"
DESCRIPTION OF SMI: The SMI is intended to provide an indication of
the pattern of common stock price movement of common stocks with the
largest market capitalization and greatest liquidity on the Geneva,
Zurich and Basle Stock Exchanges.
PUBLISHER: Swiss Exchange
REQUIRED DISCLOSURE: "SMI" is a registered trademark of the Swiss
Exchange. The MITTS Securities are not in any way sponsored, endorsed,
sold or promoted by the Swiss Exchange and the Swiss Exchange makes no
warranty or representation whatsoever, express or implied, either as
to the results to be obtained from the use of the SMI and/or the
figure at which the SMI stands at any particular time on any
particular day or otherwise. The SMI is compiled and calculated solely
by the Swiss Exchange. However, the Swiss Exchange shall not be liable
whether in negligence or otherwise to any person for any error in the
SMI and the Swiss Exchange shall have no obligation to advise any
person of any error in SMI.
AMSTERDAM EXCHANGES-INDEX(R), "AEX-INDEX(R)"
DESCRIPTION OF AEX: The AEX is intended to provide an indication of
the pattern of common stock price movement of the 25 common stocks
with the largest market capitalization on the Amsterdam Stock
Exchange.
PUBLISHER: AEX-Optiebeurs nv
REQUIRED DISCLOSURE: "AEX-index" is a registered trademark of the
AEX-Optiebeurs nv. The AEX-Optiebeurs nv has all proprietary rights
with relation to the AEX. The AEX-Optiebeurs nv in no way sponsors,
endorses or is otherwise involved in the issue and offering of the
MITTS Securities. The AEX-Optiebeurs nv disclaims any liability to any
party for any inaccuracy in the data on which the AEX is based, for
any mistakes, errors, or omissions in the calculation or dissemination
of the AEX or for the manner in which the AEX is used in connection
with the issue and offering of the MITTS Securities.
AMEX HONG KONG 30 INDEX-, "HK30"
DESCRIPTION OF HK30: The HK30 is intended to provide an indication of
the pattern of common stock price movement of 30 common stocks listed
on the Hong Kong Stock Exchange and selected on the basis of market
weight, trading liquidity and representation of business industry.
PUBLISHER: The American Stock Exchange
REQUIRED DISCLOSURE: The "AMEX Hong Kong 30 Index" is a service mark
of the AMEX. The AMEX in no way sponsors, endorses or is otherwise
involved in the issuance of the MITTS Securities, other than the fact
that the MITTS Securities will be listed and traded on the AMEX and
the AMEX will calculate and disseminate the Major 11 Index, and the
AMEX disclaims any liability to any party for any inaccuracy in the
data on which the HK30 is based, for any mistakes, errors or omissions
in the calculation, and/or dissemination of the HK30, or for the
manner in which it is applied in connection with the issuance of the
MITTS Securities.
AMEX has consented to the use and reference to the term "AMEX Hong
Kong 30 Index".
AUSTRALIA ALL ORDINARIES INDEX, "XAO"
DESCRIPTION OF XAO: The XAO is a capitalization-weighted index of 338
common stocks listed on the Australian Stock Exchange.
PUBLISHER: ASX Operations Pty Limited
REQUIRED DISCLOSURE: The XAO is a registered trade mark of ASX
Operations Pty Limited or ASXO, a wholly-owned subsidiary of the
Australian Stock Exchange Limited or ASX. ASXO has granted a license
for the use of the XAO on the basis that ASXO does not expressly or
impliedly approve, endorse, make any judgment or express any opinion
in respect of the M&L & Co. or the MITTS Securities. ASX and its
related corporations, shall have no liability for any claim whatsoever
where the claim arises wholly or substantially out of accident or
negligence of ASX, its related corporations and their servants and
agents as the case may be or acts of third parties; and without in any
way limiting the generality of the foregoing, arising out of
unavailability of the All Ordinaries Index or non-supply of the All
Ordinaries Index.
MILANO ITALIA BORSA 30 INDEX, "MIB 30"
DESCRIPTION OF MIB 30: The MIB 30 is intended to provide an indication
of the pattern of common stock price movement of common stocks with
the largest market capitalization and greatest liquidity on the
Italian Stock Exchange.
PUBLISHER: Consiglio di Borsa
STOCKHOLM OPTIONS MARKET INDEX, "OMX index"
DESCRIPTION OF OMX INDEX: The OMX index is intended to provide an
indication of the pattern of common stock price movement of the 30
common stocks with the largest volume of trading on the Stockholm
Stock Exchange.
PUBLISHER: OM Gruppen AB
REQUIRED DISCLOSURE: The MITTS Securities are not in any way
sponsored, endorsed, sold or promoted by OM Gruppen AB or OM and OM
makes no warranty or representation whatsoever, express or implied,
either as to the results to be obtained from the use of the OMX index
and/or the figure at which the said OMX index stands at any particular
time on any particular day or otherwise. The OMX index is compiled and
calculated solely by an indexer on behalf of OM. However, OM shall not
be liable whether in negligence or otherwise to any person for any
error in the OMX index and OM shall not be under any obligation to
advise any person of any error therein.
All rights to the trademark OMX, OMX INDEX are vested in OM Gruppen AB
and are used under a license agreement with OM.
IBEX 35 INDEX, "IBEX 35"
DESCRIPTION OF IBEX 35: The IBEX 35 is intended to provide an
indication of the pattern of common stock price movement of the 35
common stocks with the greatest liquidity continuously traded and
quoted on the Joint Stock Exchange System made up of the Barcelona,
Bilbao, Madrid and Valencia stock exchanges.
PUBLISHER: Sociedad de Bolsas, S.A.
REQUIRED DISCLOSURE: Sociedad de Bolsas, S.A. does not warrant in any
case nor for any reason whatsoever:
(a) the continuity of the composition of the IBEX 35 exactly as it is
today;
(b) the continuity of the method for calculating the IBEX 35 exactly
as it is calculated today;
(c) the continuity of the calculation, formula and publication of the
IBEX 35;
(d) the precision, integrity or freedom from errors or mistakes in
the composition and calculation of the IBEX 35; and
(e) the adequacy of the IBEX 35 for the purposes expected in the
issue of the MITTS Securities nor for dealing in the same.
The publisher of each sub-index will add or delete stocks due to
events such as the bankruptcy or merger of the issuer of a stock. The publisher
of a sub-index may reevaluate the composition of the stocks underlying the
sub-index at specified intervals to assure that they still meet the selection
criteria or any ongoing eligibility criteria.
The publisher of a sub-index is under no obligation to continue the
calculation and dissemination of such sub-index and such publisher may change
the method by which such sub-index is calculated. The publishers of the
sub-indices are under no obligation to take the needs of ML&Co. or the holders
of the MITTS into consideration in determining, composing or calculating the
sub-indices.
<PAGE>
OTHER TERMS
The MITTS Securities were issued 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.
Series of senior debt securities may from time to time be issued 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 claims of ML&Co. itself as a creditor of
the subsidiary may be recognized. 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 such 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 of 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 debt securities affected. However, without the consent of
each holder of any outstanding debt security affected, no amendment or
modification to any 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 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 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 debt securities of any series of debt securities 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 any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of 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.
<PAGE>
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, we have determined that the projected payment schedule for the
MITTS Securities will consist of payment on the maturity date of the principal
amount thereof and a projected Supplemental Redemption Amount equal to $3.6261
per unit. This represents an estimated yield on the MITTS Securities equal to
6.25% per annum (compounded semiannually).
The projected payment schedule, including both 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 a term of five years and ten days for the MITTS
Securities based upon the projected payment schedule for the MITTS Securities,
including both the projected Supplemental Redemption Amount and the estimated
yield equal to 6.25% per annum, compounded semiannually, as determined by
ML&Co. for purposes of illustrating the application of the Final Regulations to
the MITTS Securities:
<TABLE>
<CAPTION>
TOTAL INTEREST
INTEREST DEEMED DEEMED TO HAVE
TO ACCRUED ON
ACCRUE DURING SECURITIES AS OF
ACCRUAL PERIOD END OF
(PER UNIT) ACCRUAL PERIOD
ACCRUAL PERIOD (PER UNIT)
-------------- ------------- -----------
<S> <C> <C>
November 26, 1997 through December 6, 1997......... $0.0169 $0.0169
December 7, 1997 through June 6, 1998.............. $0.3130 $0.3299
June 7, 1998 through December 6, 1998.............. $0.3228 $0.6527
December 7, 1998 through June 6, 1999.............. $0.3329 $0.9856
June 7, 1999 through December 6, 1999.............. $0.3433 $1.3289
December 7, 1999 through June 6, 2000.............. $0.3540 $1.6829
June 7, 2000 through December 6, 2000.............. $0.3651 $2.0480
December 7, 2000 through June 6, 2001.............. $0.3765 $2.4245
June 7, 2001 through December 6, 2001.............. $0.3883 $2.8128
December 7, 2001 through June 6, 2002.............. $0.4004 $3.2132
June 7, 2002 through December 6, 2002.............. $0.4129 $3.6261
</TABLE>
Projected Supplemental Redemption Amount = $3.6261 per unit.
All prospective investors in the MITTS 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 for such information to Merrill Lynch & Co., Inc., Attn:
Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street, 12th
Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
S&P 500 INFLATION ADJUSTED MARKET INDEX TARGET-TERM SECURITIES(R) DUE
SEPTEMBER 24, 2007
"MITTS(R) SECURITIES"
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.
<PAGE>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities you
o No payments before the maturity own, we will pay you an amount
date equal to the sum of
o Senior unsecured debt securities o the principal amount of each
of Merrill Lynch & Co., Inc. unit, adjusted by the CPI, and
o Linked to the value of the S&P o an additional amount based on the
500 Index percentage increase, if any, in
o The MITTS Securities are listed the value of the S&P 500 Index,
on the New York Stock Exchange adjusted as described in this
under the symbol "IEM". prospectus.
o You will receive no less than the
principal amount of your MITTS
Securities and the additional
amount you receive, if any, will
not exceed $10.
<PAGE>
INVESTING IN THE MITTS SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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.
----------------
MERRILL LYNCH & CO.
----------------
The date of this prospectus is , 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc. "Standard & Poor's(R)", "Standard & Poor's
500", "S&P 500(R)", "S&P(R)" and "500", are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Merrill Lynch Capital
Services, Inc. and ML&Co. is an
authorized sublicensee.
<PAGE>
Table of Contents
Page
RISK FACTORS.................................................................3
MERRILL LYNCH & CO., INC.....................................................6
RATIO OF EARNINGS TO FIXED CHARGES...........................................7
DESCRIPTION OF THE MITTS SECURITIES..........................................8
THE INDEX...................................................................15
CONSUMER PRICE INDEX........................................................18
OTHER TERMS.................................................................18
PROJECTED PAYMENT SCHEDULE..................................................22
WHERE YOU CAN FIND MORE INFORMATION.........................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................23
PLAN OF DISTRIBUTION........................................................24
EXPERTS.....................................................................24
<PAGE>
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT
You should be aware that at maturity we will pay you no more than the
principal amount, as adjusted, for each unit of the MITTS Securities you own if
the average value of the S&P 500 Index over five trading days shortly before
the maturity date is less than 1089.38. This will be true even if the value of
the S&P 500 Index was higher than 1089.38 at some time during the life of the
MITTS Securities but later falls below 1089.38.
You will not receive an amount in addition to the principal amount, as
adjusted, that exceeds $10 per unit regardless of how much the S&P 500 Index
increases. If the S&P 500 Index reaches a value of 2178.76, you will receive an
additional amount of $10. Since $10 is the maximum additional amount we will
pay, you will not receive any incremental benefit from increases beyond that
value. If we pay you the maximum additional amount of $10 per unit, this will
represent a maximum annualized rate of return of 7.05% compounded semi-annually
over a term of ten years. This limitation does not apply to the principal
amount, as adjusted, which is dependent on changes in the Consumer Price Index
or CPI.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of ML&Co.
with the same maturity date. Your investment may not reflect the full
opportunity cost to you when you consider the effect of factors that affect the
time value of money.
YOUR RETURN WILL NOT REFLECT THE PAYMENT OF DIVIDENDS ON THE STOCKS INCLUDED
IN THE S&P 500 INDEX
S&P calculates the S&P 500 Index by reference to the prices of the
common stocks comprising the S&P 500 Index without taking into consideration
the value of dividends paid on those stocks. Therefore, the return you earn on
the MITTS Securities, if any, will not be the same as the return that you would
earn if you actually owned each of the common stocks in the S&P 500 Index and
received the dividends paid on those stocks.
MANY FACTORS MAY AFFECT THE VALUE OF THE CONSUMER PRICE INDEX
Changes in the CPI will affect the principal amount, as adjusted, that
we will pay you at maturity. The changes may be significant. Changes in the CPI
are a function of the changes in specified consumer prices over time, which
result from the interaction of many factors over which ML&Co. has no control.
In the past, the CPI has experienced periods of volatility and this
volatility may occur in the future. Fluctuations and trends in the CPI that
have occurred in the past are not necessarily indicative, however, of
fluctuations that may occur in the future.
As a result of any change of calculating the CPI, the principal
amount, as adjusted, payable on the MITTS Securities, and therefore the value
of the MITTS Securities could be significantly reduced. If the CPI is
substantially altered, the calculation agent may employ a substitute index to
calculate the principal amount, as adjusted, as described under "Description of
MITTS Securities--Payment at Maturity".
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE FUTURE
Although the MITTS Securities are listed on the NYSE under the symbol
"IEM," 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, you cannot assume 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 appreciation,
if any, of the value of the S&P 500 Index.
If the trading market for the MITTS Securities is limited and you do
not wish to hold your investment until maturity, there may be a limited number
of buyers for your MITTS Securities. This may affect the price you receive if
you sell before maturity.
FACTORS AFFECTING TRADING VALUE OF THE MITTS SECURITIES
We believe that the value of the S&P 500 Index and the CPI and by a
number of other factors will affect the market value of the MITTS Securities.
Some of these factors are interrelated in complex ways; as a result, the effect
of any one factor may be offset or magnified by the effect of another factor.
The following paragraphs describe the expected impact on the market value of
the MITTS Securities given a change in a specific factor, assuming all other
conditions remain constant.
o S&P 500 Index Value We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the S&P
500 Index exceeds 1089.38. If you choose to sell your MITTS Securities
when the value of the S&P 500 Index exceeds 1089.38, you may receive
substantially less than the amount that would be payable at maturity
based on that S&P 500 Index value because of the expectation that the
S&P 500 Index will continue to fluctuate until the maturity of the
MITTS Securities. If you choose to sell your MITTS Securities when the
value of the S&P 500 Index is below 1089.38, you may receive less than
the $10 principal amount per unit of MITTS Securities. In general,
rising U.S. dividend rates may increase the value of the S&P 500 Index
while falling U.S. dividend rates may decrease the value of the S&P
500 Index. Political, economic and other developments that affect the
stocks included in the S&P 500 Index may also affect the value of the
S&P 500 Index and the value of the MITTS Securities.
o Interest Rates Because the MITTS Securities repay, at a minimum, the
principal amount at maturity, we expect that changes in interest rates
will affect 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. Conversely, if U.S. interest rates
decrease, we expect the trading value of the MITTS Securities will
increase. Interest rates may also affect the U.S. economy and, in
turn, the value of the S&P 500 Index. Rising interest rates may lower
the value of the S&P 500 Index and, thus, the MITTS Securities.
Falling rates may increase the value of the S&P 500 Index and, thus,
may increase the value of the MITTS Securities.
o Value of the CPI The principal amount of the MITTS Securities, as
adjusted, will generally be higher in direct proportion to the
percentage increase, if any, in the value of the CPI from when the
initial CPI is fixed to when the final CPI is determined. However,
interim increases in the CPI may or may not result in increases in the
trading value of the MITTS Securities because of other economic
factors. For example, an increase in the CPI may be accompanied by
higher interest rates. Higher interest rates could offset any positive
impact of increases in the CPI on the trading value of the MITTS
Securities.
o Volatility of the S&P 500 Index or of the CPI Volatility is the term
used to describe the size and frequency of market fluctuations. If the
volatility of the S&P 500 Index or of the CPI increases, we expect
that the trading value of the MITTS Securities will increase.
Conversely, if the volatility of the S&P 500 Index or of the CPI
decreases, we expect that the trading value of the MITTS Securities
will decrease.
o Time Remaining to Maturity We anticipate that prior to the maturity of
the MITTS Securities, the MITTS Securities may trade at a value above
that which would be expected based on the level of interest rates and
the S&P 500 Index. This difference will reflect a "time premium" due
to expectations concerning the value of the S&P 500 Index during the
period prior to maturity of the MITTS Securities. However, as the time
remaining to maturity of the MITTS Securities decreases, we expect
that this time premium will decrease, lowering the trading value of
the MITTS Securities.
o Dividend Yields If dividend yields on the stocks included in the S&P
500 Index increase, we expect that the value of the MITTS Securities
will decrease. Conversely, if dividend yields on the stocks included
in the S&P 500 Index decrease, we expect that the value of the MITTS
Securities will increase.
o Changes in our credit ratings. 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 value of the S&P 500 Index at maturity, an improvement
in our credit ratings will not reduce investment risks related to the
MITTS Securities.
We want you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any increase in the trading value of the MITTS Securities attributable to
another factor, such as an increase in the S&P 500 Index value.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 a given increase in the value of the S&P 500 Index or the
CPI 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.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW
New York State laws govern 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 MITTS Securities holders, to
the extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
PURCHASES AND SALES BY MERRILL LYNCH
We and our other affiliates may from time to time buy or sell the
stocks underlying the S&P 500 Index for their own accounts for business reasons
or in connection with hedging ML&Co.'s obligations under the MITTS Securities.
These transactions could affect the price of those stocks and the value of the
S&P 500 Index.
POTENTIAL CONFLICTS OF INTERESTS
The calculation agent is a subsidiary of ML&Co., the issuer of the
MITTS Securities. In come circumstances, MLPF&S' roles as a subsidiary of
ML&Co. and its responsibilities as calculation agent for the MITTS Securities
could give rise to conflicts of interests. You should be aware that because the
calculation agent is controlled by ML&Co., potential conflicts of interest
could arise; however, the calculation agent is subject to limits and has
certain duties. For example, in the case of the CPI, the calculation agent
could only adjust a value of the CPI to undo a change to how the CPI is
calculated or select a successor measure for inflation to maintain the intended
economic benefits of the MITTS Securities to you if the CPI is discontinued.
The calculation agent could not otherwise adjust a value of the CPI or replace
the CPI with another measure of inflation.
OTHER CONSIDERATIONS
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax advisor.
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.
<PAGE>
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
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios
reported for the fiscal years 1994
</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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On September 24, 1997, ML&Co. issued $16,500,000 aggregate principal
amount of S&P 500 MITTS Securities due September 24, 2007. The MITTS Securities
were issued as a series of senior debt securities under the 1983 Indenture
which is more fully described in this prospectus.
The MITTS Securities will mature on September 24, 2007.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security, as adjusted, plus the Supplemental
Redemption Amount described below, if any, there will be no other payment of
interest, periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms - Events of
Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
PAYMENT AT MATURITY
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the Adjusted Principal Amount of each unit plus the
Supplemental Redemption Amount, if any, all as provided below. If the Ending
Index Value does not exceed the Benchmark Index Value, a beneficial owner of a
MITTS Security will be entitled to receive only the principal amount of its
MITTS Securities.
Determination of the Adjusted Principal Amount
The "Adjusted Principal Amount" for a MITTS Security will be
determined by the calculation agent, and will equal the greater of:
(a) the principal amount of the MITTS Security ($10 for each unit); and
(b) the principal amount of the MITTS Security X Final CPI
-----------
Initial CPI
"Initial CPI" equals 160.3, the value of the CPI for the third
calendar month prior to the month containing the Pricing Date.
"Final CPI" shall be determined by the calculation agent and will
equal the value of the CPI for the third calendar month prior to September 24,
2007 as reported on the seventh calendar day prior to the maturity date.
"CPI" means the non-seasonally adjusted U.S. City Average All Items
Consumer Price Index for All Urban Consumers, published monthly by the Bureau
of Labor Statistics of the Department of Labor (the "BLS").
If a previously reported CPI value is revised by the BLS after the
Final CPI is determined, the calculation agent will continue to use the
previously reported CPI value in calculating the Adjusted Principal Amount.
If the CPI is rebased to a different year, the calculation agent will
continue to use the CPI based on the base reference period in effect on the
Pricing Date for those purposes, as long as the CPI continues to be published.
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>
<S> <C> <C>
Principal Amount of the MITTS Security ($10 per unit) X Ending Index Value--Benchmark Index Value
-----------------------------------------
Benchmark Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero or more than $10 per unit. As indicated in the formula above,
the calculation agent will calculate the Supplemental Redemption Amount for the
MITTS Securities using the principal amount of the MITTS Securities, not the
Adjusted Principal Amount which may be greater if the CPI has increased over
the term of the MITTS Securities.
The "Benchmark Index Value" equals 1089.38. The Benchmark Index Value
was determined on the Pricing Date by multiplying the Starting Index Value by a
factor equal to 115%.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the S&P
500 Index (the "Index") determined on each of the first five Calculation Days
during the Calculation Period. If there are fewer than five Calculation Days,
then the Ending Index Value will equal the average or arithmetic mean of the
closing values of the Index on these Calculation Days. If there is only one
Calculation Day, then the Ending Index Value will equal the closing value of
the Index on that Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
For purposes of determining the Ending Index Value, an "Index Business
Day" is a day on which the NYSE and the American Stock Exchange are open for
trading and the Index or any Successor Index, as defined below on page 12, is
calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
HYPOTHETICAL RETURNS
The following table provides the amount payable to beneficial owners
of MITTS Securities related to the pretax annualized rates of return given in
the table on the following page for a range of hypothetical annualized rates of
change in the CPI and percentage changes in the Index from the Starting Index
Value to the Ending Index Value.
<TABLE>
<CAPTION>
ANNUALIZED RATE OF CHANGE IN CPI
PERCENTAGE CHANGE IN INDEX ----------------------------------------------------------
FROM STARTING INDEX VALUE -3.00% -1.00% 0.00% 1.00% 3.00% 5.00% 7.00% 9.00%
-------------------------- ------ ------ ----- ----- ----- ----- - -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-50.00%.....................$ 10.00 $ 10.00$ 10.00 $ 11.05 $ 13.44 $ 16.29$ $ 23.67
19.67
-30.00%..................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
-10.00%..................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
0.00%....................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
10.00%...................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
30.00%...................... 11.30 11.30 11.30 12.35 14.74 17.59 20.98 24.98
50.00%...................... 13.04 13.04 13.04 14.09 16.48 19.33 22.71 26.72
70.00%...................... 14.78 14.78 14.78 15.83 18.22 21.07 24.45 28.46
90.00%...................... 16.52 16.52 16.52 17.57 19.96 22.81 26.19 30.20
110.00%..................... 18.26 18.26 18.26 19.31 21.70 24.55 27.93 31.93
130.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
150.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
170.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
190.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
</TABLE>
The following table provides the pretax annualized rate of return to
beneficial owners of the MITTS Securities for a range of hypothetical
annualized rates of change in the CPI and percentage changes in the Index from
the Starting Index Value to the Ending Index Value. The far right column of the
table provides the pretax annualized rate of return of an investment in the
stocks underlying the Index, which includes an assumed aggregate dividend yield
of 1.60% per annum, as more fully described below.
<TABLE>
<CAPTION>
ANNUALIZED RATE OF CHANGE IN CPI (1)
PERCENTAGE CHANGE -------------------------------------------------------------------- PRETAX ANNUALIZED
IN INDEX RATE OF RETURN OF
FROM STARTING STOCKS UNDERLYING
INDEX VALUE -3.00% -1.00% 0.00% 1.00% 3.00% 5.00% 7.00% 9.00% THE INDEX (2)
----------- ------ ------ ----- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-50.00%.......... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% -5.24%
-30.00%.......... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% -1.95%
-10.00%.......... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% 0.55%
0.00%............ 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% 1.60%
10.00%........... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% 2.56%
30.00%........... 1.23% 1.23% 1.23% 2.12% 3.92% 5.73% 7.55% 9.37% 4.25%
50.00%........... 2.67% 2.67% 2.67% 3.46% 5.06% 6.70% 8.38% 10.07% 5.71%
70.00%........... 3.95% 3.95% 3.95% 4.65% 6.09% 7.59% 9.15% 10.74% 7.00%
90.00%........... 5.08% 5.08% 5.08% 5.72% 7.03% 8.42% 9.86% 11.36% 8.15%
110.00%.......... 6.11% 6.11% 6.11% 6.69% 7.90% 9.19% 10.54% 11.95% 9.20%
130.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 10.15%
150.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 11.02%
170.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 11.84%
190.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 12.60%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the Index
with the allocation of that amount reflecting the current relative
weights of the stocks in the Index;
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the Starting Index Value to
the relevant hypothetical Ending Index Value;
(c) a constant dividend yield of 1.60% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter assuming the value increases or
decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value;
(d) no transaction fees or expenses;
(e) a term for the MITTS Securities from September 24, 1997 to September
24, 2007; and
(f) a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks included in the Index as of September 18,
1997 was approximately 1.60%.
As you can see from the tables, if you assume a 3% per annum change in
the CPI during the term of the MITTS Securities and a 70% increase in the Index
from the Starting Index Value to the Ending Index Value, $18.22 would be
payable at the maturity of the MITTS Securities and the pretax annualized rate
of return to beneficial owners of the MITTS Securities calculated on a
semi-annual bond equivalent basis would be 6.09%. Given a fixed annual
percentage change in the CPI, any increase in the value of the Index above 230%
of the Starting Index Value, a percentage increase in the Index from the
Starting Index Value of 130%, will not increase the pretax annualized rate of
return on the MITTS Securities.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as described in this
prospectus.
ADJUSTMENTS TO THE CPI
If at any time the method of calculating the CPI, or its value , is
changed in any material respect, or if the CPI is in any other way modified so
that the CPI does not, in the opinion of the calculation agent, fairly
represent the value of the CPI had the changes or modifications not been made,
then the calculation agent shall make any adjustments for purposes of
determining the Final CPI as, in the good faith judgment of the calculation
agent, may be necessary in order to arrive at a calculation of a value of an
inflation index comparable to the CPI as if changes or modifications had not
been made.
If the CPI is discontinued while the MITTS Securities are outstanding,
the calculation agent shall determine an alternative index that in the
calculation agent's sole discretion is comparable to the CPI (the "Successor
CPI"). Upon the calculation agent's notification of this determination to the
trustee and ML&Co., the calculation agent will substitute the Successor CPI for
the CPI. The calculation agent may make any adjustments to the values of the
Successor CPI in order to maintain the intended economic benefits to ML&Co. and
the holders of the MITTS Securities. Upon any selection by the calculation
agent of a Successor CPI, ML&Co. shall cause notice to be given to the Holders
of the MITTS Securities.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had those changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Index Value is to be calculated, make any adjustments as,
in the good faith judgment of the calculation agent, may be necessary in order
to arrive at a calculation of a value of a stock index comparable to the Index
as if the changes or modifications had not been made, and calculate the closing
value with reference to the Index, as adjusted. Accordingly, if the method of
calculating the Index is modified so that the value of the Index is a fraction
or a multiple of what it would have been if it had not been modified, for
example, due to a split in the Index, then the calculation agent shall adjust
the Index in order to arrive at a value of the Index as if it had not been
modified, for example, as if the split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more
than two hours of trading in 100 or more of the securities included in the S&P
500 Index, or
(b) the suspension or material limitation, in each case, for more
than two hours of trading, whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise, in
(1) futures contracts related to the Index which are traded on the
Chicago Mercantile Exchange or
(2) option contracts related to the Index which are traded on the
Chicago Board Options Exchange, Inc.
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".
DISCONTINUANCE OF THE INDEX
If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of the determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by S&P or any other entity for the Index . Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If S&P discontinues publication of the Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any Calculation
Day used to calculate the Supplemental Redemption Amount at maturity will be a
value computed by the calculation agent for each Calculation Day in accordance
with the procedures last used to calculate the Index before the discontinuance.
If a Successor Index is selected or the calculation agent calculates a value as
a substitute for the Index as described below, the Successor Index or value
shall be substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If S&P discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that time,
then on each Business Day until the earlier to occur of:
o the determination of the Ending Index Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in computing
the Supplemental Redemption Amount as described in the preceding paragraph as
if that day were a Calculation Day. 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.
Despite these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the MITTS Securities.
<PAGE>
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 per unit, will be equal to the Adjusted Principal
Amount and the Supplemental Redemption Amount, if any, calculated as though the
date of early repayment were the stated maturity date of the MITTS Securities.
See "- Payment 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 per unit 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 of the MITTS Securities, whether at the
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 6.58% 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.
<PAGE>
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 are to 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 PAYMENT
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components, are
derived from publicly available information prepared by S&P as of March 22,
1999. ML&Co. and MLPF&S do not assume any responsibility for the accuracy or
completeness of this information.
The Index is published by S&P, and is intended to provide an
indication of the pattern of common stock price movement. The calculation of
the value of the Index, discussed below in further detail, is based on the
relative value of the aggregate Market Value of the common stocks of 500
companies as of a particular time compared to the aggregate average Market
Value of the common stocks of 500 similar companies during the base period of
the years 1941 through 1943. As of March 22, 1999 the 500 companies included in
the Index represented approximately 78% of the aggregate Market Value of
common stocks traded on the NYSE; however, these 500 companies are not the 500
largest companies listed on the NYSE and not all of these 500 companies are
listed on the exchange. As of March 22, 1999, the aggregate Market Value of
the 500 companies included in the Index represented approximately 79% of the
aggregate Market Value of United States domestic, public companies. S&P chooses
companies for inclusion in the Index with the aim of achieving a distribution
by broad industry groupings that approximates the distribution of these
groupings in the common stock population of the NYSE, which S&P uses as an
assumed model for the composition of the total market. Relevant criteria
employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to
which it is assigned,
o the extent to which the market price of that company's common stock is
generally responsive to changes in the affairs of the respective
industry, and
o the Market Value and trading activity of the common stock of that
company.
Four main groups of companies comprise the Index, with the number of
companies currently included in each group indicated in parentheses:
Industrials (380), Utilities (39), Transportation (10) and Financial (71). S&P
may from time to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated above.
The Index does not reflect the payment of dividends on the stocks
underlying it. The return based on the MITTS Securities will not be the same
return you would receive if you were to purchase these underlying stocks and
hold them for a period equal to the maturity of the MITTS Securities.
COMPUTATION OF THE INDEX
S&P currently computes the Index as of a particular time as follows:
(a) the product of the market price per share and the number
of then outstanding shares of each component stock is determined at a
particular time (the "Market Value" of the stock);
(b) the Market Value of all component stock as of that time
are aggregated;
(c) the mean average of the Market Values as of each week in
the base period of the years 1941 through 1943 of the common stock of
each company in a group of 500 substantially similar companies is
determined;
(d) the mean average Market Values of all these common stocks
over the base period are aggregated (the aggregate amount being the
"Base Value");
(e) the current aggregate Market Value of all component
stocks is divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is
multiplied by ten.
While S&P currently employs the above methodology to calculate the
Index, no assurance can be given that S&P will not modify or change this
methodology in a manner that may affect the Supplemental Redemption Amount, if
any, payable to beneficial owners of MITTS Securities upon maturity or
otherwise.
S&P adjusts the foregoing formula to negate the effects of changes in
the Market Value of component stocks that are determined by S&P to be arbitrary
or not due to true market fluctuations. Changes may result from such causes as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities of
ML&Co.,
o the substitution by S&P of particular component stocks in the Index,
and
o other reasons.
In these cases, S&P first recalculates the aggregate Market Value of all
component stocks, after taking account of the new market price per share of the
particular component stock or the new number of outstanding shares thereof or
both, and then determines the New Base Value in accordance with the following
formula:
Old Base Value X New Market Value = New Base Value
-----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any
change in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of these
causes upon the Index.
HISTORICAL DATA ON THE INDEX
The following table sets forth the value of the Index at the end of
each month, in the period from January 1990 through February 1999. These
historical data on the Index are not necessarily indicative of the future
performance of the Index or what the value of the MITTS Securities may be. Any
historical upward or downward trend in the value of the Index during any period
set forth below is not any indication that the Index is more or less likely to
increase or decrease at any time during the term of the MITTS Securities.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
April......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
May........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
June.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
July.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
August........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
September..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
October....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
November...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
December...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
</TABLE>
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with particular securities, including
the Securities, and ML&Co. is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this prospectus:
"The MITTS Securities 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 the ability of the Index to
track general stock market performance. S&P's only relationship to
Merrill Lynch Capital Services, Inc. and ML&Co. (other than
transactions entered into in the ordinary course of business) is the
licensing of certain servicemarks and trade names of S&P and of the
Index which is determined, composed and calculated by S&P without
regard to ML&Co. or the MITTS Securities. S&P has no obligation to
take the needs of ML&Co. or the Holders of the MITTS Securities into
consideration in determining, composing or calculating the Index. S&P
is not responsible for and has not participated in the determination
of the timing of the sale of the MITTS Securities, prices at which the
MITTS Securities are to initially be sold, or quantities of the MITTS
Securities to be issued or in the determination or calculation of the
equation by which the MITTS Securities are to be converted into cash.
S&P has no obligation or liability in connection with the
administration, marketing or trading of the MITTS Securities."
CONSUMER PRICE INDEX
The Consumer Price Index or CPI, is a measure of the average change in
consumer prices over time for a fixed market basket of goods and services,
including food, clothing, shelter, fuels, transportation, charges for doctors
and dentists services, and drugs. In calculating the CPI, price changes for the
various items are averaged together with weights that represent their
importance in the spending of urban households in the United States. The
contents of the market basket of goods and services and the weights assigned to
the various items are updated periodically by the BLS to take into account
changes in consumer expenditure patterns.
All disclosure contained in this prospectus regarding the CPI,
including, without limitation, its composition, method of calculation and
changes in its components, is derived from publicly available information
prepared by the United States Government. Neither ML&Co. nor the underwriter
takes any responsibility for the accuracy or completeness of this information.
The CPI is expressed in relative terms in relation to a time base
reference period for which the level is set at 100. For example, if the CPI for
the 1982-1984 reference period is 100, an increase of 16.5 percent from that
period would result in a CPI value equal to 116.5. The CPI for a particular
month is released and published during the following month. From time to time,
the CPI is rebased to a more recent base reference period. The base reference
period for these Notes is the 1982-1984 average which is equal to 100.
Historical data on the CPI is available from the U.S. Department of
Labor's Bureau of Labor Statistics, Washington, D.C. 20212 or accessing the
Bureau of Labor Statistics' web site located at http://www.bls.gov.
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 such 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.
<PAGE>
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 a projected
amount equal to $19.0973 per unit. This represents an estimated yield on the
MITTS Securities equal to 6.58% per annum (compounded semiannually).
The projected payment schedule (including both the projected
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 either the actual Adjusted
Principal Amount or the actual Supplemental Redemption Amount will be, or that
either the actual Adjusted Principal Amount will exceed $10 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 a term of ten 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 6.58%
per annum (compounded semiannually)) as determined by ML&Co. for purposes of
application of the Final Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
TOTAL INTEREST
INTEREST DEEMED DEEMED TO
TO HAVE ACCRUED ON
ACCRUE DURING SECURITIES AS OF
ACCRUAL END
PERIOD (PER F ACCRUAL PERIOD
ACCRUAL PERIOD UNIT) O (PER UNIT)
<S> <C> <C> <C>
September 24, 1997 through March 23, 1998................ $ 0.3244 $ 0.3244
March 24, 1998 through September 23, 1998................ $ 0.3415 $ 0.6659
September 24, 1998 through March 23, 1999................ $ 0.3490 $ 1.0149
March 24, 1999 through September 23, 1999................ $ 0.3624 $ 1.3773
September 24, 1999 through March 23, 2000................ $ 0.3743 $ 1.7516
March 24, 2000 through September 23, 2000................ $ 0.3867 $ 2.1383
September 24, 2000 through March 23, 2001................ $ 0.3993 $ 2.5376
March 24, 2001 through September 23, 2001................ $ 0.4125 $ 2.9501
September 24, 2001 through March 23, 2002................ $ 0.4261 $ 3.3762
March 24, 2002 through September 23, 2002................ $ 0.4401 $ 3.8163
September 24, 2002 through March 23, 2003................ $ 0.4545 $ 4.2708
March 24, 2003 through September 23, 2003................ $ 0.4695 $ 4.7403
September 24, 2003 through March 23, 2004................ $ 0.4850 $ 5.2253
March 24, 2004 through September 23, 2004................ $ 0.5009 $ 5.7262
September 24, 2004 through March 23, 2005................ $ 0.5174 $ 6.2436
March 24, 2005 through September 23, 2005................ $ 0.5344 $ 6.7780
September 24, 2005 through March 23, 2006................ $ 0.5520 $ 7.3300
March 24, 2006 through September 23, 2006................ $ 0.5701 $ 7.9001
September 24, 2006 through March 23, 2007................ $ 0.5890 $ 8.4891
March 24, 2007 through September 24, 2007................ $ 0.6082 $ 9.0973
</TABLE>
- -------------
Projected Redemption Amount = $19.0973 per unit.
All prospective investors in the MITTS 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 for the information to Merrill Lynch & Co., Inc., Attn:
Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street, 12th
Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
MAJOR 8 EUROPEAN INDEX MARKET INDEX TARGET-TERM SECURITIES DUE AUGUST 30, 2002
"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.
<PAGE>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities you
o No payments before maturity own, we will pay you an amount
o Linked to the value of the Major equal to the sum of the principal
8 European Index o Senior amount of each unit and an
unsecured debt securities of additional amount based on the
Merrill Lynch & Co., Inc. product of the percentage
o The MITTS Securities are listed increase, if any, in the value of
on the American Stock Exchange the Major 8 European Index and
under the trading symbol "MEM" 115% as described in this
prospectus
o You will receive no less than the
principal amount of your MITTS
Securities
<PAGE>
INVESTING IN THE MITTS SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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.
MERRILL LYNCH & CO.
The date of this prospectus is , 199.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
RISK FACTORS..................................................................3
MERRILL LYNCH & CO., INC......................................................7
RATIO OF EARNINGS TO FIXED CHARGES............................................8
DESCRIPTION OF THE MITTS SECURITIES...........................................9
THE INDEX....................................................................16
OTHER TERMS..................................................................19
PROJECTED PAYMENT SCHEDULE...................................................22
WHERE YOU CAN FIND MORE INFORMATION..........................................24
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................24
PLAN OF DISTRIBUTION.........................................................25
EXPERTS......................................................................25
<PAGE>
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT.
You should be aware that we will pay you no more than $10 per unit of
the MITTS Securities you own if the average value of the index over five
trading days shortly before the maturity is less than 100. This will be true
even if at some time during the life of the MITTS Securities, the value of the
index, as adjusted, was higher than 100 but later falls below 100 .
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY.
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you consider the effect of
factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX.
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks. This is because, except as described below in the immediately
succeeding paragraph, the value of the index is calculated by reference to the
prices of the common stocks included in the index without taking into
consideration the value of dividends paid on those stocks.
Your return will not reflect the payment of dividends.
The index is calculated with reference to the sub-indices which
reflect the prices of the common stocks comprising the sub-indices without
taking into consideration the value of dividends paid on those stocks, except
in the case of the Deutscher Aktienindex sub-index which reflects dividends
paid on its underlying common stocks. Therefore, the return you earn on the
MITTS Securities, if any, will not be the same as the return that you would
earn if you actually owned each of the common stocks underlying each sub-index
and received the dividends paid on those stocks.
YOUR RETURN WILL BE AFFECTED BY CHANGES IN CURRENCY EXCHANGE RATES.
Although the stocks included in the sub-indices are traded in
currencies other than U.S. dollars and the MITTS Securities are denominated in
U.S. dollars, we will not adjust any amounts payable on the MITTS Securities
for currency exchange rates in effect at the maturity of the MITTS Securities.
Any amount in addition to the principal amount of each unit payable to you at
maturity is based solely upon the percentage increase in the index. Changes in
exchange rates, however, may reflect changes in the relevant European economies
that may affect the value of the sub-indices, and the MITTS Securities.
CHANGES IN EUROPEAN SECURITIES MARKETS WILL AFFECT YOUR RETURN.
Companies listed on European exchanges issued the underlying stocks
that constitute the sub-indices. You should be aware that investments in
securities indexed to the value of the European equity securities involve
certain risks. The European securities markets may be more volatile than U.S.
or other securities markets and market developments may affect these markets in
different ways than U.S. or other securities markets. Direct or indirect
government intervention to stabilize a particular European securities market
and cross-shareholdings in European companies on these markets may affect
prices and volume of trading on those markets. Also, there is generally less
publicly available information about European companies than about those U.S.
companies that are subject to the reporting requirements of the SEC and
European companies are subject to accounting, auditing and financial reporting
standards and requirements that differ from those applicable to U.S. reporting
companies.
Political, economic, financial and social factors in Europe may affect
securities prices in Europe. These factors, including the possibility that
recent or future changes in a European country's government, economic and
fiscal policies, the possible imposition of, or changes in, currency exchange
laws or other laws or restrictions applicable to European companies or
investments in European equity securities and the possibility of fluctuations
in the rate of exchange between currencies, could negatively affect the
European securities markets. Moreover, the relevant European economies may
differ favorably or unfavorably from the U.S. economy in areas of growth of
gross national product, rate of inflation, capital reinvestment, resources and
self-sufficiency.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE
FUTURE.
Although the MITTS Securities are listed on the NYSE under the symbol
"MEM," 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, you cannot assume 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 appreciation,
if any, of the value of the index.
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.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES.
We believe that by the value of the index and a number of other
factors will affect the trading value of the MITTS Securities. Some of these
factors interrelate in complex ways; as a result, the effect of any one factor
may offset or magnify the effect of another factor. The following bullets
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.
o The value of the index. We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the value
of the index exceeds 100. If you choose to sell your MITTS Securities
when the value of the index exceeds 100 you may receive substantially
less than the amount that would be payable at maturity based on that
index value because of the expectation that the index will continue to
fluctuate until the ending index value is determined. If you choose to
sell your MITTS Securities when the value of the index is below 100,
you may receive less than the $10 principal amount per unit of MITTS
Securities. In general, rising dividend rates, or dividends per share
in the European countries related to the common stocks underlying the
sub-indices, each an "applicable European country", may increase the
value of the index while falling dividend rates in the applicable
European countries may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying the
index may also affect the value of the index and the value of the
MITTS Securities.
o Interest rates. 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 affect 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 the trading
value of the MITTS Securities will increase. In general, if interest
rates in the applicable European countries increase, we expect that
the trading value of the MITTS Securities will increase. If interest
rates in the applicable European countries decrease, we expect the
trading value of the MITTS Securities will decrease. However, interest
rates in the applicable European countries may also affect the
relevant economies and, in turn, the value of the index. Rising
interest rates in the applicable European countries may lower the
value of the index and the MITTS Securities. Falling interest rates in
the applicable European countries may increase the value of the index
and the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. If the volatility of the
index increases, we expect that the trading value of the MITTS
Securities will increase. If the volatility of the index decreases, we
expect that the trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that prior to the maturity
of the MITTS Securities, the MITTS Securities may trade at a value
above that which would be expected based on the level of interest
rates and the index. This difference will reflect a "time premium" due
to expectations concerning the value of the index during the period
prior to maturity of the MITTS Securities. However, as the time
remaining to maturity of the MITTS Securities decreases, we expect
that this time premium will decrease, lowering the trading value of
the MITTS Securities.
o Dividend yields. If dividend yields on the stocks comprising the index
increase, we expect that the value of the MITTS Securities will
decrease. Conversely, if dividend yields on the stocks comprising the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in our credit ratings. 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 value of the index at maturity, an improvement in our
credit ratings will not reduce investment risks related to the MITTS
Securities.
We want you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any change in the trading value of the MITTS Securities attributable to
another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 except that we expect that the effect on the trading value of the
MITTS Securities of a given increase in the value of the index 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.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW
New York State laws govern the indenture under which the MITTS
Securities are 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 chargeable to and payable by a borrower.
We will promise, for the benefit of the MITTS Securities holders, to the extent
permitted by law, not to voluntarily claim the benefits of any laws concerning
usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We and our affiliates may from time to time buy or sell the stocks
underlying the index for our own accounts for business reasons or in connection
with hedging our obligations under the MITTS Securities. These transactions
could affect the price of these stocks and the value of the index in a manner
that would be adverse to your investment in the MITTS Securities.
POTENTIAL CONFLICTS OF INTEREST.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index and
the amount payable to you at maturity. 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. These conflicts could
occur, for instance, in connection with its determination as to whether the
value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
It is suggested that you should reach an investment decision with
regard to the MITTS Securities only after carefully considering the suitability
of the MITTS Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax adviser.
<PAGE>
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.
<PAGE>
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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On July 28, 1997, ML&Co. issued an aggregate principal amount of
$72,000,000 or 7,200,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture which is more fully described below.
The MITTS Securities will mature on August 30, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, we will make no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
PAYMENT AT MATURITY
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<S> <C> <C>
Principal Amount of each Security ($10 per unit) X Ending Index Value--Starting Index Value x Participation Rate
-------------------------------------------------------------
Starting Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Participation Rate" equals 110%.
The "Starting Index Value" equals 100.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average, or the arithmetic mean, of the closing values of
the Index determined on each of the first five Calculation Days during the
Calculation Period. If there are fewer than five Calculation Days, then the
Ending Index Value will equal the average, or the arithmetic mean, of the
closing values of the Index on the Calculation Days, and if there is only one
Calculation Day, then the Ending Index Value will equal the closing value of
the Index on that Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which The New York Stock Exchange
and the AMEX are open for trading and the Index or any Successor Index, as
defined below, is calculated and published. All determinations made by the
calculation agent shall be at the sole discretion of the calculation agent and,
absent a determination by the calculation agent of a manifest error, shall be
conclusive for all purposes and binding on ML&Co. and beneficial owners of the
MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the percentage change from the Starting Index Value to the Ending
Index Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks underlying the
Index, which includes an assumed aggregate dividend yield of 2.33% per
annum, as more fully described below.
<TABLE>
<CAPTION>
PRETAX
TOTAL AMOUNT ANNUALIZED
PAYABLE AT MATURITY TOTAL RATE RATE PRETAX ANNUALIZED
PERCENTAGE CHANGE PER $10 PRINCIPAL OF RETURN ON OF RETURN ON RATE OF RETURN OF
HYPOTHETICAL ENDING OVER THE STARTING AMOUNT OF MITTS THE MITTS THE MITTS STOCKS UNDERLYING THE
INDEX VALUE INDEX VALUE SECURITIES SECURITIES SECURITIES(1) INDEX(1)(2)
----------- ------------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
40 -60% $10.00 0.00% 0.00% -15.28%
50 -50% $10.00 0.00% 0.00% -11.10%
60 -40% $10.00 0.00% 0.00% -7.64%
70 -30% $10.00 0.00% 0.00% -4.68%
80 -20% $10.00 0.00% 0.00% -2.09%
90 -10% $10.00 0.00% 0.00% 0.21%
100(3) 0% $10.00 0.00% 0.00% 2.29%
110 10% $11.10 11.00% 2.06% 4.18%
120 20% $12.20 22.00% 3.95% 5.92%
130 30% $13.30 33.00% 5.69% 7.53%
140 40% $14.40 44.00% 7.31% 9.03%
150 50% $15.50 55.00% 8.81% 10.43%
160 60% $16.60 66.00% 10.23% 11.75%
170 70% $17.70 77.00% 11.56% 12.99%
180 80% $18.80 88.00% 12.82% 14.17%
190 90% $19.90 99.00% 14.01% 15.28%
200 100% $21.00 110.00% 15.14% 16.35%
210 110% $22.10 121.00% 16.23% 17.36%
220 120% $23.20 132.00% 17.26% 18.34%
230 130% $24.30 143.00% 18.26% 19.27%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the
Sub-Indices with the allocation of that amount reflecting the current
relative weights of the stocks in the Sub-Indices
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the Starting Index Value to
the relevant hypothetical Ending Index Value
(c) a constant dividend yield of 2.33% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter, assuming that value increases or
decreases linearly from the Starting Value to the hypothetical Ending
Value;
(d) no transaction fees or expenses;
(e) the term of the MITTS Securities is from August 1, 1997 to August 30,
2002; and
(f) a final Index Value equal to the hypothetical Ending Index Value. A
final Index Value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Sub-Indices as of July 28,
1997 was approximately 2.33%
(3) The Starting Index Value of the Index.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
annualized rate of return resulting therefrom will depend entirely on the
actual Ending Index Value determined by the calculation agent as provided
herein.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Value is to be calculated, make any adjustments as, in
the good faith judgment of the calculation agent, may be necessary in order to
arrive at a calculation of a value of a stock index comparable to the Index as
if the changes or modifications had not been made, and calculate the closing
value with reference to the Index, as adjusted. Accordingly, if the method of
calculating the Index is modified so that the value of the Index is a fraction
or a multiple of what it would have been if it had not been modified for
example, due to a split in the Index, then the calculation agent shall adjust
the Index in order to arrive at a value of the Index as if it had not been
modified for example, as if the split had not occurred.
"Market Disruption Event" means the occurrence or existence on any
Overseas Index Business Day with respect to a Sub-Index during the one-half
hour period that ends at the regular official weekday time at which trading on
the Index Exchange related to that Sub-Index occurs of any suspension of, or
limitation imposed on, trading, by reason of movements in price exceeding
limits permitted by the relevant exchange or otherwise, on
o the Index Exchange in securities that comprise 20% or more of the
value of that Sub-Index or
o any exchanges on which futures or options on that Sub-Index are traded
in options or futures if, in the determination of the calculation
agent, the suspension or limitation is material. For the purpose of
the foregoing definition:
o a limitation on the hours and number of days of trading will not
constitute a Market Disruption Event if it results from an announced
change in the regular hours of the relevant exchange and
o a limitation on trading imposed during the course of a day by reason
of movements in price otherwise exceeding levels permitted by the
relevant exchange will constitute a Market Disruption Event.
"Overseas Index Business Day" means, with respect to any sub-index,
any day that is, or, but for the occurrence of a Market Disruption Event, would
have been, a trading day on the relevant Index Exchange or on any exchanges on
which futures or options on that Sub-Index are traded, other than a day on
which trading on any relevant exchange is scheduled to close prior to its
regular weekday closing time.
"Index Exchange" means, with respect to any Sub-Index, the principal
exchange on which the shares comprising that Sub-Index are traded.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the Index and the AMEX or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the Index,
referred to in this prospectus as a "Successor Index", then, upon the
calculation agent's notification of that determination to the Trustee and
ML&Co., the calculation agent will substitute the Successor Index as calculated
by AMEX or another entity for the Index and calculate the Ending Value as
described above under "-Payment at Maturity". Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If the AMEX discontinues publication of the Index and a Successor
Index is not selected by the calculation agent or is no longer published on any
of the Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each Calculation
Day in accordance with the procedures last used to calculate the Index before
any discontinuance. If a Successor Index is selected or the calculation agent
calculates a value as a substitute for the Index as described below, that
Successor Index or value shall be substituted for the Index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
If the calculation agent calculates a value as a substitute for the Index,
"Calculation Day" shall mean any day on which the calculation agent is able to
calculate a substitute value.
If the AMEX discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that time,
then on each Business Day until the earlier to occur of
o the determination of the Ending Index Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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 the values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any 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 per unit, will be equal to the principal amount
per unit and the Supplemental Redemption Amount, if any, calculated as though
the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment at Maturity" in this prospectus. A bankruptcy
proceeding commenced in respect of ML&Co. may limit the claim of the beneficial
owner of a MITTS Security , under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount per unit 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 of the MITTS Securities, whether at the
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 6.01% 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, the depositary cannot transfer any global security except as a
whole 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 appropriate, 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. Arrangements among participants,
indirect participants and beneficial owners will govern conveyance of notices
and other communications by DTC to participants, by participants to indirect
participants and by participants and indirect participants to beneficial
owners, 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 are to 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.
Arrangements among participants, indirect participants and beneficial
owners will govern conveyance of notices and other communications by DTC to
participants, by participants to indirect participants and by participants and
indirect participants to beneficial owners, 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.
DTC will make principal, premium, if any, and/or interest, if any,
payments on the MITTS Securities in funds immediately available 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. 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", will govern payments by participants to beneficial owners, 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,
DTC will exchange the global securities 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 depositary shall instruct the Trustee as
to the names in which it is to register the definitive MITTS Securities. DTC
expects that these instructions to 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 PAYMENT
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
The value of the Index on any Index Business Day is calculated and
disseminated by the AMEX. The AMEX generally calculates and disseminates the
value of the Index based on the most recently reported values of the
Sub-Indices, at approximately 15-second intervals during the AMEX's business
hours and the end of each Index Business Day via the Consolidated Tape
Association's Network B. The value of the Index is reported on the AMEX and
Bloomberg under the symbol "EMX" and on Reuters under the symmbol ".EMX".
DETERMINATION OF INDEX MULTIPLIER FOR EACH SUB-INDEX
The initial weighting of each Sub-Index was determined at the close of
business on the date the MITTS Securities were priced for initial sale to the
public, or the "Pricing Date", based on its relative market capitalization. The
market capitalization of a stock equals the product of the total number of
shares of stock outstanding and the price of a share of stock. The total market
capitalization of the stocks comprising each Sub-Index was determined using the
most recently available information concerning the number of shares outstanding
for each stock contained in a Sub-Index and the most recently available price
for each share. Current exchange rates were used to translate market
capitalization information into U.S. dollars. The market capitalizations
expressed in U.S. dollars of each Sub-Index were totaled, or the "Total Market
Capitalization". The weighting of each Sub-Index was then determined and equals
the percentage of the market capitalization for each Sub-Index relative to the
Total Market Capitalization. The Index Multiplier for each Sub-Index was then
calculated and equals
o the weighting for that Sub-Index multiplied by 100, divided by
o the most recently available value of that Sub-Index. The Index
Multipliers were calculated in this way so that the Index would equal
100.00 on the Pricing Date.
The Index Multiplier for each Sub-Index will remain fixed, except that
the AMEX may adjust the Index Multiplier in the event of a significant change
in how a Sub-Index is calculated. The Index will not be rebalanced periodically
to reflect changes in the relative market capitalizations of the Sub-Indices.
COMPUTATION OF THE INDEX
The Index is calculated by totaling the products of the most recently
available value of each Sub-Index and the Index Multiplier applicable to that
Sub-Index. Since the Sub-Indices are based on stocks traded on stock exchanges
in Europe, once these stock exchanges close and the values of the Sub-Indices
become fixed until these stock exchanges reopen, the value of the Index will be
fixed.
SUB-INDICES
The following is a list of the Sub-Indices and certain information
concerning each Sub-Index. All disclosure contained in this prospectus
regarding the Sub-Indices is derived from publicly available information.
FINANCIAL TIMES SE 100 INDEX--"FTSE 100"
DESCRIPTION OF FTSE 100: The FTSE 100 is intended to provide an
indication of the pattern of common stock price movement of the 100
common stocks with the largest market capitalization on the London
Stock Exchange.
PUBLISHER: The Financial Times and London Stock Exchange
REQUIRED DISCLOSURE: The FTSE 100 is calculated by FTSE International
Limited in conjunction with the Institute of Actuaries and the Faculty
of Actuaries. Merrill Lynch & Co., Inc. has obtained full license from
FTSE International Limited to use its trademark and copyright in the
creation of this MITTS Security. FTSE International Limited does not
sponsor, endorse or promote this MITTS Security.
DEUTSCHER AKTIENINDEX--"DAX(R)"
DESCRIPTION OF DAX: The DAX is total rate of return index measuring
the performance of 30 common stocks on the Frankfurt Stock Exchange
selected based on their market capitalization and trading volume. A
total rate of return index reflects both the price performance of the
relevant common stocks as well as the dividends paid on common stocks.
PUBLISHER: Deutsche Borse AG
"DAX" is a registered trademark of Deutsche Borse AG.
COMPAGNIE DES AGENTS DE CHANGE 40 INDEX--"CAC 40"
DESCRIPTION OF CAC 40: The CAC 40 is intended to provide an indication
of the pattern of common stock price movement of the 40 common stocks
with the largest market capitalization on the Paris Bourse.
PUBLISHER: SBF--Paris Bourse
REQUIRED DISCLOSURE: "CAC-40" is a registered trademark of the Societe
des Bourses Francaises-Paris Bourse, which designates the index that
the SBF-Paris Bourse calculates and publishes. Authorization to use
the index and the "CAC-40" trademark in connection with the Securities
has been granted by license.
The SBF-Paris Bourse, owner of the trademark and of the CAC-40, does
not sponsor, endorse or participate in the marketing of the
Securities. The SBF-Paris Bourse makes no warranty or representation
to any person, express or implied, as to the figure at which the
CAC-40 stands at any particular time, nor as to the results or
performance of the Securities. Neither shall the SBF-Paris Bourse be
under any obligation to advise any person of any error in the
published level of the CAC-40.
SWISS MARKET INDEX--"SMI(R)"
DESCRIPTION OF SMI: The SMI is intended to provide an indication of
the pattern of common stock price movement of common stocks with the
largest market capitalization and greatest liquidity on the Geneva,
Zurich and Basle Stock Exchanges.
PUBLISHER: Swiss Exchange
REQUIRED DISCLOSURE: The Securities are not in any way sponsored,
endorsed, sold or promoted by the Swiss Exchange and the Swiss
Exchange makes no warranty or representation whatsoever, express or
implied, either as to the results to be obtained from the use of the
SMI index and/or the figure at which the SMI index stands at any
particular time on any particular day or otherwise. The SMI index is
compiled and calculated solely by the Swiss Exchange. However, the
Swiss Exchange shall not be liable, whether in negligence or
otherwise, to any person for any error in the SMI index and the Swiss
Exchange shall not be under any obligation to advise any person of any
error therein.
"SMI" is a registered trademark of the Swiss Exchange.
AMSTERDAM EUROPEAN OPTIONS EXCHANGE INDEX--"AEX"
DESCRIPTION OF AEX: The AEX is intended to provide an indication of
the pattern of common stock price movement of the 25 common stocks
with the largest market capitalization on the Amsterdam Stock
Exchange.
PUBLISHER: AEX--Optiebeurs nv
REQUIRED DISCLOSURE: The AEX-Optiebeurs nv has all proprietary rights
with relation to the AEX index. The AEX-Optiebeurs nv in no way
sponsors, endorses or is otherwise involved in the issue and offering
of the Securities. The AEX-Optiebeurs nv disclaims any liability to
any party for any inaccuracy in the data on which the AEX Index is
based, for any mistakes, errors, or omissions in the calculation or
dissemination of the AEX Index or for the manner in which the AEX
Index is used in connection with the issue and offering of the
Securities.
MILANO ITALIA BORSA 30 INDEX--"MIB 30"
DESCRIPTION OF MIB 30: The MIB 30 is intended to provide an indication
of the pattern of common stock price movement of common stocks with
the largest market capitalization and greatest liquidity on the
Italian Stock Exchange.
PUBLISHER: Consiglio di Borsa
STOCKHOLM OPTIONS MARKET INDEX--"OMX index"
DESCRIPTION OF OMX INDEX: The OMX index is intended to provide an
indication of the pattern of common stock price movement of the 30
common stocks with the largest volume of trading on the Stockholm
Stock Exchange.
PUBLISHER: OM Gruppen AB
REQUIRED DISCLOSURE: The Securities are not in any way sponsored,
endorsed, sold or promoted by OM Gruppen AB ("OM") and OM makes no
warranty or representation whatsoever, express or implied, either as
to the results to be obtained from the use of the OMX index and/or the
figure at which the said OMX index stands at any particular time on
any particular day or otherwise. The OMX index is compiled and
calculated solely by an indexer on behalf of OM. However, OM shall not
be liable, whether in negligence or otherwise, to any person for any
error in the OMX index and OM shall not be under any obligation to
advise any person of any error therein.
All rights to the trademark OMX, OMX INDEX are vested in OM Gruppen AB
("OM") and are used under a license agreement with OM.
IBEX 35 Index
DESCRIPTION OF IBEX 35: The IBEX 35 is intended to provide an
indication of the pattern of common stock price movement of the 35
common stocks with the greatest liquidity continuously traded and
quoted on the Joint Stock Exchange System made up of the Barcelona,
Bilbao, Madrid and Valencia stock exchanges.
PUBLISHER: Sociedad de Bolsas, S.A.
REQUIRED DISCLOSURE: Sociedad de Bolsas, S.A. does not warrant in any
case nor for any reason whatsoever: (a) The continuity of the
composition of the IBEX 35 Index exactly as it is today; (b) the
continuity of the method for calculating the IBEX 35 Index exactly as
it is calculated today; (c) the continuity of the calculation, formula
and publication of the IBEX 35 Index; (d) the precision, integrity or
freedom from errors or mistakes in the composition and calculation of
the IBEX 35 Index; (e) the adequacy of the IBEX 35 Index for the
purposes expected in the issue of the Securities nor for dealing in
the same.
The publisher of each Sub-Index will add or delete stocks due to events
such as the bankruptcy or merger of the issuer of a stock. The publisher of a
Sub-Index may reevaluate the composition of the stocks underlying the Sub-Index
at specified intervals to assure that they still meet the selection criteria or
any ongoing eligibility criteria.
The publisher of a Sub-Index is under no obligation to continue the
calculation and dissemination of that Sub-Index and the publisher may change
the method by which that Sub-Index is calculated. The publishers of the
Sub-Indices are under no obligation to take the needs of ML&Co. or the holders
of the MITTS into consideration in determining, composing or calculating the
Sub-Indices.
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 a projected Supplemental Redemption Amount equal to $3.7137 per unit.
This represents an estimated yield on the MITTS Securities equal to 6.32% 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 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 five years and one month for the
MITTS Securities based upon the projected payment schedule for the MITTS
Securities, including both the projected Supplemental Redemption Amount and the
estimated yield equal to 6.32% per annum, compounded semiannually, as
determined by ML&Co. for purposes of application of the Final Regulations to
the MITTS Securities:
<PAGE>
<TABLE>
<CAPTION>
INTEREST DEEMED TOTAL INTEREST
TO DEEMED TO HAVE
ACCRUE DURING ACCRUED ON
ACCRUAL PERIOD SECURITIES AS OF END
(PER UNIT) OF ACCRUAL PERIOD
(PER UNIT)
ACCRUAL PERIOD
<S> <C> <C>
August 1, 1997 through August 30, 1997........................... $0.0495 $0.0495
August 31, 1997 through February 28, 1998........................ $0.3173 $0.3668
March 1, 1998 through August 30, 1998............................ $0.3274 $0.6942
August 31, 1998 through February 28, 1999........................ $0.3376 $1.0318
March 1, 1999 through August 30, 1999............................ $0.3484 $1.3802
August 31, 1999 through February 29, 2000........................ $0.3593 $1.7395
March 1, 2000 through August 30, 2000............................ $0.3707 $2.1102
August 31, 2000 through February 28, 2001........................ $0.3823 $2.4925
March 1, 2001 through August 30, 2001............................ $0.3945 $2.8870
August 31, 2001 through February 28, 2002........................ $0.4069 $3.2939
March 1, 2002 through August 30, 2002............................ $0.4198 $3.7137
</TABLE>
PROJECTED SUPPLEMENTAL REDEMPTION AMOUNT = $3.7137 PER UNIT.
All prospective investors in the MITTS 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 for such information to Merrill Lynch & Co., Inc., Attn:
Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street, 12th
Floor, New York, New York 10080- 6512.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Market Index Target-Term Securities(R)
based upon the Dow Jones Industrial AverageSM
due January 14, 2003
"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.
<TABLE>
<CAPTION>
The MITTS Securities: Payment at Maturity:
<S> <C>
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before the maturity date MITTS Securities you own, we will pay you an
o Senior unsecured debt securities of Merrill Lynch & amount equal to the sum of the principal amount
Co., Inc. of each unit and an additional amount based on
o Linked to the value of the index measuring the Dow the percentage increase, if any, in the value
Jones Industrial Average SM of the index, above a benchmark value
of 8,594, as described in this prospectus
o The MITTS Securities are listed on the New o You will receive no less than the principal amount
York Stock Exchange under the symbol "DJM" of your MITTS Securities
Securities
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
------------------------------------------
Merrill Lynch & Co.
-------------------------------------------
The date of this prospectus is , 199 .
- -----------------
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
"Dow Jones", "Dow Jones Industrial Average SM", and "DJIASM" are
service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been
licensed for use for certain purposes by Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS..............................................................3
MERRILL LYNCH & CO., INC..................................................7
RATIO OF EARNINGS TO FIXED CHARGES........................................8
DESCRIPTION OF THE MITTS SECURITIES.......................................9
THE INDEX................................................................16
OTHER TERMS..............................................................17
PROJECTED PAYMENT SCHEDULE...............................................20
WHERE YOU CAN FIND MORE INFORMATION......................................21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........................22
PLAN OF DISTRIBUTION.....................................................23
EXPERTS..................................................................23
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You
should carefully consider the following discussion of risks before deciding
whether an investment in the MITTS Securities is suitable for you.
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 date is less than
8,594. This will be true even if at some time during the life of the MITTS
Securities, the value of the index, as adjusted, was higher than 8,594 but
later falls below 8,594.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY.
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you take into account inflation
and other factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX.
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks. This is because the value of the index is calculated by
reference to the prices of the common stocks included in the index without
taking into consideration the value of dividends paid on those stocks.
YOUR RETURN WILL NOT REFLECT THE PAYMENT OF DIVIDENDS.
The index is calculated with reference to the prices of the common
stocks comprising the index without taking into consideration the value of
dividends paid on those stocks. Therefore, the return you earn on your MITTS
Securities, if any, will not be the same as the return that you would earn if
you actually owned each of the common stocks underlying the index and received
the dividends paid on those stocks.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE
FUTURE.
Although the MITTS Securities are listed on the NYSE under the symbol
"DJM," 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, you cannot assume 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
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited and you do
not wish to hold your investment until maturity, there may be a limited number
of buyers for your MITTS Securities. This may affect the price you receive if
you sell before maturity.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES.
We believe that the value of the index and a number of other factors
will affect the trading value of the MITTS Securities. Some of these factors
interrelate in complex ways; as a result, the effect of any one factor may
offset or magnify the effect of another factor. 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.
o The value of the index We expect that the market value of the
MITTS Securities will depend substantially on the amount by which
the index does or does not exceed 8,594. If you choose to sell your
MITTS Securities when the value of the index exceeds 8,594, you may
receive substantially less than the amount that would be payable at
maturity based on that index value because of the expectation that
the index will continue to fluctuate until shortly before the
maturity date when the average value of the index is determined. If
you choose to sell your MITTS Securities when the value of the
index is below 8,594, you may receive less than the $10 principal
amount per unit of MITTS Securities. In general, rising U.S.
dividend rates, or dividends per share, may increase the value of
the index while falling U.S. dividend rates may decrease the value
of the index. Political, economic and other developments that
affect the stocks underlying the index may also affect the value of
the index and the value of the MITTS Securities.
o Interest rates. Because we will pay, at a minimum, the principal
amount per unit of MITTS Securities at maturity, we expect that
changes in interest rates will affect 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 the
trading value of the MITTS Securities will increase. Interest rates
may also affect the U.S. economy and, in turn, the value of the
index. Rising interest rates may lower the value of the index and,
thus, may lower the value of the MITTS Securities. Falling interest
rates may increase the value of the index and, thus, may increase
the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe
the size and frequency of market fluctuations. Generally, if the
volatility of the index increases, we expect that the trading value
of the MITTS Securities will increase. If the volatility of the
index decreases, we expect that the trading value of the MITTS
Securities will decrease.
o Time remaining to maturity. We anticipate that prior to the
maturity of the MITTS Securities, the MITTS Securities may trade at
a value above that which would be expected based on the level of
interest rates and the index. This difference will reflect a "time
premium" due to expectations concerning the value of the index
during the period prior to January 14, 2003, the stated maturity of
the MITTS Securities. However, as the time remaining to maturity of
the MITTS Securities decreases, we expect that this time premium
will decrease, lowering the trading value of the MITTS Securities.
o Dividend yields. If dividend yields on the stocks comprising the
index increase, we expect that the value of the MITTS Securities
will decrease. Conversely, if dividend yields on the stock
comprising the index decrease, we expect that the value of the
MITTS Securities will increase.
o Changes in our credit ratings. 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 value of the index at maturity,
an improvement in our credit ratings will not reduce investment
risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most 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 except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the index 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.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW.
New York State laws govern the indenture under which the MITTS
Securities are 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.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We and our affiliates may from time to time buy or sell the stocks
underlying the Index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment.
POTENTIAL CONFLICTS OF INTEREST.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult with your tax adviser.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed
charges(a)................ 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On December 23, 1997, ML&Co. issued an aggregate principal amount of
$90,000,000 or 9,000,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt
securities under the 1983 Indenture which is more fully described in this
prospectus.
The MITTS Securities will mature on January 14, 2003.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, ML&Co. will make no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at
the option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms Events
of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<S> <C> <C>
Principal Amount of each MITTS Security ($10 per unit) X Ending Index Value - Benchmark Index Value
-------------------------------------------
Benchmark Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Benchmark Index Value" equals 8,594, which was determined on the
pricing date by multiplying 7,957.41, the value of the index on the pricing
date by 108%.
The "Ending Value" will be determined by the calculation agent and
will equal the average or arithmetic mean of the closing values of the Dow
Jones Industrial Average Index (the "Index") determined on each of the first
five Calculation Days during the Calculation Period. If there are fewer than
five Calculation Days, then the Ending Value will equal the average or
arithmetic mean of the closing values of the Index on these Calculation Days,
and if there is only one Calculation Day, then the Ending Value will equal the
closing value of the Index on that Calculation Day. If no Calculation Days
occur during the Calculation Period, then the Ending Value will equal the
closing value of the Index determined on the last scheduled Index Business Day
in the Calculation Period, regardless of the occurrence of a Market Disruption
Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day before the maturity date to and including
the second scheduled Index Business Day before the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are
open for trading and the Index or any Successor Index, as defined on page 10
below, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the percentage change from the starting index value to the Ending
Index Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks
underlying the Index, which includes an assumed aggregate
dividend yield of 1.72% per annum, as more fully described
below.
<TABLE>
<CAPTION>
Total Amount Pretax
Payable at Total Rate Annualized
Percentage Maturity per $10 of Rate Pretax Annualized
Hypothetical Change Principal Return on of Return on Rate of Return of
Ending Over the Starting Amount of MITTS the MITTS the MITTS Stocks Underlying the
Index Value Index Value Securities Securities Securities(1) Index(1)(2)
----------- ----------------- ---------------- ---------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
3,182.96 -60.00% $10.00 0.00% 0.00% - 14.21%
3,978.71 -50.00% $10.00 0.00% 0.00% - 10.67%
4,774.45 -40.00% $10.00 0.00% 0.00% - 7.63%
5,570.19 -30.00% $10.00 0.00% 0.00% - 4.95%
6,365.93 -20.00% $10.00 0.00% 0.00% -2.55%
7,161.67 -10.00% $10.00 0.00% 0.00% -0.37%
7,957.41(3) 0.00% $10.00 0.00% 0.00% 1.64%
8,753.15 10.00% $10.19 1.85% 0.36% 3.49%
9,548.89 20.00% $11.11 11.11% 2.09% 5.22%
10,344.63 30.00% $12.04 20.37% 3.70% 6.84%
11,140.37 40.00% $12.96 29.63% 5.19% 8.36%
11,936.12 50.00% $13.89 38.89% 6.59% 9.80%
12,731.86 60.00% $14.81 48.15% 7.92% 11.17%
13,527.60 70.00% $15.74 57.41% 9.16% 12.48%
14,323.34 80.00% $16.67 66.67% 10.35% 13.72%
15,119.08 90.00% $17.59 75.93% 11.47% 14.91%
15,914.82 100.00% $18.52 85.19% 12.55% 16.05%
16,710.56 110.00% $19.44 94.44% 13.57% 17.15%
17,506.30 120.00% $20.37 103.70% 14.56% 18.21%
</TABLE>
- ----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the Index
with the allocation of an amount reflecting the current relative
weights of the stocks in the Index;
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the starting index value to
the relevant hypothetical Ending Index Value;
(c) a constant dividend yield of 1.72% per annum, paid quarterly from
the date of initial delivery of MITTS Securities, applied to the
value of the Index at the end of each quarter assuming this value
increases or decreases linearly from the starting index value to the
hypothetical Ending Index Value;
(d) no transaction fees or expenses;
(e) the term of the MITTS Securities is from December 23, 1997 to
January 14, 2003; and
(f) a final Index value equal to the hypothetical Ending Index
Value. The aggregate dividend yield of the stocks underlying the
Index as of December 17, 1997 was approximately 1.72%.
(3) The starting index value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the respective total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this
prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Ending Index Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if any changes or modifications had not been made,
and calculate the closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of the Index is a fraction or a multiple of what it would have been if
it had not been modified for example, due to a split in the Index, then the
calculation agent shall adjust the Index in order to arrive at a value of the
Index as if it had not been modified for example, as if the split had not
occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation 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, in
(1) futures contracts related to the Index, or options on
these futures contracts, which are traded on any major U.S.
exchange or
(2) option contracts related to the Index which are traded
on any major U.S. 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".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
Discontinuance of the Index
If Dow Jones discontinues publication of the Index and Dow Jones or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the Index, this
index being referred to in this prospectus as a "Successor Index", then, upon
the calculation agent's notification of its determination to the trustee and
ML&Co., the calculation agent will substitute the Successor Index as
calculated by Dow Jones or any other entity for the Index. Upon any selection
by the calculation agent of a Successor Index, ML&Co. shall cause notice to be
given to holders of the MITTS Securities.
If Dow Jones discontinues publication of the Index and a Successor
Index is not selected by the calculation agent or is no longer published on
any of the Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before any discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists. If the calculation agent calculates a value as a
substitute for the Index, "Index Calculation Day" shall mean any day on which
the calculation agent is able to calculate a value.
If Dow Jones discontinues publication of the Index before the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Ending Index Value and
o a determination by the calculation agent shall determine the
value that would be used in computing the Supplemental
Redemption Amount as described in the preceding paragraph as if
that day were a Calculation Day.
the calculation agent will cause notice of each value to be published not less
often than once each month in The Wall Street Journal (the "WSJ"), or another
newspaper of general circulation, and arrange for information with respect to
these values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the Index may
adversely affect trading in the MITTS Securities.
Events of Default and Acceleration
If 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 of the MITTS Securities, will be equal to
the principal amount and the Supplemental Redemption Amount, if any,
calculated as though the date of early repayment were the stated maturity date
of the MITTS Securities. See "Description of the MITTS Securities--Payment at
Maturity". 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 their beneficial owners , at the rate of 6.18% per annum, to the
extent that payment of any interest shall be legally enforceable, on the
unpaid amount due and payable on any 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 to DTC, 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 a 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 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 are to 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 Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
Unless otherwise stated, all information in this prospectus on the
Index is derived from Dow Jones or other publicly available sources. This
information reflects the policies of Dow Jones as stated in these sources and
these policies are subject to change by Dow Jones. Dow Jones is under no
obligation to continue to publish the Index and may discontinue publication of
the Index at any time.
The Index is a price-weighted index, meaning that the weight of a
component stock in the Index is based on its price per share rather than the
total market capitalization of the issuer of a component stock, comprised of
30 common stocks chosen by the editors of the WSJ as representative of the
broad market of U.S. industry. The corporations represented in the Index tend
to be leaders within their respective industries and their stocks are
typically widely held by individuals and institutional investors. Changes in
the composition of the Index are made entirely by the editors of the WSJ
without consultation with the corporations represented in the Index, any stock
exchange, any official agency or ML&Co.. Changes to the common stocks included
in the Index tend to be made infrequently. Historically, most substitutions
have been the result of mergers, but from time to time, changes may be made to
achieve what the editors of the WSJ deem to be a more accurate representation
of the broad market of U.S. industry. In choosing a new corporation for the
Index, the editors of the WSJ look for leading industrial companies with a
successful history of growth and wide interest among investors. The WSJ may
change the component stocks of the Index at any time for any reason. Dow
Jones, publisher of the WSJ, is not affiliated with ML&Co. and has not
participated in any way in the creation of the MITTS Securities.
The Index initially consisted of 12 common stocks and was first
published in the WSJ in 1896. The Index was increased to include 20 common
stocks in 1916 and to 30 common stocks in 1928. The number of common stocks in
the Index has remained at 30 since 1928, and, in an effort to maintain
continuity, the constituent corporations represented in the Index have been
changed on a relatively infrequent basis.
The value of the Index is the sum of the primary exchange prices of
each of the 30 common stocks included in the Index, divided by a divisor that
is designed to provide a meaningful continuity in the value of the Index.
Because the Index is price-weighted, stock splits or changes in the component
stocks could result in distortions in the Index value. In order to prevent
these distortions related to extrinsic factors, the divisor is changed in
accordance with a mathematical formula that reflects adjusted proportions
within the Index. The current divisor of the Index is published daily in the
WSJ and other publications. In addition, other statistics based on the Index
may be found in a variety of publicly available sources.
ML&Co. or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the component stocks of the Index,
including extending loans to, or making equity investments in these issuers or
providing advisory services to these issuers, including merger and acquisition
advisory services. In the course of this business, ML&Co. or its affiliates
may acquire non-public information with respect to these issuers. ML&Co. does
not make any representation to any purchaser of MITTS Securities with respect
to any matters whatsoever relating to these issuers. Any prospective purchaser
of MITTS Securities should undertake an independent investigation of the
issuers of the component stocks of the Index as in its judgment is appropriate
to make an informed decision with respect to an investment in the MITTS
Securities. The composition of the Index does not reflect any investment or
sell recommendations of ML&Co. or its affiliates.
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 proper 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
$3.6070 per unit, the "Projected Supplemental Redemption Amount". This
represents an estimated yield on the MITTS Securities equal to 6.18% 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, 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 a term of five years and twenty-two days for
the MITTS Securities based upon the projected payment schedule for the MITTS
Securities, including both the Projected Supplemental Redemption Amount and
the estimated yield equal to 6.18% per annum, compounded semiannually, as
determined by ML&Co. for purposes of applying the Final Regulations to the
MITTS Securities:
<TABLE>
<CAPTION>
Total Interest
Deemed to
Have Accrued
Interest Deemed to On the MITTS Securities
Accrue During as of End of
Accrual Period Accrual Period
Accrual Period (per Unit) (per Unit)
- ----------------------------------- ---------- ----------
<S> <C> <C>
January 15, 1998 through July 14, 1998..................... $0.3101 $0.3470
July 15, 1998 through January 14, 1999.................... $0.3197 $0.6667
January 15, 1999 through July 14, 1999.................... $0.3296 $0.9963
July 15, 1999 through January 14, 2000.................... $0.3398 $1.3361
January 15, 2000 through July 14, 2000.................... $0.3503 $1.6864
July 15, 2000 through January 14, 2001.................... $0.3611 $2.0475
January 15, 2001 through July 14, 2001.................... $0.3723 $2.4198
July 15, 2001 through January 14, 2002.................... $0.3837 $2.8035
January 15, 2002 through July 14, 2002.................... $0.3957 $3.1992
July 15, 2002 through January 14, 2003.................... $0.4078 $3.6070
</TABLE>
- -------------
Projected Supplemental Redemption Amount = $3.6070 per Unit.
All prospective investors in the MITTS 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 for such information to Merrill Lynch & Co.,
Inc., Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church
Street, 12th Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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 NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Nikkei 225 Market Index Target-Term Securities(R) due June 14, 2002
"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.
<TABLE>
<CAPTION>
The MITTS Securities: Payment at Maturity:
<S> <C>
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before maturity MITTS Securities you own, we will pay you
o Senior unsecured debt securities of Merrill an amount equal to the sum of the principal
Lynch & Co., Inc. amount of each unit and an additional amount
o Linked to the value of the Nikkei Stock based on the product of the percentage change in the
Average value of the index and 140%
o The MITTS Securities are listed on the New York o You will receive no less than the principal amount of your
Stock Exchange under the symbol "MLN" MITTS Securities
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
------------------------
Merrill Lynch & Co.
------------------------
The date of this prospectus is , 199 .
"MITTS" and "Market Index Target-Term Securities" are registered service marks
of Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS...............................................................3
MERRILL LYNCH & CO., INC...................................................7
RATIO OF EARNINGS TO FIXED CHARGES.........................................8
DESCRIPTION OF THE MITTS SECURITIES........................................9
THE INDEX.................................................................17
OTHER TERMS...............................................................19
PROJECTED PAYMENT SCHEDULE................................................22
WHERE YOU CAN FIND MORE INFORMATION.......................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.........................23
PLAN OF DISTRIBUTION......................................................24
EXPERTS...................................................................24
<PAGE>
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the MITTS Securities is suitable for you.
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 date is less than
20,351.34, the value of the index on the date the MITTS Securities were
priced. This will be true even if at some time during the life of the MITTS
Securities, the value of the index, as adjusted, was higher than 20,351.34 but
later falls below 20,351.34.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY.
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you consider inflation or other
factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX.
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks. This is because the value of the index is calculated by
reference to the prices of the common stocks included in the index without
taking into consideration the value of dividends paid on those stocks.
YOUR RETURN WILL BE AFFECTED BY CURRENCY EXCHANGE RATES.
Although the stocks included in the index are traded in Japanese Yen
and the MITTS Securities are denominated in U.S. Dollars, we will not adjust
any amounts payable on the MITTS Securities for the currency exchange rate in
effect at maturity. Any amount in addition to the principal amount of each
unit payable to you at maturity is based solely upon the percentage increase
in the index. Changes in the exchange rate, however, may reflect changes in
the Japanese economy that may affect the value of the index and the MITTS
Securities.
YOUR RETURN MAY BE AFFECTED BY FACTORS AFFECTING THE VALUE OF JAPANESE STOCKS.
Because the underlying stocks included in the index have been issued
by Japanese companies, risks relating to an investment in Japanese equity
securities may affect the return on your MITTS Securities. The Japanese
securities markets may be more volatile than U.S. or other securities markets
and market developments can effect the Japanese markets in different ways than
U.S. or other securities markets. Direct or indirect government intervention
to stabilize the Japanese securities markets and cross-shareholdings in
Japanese companies on those markets may affect prices and volume of trading on
those markets. Also, there is generally less publicly available information
about Japanese companies than about those U.S. companies that are subject to
the reporting requirements of the U.S. Securities and Exchange Commission, and
Japanese companies are subject to accounting, auditing and financial reporting
standards and requirements that differ from those applicable to U.S. reporting
companies.
Securities prices in Japan are subject to political, economic,
financial and social factors that apply in Japan. In addition, recent or
future changes in the Japanese government's economic and fiscal policies, the
possible imposition of, or changes in, currency exchange laws or other
Japanese laws or restrictions applicable to Japanese companies or investments
in Japanese equity securities and fluctuations in the rate of exchange between
currencies may negatively affect the Japanese securities markets. Moreover,
the Japanese economy may differ favorably or unfavorably from the U.S. economy
in economic factors such as growth in gross national product, rates of
inflation, capital reinvestment, resources and self-sufficiency.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE
FUTURE.
Although the MITTS Securities are listed on the NYSE under the symbol
"MLN," 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, you cannot assume 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
appreciation, if any, of the value of the index.
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.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES.
We believe that the value of the index and by a number of other
factors will affect trading value of the MITTS Securities. Some of these
factors interrelate in complex ways; as a result, the effect of any one factor
may offset or magnify the effect of another factor. 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.
o The value of the index. We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the index
exceeds 20,351.34. If you choose to sell your MITTS Securities when the
value of the Index exceeds 20,351.34, you may receive substantially less
than the amount that would be payable at maturity based on that index
value because of the expectation that the index will continue to
fluctuate until shortly before the maturity date when the average value
of the index over five trading days is determined. If you choose to sell
your MITTS Securities when the value of the index is below 20,351.34,
you may receive less than the $10 principal amount per Unit of MITTS
Securities. In general, rising Japanese dividend rates, or dividends per
share, may increase the value of the index while falling Japanese
dividend rates may decrease the value of the Index. Political, economic
and other developments that affect the stocks underlying the index may
also affect the value of the index and the value of the MITTS
Securities.
o Interest rates. 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 affect 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 the trading value of the
MITTS Securities will increase. In general, if interest rates in Japan
increase, we expect that the trading value of the MITTS Securities will
increase. If interest rates in Japan decrease, we expect the trading
value of the MITTS Securities will decrease. However, interest rates in
Japan may also affect the Japanese economy and, in turn, the value of
the index. Rising interest rates in Japan may lower the value of the
Index and the MITTS Securities. Falling interest rates in Japan may
increase the value of the Index and the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. If the volatility of the
Index increases, we expect that the trading value of the Securities will
increase. If the volatility of the Index decreases, we expect that the
trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that prior to the maturity of
the MITTS Securities, the MITTS Securities may trade at a value above
that which would be expected based on the level of interest rates and
the index. This difference will reflect a "time premium" due to
expectations concerning the value of the index during the period prior
to maturity of the MITTS Securities. However, as the time remaining to
maturity of the MITTS Securities decreases, we expect that this time
premium will decrease, lowering the trading value of the MITTS
Securities.
o Dividend yields. If dividend yields on the stocks comprising the index
increase, we expect that the value of the MITTS Securities will
decrease. Conversely, if dividend yields on the stocks comprising the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in our credit ratings. 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 value
of the index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the MITTS Securities.
We want you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any change in the trading value of the MITTS Securities attributable to
another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most 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 except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the index 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.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW.
New York State laws govern the indenture under which the MITTS
Securities are 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 chargeable to and payable by a
borrower. We will promise, for the benefit of the MITTS Securities holders, to
the extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We, MLPF&S, and our affiliates may from time to time buy or sell the
stocks underlying the index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
POTENTIAL CONFLICTS OF INTEREST
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
It is suggested that you should reach an investment decision with
regard to the MITTS Securities only after carefully considering the
suitability of the MITTS Securities in the light of your particular
circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax adviser.
<PAGE>
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.
<PAGE>
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
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
=== === === === ===
</TABLE>
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On June 3, 1997, ML&Co., Inc. issued an aggregate principal amount of
$255,000,000 or 25,500,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt
securities under the 1983 Indenture which is more fully described in this
prospectus.
The MITTS Securities will mature on June 14, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
ML&Co., or any beneficial owner, may not redeem the MITTS Securities
before 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 "- Events of Default
and Acceleration" and "Other Terms - Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<S> <C> <C>
Principal Amount of each MITTS Security ($10 per Unit) X Ending Index Value-Starting Index Value X Participation Rate
------------------------------------------------------------
Starting Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption
Amount be less than zero.
The "Starting Index Value" equals 20,351.34, the closing value of the
Index on the Pricing Date.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the
Nikkei 225 Index (the "Index") determined on each of the first five
Calculation Days during the Calculation Period. If there are fewer than five
Calculation Days, then the Ending Value will equal the average or arithmetic
mean of the closing values of the Index on these Calculation Days, and if
there is only one Calculation Day, then the Ending Value will equal the
closing value of the Index on that Calculation Day. If no Calculation Days
occur during the Calculation Period , then the Ending Value will equal the
closing value of the Index determined on the last scheduled Index Business Day
in the Calculation Period, regardless of the occurrence of a Market Disruption
Event on that day.
The "Participation Rate" equals 140%.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are
open for trading and the Index or any Successor Index, as defined on page 12
below, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the percentage change from the Starting Index Value to the Ending Index
Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks underlying
the Index, which includes an assumed aggregate dividend yield of
.75% per annum, as more fully described below.
<TABLE>
<CAPTION>
Total Amount Pretax Pretax Annualized
Payable at Maturity Total Rate of Annualized Rate Rate of Return of
Percentage Change Per $10 Principal Return on of Return on Stocks Underlying
Hypothetical Ending Over the Starting Amount of MITTS the MITTS the MITTS the
Index Value Index Value Securities Securities Securities(1) Index(1)(2)
------------------- ----------------- ------------------- ------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
8,140.54 -60% $10.00 0.00% 0.00% -17.13%
10,175.67 -50% $10.00 0.00% 0.00% -12.86%
12,210.80 -40% $10.00 0.00% 0.00% -9.33%
14,245.94 -30% $10.00 0.00% 0.00% -6.32%
16,281.07 -20% $10.00 0.00% 0.00% -3.69%
18,316.21 -10% $10.00 0.00% 0.00% -1.35%
20,351.34(3) 0% $10.00 0.00% 0.00% 0.75%
22,386.47 10% $11.40 14.00% 2.62% 2.66%
24,421.61 20% $12.80 28.00% 4.97% 4.42%
26,456.74 30% $14.20 42.00% 7.09% 6.04%
28,491.88 40% $15.60 56.00% 9.04% 7.55%
30,527.01 50% $17.00 70.00% 10.83% 8.96%
32,562.14 60% $18.40 84.00% 12.50% 10.29%
34,597.28 70% $19.80 98.00% 14.05% 11.54%
36,632.41 80% $21.20 112.00% 15.51% 12.72%
38,667.55 90% $22.60 126.00% 16.88% 13.84%
40,702.68 100% $24.00 140.00% 18.18% 14.91%
42,737.81 110% $25.40 154.00% 19.42% 15.92%
44,772.95 120% $26.80 168.00% 20.59% 16.90%
46,808.08 130% $28.20 182.00% 21.71% 17.83%
</TABLE>
- ----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the Index
with the allocation of an amount reflecting the current relative
weights of the stocks in the Index; a constant dividend yield of
.75% per annum, paid quarterly from the date of initial delivery of
MITTS Securities, applied to the value of the Index at the end of
each quarter assuming this value increases or decreases linearly
from the Starting Value to the hypothetical Ending Index Value;
(b) a percentage change in the aggregate price of these stocks that
equals the percentage change in the Index from 20,351.34 to the
relevant hypothetical Ending Index Value;
(c) no transaction fees or expenses;
(d) the term of the MITTS Securities is from June 3, 1997 to June 14,
2002;
(e) a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Index as of May 28, 1997
was approximately .75%.
(3) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this
prospectus.
Adjustments to the Index; Market Disruption Events
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) a suspension, material limitation or absence of trading on the
Tokyo Stock Exchange (the "TSE") of 20% or more of the
underlying stocks included in the Index or a Successor Index
during the one-half hour period preceding the close of trading
on the applicable exchange; or
(b) the suspension or material limitation on the Singapore
International Monetary Exchange, Ltd. (the "SIMEX"), the Osaka
Securities Exchange (the "OSE") or any other major futures or
securities market from trading in futures or options contracts
related to the Index or a Successor Index during the one-half
hour period preceding the close of trading on the applicable
exchange.
For the purposes of determining whether a Market Disruption Event has
occurred:
o a limitation on the hours 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,
o a decision to permanently discontinue trading in the relevant
futures or options contract will not constitute a Market
Disruption Event,
o a suspension in trading in a futures or options contracts on the
Index by a major securities market by reason of
o a price change violating limits set by that securities market,
o an imbalance of orders relating to futures or options contracts or
o a disparity in bid and ask quotes relating to futures or
options contracts will constitute a suspension or
material limitation of trading in futures or options
contracts related to the Index, and,
o an absence of trading on the TSE will not include any time when
the TSE is closed for trading under ordinary circumstances. In
some circumstances, the duties of MLPF&S as calculation agent in
determining the existence of Market Disruption Events could
conflict with the interests of MLPF&S as an affiliate of the
issuer of the MITTS Securities.
Discontinuance of the Index
If the publisher of the Nikkei 225 Index, Nihon Keizai Shimbum, Inc.
("NKS"), discontinues publication of the Index and NKS or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of its determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by NKS or other entity for the Index and calculate the Ending Value
as described above under "-Payment at Maturity". Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice of that
selection to be given to holders of the MITTS Securities.
If NKS discontinues publication of the Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for a Calculation
Day used to calculate the Supplemental Redemption Amount at maturity will be a
value computed by the calculation agent for each Calculation Day in accordance
with the procedures last used to calculate the Index prior to the
discontinuance. If a Successor Index is selected or the calculation agent
calculates a value as a substitute for the Index as described below, the
Successor Index or value shall be substituted for the Index for all purposes,
including for purposes of determining whether a Market Disruption Event
exists. If the calculation agent calculates a value as a substitute for the
Index, "Calculation Day" shall mean any day on which the calculation agent is
able to calculate that value.
If NKS discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of
o the determination of the Ending Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. The calculation agent will
cause notice of these values 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 these values to be made available
by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the MITTS Securities.
Events of Default and Acceleration
If 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 per unit, will be equal to the principal
amount per unit and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment 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 per unit 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 of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners of the MITTS Securities, at the rate of 6.96% 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, 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, the global security is not transferrable 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 appropriate, 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 the
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. Arrangements among
participants, indirect participants and beneficial owners, will govern
conveyance of notices and other communications by DTC to participants, by
participants to indirect participants and by participants and indirect
participants to beneficial owners, subject to any statutory or regulatory
requirements 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 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 are to 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.
Arrangements among participants, indirect participants and beneficial
owners, will govern conveyance of notices and other communications by DTC to
participants, by participants to indirect participants and by participants and
indirect participants to beneficial owners, subject to any statutory or
regulatory requirements 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. 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", will govern payments by participants to beneficial owners, and
these payments will be the responsibility of the participant and not of DTC,
the trustee or ML&Co., subject to any statutory or regulatory requirements 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,
DTC will exchange the global securities 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. The depositary expects that these 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 to holders.
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 Payment
ML&Co will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
<PAGE>
THE INDEX
All disclosure contained in this prospectus regarding the Index,
including, without limitation, its make-up, method of calculation and changes
in its components, is derived from publicly available information prepared by
Nihon Keizai Shimbun, Inc. ("NKS").
Unless otherwise stated, all information in this prospectus relating
to the Nikkei 225 Index has been derived from the Stock Market Indices Data
Book published by NKS and other publicly-available sources. This information
reflects the policies of NKS as stated in these sources. These policies are
subject to change at the discretion of NKS.
The Nikkei 225 Index is a stock index calculated, published and
disseminated by NKS that measures the composite price performance of selected
Japanese stocks. The Nikkei 225 Index is currently based on 225 Underlying
Stocks trading on the TSE and represents a broad cross-section of Japanese
industry. All 225 Underlying Stocks are stocks listed in the First Section of
the TSE. Stocks listed in the First Section are among the most actively traded
stocks on the TSE. Futures and options contracts on the Nikkei 225 Index are
traded on the Singapore International Monetary Exchange Ltd., the Osaka
Securities Exchange and the Chicago Mercantile Exchange.
The Nikkei 225 Index is a modified, price-weighted index (i.e., an
Underlying Stock's weight in the index is based on its price per share rather
than the total market capitalization of the issuer) which is calculated by:
o multiplying the per share price of each Underlying Stock by the
corresponding weighting factor for the Underlying Stock (a
"Weight Factor"),
o calculating the sum of all these products; and
o dividing this sum by a divisor.
The value of the Nikkei 225 Index is reported on the AMEX under the
symbol "N225", on Bloomberg under the symbol "NKY" and on Reuters under the
symbol ".N225".
The divisor, initially set in 1949 at 225, was 10.052 as of December 21,
1998, and is subject to periodic adjustments as set forth below. Each Weight
Factor is computed by dividing (Y)50 by the par value of the relevant
Underlying Stock, so that the share price of each Underlying Stock when
multiplied by its Weight Factor corresponds to a share price based on a
uniform par value of (Y)50. Each Weight Factor represents the number of shares
of the related Underlying Stock which are included in one trading unit of the
Nikkei 225 Index. The stock prices used in the calculation of the Nikkei 225
Index are those reported by a primary market for the Underlying Stocks,
currently the TSE. The level of the Nikkei 225 Index is calculated once per
minute during TSE trading hours.
In order to maintain continuity in the level of the Nikkei 225 Index
in the event of certain changes due to non-market factors affecting the
Underlying Stocks, including the addition or deletion of stocks, substitution
of stocks, stock dividends, stock splits or distributions of assets to
stockholders, the divisor used in calculating the Nikkei 225 Index is adjusted
in a manner designed to prevent any instantaneous change or discontinuity in
the level of the Nikkei 225 Index. Thereafter, the divisor remains at the new
value until a further adjustment is necessary as the result of another change.
As a result of each change affecting any Underlying Stock, the divisor is
adjusted so that the sum of all share prices immediately after the change
multiplied by the applicable Weight Factor and divided by the new divisor, the
level of the Nikkei 225 Index immediately after the change, will equal the
level of the Nikkei 225 Index immediately prior to the change.
NKS may delete or add Underlying Stocks. However, to maintain
continuity in the Nikkei 225 Index, the policy of NKS is generally not to
alter the composition of the Underlying Stocks except when an Underlying Stock
is deleted in accordance with the following criteria. NKS will delete from the
Underlying Stocks any stock becoming ineligible for listing in the First
Section of the TSE due to any of the following reasons : bankruptcy of the
issuer; merger of the issuer into, or acquisition of the issuer by, another
company; delisting of the stock or transfer of the stock to the "Seiri-Post"
because of excess debt of the issuer or because of any other reason; or
transfer of the stock to the Second Section of the TSE. Upon deletion of a
stock from the Underlying Stocks, NKS will select, in accordance with certain
criteria established by it, a replacement for the deleted Underlying Stock. In
an exceptional case, NKS may add to the Underlying Stocks a newly listed stock
in the First Section of the TSE that is recognized by NKS to be representative
of a market . In that case, NKS will delete an existing Underlying Stock with
low trading volume that is not representative of a market .
NKS is under no obligation to continue the calculation and
dissemination of the Nikkei 225 Index. The MITTS Securities are not sponsored,
endorsed, sold or promoted by NKS. No inference should be drawn from the
information contained in this Prospectus Supplement that NKS makes any
representation or warranty, implied or express, to Merrill Lynch & Co., 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
in particular or the ability of the Nikkei 225 Index to track general stock
market performance. NKS has no obligation to take the needs of ML&Co. or the
holders of the MITTS Securities into consideration in determining, composing
or calculating the Nikkei 225 Index. NKS is not responsible for, and has not
participated in the determination of the timing of, prices for, or quantities
of, the MITTS Securities to be issued or in the determination or calculation
of the equation by which the MITTS Securities are to be settled in cash. NKS
has no obligation or liability in connection with the administration,
marketing or trading of the MITTS Securities.
The use of and reference to the Nikkei 225 Index in connection with
the MITTS Securities have been consented to by NKS, the publisher of the
Nikkei 225 Index.
None of ML&Co., the calculation agent and the underwriter accepts any
responsibility for the calculation, maintenance or publication of the Nikkei
225 Index or any Successor Index. NKS disclaims all responsibility for any
errors or omissions in the calculation and dissemination of the Nikkei 225
Index or the manner in which the Index is applied in determining any Starting
or Ending Index Values or any Supplemental Redemption Amount upon maturity of
the MITTS Securities.
The Tokyo Stock Exchange
The Tokyo Stock Exchange is one of the world's largest securities
exchanges in terms of market capitalization. The TSE market is a two-way,
continuous pure auction market. Trading hours are currently from 9:00 A.M. to
11:00 A.M. and from 12:30 P.M. to 3:00 P.M., Tokyo time, Monday through
Friday.
Due to the time zone difference, on any normal trading day the TSE
will close prior to the opening of business in New York City on the same
calendar day. Therefore, the closing level of the Nikkei 225 Index on a
trading day will generally be available in the United States by the opening of
business on the same calendar day.
The TSE has adopted certain measures, including daily price floors
and ceilings on individual stocks, intended to prevent any extreme short-term
price fluctuations resulting from order imbalances. In general, any stock
listed on the TSE cannot be traded at a price lower than the applicable price
floor or higher than the applicable price ceiling. These price floors and
ceilings are expressed in absolute Japanese yen, rather than percentage,
limits based on the closing price of the stock on the previous trading day. In
addition, when there is a major order imbalance in a listed stock, the TSE
posts a "special bid quote" or a "special asked quote" for that stock at a
specified higher or lower price level than the stock's last sale price in
order to solicit counter-orders and balance supply and demand for the stock.
Investors should also be aware that the TSE may suspend the trading of
individual stocks in certain limited and extraordinary circumstances,
including, for example, unusual trading activity in that stock. As a result,
changes in the Nikkei 225 Index may be limited by price limitations or special
quotes, or by suspension of trading, on individual stocks which comprise the
Nikkei 225 Index. These limitations may, in turn, adversely affect the value
of the MITTS Securities.
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 final Treasury 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
Supplemental Redemption Amount equal to $4.1078 per Unit. This represents an
estimated yield on the MITTS Securities equal to 6.96% 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, for purposes of applying the Final Regulations to the MITTS
Securities, and is not a prediction 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 the term of the Securities based upon the
projected payment schedule for the MITTS Securities, including both the
projected Supplemental Redemption Amount and the estimated yield equal to
6.96% per annum, compounded semiannually, as determined by ML&Co. for purposes
of the application of the Final Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
Interest Deemed to Total Interest Deemed
Accrue During Accrual to Have Accrued on
Accrual Period Period (per Unit) MITTS Securities as of End
of Accrual Period
(per Unit)
<S> <C> <C>
June 3, 1997 through June 14, 1997................. $0.0206 $0.0206
June 15, 1997 through December 14, 1997............ $0.3506 $0.3712
December 15, 1997 through June 14, 1998............ $0.3590 $0.7302
June 15, 1998 through December 14, 1998............ $0.3734 $1.1036
December 15, 1998 through June 14, 1999............ $0.3864 $1.4900
June 15, 1999 through December 14, 1999............ $0.3999 $1.8899
December 15, 1999 through June 14, 2000............ $0.4138 $2.3037
June 15, 2000 through December 14, 2000............ $0.4281 $2.7318
June 15, 2001 through December 14, 2001............ $0.4585 $3.6334
December 15, 2001 through June 14, 2002............ $0.4744 $4.1078
- ---------------
Projected Supplemental Redemption Amount = $4.1078 per Unit.
</TABLE>
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
for such information to Merrill Lynch & Co., Inc., Attn: Darryl W. Colletti,
Office of the Corporate Secretary, 100 Church Street, New York, New York
10080.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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 NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Merrill Lynch EuroFund Market Index Target-Term Securities(R) due
February 28, 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.
<PAGE>
<TABLE>
<CAPTION>
The MITTS Securities: Payment at Maturity:
<S> <C>
o 100% principal protection at maturity o On the maturity date, for each unit of the MITTS
o No payments before the maturity date Securities you own, we will pay you an amount
o Senior unsecured debt securities of Merrill Lynch & Co., Inc. equal to the sum of the principal amount of each
o Linked to the value of the Merrill Lynch EuroFund, a registered mutual fund unit and an additional amount based on the
o The MITTS Securities are listed on the American Stock Exchange under the percentage increase, if any, in the total return
symbol "EFM" value of the Class B shares of the Merrill Lynch
EuroFund, reduced by an adjustment factor of
2.6% of the EuroFund's value each year, as
described in this prospectus
o ML&Co. will pay you by delivering to you a
number of Class D shares of the Merrill Lynch
EuroFund with an equal value, based upon the
market price for Class D Shares shortly before
the stated maturity of the MITTS Securities
o You will receive no less than the principal
amount of your MITTS Securities
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these MITTS 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.
------------------
Merrill Lynch & Co.
------------------
The date of this prospectus is , 199 .
- -----------
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS.............................................................3
MERRILL LYNCH & CO., INC.................................................7
RATIO OF EARNINGS TO FIXED CHARGES.......................................8
DESCRIPTION OF THE MITTS SECURITIES......................................9
THE EUROFUND INDEX......................................................16
OTHER TERMS.............................................................17
PROJECTED PAYMENT SCHEDULE..............................................21
WHERE YOU CAN FIND MORE INFORMATION.....................................22
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.......................22
PLAN OF DISTRIBUTION....................................................23
EXPERTS.................................................................23
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You
should carefully consider the following discussion of risks before deciding
whether an investment in the MITTS Securities is suitable for you.
You may not earn a return on your investment
You should be aware that at maturity you will receive no more than a
number of Class D shares of the EuroFund in an amount equal in value,
determined based on the market price of the Class D shares shortly before the
maturity date, to the principal amount, if these shares are available, if the
average value of the index over five trading days shortly before the maturity
date is less than 15.53. This will be true even if, at some time during the
life of the MITTS Securities, the value of the EuroFund index, as adjusted,
was higher than 15.53, the value of the EuroFund Index on the date the MITTS
Securities were priced for initial sale to the public, but later falls below
15.53.
Your yield on the MITTS Securities will not equal the yield on Class B Shares
or the securities held by the EuroFund
The yield you earn on the MITTS Securities, if any, will not be the
same as the yield that you would earn if you directly owned Class B Shares of
the EuroFund. In calculating the value of the EuroFund index, the AMEX will
reduce the value of the EuroFund index by 2.6% each year. This annual
reduction will be applied on a pro rata basis each calendar day. Because of
these cumulative daily reductions, the value of the EuroFund index over time
will increasingly diverge from the actual value of the Class B Shares and
their distributions had you directly owned the Class B Shares. These
reductions would not apply if you directly owned the Class B Shares of the
EuroFund.
In addition, the yield you earn on the MITTS Securities, if any, will
not be the same yield that you would earn if you directly owned the securities
held by the EuroFund. Because the EuroFund's return, as measured by the index,
is determined after deductions for annual fees and expenses and transaction
fees, the EuroFund's return, and consequently the return on the MITTS
Securities, will be less than the return you would realize if you directly
owned the securities held by the EuroFund.
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 similar investments. Your yield may be less than the yield
you would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you consider inflation or other
factors that affect the time value of money.
There may be an uncertain trading market for the MITTS Securities in the future
Although the MITTS Securities are listed on the NYSE under the symbol
"EFM," 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, you cannot assume 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 including the
appreciation, if any, of the value of the index.
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.
There are many factors affecting the trading value of the MITTS Securities
We believe that the value of the EuroFund index and by a number of
other factors will affect the trading value of the MITTS Securities. Some of
these factors interrelate in complex ways; as a result, the effect of any one
factor may offset or magnify the effect of another factor. 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.
o The value of the EuroFund index. We expect that the market value
of the MITTS Securities will depend substantially on the amount
by which the value of the EuroFund index exceeds or does not
exceed 15.53. If you choose to sell your MITTS Securities when
the value of the EuroFund index exceeds 15.53 on any given date,
you may receive substantially less than the value that would be
payable at maturity based on that value of the EuroFund index
because of the expectation that the value of the EuroFund index
will continue to fluctuate until shortly before the maturity
date when the average value of the index is determined. If you
choose to sell your MITTS Securities when the value of the
EuroFund index is below, or not sufficiently above, 15.53, you
may receive less than the principal amount per unit of MITTS
Securities and lose a substantial portion of your investment.
Political, economic and other developments that affect the
securities owned by the EuroFund may also affect the value of
the EuroFund Index and the value of the MITTS Securities.
o Interest rates. 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 affect the trading value of
the MITTS Securities . In general, if interest rates increase,
we expect that the trading value of the MITTS Securities will
decrease, and, conversely, if interest rates decrease, we expect
the trading value of the MITTS Securities will increase.
o Volatility of the EuroFund index. Volatility is the term used to
describe the size and frequency of market fluctuations.
Generally, if the volatility of the EuroFund index increases, we
expect that the trading value of the MITTS Securities will
increase. If the volatility of the EuroFund index decreases, we
expect that the trading value of the MITTS Securities will
decrease.
o Time remaining to maturity. The MITTS Securities may trade at a
value above that which would be expected based on the level of
interest rates and the EuroFund index. This difference would
reflect a "time premium" due to expectations concerning the
value of the EuroFund index during the period before February
28, 2006, the stated maturity of the MITTS Securities. However,
as the time remaining to maturity of the MITTS Securities
decreases, we expect that this time premium will decrease,
lowering the trading value of the MITTS Securities.
o Changes in our credit ratings. 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 value of the
index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the EuroFund index.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most 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, except that we expect that the effect on the trading value
of the MITTS Securities of a given increase or decrease in the EuroFund index
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.
No shareholder's rights
You will not be entitled to any rights with respect to any shares of
the EuroFund, including, without limitation, voting rights and rights to
receive any dividends or distributions on the shares, until we deliver Class D
Shares at the maturity of the MITTS Securities. For example, if the EuroFund
sets a record date for a matter to be voted on by holders of Class D Shares
prior to our delivery of Class D Shares to you, you will not be entitled to
vote on that matter. You should be aware that if Class D Shares of the
EuroFund are not available for sale to new investors immediately prior to the
stated maturity date, we will pay you the amounts due to you for your MITTS
Securities in cash instead of delivering Class D Shares on the stated maturity
date.
Amounts payable on the MITTS Securities may be limited by state law
New York State laws govern the indenture under which the MITTS
Securities are 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 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.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell shares of the
EuroFund or shares of the companies in which the EuroFund invests, for our own
accounts, for business reasons or in connection with hedging our obligations
under the MITTS Securities. These transactions could affect the EuroFund index
in a manner that would be adverse to your investment in the MITTS Securities.
Potential conflicts of interest
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult with your tax adviser.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed
charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On September 3, 1998, ML&Co. issued an aggregate principal amount of
$77,000,000 or 7,700,000 of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt
securities under the 1983 Indenture, which is more fully described in this
prospectus.
The MITTS Securities will mature on February 28, 2006.
While at maturity a beneficial owner of a MITTS Security will
receive, if available, the number of Class D Shares of the EuroFund equal in
value, determined based on the Maturity NAV, 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 before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Delivery at Maturity
At maturity, a beneficial owner of a MITTS Security will be entitled
to receive the number of Class D Shares of the EuroFund equal in value,
determined based on the Maturity NAV, to the principal amount of each MITTS
Security plus the Supplemental Redemption Amount, if any, all as provided
below. The number of Class D Shares delivered by ML&Co. will be rounded to the
nearest one-thousandth of a share. If the Ending Index Value does not exceed
the Starting Index Value, a beneficial owner of a MITTS Security will be
entitled to receive only the number of Class D Shares of the EuroFund equal in
value to the principal amount of each MITTS Security, determined based on the
Maturity NAV.
"Maturity NAV" shall mean the net asset value for the Class D Shares
of the EuroFund as calculated by the EuroFund on the first Calculation Day
during the Calculation Period; provided, however, if no Calculation Days occur
during the Calculation Period because of Market Disruption Events, then
Maturity NAV shall mean the net asset value for the Class D Shares of the
EuroFund as calculated by the EuroFund on the last scheduled Index Business
Day in the Calculation Period regardless of the occurrence of a Market
Disruption Event on that day.
Notwithstanding the foregoing, if the EuroFund is not issuing Class D
Shares to new investors in the EuroFund on the date Maturity NAV is to be
determined, ML&Co. may, in lieu of delivering Class D Shares of the EuroFund,
pay cash in an amount equal to the sum of the principal amount of the MITTS
Securities and the Supplemental Redemption Amount, if any.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<CAPTION>
<S> <C>
Principal amount of each MITTS Security ($10 per unit) X Ending Index Value - Starting Index Value
-----------------------------------------
Starting Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Index Value" equals 15.53, which was the value of the
EuroFund Index on the date the MITTS Securities were initially priced for sale
to the public (the "Pricing Date"). The value of the EuroFund Index on the
Pricing Date was set to match the net asset value of Class B Shares of the
EuroFund on the Pricing Date.
The "Ending Index Value" will be determined by the calculation agent
and will the equal the closing value of the EuroFund Index determined on the
first Calculation Day during the Calculation Period. If no Calculation Days
occur during the Calculation Period because of Market Disruption Events, then
the Ending Index Value will equal the closing value of the EuroFund Index
determined on the last scheduled Index Business Day in the Calculation Period
regardless of the occurrence of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are
open for trading and the AMEX calculates and publishes the EuroFund Index.
"Market Disruption Event" means the EuroFund
o is unable or otherwise fails to issue a net asset value for any
series of shares of the EuroFund after the close of business on
the NYSE but before 11:00 p.m., New York City time on the same
day or
o suspends redemption of shares of the EuroFund.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values:
o the Ending Index Value used to calculate the Supplemental
Redemption Amount;
o the percentage change from the Starting Index Value to the Ending
Index Value;
o the total value of Class D Shares deliverable at maturity for
each $10 principal amount of MITTS Securities;
o the total rate of return to beneficial owners of the MITTS
Securities;
o the pretax annualized rate of return on the MITTS Securities;
and
o the pretax annualized rate of return of class B Shares.
<TABLE>
<CAPTION>
Total Value of
Class D Shares
Percentage Change Deliverable at Pretax Pretax
of Ending Index Maturity per $10 Total Rate of Annualized Rate Annualized Rate
Hypothetical Value Principal Return on the of Return on the of Return of
Ending Index Over the Starting Amount of MITTS MITTS Class B
Value Index Value MITTS Securities Securities Securities(1) Shares(1)(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3.11 -80.00% $10.00 0.00% 0.00% -18.02%
6.21 -60.00% $10.00 0.00% 0.00% -9.40%
9.32 -40.00% $10.00 0.00% 0.00% -4.17%
12.42 -20.00% $10.00 0.00% 0.00% -0.38%
15.53(3) 0.00% $10.00 0.00% 0.00% 2.62%
18.64 20.00% $12.00 20.00% 2.45% 5.10%
21.74 40.00% $14.00 40.00% 4.54% 7.22%
24.85 60.00% $16.00 60.00% 6.37% 9.07%
27.95 80.00% $18.00 80.00% 8.00% 10.72%
31.06 100.00% $20.00 100.00% 9.47% 12.21%
34.17 120.00% $22.00 120.00% 10.80% 13.56%
37.27 140.00% $24.00 140.00% 12.03% 14.81%
40.38 160.00% $26.00 160.00% 13.17% 15.96%
43.48 180.00% $28.00 180.00% 14.22% 17.03%
46.59 200.00% $30.00 200.00% 15.21% 18.03%
</TABLE>
- -------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an initial investment of a fixed amount in the Series B Shares
of the EuroFund;
(b) a reinvestment of all cash dividends and distributions in the
Series B Shares of the EuroFund;
(c) no transaction fees or expenses;
(d) an investment term from September 3, 1998 to February 28, 2006; and
(e) a final EuroFund Index value equal to the Ending Index Value.
(3) This is the Starting Index Value.
The above figures are for purposes of illustration only. The actual
investment term, Supplemental Redemption Amount received by investors, and the
resulting total and pretax annualized rate of return will depend entirely on
the Starting Index Value and the actual Ending Index Value determined by the
calculation agent as provided in this prospectus.
Adjustments to the EuroFund Index
If at any time the AMEX changes the method of calculating the
EuroFund Index, or the index's value changes, in any material respect, or if
the EuroFund Index is in any other way modified so that the EuroFund Index
does not, in the opinion of the calculation agent, fairly represent the value
of the EuroFund Index had the changes or modifications not been made, then,
from and after that time, the calculation agent shall, at the close of
business in New York, New York, on each date that the closing value with
respect to the Ending Index Value is to be calculated, make any adjustments
as, in the good faith judgment of the calculation agent, may be necessary in
order to arrive at a calculation of a value of an index comparable to the
EuroFund Index as if any changes or modifications had not been made, and
calculate the closing value with reference to the EuroFund Index, as adjusted.
Accordingly, if the method of calculating the EuroFund Index is modified so
that the value of the EuroFund Index is a fraction or a multiple of what it
would have been if it had not been modified, for example, due to a split in
the EuroFund Index, then the calculation agent shall adjust the EuroFund Index
in order to arrive at a value of the EuroFund Index as if it had not been
modified, for example, as if the split had not occurred.
Discontinuance of the EuroFund Index
If the AMEX discontinues publication of the EuroFund Index and the
AMEX or another entity publishes a successor or substitute index that the
calculation agent determines, in its sole discretion, to be comparable to the
EuroFund Index (a "Successor Index") then, upon the calculation agent's
notification of its determination to the Trustee and ML&Co., the calculation
agent will substitute the Successor Index as calculated by the AMEX or any
other entity for the EuroFund Index and calculate the Ending Index Value as
described above under "Delivery at Maturity". Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If the AMEX discontinues publication of the EuroFund Index and a
Successor Index is not selected by the calculation agent or is no longer
published on any of the Calculation Days, the value to be substituted for the
EuroFund Index for any Calculation Day used to calculate the Supplemental
Redemption Amount at maturity will be a value computed by the calculation
agent for each Calculation Day in accordance with the procedures last used to
calculate the EuroFund Index before any discontinuance. If a Successor Index
is selected or the calculation agent calculates a value as a substitute for
the EuroFund Index as described below, the Successor Index or value shall be
substituted for the EuroFund Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the Index before the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Adjusted Ending Value and
o a determination by the calculation agent that a Successor Index
is available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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 these values to be made available by
telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the 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 of a MITTS Security, will be equal to the
principal amount and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. 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 , at the rate of 5.97% 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 are to 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 Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
<PAGE>
THE EUROFUND INDEX
Calculation of the EuroFund Index
The AMEX has set the starting value of the EuroFund Index to equal
the net asset value of one Class B Share of the EuroFund on the Pricing Date.
Thereafter, the AMEX will calculate the value of the EuroFund Index on any day
by multiplying the current Index Share Multiplier by the most recent net asset
value per Class B Share announced by the EuroFund. For purposes of this
calculation, any declared but unpaid Cash Distribution ,as defined below, will
be added back and included in the "net asset value" of the EuroFund from and
including the ex-dividend date related to any Cash Distribution to but
excluding the date that any Cash Distribution is paid to holders of the Class
B Shares.
The value of the EuroFund Index is reported on the AMEX and Bloomberg
under the symbel "EFI" and on Reuters under the symbol ".EFI."
Calculation of the Index Share Multiplier
The Index Share Multiplier shall initially be set to one,
representing one Class B Share of the EuroFund. If the EuroFund distributes
any cash dividends or distributions of any character to holders of the Class B
Shares (a "Cash Distribution"), then the Index Share Multiplier shall be
increased by a percentage of Class B Shares equal to the Cash Distribution
divided by the net asset value for Class B Shares calculated by the EuroFund
on the date that any Cash Distribution is paid to holders of Class B Shares.
If a Market Disruption Event has occurred on the day any Cash Distribution is
paid, the adjustment to the Index Share Multiplier shall be postponed until
the next succeeding Index Business Day on which a Market Disruption Event has
not occurred. The Index Share Multiplier shall also be adjusted by the AMEX to
reflect certain stock splits, reverse stock splits or share dividends that may
occur with respect to the Class B Shares.
Each calendar day, the AMEX shall reduce the value of the EuroFund
Index by a percentage equal to 2.6% divided by 365 and reset the Index Share
Multiplier so that the product of the net asset value and the revised Index
Share Multiplier equals the value of the EuroFund Index so reduced. If a
Market Disruption Event occurs on any day on which the EuroFund Index value is
to be determined, then the foregoing adjustment to the Index Share Multiplier
shall occur on the next succeeding Index Business Day on which a Market
Disruption Event has not occurred.
The EuroFund
The EuroFund has stated that its investment objectives are to seek
capital appreciation primarily through investment in equities of corporations
domiciled in European countries. Current income from dividends and interest
will not be an important consideration in selecting portfolio securities. The
EuroFund has stated that it anticipates that under normal market conditions at
least 80% of its net assets will consist of European corporate securities,
primarily common stocks and securities convertible into common stock.
The EuroFund is a diversified, open-end management investment company
under the Investment Company Act.
The EuroFund has publicly disclosed its intention to distribute all
of its net investment income, if any. The EuroFund has indicated that
dividends from the net investment income are paid at least annually and all
net realized capital gains, if any, are distributed to the shareholders of the
EuroFund annually.
The EuroFund is subject to the registration requirements of the
Securities Act and the Investment Company Act. Accordingly, the EuroFund files
prospectuses, statements of additional information, reports, proxy and other
information statements and other information with the SEC. ML&Co. makes no
representation or warranty as to the accuracy or completeness of that
information.
The foregoing summary of the policies of the EuroFund reflect certain
investment restrictions which are subject to change by shareholders of the
EuroFund at any time.
The EuroFund is managed by Merrill Lynch Asset Management, L.P., an
affiliate of ML&Co. The EuroFund itself is governed by an independent board of
directors.
The EuroFund 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 Class B or Class D shares of the EuroFund. The information
contained in this prospectus regarding the EuroFund has been derived from the
publicly available documents described above. ML&Co. has not participated in
the preparation of these documents or made any due diligence inquiries with
respect to the EuroFund in connection with the offering of the MITTS
Securities. ML&Co. makes no representation that these publicly available
documents or any other publicly available information regarding the EuroFund
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 EuroFund index,
and therefore the trading price of the MITTS securities, have been publicly
disclosed. Subsequent disclosure of any events or the disclosure of or failure
to disclose material future events concerning the EuroFund could affect the
supplemental redemption amount to be received at the stated maturity date and
therefore the trading value of the MITTS Securities.
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.
<PAGE>
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 $5.5344 per
unit, the "Projected Supplemental Redemption Amount". This represents an
estimated yield on the MITTS Securities equal to 5.97% per annum (compounded
semiannually).
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 a term of seven years and six months for the
MITTS Securities based upon the projected payment schedule for the MITTS
Securities, including both the Projected Supplemental Redemption Amount and
the estimated yield equal to 5.97% per annum, compounded semiannually, as
determined by ML&Co. for purposes of applying the Final Regulations to the
MITTS Securities:
<PAGE>
<TABLE>
<CAPTION>
Total Interest Deemed
Interest Deemed to to Have Accrued on
Accrue During MITTS Securities as of
Accrual Period End of Accrual Period
Accrual Period (per unit) (per unit)
-------------- ------------------ ----------------------
<S> <C> <C>
September 3, 1998 through February 28, 1999................... $0.2910 $0.2910
March 1, 1999 through August 28, 1999......................... $0.3072 $0.5982
August 29, 1999 through February 28, 2000..................... $0.3164 $0.9146
February 29, 2000 through August 28, 2000..................... $0.3258 $1.2404
August 29, 2000 through February 28, 2001..................... $0.3355 $1.5759
March 1, 2001 through August 28, 2001......................... $0.3455 $1.9214
August 29, 2001 through February 28, 2002..................... $0.3559 $2.2773
March 1, 2002 through August 28, 2002......................... $0.3665 $2.6438
August 29, 2002 through February 28, 2003..................... $0.3774 $3.0212
March 1, 2003 through August 28, 2003......................... $0.3887 $3.4099
August 29, 2003 through February 28, 2004..................... $0.4003 $3.8102
February 29, 2004 through August 28, 2004..................... $0.4122 $4.2224
August 29, 2004 through February 28, 2005..................... $0.4245 $4.6469
March 1, 2005 through August 28, 2005......................... $0.4372 $5.0841
August 29, 2005 through February 28, 2006..................... $0.4503 $5.5344
</TABLE>
Projected Supplemental Redemption Amount = $5.5344 per unit.
Prospective investors in the MITTS 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 for this information to Merrill Lynch & Co.,
Inc., Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church
Street, 12th Floor, New York, New York 10080-6512.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
<PAGE>
The information in this prospectus is not complete and may
be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
S&P 500(R) Market Index Target-Term Securities(R) due September 28, 2005
"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.
<PAGE>
<TABLE>
<CAPTION>
The MITTS Securities:
<S> <C>
o 100% principal protection at maturity Payment at Maturity:
o No payments before the maturity date o On the maturity date, for each unit of the MITTS
o Senior unsecured debt securities of Merrill Lynch & Co., Inc. Securities you own, we pay you an amount equal to the sum
o Linked to the value of the S&P 500 Index of the principal amount of each unit and an additional
o The MITTS Securities are listed on the New amount based on the percentage increase, if any, in the
York Stock Exchange under the symbol "MIJ" value of the index, adjusted as described in this
prospectus
o You will receive no less than the principal amount of your
MITTS Securities
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 1999.
- ------------
"MITTS" and "Market Index Target-Term Securities" are registered service
marks owned by Merrill Lynch & Co., Inc.
"Standard & Poor's(R)", "Standard & Poor's 500", "S&P 500(R)", "S&P(R)"
and "500", are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Merrill Lynch Capital Services, Inc. and ML&Co. is an
authorized sublicensee.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS...............................................................3
MERRILL LYNCH & CO., INC...................................................6
RATIO OF EARNINGS TO FIXED CHARGES.........................................7
DESCRIPTIONOF THE MITTS SECURITIES.........................................8
THE INDEX.................................................................11
OTHER TERMS...............................................................11
PROJECTED PAYMENT SCHEDULE................................................11
WHERE YOU CAN FIND MORE INFORMATION.......................................11
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.........................11
PLAN OF DISTRIBUTION......................................................11
EXPERTS...................................................................11
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You
should carefully consider the following discussion of risks before deciding
whether an investment in the MITTS Securities is suitable for you.
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 date is less than
1,066.09, the value of the index on the date the MITTS Securities were priced.
This will be true even if at some time during the life of the MITTS
Securities, the value of the index, as adjusted, was higher than 1,066.09 but
later falls below 1,066.09.
Your yield may be lower than the yield on a standard debt security of
comparable maturity
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you take into account factors
that affect the time value of money.
Your return will not reflect the return of owning the stocks underlying the
Index
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks because of the reduction caused by the adjustment factor
described in this prospectus and because the index is calculated by reference
to the prices of the common stocks included in the index without taking into
consideration the value of dividends paid on those stocks.
There may be an uncertain trading market for the MITTS Securities in the future
Although the MITTS Securities are listed on the NYSE under the symbol
"MIJ", 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, you cannot assume that 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
appreciation, if any, of the value of the index.
Factors affecting trading value of the MITTS Securities
We believe that the value of the index and a number of other factors
will affect the trading value of the MITTS Securities . Some of these factors
are interrelated in complex ways; as a result, the effect of any one factor
may be offset or magnified by the effect of another factor. The following
paragraphs describe the expected impact on the trading value of the MITTS
Securities given a change in a specific factor, assuming all other conditions
remain constant.
o Index Value. We expect that the market value of the MITTS Securities
will depend substantially on the amount by which the index, as
reduced by the adjustment factor, exceeds 1,066.09. If you choose to
sell your MITTS Securities when the value of the index, as reduced by
the adjustment factor, exceeds 1,066.09, you may receive
substantially less than the amount that would be payable at maturity
based on this value because of the expectation that the index will
continue to fluctuate until shortly before the maturity date when the
average value of the index is determined. If you choose to sell your
MITTS Securities when the value of the index is below 1,066.09, you
may receive less than the $10 principal amount per unit of MITTS
Securities. In general, rising U.S. dividend rates, or dividends per
share, may increase the value of the index while falling U.S.
dividend rates may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying the
index may also affect the value of the index and the value of the
MITTS Securities.
o Interest Rates. Because we will pay, at a minimum, the principal
amount per unit of MITTS Securities at maturity, we expect that
changes in interest rates will affect 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 the trading
value of the MITTS Securities will increase. Interest rates may also
affect the U.S. economy and, in turn, the value of the index. Rising
interest rates may lower the value of the index and, thus, the MITTS
Securities. Falling interest rates may increase the value of the
index and, thus, may increase the value of the MITTS Securities.
o Volatility of the Index. Volatility is the term used to describe the
size and frequency of market fluctuations. Generally, if the
volatility of the index increases, we expect that the trading value
of the MITTS Securities will increase. If the volatility of the index
decreases, we expect that the trading value of the MITTS Securities
will decrease.
o Time Remaining to Maturity. The MITTS Securities may trade at a value
above that which would be expected based on the level of interest
rates and the index. This difference will reflect a "time premium"
due to expectations concerning the value of the index during the
period prior to the stated maturity of the MITTS Securities. However,
as the time remaining to the stated maturity of the MITTS Securities
decreases, we expect that this time premium will decrease, lowering
the trading value of the MITTS Securities.
o Dividend Yields. If dividend yields on the stocks included in the
index increase, we expect that the value of the MITTS Securities will
decrease. Conversely, if dividend yields on the stock comprising the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in Our Credit Ratings. 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 value of the index at maturity, an
improvement in our credit ratings will not reduce investment risks
related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most 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 a given increase in the value of the index 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.
Amounts payable on the MITTS Securities may be limited by state law
New York State law governs the senior 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.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the stocks
underlying the index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
Potential conflicts of interest
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations
It is suggested that you should reach an investment decision
regarding the MITTS Securities only after carefully considering the
suitability of the MITTS Securities in the light of your particular
circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax advisor.
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to
fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On September 29, 1998, ML&Co. issued $82,000,000 aggregate principal
amount of S&P 500 MITTS Securities due September 28, 2005. The MITTS
Securities were issued as a series of senior debt securities under the 1983
Indenture which is more fully described in this prospectus.
The MITTS Securities will mature on September 28, 2005.
While at maturity ML&Co. will pay a beneficial owner of a MITTS
Security the principal amount of each MITTS Security plus the Supplemental
Redemption Amount described below, if any, ML&Co. will make no other payment
of interest, periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at
the option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, ML&Co. will pay a beneficial owner of a MITTS
Security the principal amount of each unit plus the Supplemental Redemption
Amount, if any, all as provided below. If the Adjusted Ending Value does not
exceed the Starting Value, ML&Co. will pay a beneficial owner of a MITTS
Security only the principal amount of its MITTS Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<CAPTION>
<S> <C>
Principal Amount of each MITTS Security ($10 per Unit) x (Adjusted Ending Value - Starting Value)
(--------------------------------------)
( Starting Value )
</TABLE>
provided, however, that in no event will the Supplemental
Redemption Amount be less than zero.
The "Starting Value" equals 1,066.09.
The "Adjusted Ending Value" will be determined by the calculation
agent and will equal the average or arithmetic mean of the closing values of
the S&P 500 Index (the "Index") as adjusted by the Adjustment Factor (the
"Adjusted Index Value") determined on each of the first five Calculation Days
during the Calculation Period. If there are fewer than five Calculation Days,
then the Adjusted Ending Value will equal the average or arithmetic mean of
the closing values of the Adjusted Index Value on these Calculation Days. If
there is only one Calculation Day, then the Adjusted Ending Value will equal
the closing value of the Adjusted Index Value on that Calculation Day. If no
Calculation Days occur during the Calculation Period, then the Adjusted Ending
Value will equal the closing value of the Adjusted Index Value determined on
the last scheduled Index Business Day in the Calculation Period, regardless of
the occurrence of a Market Disruption Event on that day.
The "Adjustment Factor" equals 1.9% per annum and will be prorated
based on a 365-day year and applied each calendar day during the term of the
MITTS Securities to reduce the Index. As a result of the application of the
Adjustment Factor, the adjusted value of the Index used to calculate your
Supplemental Redemption Amount at the stated maturity of the MITTS Securities
will be approximately 12.48% less than the actual Index value on any day
during the Calculation Period.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
For purposes of determining the Adjusted Ending Value, an "Index
Business Day" is a day on which the NYSE and the AMEX are open for trading and
the Index or any Successor Index, as defined on page 10 below, is calculated
and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
Hypothetical Returns
The following table illustrates, for a range of hypothetical values
of the Index during the Calculation Period,
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 total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks
underlying the Index, which includes an assumed
aggregate dividend yield of 1.49% per annum, as more
fully described below.
<TABLE>
<CAPTION>
Hypothetical Total Amount Pretax
Index Adjusted Ending Payable at Total Rate Annualized Pretax Annualized
Value During the Value Percentage Maturity of Return Rate of Rate of Return of
Calculation Adjusted Change Over the per unit of on the Return on the Stocks Underlying
Period Ending Value Starting Value MITTS Securities MITTS Securities MITTS Securities(1) the Index(1)(2)
<S> <C> <C> <C> <C> <C> <C>
533.05 466.49 -56.24% $10.00 0.00% 0.00% -8.16%
639.65 559.79 -47.49% $10.00 0.00% 0.00% -5.68%
746.26 653.09 -38.74% $10.00 0.00% 0.00% -3.55%
852.87 746.39 -29.99% $10.00 0.00% 0.00% -1.68%
959.48 839.68 -21.24% $10.00 0.00% 0.00% -0.02%
1,066.09(3) 932.98 -12.49% $10.00 0.00% 0.00% 1.49%
1,172.70 1,026.28 -3.73% $10.00 0.00% 0.00% 2.86%
1,279.31 1,119.58 5.02% $10.50 5.02% 0.70% 4.13%
1,385.92 1,212.88 13.77% $11.38 13.77% 1.85% 5.30%
1,492.53 1,306.17 22.52% $12.25 22.52% 2.91% 6.39%
1,599.14 1,399.47 31.27% $13.13 31.27% 3.91% 7.41%
1,705.74 1,492.77 40.02% $14.00 40.02% 4.85% 8.38%
1,812.35 1,586.07 48.77% $14.88 48.77% 5.74% 9.29%
1,918.96 1,679.37 57.53% $15.75 57.53% 6.58% 10.15%
2,025.57 1,772.66 66.28% $16.63 66.28% 7.38% 10.97%
2,132.18 1,865.96 75.03% $17.50 75.03% 8.14% 11.75%
2,238.79 1,959.26 83.78% $18.38 83.78% 8.86% 12.50%
2,345.40 2,052.56 92.53% $19.25 92.53% 9.55% 13.21%
2,452.01 2,145.86 101.28% $20.13 101.28% 10.22% 13.90%
2,558.62 2,239.16 110.03% $21.00 110.03% 10.86% 14.56%
2,665.23 2,332.45 118.79% $21.88 118.79% 11.47% 15.19%
</TABLE>
- -------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) a constant dividend yield of 1.49% per annum, paid
quarterly from the date of initial delivery of MITTS
Securities, applied to the value of the Index at the end of
each quarter assuming this value increases or decreases
linearly from the Starting Value to the hypothetical Index
value during the Calculation Period;
(b) no transaction fees or expenses;
(c) an investment term from September 23, 1998 to September 28,
2005; and
(d) a final Index value equal to the hypothetical Index value
during the Calculation Period.
(3) The Starting Value equals 1,066.09.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
annualized rate of return will depend entirely on the actual Adjusted Ending
Value determined by the calculation agent as provided in this prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had any changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Adjusted Ending Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if any changes or modifications had not been made,
and calculate the closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of the Index is a fraction or a multiple of what it would have been if
it had not been modified, due to a split in the Index, then the calculation
agent shall adjust the Index in order to arrive at a value of the Index as if
it had not been modified for example, as if the split had not occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation 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, in
(1) futures contracts related to the Index, or options on
futures contracts, which are traded on any major U.S. exchange or
(2) option contracts related to the Index which are traded on
any major U.S. 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".
A limitation on the hours in a trading day and/or number of days of
trading will not constitute a Market Disruption Event if it results from an
announced change in the regular business hours of the relevant exchange.
Discontinuance of the Index
If S&P discontinues publication of the Index and S&P or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitue index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of the determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by S&P or any other entity for the Index. Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If S&P discontinues publication of the Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before the discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists. If the calculation agent calculates a value as a
substitute for the Index, "Index Calculation Day" shall mean any day on which
the calculation agent is able to calculate the value.
If S&P discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Adjusted Ending Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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.
Despite these alternative arrangements, discontinuance of the
publication of the 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 per unit, will be equal to the principal
amount per unit and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment 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 per unit 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 of the MITTS Securities, whether at the
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 5.78% 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 are to 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 Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components,
are derived from publicly available information prepared by S&P as of March
22, 1999. ML&Co. and MLPF&S do not assume any responsibility for the accuracy
or completeness of the information.
The Index is published by S&P, and is intended to provide an indication
of the pattern of common stock price movement. The calculation of the value of
the Index, discussed below in further detail, is based on the relative value
of the aggregate Market Value of the common stocks of 500 companies as of a
particular time compared to the aggregate average Market Value of the common
stocks of 500 similar companies during the base period of the years 1941
through 1943. As of March 22, 1999 the 500 companies included in the Index
represented approximately 78% of the aggregate Market Value of common stocks
traded on the NYSE; however, these 500 companies are not the 500 largest
companies listed on the NYSE and not all of these 500 companies are listed on
the exchange. As of March 22, 1999, the aggregate Market Value of the 500
companies included in the Index represented approximately 79% of the aggregate
Market Value of United States domestic, public companies. S&P chooses
companies for inclusion in the Index with the aim of achieving a distribution
by broad industry groupings that approximates the distribution of these
groupings in the common stock population of the NYSE, which S&P uses as an
assumed model for the composition of the total market. Relevant criteria
employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to
which it is assigned,
o the extent to which the market price of that company's
common stock is generally responsive to changes in the
affairs of the respective industry, and
o the Market Value and trading activity of the common stock of that
company.
Four main groups of companies comprise the Index, with the number of
companies currently included in each group indicated in parentheses:
Industrials (380), Utilities (39), Transportation (10) and Financial (71). S&P
may from time to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated above.
The Index does not reflect the payment of dividends on the stocks
underlying it. Because of this and the application of the Adjustment Factor,
the return based on the MITTS Securities will not be the same return you would
receive if you were to purchase the underlying stocks and hold them for a
period equal to the maturity of the MITTS Securities.
Computation of the Index
S&P currently computes the Index as of a particular time as follows:
(a) the product of the market price per share and the number
of then outstanding shares of each component stock is determined at a
particular time (the "Market Value" of the stock);
(b) the Market Value of all component stock as of that time
are aggregated;
(c) the mean average of the Market Values as of each week in
the base period of the years 1941 through 1943 of the common stock of
each company in a group of 500 substantially similar companies is
determined;
(d) the mean average Market Values of all these common
stocks over the base period are aggregated (the aggregate amount
being referred to as the "Base Value");
(e) the current aggregate Market Value of all component stocks
is divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is
multiplied by ten.
While S&P currently employs the above methodology to calculate the
Index, no assurance can be given that S&P will not modify or change this
methodology in a manner that may affect the Supplemental Redemption Amount, if
any, payable to beneficial owners of MITTS Securities upon maturity or
otherwise.
S&P adjusts the foregoing formula to negate the effects of changes in
the Market Value of component stocks that are determined by S&P to be
arbitrary or not due to true market fluctuations. Changes may result from
causes such as:
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities
of ML&Co.,
o the substitution by S&P of particular component stocks in the Index,
and other reasons.
In these cases, S&P first recalculates the aggregate Market Value of
all component stocks, after taking account of the new market price per share
of the particular component stock or the new number of outstanding shares
thereof or both, and then determines the New Base Value in accordance with the
following formula:
Old Base Value X New Market Value = New Base Value
----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any
change in the aggregate Market Value of all component stocks resulting from
the causes referred to above to the extent necessary to negate the effects of
these causes upon the Index.
Historical Data on the Index
The following table sets forth the value of the Index at the end of
each month, in the period from January 1990 through February 1999. These
historical data on the Index are not necessarily indicative of the future
performance of the Index or what the value of the MITTS Securities may be. Any
historical upward or downward trend in the value of the Index during any
period set forth below is not any indication that the Index is more or less
likely to increase or decrease at any time during the term of the MITTS
Securities.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
April......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
May........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
June.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
July.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
August........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
September..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
October....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
November...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
December...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
</TABLE>
License Agreement
Standard & Poor's ("S&P") does not guarantee the accuracy and/or the
completeness of the Index or any data included in the Index. S&P makes no
warranty, express or implied, as to results to be obtained by ML&CO., MLPF&S,
holders of the MITTS Securities, or any other person or entity from the use of
the S&P Index or any data included in the Index in connection with the rights
licensed under the license agreement described in this prospectus or for any
other use. S&P makes no express or implied warranties, and hereby expressly
disclaims all warranties of merchantability or fitness for a particular
purpose with respect to the S&P Index or any data included in the Index.
Without limiting any of the information above, in no event shall S&P have any
liability for any special, punitive, indirect or consequential damage,
including lost profits, even if notified of the possibility of these damages.
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with particular securities, including
the MITTS Securities, and ML&Co. is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this prospectus:
"The MITTS Securities 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 the ability of the Index to track general stock market
performance. S&P's only relationship to Merrill Lynch Capital Services, Inc.
and ML&Co. (other than transactions entered into in the ordinary course of
business) is the licensing of certain servicemarks and trade names of S&P and
of the Index which is determined, composed and calculated by S&P without
regard to ML&Co. or the MITTS Securities. S&P has no obligation to take the
needs of ML&Co. or the holders of the MITTS Securities into consideration in
determining, composing or calculating the Index. S&P is not responsible for
and has not participated in the determination of the timing of the sale of the
MITTS Securities, prices at which the MITTS Securities are to initially be
sold, or quantities of the MITTS Securities to be issued or in the
determination or calculation of the equation by which the MITTS Securities are
to be converted into cash. S&P has no obligation or liability in connection
with the administration, marketing or trading of the MITTS Securities."
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 such 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.
<PAGE>
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 $4.8955 per
unit (the "Projected Supplemental Redemption Amount"). This represents an
estimated yield on the MITTS Securities equal to 5.78% 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, 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 the term of the MITTS Securities based upon
the projected payment schedule for the MITTS Securities (including both the
Projected Supplemental Redemption Amount and the estimated yield equal to
5.78% per annum (compounded semiannually)) as determined by ML&Co. for
purposes of applying the Final Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
Total Interest
Deemed to
Have Accrued
On the MITTS
Interest Deemed to Securities
Accrue During as of End of
Accrual Period Accrual Period
Accrual Period (per unit) (per unit)
<S> <C> <C>
September 29, 1998 through March 28, 1999.................. $0.2850 $0.2850
March 29, 1999 through September 28, 1999.................. $0.2972 $0.5822
September 29, 1999 through March 28, 2000.................. $0.3058 $0.8880
March 29, 2000 through September 28, 2000.................. $0.3147 $1.2027
September 29, 2000 through March 28, 2001.................. $0.3238 $1.5265
March 29, 2001 through September 28, 2001.................. $0.3331 $1.8596
September 29, 2001 through March 28, 2002.................. $0.3427 $2.2023
March 29, 2002 through September 28, 2002.................. $0.3527 $2.5550
September 29, 2002 through March 28, 2003.................. $0.3628 $2.9178
March 29, 2003 through September 28, 2003.................. $0.3733 $3.2911
September 29, 2003 through March 28, 2004.................. $0.3842 $3.6753
March 29, 2004 through September 28, 2004.................. $0.3952 $4.0705
September 29, 2004 through March 28, 2005.................. $0.4066 $4.4771
March 29, 2005 through September 28, 2005.................. $0.4184 $4.8955
</TABLE>
- ---------
Projected Supplemental Redemption Amount = $4.8955 per unit.
Prospective investors in the MITTS 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 for the information to Merrill Lynch & Co., Inc.,
Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street,
12th Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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;
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 and March 26, 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 or after the date of this initial registration statement
and before the effectiveness of the registration statement:
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 NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
S&P 500(R) Market Index Target-Term Securities SM
due July 1, 2005
"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
.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the MITTS Securities you
o No payments before the maturity date own, we will pay you an amount equal to the sum of the principal
o Senior unsecured debt securities of Merrill amount of each unit and an additional amount based on the
Lynch & Co., Inc. percentage increase, if any, in the value of the index, adjusted
o Linked to the value of the S&P 500 Index as described in this prospectus.
o The MITTS Securities are listed on the American o You will receive no less than the principal amount of your MITTS
Stock Exchange under the symbol "MLF". Securities
</TABLE>
<PAGE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 1999.
- --------------------
"MITTS" and "Market Index Target-Term Securities" are registered service mark
owneds by Merrill Lynch & Co., Inc. "Standard & Poor's(R)", "Standard & Poor's
500", "S&P 500(R)", "S&P(R)" and "500", are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Merrill Lynch Capital
Services, Inc. and ML&Co. is an authorized sublicensee.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
RISK FACTORS......................................................................................................3
You may not earn a return on your investment...................................................................3
Your yield may be lower than the yield on a standard debt security of comparable maturity......................3
Your return will not reflect the return of owning the stocks underlying the index..............................3
There may be an uncertain trading market for the MITTS Securities in the future................................3
Factors affecting trading value of the MITTS Securities........................................................3
Amounts payable on the MITTS Securities may be limited by state law............................................4
Purchases and sales by us and our affiliates may affect your return............................................5
Potential conflicts of interest................................................................................5
Other Considerations...........................................................................................5
MERRILL LYNCH & CO., INC.........................................................................................6
RATIO OF EARNINGS TO FIXED CHARGES................................................................................7
DESCRIPTION OF THE MITTS SECURITIES...............................................................................8
Payment at Maturity............................................................................................8
Adjustments to the Index; Market Disruption Events............................................................11
Discontinuance of the Index...................................................................................11
Events of Default and Acceleration............................................................................12
Global Securities.............................................................................................12
Same-Day Settlement and Payment...............................................................................15
THE INDEX........................................................................................................15
Computation of the Index......................................................................................15
Historical Data on the Index..................................................................................17
License Agreement.............................................................................................17
OTHER TERMS......................................................................................................18
Limitations Upon Liens........................................................................................18
Limitation on Disposition of Voting Stock of, and Merger and Sale of Assets by, MLPF&S........................19
Merger and Consolidation......................................................................................19
Modification and Waiver.......................................................................................19
Events of Default.............................................................................................20
PROJECTED PAYMENT SCHEUDLE.......................................................................................22
WHERE YOU CAN FIND MORE INFORMATION..............................................................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC................................................................23
PLAN OF DISTRIBUTION.............................................................................................24
EXPERTS..........................................................................................................24
</TABLE>
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the MITTS Securities is suitable for you.
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 date is less than 1,119.49,
the value of the index on the date the MITTS Securities were priced. This will
be true even if at some time during the life of the MITTS Securities, the
value of the index, as adjusted, was higher than 1,119.49 but later falls
below 1,119.49.
Your yield may be lower than the yield on a standard debt security of comparable
maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. with the same maturity date. Your investment may not reflect
the full opportunity cost to you when you take into account factors that
affect the time value of money.
Your return will not reflect the return of owning the stocks underlying the
index
Your return will not reflect the return you would realize if you actually
owned the stocks underlying the index and received the dividends paid on those
stocks because of the reduction caused by the adjustment factor described in
this prospectus and because the index is calculated by reference to the prices
of the common stocks included in the index without taking into consideration
the value of dividends paid on those stocks.
There may be an uncertain trading market for the MITTS Securities in the future
Although the MITTS Securities are listed on the AMEX under the symbol
"MLF", 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, you cannot assume that 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
appreciation, if any, of the value of the index.
Factors affecting trading value of the MITTS Securities
We believe that the value of the index and a number of other factors will
affect the trading value of the MITTS Securities . Some of these factors are
interrelated in complex ways; as a result, the effect of any one factor may be
offset or magnified by the effect of another factor. The following paragraphs
describe the expected impact on the trading value of the MITTS Securities
given a change in a specific factor, assuming all other conditions remain
constant.
o Index Value. We expect that the market value of the MITTS Securities will
depend substantially on the amount by which the index, as reduced by the
adjustment factor, exceeds 1,119.49. If you choose to sell your MITTS
Securities when the value of the index, as reduced by the adjustment
factor, exceeds 1,119.49, you may receive substantially less than the
amount that would be payable at maturity based on this value because of
the expectation that the index will continue to fluctuate until shortly
before the maturity date when the average value of the index is
determined. If you choose to sell your MITTS Securities when the value of
the index is below 1,119.49, you may receive less than the $10 principal
amount per unit of MITTS Securities. In general, rising U.S. dividend
rates, or dividends per share, may increase the value of the index while
falling U.S. dividend rates may decrease the value of the index.
Political, economic and other developments that affect the stocks
underlying the index may also affect the value of the index and the value
of the MITTS Securities.
o Interest Rates. Because we will pay, at a minimum, the principal amount
per unit of MITTS Securities at maturity, we expect that changes in
interest rates will affect 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 the trading value of the MITTS
Securities will increase. Interest rates may also affect the U.S. economy
and, in turn, the value of the index. Rising interest rates may lower the
value of the index and, thus, the MITTS Securities. Falling interest
rates may increase the value of the index and, thus, may increase the
value of the MITTS Securities.
o Volatility of the Index. Volatility is the term used to describe the size
and frequency of market fluctuations. Generally, if the volatility of the
index increases, we expect that the trading value of the MITTS Securities
will increase. If the volatility of the index decreases, we expect that
the trading value of the MITTS Securities will decrease.
o Time Remaining to Maturity. The MITTS Securities may trade at a value
above that which would be expected based on the level of interest rates
and the index. This difference will reflect a "time premium" due to
expectations concerning the value of the index during the period prior to
the stated maturity of the MITTS Securities. However, as the time
remaining to the stated maturity of the MITTS Securities decreases, we
expect that this time premium will decrease, lowering the trading value
of the MITTS Securities.
o Dividend Yields. If dividend yields on the stocks included in the index
increase, we expect that the value of the MITTS Securities will decrease.
Conversely, if dividend yields on the stock comprising the index
decrease, we expect that the value of the MITTS Securities will increase.
o Changes in Our Credit Ratings. 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 value
of the index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 a given increase in the value of the index 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.
Amounts payable on the MITTS Securities may be limited by state law
New York State law governs the senior 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.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the stocks
underlying the index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
Potential conflicts of interest
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations
It is suggested that you should reach an investment decision regarding
the MITTS Securities only after carefully considering the suitability of the
MITTS Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult your tax advisor.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On June 26, 1998, ML&Co. issued $285,000,000 aggregate principal amount
of S&P 500 MITTS Securities due July 1, 2005. The MITTS Securities were issued
as a series of Senior Debt Securities under the 1983 Indenture which is more
fully described in this prospectus.
The MITTS Securities will mature on July 1, 2005.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of the MITTS Security plus the Supplemental Redemption Amount
described below, if any, there will be no other payment of interest, periodic
or otherwise. See "-- Payment at Maturity" below.
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 "-- Events of Default and Acceleration" and "Other Terms --
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. 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 principal amount of its MITTS Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<CAPTION>
<S> <C>
"Principal Amount" of the MITTS Security ($10 per unit) X ( Adjusted Ending Value - Starting Value )
--------------------------------------
Starting Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption
Amount be less than zero.
The "Starting Value" equals 1,119.49.
The "Adjusted Ending Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the S&P
500 Index (the "Index") as adjusted by the Adjustment Factor (the "Adjusted
Index Value") determined on each of the first five Calculation Days during the
Calculation Period. If there are fewer than five but more than one Calculation
Days, then the Adjusted Ending Value will equal the average or arithmetic mean
of the closing values of the Adjusted Index Value on these Calculation Days.
If there is only one Calculation Day, then the Adjusted Ending Value will
equal the closing value of the Adjusted Index Value on that Calculation Day.
If no Calculation Days occur during the Calculation Period, then the Adjusted
Ending Value will equal the closing value of the Adjusted Index Value
determined on the last scheduled Index Business Day in the Calculation Period,
regardless of the occurrence of a Market Disruption Event on that day.
The "Adjustment Factor" equals 1.3% per annum and will be prorated based
on a 365-day year and applied each calendar day during the term of the MITTS
Securities to reduce the Index. As a result of the application of the
Adjustment Factor, the adjusted value of the Index used to calculate your
Supplemental Redemption Amount at the stated maturity of the MITTS Securities
will be approximately 8.78% less than the actual Index value on any day during
the Calculation Period.
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day prior to the maturity date to and including the
second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
For purposes of determining the Adjusted Ending Value, an "Index Business
Day" is a day on which the NYSE and the AMEX are open for trading and the
Index or any Successor Index, as defined on page 11 below, is calculated and
published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical values of
the Index during the Calculation Period,
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 total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities;
and
o the pretax annualized rate of return of the stocks underlying
the Index, which includes an assumed aggregate dividend yield
of 1.40% per annum, as more fully described below.
<TABLE>
<CAPTION>
Total Amount Pretax
Percentage Payable at Annualized Pretax
Hypothetical Adjusted Change Maturity Total Rate of Rate of Annualized
Index Ending of Adjusted Per $10 Return on the Return on the Rate of Return
Value During Value Ending Principal MITTS MITTS Securities(1) on
the Value Over the Amount of Securities Stocks
Calculation Starting Value MITTS Securities Underlying
Period the Index(1)(2)
<S> <C> <C> <C> <C> <C> <C>
559.75 510.62 -54.39% $ 10.00 0.00% 0.00% -8.25%
671.69 612.75 -45.27% $ 10.00 0.00% 0.00% -5.77%
783.64 714.87 -36.14% $ 10.00 0.00% 0.00% -3.64%
895.59 817.00 -27.02% $ 10.00 0.00% 0.00% -1.77%
1,007.54 919.12 -17.90% $ 10.00 0.00% 0.00% -0.11%
1,119.49 1,021.25 -8.78% $ 10.00 0.00% 0.00% 1.40%
1,231.44 1,123.37 0.35% $ 10.03 0.35% 0.05% 2.77%
1,343.39 1,225.50 9.47% $10.95 9.47% 1.29% 4.04%
1,455.34 1,327.62 18.59% $11.86 18.59% 2.44% 5.21%
1,567.29 1,429.75 27.71% $12.77 27.71% 3.52% 6.30%
1,679.24 1,531.87 36.84% $13.68 36.84% 4.52% 7.32%
1,791.18 1,634.00 45.96% $14.60 45.96% 5.46% 8.28%
1,903.13 1,736.12 55.08% $15.51 55.08% 6.35% 9.19%
2,015.08 1,838.25 64.20% $16.42 64.20% 7.19% 10.05%
2,127.03 1,940.37 73.33% $17.33 73.33% 7.99% 10.87%
2,238.98 2,042.50 82.45% $18.24 82.45% 8.75% 11.65%
2,350.93 2,144.62 91.57% $19.16 91.57% 9.48% 12.40%
2,462.88 2,246.75 100.69% $20.07 100.69% 10.17% 13.11%
2,574.83 2,348.87 109.82% $20.98 109.82% 10.84% 13.80%
2,686.78 2,451.00 118.94% $21.89 118.94% 11.48% 14.46%
2,798.73 2,553.12 128.06% $22.81 128.06% 12.10% 15.09%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) a constant dividend yield of 1.40% per annum, paid
quarterly from the date of initial delivery of MITTS
Securities, applied to the value of the Index at the end of
each quarter assuming this value increases or decreases
linearly from the Starting Value to the hypothetical Index
value during the Calculation Period;
(b) no transaction fees or expenses;
(c) an investment term from June 26, 1998 to July 1, 2005; and
(d) a final Index value equal to the hypothetical Index value
during the Calculation Period.
(3) The Starting Value equals 1,119.49.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
annualized rate of return will depend entirely on the actual Adjusted Ending
Value determined by the calculation agent as provided in this prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had such changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Adjusted Ending Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if any changes or modifications had not been made,
and calculate the closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of the Index is a fraction or a multiple of what it would have been if
it had not been modified, due to a split in the Index, then the calculation
agent shall adjust the Index in order to arrive at a value of the Index as if
it had not been modified for example, as if the split had not occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation 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, in
(1) futures contracts related to the Index, or options on futures
contracts, which are traded on any major U.S. exchange or =
(2) option contracts related to the Index which are traded on any
major U.S. 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".
A limitation on the hours in a trading day and/or number of days of
trading will not constitute a Market Disruption Event if it results from an
announced change in the regular business hours of the relevant exchange.
Discontinuance of the Index
If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of the determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by S&P or any other entity for the Index. Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If S&P discontinues publication of the Index and a Successor Index is not
selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before the discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists. If the calculation agent calculates a value as a
substitute for the Index, "Index Calculation Day" shall mean any day on which
the calculation agent is able to calculate the value.
If S&P discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Adjusted Ending Value and
o a determination by the calculation agent that a Successor Index
is available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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.
Despite these alternative arrangements, discontinuance of the publication
of the 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 per unit, will be equal to the principal
amount per unit and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment 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 per unit 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 of the MITTS Securities, whether at the
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 5.90% 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 are to 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 Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components,
are derived from publicly available information prepared by S&P as of March
22, 1999. ML&Co. and MLPF&S do not assume any responsibility for the accuracy
or completeness of this information.
The Index is published by S&P, and is intended to provide an indication
of the pattern of common stock price movement. The calculation of the value of
the Index, discussed below in further detail, is based on the relative value
of the aggregate Market Value of the common stocks of 500 companies as of a
particular time compared to the aggregate average Market Value of the common
stocks of 500 similar companies during the base period of the years 1941
through 1943. As of March 22, 1999 the 500 companies included in the Index
represented approximately 78% of the aggregate Market Value of common stocks
traded on the NYSE; however, these 500 companies are not the 500 largest
companies listed on the NYSE and not all of these 500 companies are listed on
the exchange. As of March 22, 1999, the aggregate Market Value of the 500
companies included in the Index represented approximately 79% of the aggregate
Market Value of United States domestic, public companies. S&P chooses
companies for inclusion in the Index with the aim of achieving a distribution
by broad industry groupings that approximates the distribution of these
groupings in the common stock population of the NYSE, which S&P uses as an
assumed model for the composition of the total market. Relevant criteria
employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to
which it is assigned,
o the extent to which the market price of that company's common stock
is generally responsive to changes in the affairs of the respective
industry, and
o the Market Value and trading activity of the common stock of that
company.
Four main groups of companies comprise the Index, with the number of
companies currently included in each group indicated in parentheses:
Industrials (380), Utilities (39), Transportation (10) and Financial (71). S&P
may from time to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated above.
The Index does not reflect the payment of dividends on the stocks
underlying it . Because of this and the application of the Adjustment Factor,
the return based on the MITTS Securities will not be the same return you would
receive if you were to purchase the underlying stocks and hold them for a
period equal to the maturity of the MITTS Securities.
Computation of the Index
S&P currently computes the Index as of a particular time as follows:
(a) the product of the market price per share and the number of then
outstanding shares of each component stock is determined at a particular
time (the "Market Value" of the stock);
(b) the Market Value of all component stock as of that time are
aggregated;
(c) the mean average of the Market Values as of each week in the
base period of the years 1941 through 1943 of the common stock of each
company in a group of 500 substantially similar companies is determined;
(d) the mean average Market Values of all these common stocks over
the base period are aggregated (the aggregate amount being referred to as
the "Base Value");
(e) the current aggregate Market Value of all component stocks is
divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is multiplied by
ten.
While S&P currently employs the above methodology to calculate the Index,
no assurance can be given that S&P will not modify or change this methodology
in a manner that may affect the Supplemental Redemption Amount, if any,
payable to beneficial owners of MITTS Securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effects of changes in the
Market Value of component stocks that are determined by S&P to be arbitrary or
not due to true market fluctuations. Changes may result from causes such as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities
of ML&Co.,
o the substitution by S&P of particular component stocks in the Index,
and
o other reasons.
In these cases, S&P first recalculates the aggregate Market Value of all
component stocks, after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares thereof
or both, and then determines the New Base Value in accordance with the
following formula:
New Market Value
----------------
Old Base Value X Old Market Value = New Base Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
these causes upon the Index.
<PAGE>
Historical Data on the Index
The following table sets forth the value of the Index at the end of each
month, in the period from January 1990 through February 1999. These historical
data on the Index are not necessarily indicative of the future performance of
the Index or what the value of the MITTS Securities may be. Any historical
upward or downward trend in the value of the Index during any period set forth
below is not any indication that the Index is more or less likely to increase
or decrease at any time during the term of the MITTS Securities.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
April......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
May........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
June.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
July.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
August........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
September..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
October....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
November...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
December...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
</TABLE>
License Agreement
Standard & Poor's ("S&P") does not guarantee the accuracy and/or the
completeness of the Index or any data included in the Index. S&P makes no
warranty, express or implied, as to results to be obtained by ML&CO., MLPF&S,
holders of the MITTS Securities, or any other person or entity from the use of
the S&P index or any data included in the Index 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 hereby expressly disclaims all
warranties of merchantability or fitness for a particular purpose with respect
to the S&P Index or any data included in the Index. Without limiting any of
the above information, in no event shall S&P have any liability for any
special, punitive, indirect or consequential damage, including lost profits,
even if notified of the possibility of these damages.
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., 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 thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this prospectus:
"The MITTS Securities 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 the ability of the Index to track general stock market
performance. S&P's only relationship to Merrill Lynch Capital Services, Inc.
and ML&Co. (other than transactions entered into in the ordinary course of
business) is the licensing of certain servicemarks and trade names of S&P and
of the Index which is determined, composed and calculated by S&P without
regard to ML&Co. or the MITTS Securities. S&P has no obligation to take the
needs of ML&Co. or the holders of the MITTS Securities into consideration in
determining, composing or calculating the Index. S&P is not responsible for
and has not participated in the determination of the timing of the sale of the
MITTS Securities, prices at which the MITTS Securities are to initially be
sold, or quantities of the MITTS Securities to be issued or in the
determination or calculation of the equation by which the MITTS Securities are
to be converted into cash. S&P has no obligation or liability in connection
with the administration, marketing or trading of the MITTS Securities."
All disclosures contained in this prospectus supplement regarding the
Index, including its make-up, method of calculation and changes in its
components, are derived from publicly available information prepared by S&P.
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 such 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.
<PAGE>
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying the Treasury Department Final 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 $5.0390 per
unit. This represents an estimated yield on the MITTS Securities equal to
5.90% 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 a term of seven years and one day for the MITTS Securities
based upon the projected payment schedule for the MITTS Securities (including
both the projected Supplemental Redemption Amount and the estimated yield
equal to 5.90% per annum (compounded semiannually)) as determined by ML&Co.
for purposes of application of the Final Regulations to the MITTS Securities:
<PAGE>
<TABLE>
<CAPTION>
Total Interest
Deemed to
Have Accrued
on the MITTS
Interest Deemed to Securities
Accrue During as of End of
Accrual Period Accrual Period
Accrual Period (per unit) (per unit)
-------------- ----------- -----------
<S> <C> <C>
June 26, 1998 through January 1, 1999.................... $0.3057 $0.3057
January 2, 1999 through July 1, 1999..................... $0.3040 $0.6097
July 2, 1999 through January 1, 2000..................... $0.3130 $0.9227
January 2, 2000 through July 1, 2000..................... $0.3222 $1.2449
July 2, 2000 through January 1, 2001..................... $0.3317 $1.5766
January 2, 2001 through July 1, 2001..................... $0.3415 $1.9181
July 2, 2001 through January 1, 2002..................... $0.3516 $2.2697
January 2, 2002 through July 1, 2002..................... $0.3620 $2.6317
July 2, 2002 through January 1, 2003..................... $0.3726 $3.0043
January 2, 2003 through July 1, 2003..................... $0.3836 $3.3879
July 2, 2003 through January 1, 2004..................... $0.3950 $3.7829
January 2, 2004 through July 1, 2004..................... $0.4066 $4.1895
July 2, 2004 through January 1, 2005..................... $0.4186 $4.6081
January 2, 2005 through July 1, 2005..................... $0.4309 $5.0390
</TABLE>
------------------
Projected Supplemental Redemption Amount = $5.0390 per unit.
All prospective investors in the MITTS 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 for information to Merrill Lynch & Co., Inc.,
Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street,
12th Floor, New York, New York 10080-6512.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
Russell 2000(R) Index* Market Index Target-Term Securities due
September 30, 2004
"MITTS(R)1 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.
<TABLE>
<CAPTION>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the MITTS Securities you own, we
o No payments before the maturity date will pay you an amount equal to the sum of the principal amount of each
o Senior unsecured debt securities of Merrill unit and an additional amount based on the percentage increase, if any,
Lynch & Co. Inc. in the value of the Russell 2000 Index above a benchmark value of 494.36,
o Linked to the value of the Russell 2000 Index as described in this prospectus
o The MITTS Securities are listed on the o You will receive no less than the principal amount of your MITTS
American Stock Exchange under the symbol Securities
"RUM"
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
------------
Merrill Lynch & Co.
------------
The date of this prospectus is , 199 .
* The use of, and reference to, the term "Russell 2000 Index" in this
prospectus has been consented to by Frank Russell Company.
1 "MITTS" and "Market Index Target-Term Securities" are registered service
marks owned by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS.................................................................3
MERRILL LYNCH & CO., INC.....................................................7
RATIO OF EARNINGS TO FIXED CHARGES...........................................8
DESCRIPTION OF THE MITTS SECURITIES..........................................9
THE INDEX...................................................................16
OTHER TERMS.................................................................17
PROJECTED PAYMENT SCHEDULE..................................................20
WHERE YOU CAN FIND MORE INFORMATION.........................................22
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................22
PLAN OF DISTRIBUTION........................................................23
EXPERTS.....................................................................23
<PAGE>
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the MITTS Securities is suitable for you.
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 date the index value does
not exceed 449.42 by more than 10%. This will be true even if at some time
during the life of the MITTS Securities, the value of the Russell 2000 Index,
as adjusted, was higher than that amount, 494.36, but later falls below
494.36.
Your yield may be lower than the yield on a standard debt security of
comparable maturity.
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. with the same maturity date. Your investment may not reflect
the full opportunity cost to you when you take into account inflation and
other factors that affect the time value of money.
Your return will not reflect the return of owning the stocks included in the
index.
Your return will not reflect the return you would realize if you actually
owned the stocks underlying the index and received the dividends paid on those
stocks. This is because the value of the index is calculated by reference to
the prices of the common stocks included in the index without taking into
consideration the value of dividends paid on those stocks.
Your return will not reflect the payment of dividends.
The index is calculated with reference to the prices of the common stocks
comprising the index without taking into consideration the value of dividends
paid on those stocks. Therefore, the return you earn on your MITTS Securities,
if any, will not be the same as the return that you would earn if you actually
owned each of the common stocks underlying the index and received the
dividends paid on those stocks.
Investments in small capitalization stocks involve risks.
The underlying stocks that constitute the index have been issued by
corporations domiciled in the U.S. and its territories and traded on the NYSE,
on the AMEX or in the over-the-counter market. If a successor index is
substituted for the index as described below, any successor index would also
be based upon stocks issued by corporations domiciled in the U.S. and its
territories and traded on the NYSE, on the AMEX or in the over-the-counter
market. You should be aware that investments in securities indexed to the
value of small capitalization companies involve risks. In general, the stocks
comprising the index have smaller market capitalizations, less trading
liquidity and greater price volatility than stocks in other larger
capitalization indexes which are designed to measure the broad movement of the
U.S. stock markets. You should understand that these factors could adversely
affect the value of the index and your MITTS Securities.
There may be an uncertain trading market for the MITTS Securities in the
future.
Although the MITTS Securities are listed on the NYSE under the symbol
"RUM," 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, you cannot assume 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
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited and you do not
wish to hold your investment until maturity, there may be a limited number of
buyers for your MITTS Securities. This may affect the price you receive if you
sell before maturity.
There are many factors affecting trading value of the MITTS Securities.
We believe that the value of the index and by a number of other factors
will affect the trading value of the MITTS Securities. Some of these factors
interrelate in complex ways; as a result, the effect of any one factor may
offset or magnify the effect of another factor. The following paragraphs
describe the expected impact on the market value of the MITTS Securities given
a change in a specific factor, assuming all other conditions remain constant.
o The value of the index. We expect that the market value of the MITTS
Securities will depend substantially on the value of the index
relative to the benchmark index value. If you choose to sell your
MITTS Securities when the value of the index exceeds the benchmark
index value, you may receive substantially less than the amount that
would be payable at maturity based on that index value because of
the expectation that the index will continue to fluctuate until
shortly before the maturity date when the average value of the index
is determined. If you choose to sell your MITTS Securities when the
value of the index is below the benchmark index value, you may
receive less than the $10 principal amount per unit of MITTS
Securities. In general, rising U.S. dividend rates, i.e., dividends
per share, may increase the value of the index, while falling U.S.
dividend rates may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying
the index may also affect the value of the index and the value of
the MITTS Securities.
o Interest rates. 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 affect 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 the trading
value of the MITTS Securities will increase. Interest rates may also
affect the U.S. economy and, in turn, the value of the index. Rising
interest rates may lower the value of the index and, thus, the MITTS
Securities. Falling interest rates may increase the value of the
index and, thus, may increase the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. Generally if the
volatility of the index increases, we expect that the trading value
of the MITTS Securities will increase. If the volatility of the
index decreases, we expect that the trading value of the MITTS
Securities will decrease.
o Time remaining to maturity. The MITTS Securities may trade at a
value above that which would be expected based on the level of
interest rates and the index. This difference will reflect a "time
premium" due to expectations concerning the value of the index
during the period prior to maturity of the MITTS Securities.
However, as the time remaining to maturity of the MITTS Securities
decreases, we expect that this time premium will decrease, lowering
the trading value of the MITTS Securities.
o Dividend yields. If dividend yields on the stocks comprising the
index increase, we expect that the value of the MITTS Securities
will decrease. Conversely, if dividend yields on the stock
comprising the index decrease, we expect that the value of the MITTS
Securities will increase.
o Changes in our credit ratings. 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 value of the index at maturity, an
improvement in our credit ratings will not reduce investment risks
related to the MITTS Securities.
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
increase in the trading value of the MITTS Securities attributable to another
factor, such as an increase in the value of the index.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the index 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.
Amounts payable on the MITTS Securities may be limited by state law.
New York State laws govern the indenture, under which the MITTS
Securities are 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 MITTS holders, to the extent
permitted by law, not to voluntarily claim the benefits of any laws concerning
usurious rates of interest.
Purchases and sales by us and our affiliates may affect your return.
We and our affiliates may from time to time buy or sell the stocks
underlying the index for their own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
Potential conflicts of interest.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the index; Market Disruption Events" and
"--Discontinuance of the index" in this prospectus. 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 have entered into an arrangement with one of our a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations.
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the
Securities and should consult with your tax adviser.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On September 29, 1997, ML&Co. issued an aggregate principle amount of
$167,500,000 or 16,750,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture which is more fully described in this prospectus.
The MITTS Securities will mature on September 30, 2004.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of each MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this Prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal amount of each MITTS Security Ending Value - Starting Value
-----------------------------
($10 per Unit) X Starting Value
provided, however, that in no event will the Supplemental Redemption
Amount be less than zero.
The "Starting Value" equals 494.36 which was determined on the Pricing
Date by multiplying 449.82, the value of the index on the pricing date by
110%.
The "Ending Value" will be determined by the calculation agent and will
equal the average, or arithmetic mean, of the closing values of the Index
determined on each of the first five Calculation Days during the Calculation
Period. If there are fewer than five Calculation Days, then the Ending Value
will equal the average or arithmetic mean of the closing values of the Index
on these Calculation Days, and if there is only one Calculation Day, then the
Ending Value will equal the closing value of the Index on that Calculation
Day. If no Calculation Days occur during the Calculation Period because of
Market Disruption Events, then the Ending Index Value will equal the closing
value of the Index determined on the last scheduled Index Business Day in the
Calculation Period, regardless of the occurrences of a Market Disruption Event
on that day.
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day prior to the maturity date to and including the
second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are open
for trading and the Index or any Successor Index, as defined on page 10 below,
is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values:
o the percentage change from the Starting Value to the Ending Value;
o the total amount payable per Unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks underlying the
Index, which includes an assumed aggregate dividend yield of 1.15%
per annum, as more fully described below.
<TABLE>
<CAPTION>
Pretax
Total Amount Annualized
Payable at Maturity Total Rate of Rate Pretax Annualized
Percentage Change per $10 Principal Return on of Return on Rate of Return of
Hypothetical Ending Over the Starting Amount of MITTS the MITTS the MITTS Stocks Underlying the
Value Value Securities Securities Securities(1) Index(1)(2)
- ------------------- ----------------- ----------------- ----------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
179.77 -60.00% $10.00 0.00% 0.00% -11.69%
224.71 -50.00% $10.00 0.00% 0.00% -8.61%
269.65 -40.00% $10.00 0.00% 0.00% -6.08%
314.59 -30.00% $10.00 0.00% 0.00% -3.92%
359.54 -20.00% $10.00 0.00% 0.00% -2.03%
404.48 -10.00% $10.00 0.00% 0.00% -0.36%
449.42(3) 0.00% $10.00 0.00% 0.00% 1.15%
494.36 10.00% $10.00 0.00% 0.00% 2.52%
539.30 20.00% $10.91 9.09% 1.25% 3.77%
584.25 30.00% $11.82 18.18% 2.40% 4.93%
629.19 40.00% $12.73 27.27% 3.48% 6.01%
674.13 50.00% $13.64 36.36% 4.48% 7.02%
719.07 60.00% $14.55 45.45% 5.43% 7.96%
764.01 70.00% $15.45 54.55% 6.32% 8.85%
808.96 80.00% $16.36 63.64% 7.16% 9.69%
853.90 90.00% $17.27 72.73% 7.96% 10.49%
898.84 100.00% $18.18 81.82% 8.73% 11.25%
943.78 110.00% $19.09 90.91% 9.45% 11.98%
988.72 120.00% $20.00 100.00% 10.15% 12.67%
1,033.67 130.00% $20.91 109.09% 10.82% 13.33%
1,078.61 140.00% $21.82 118.18% 11.46% 13.97%
1,123.55 150.00% $22.73 127.27% 12.08% 14.58%
</TABLE>
- -----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) a constant dividend yield of 1.15% per annum, paid quarterly from
the date of initial delivery of MITTS Securities, applied to the
value of the Index at the end of each quarter, assuming this value
increases or decreases linearly from the Starting Value to the
hypothetical Ending Value;
(b) no transaction fees or expenses;
(c) the term of the MITTS Securities is from September 29, 1997 to
September 30, 2004;
(d) the aggregate dividend yield of the stocks underlying the Index
as of September 23, 1997 was
approximately 1.15%.
(e) a final Index value equal to the hypothetical Ending Value.
(3) The Starting Value of the Index.
The above figures are for purposes of illustration only. The actual
investment term, Supplemental Redemption Amount received by investors, and the
respective resulting total and pretax annualized rate of return will depend
entirely on the actual Ending Value determined by the calculation agent as
provided in this prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Ending Value is to be calculated, make any adjustments as,
in the good faith judgment of the calculation agent, may be necessary in order
to arrive at a calculation of a value of a stock Index comparable to the Index
as if any changes or modifications had not been made, and calculate the
closing value with reference to the Index, as adjusted. Accordingly, if the
method of calculating the Index is modified so that the value of the Index is
a fraction or a multiple of what it would have been if it had not been
modified, for example, due to a split in the Index, then the calculation agent
shall adjust the Index in order to arrive at a value of the Index as if it had
not been modified, for example, as if the split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation 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, 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, in
(A) futures contracts related to the Index which are traded on the
Chicago Mercantile Exchange or
(B) option contracts related to the Index which are traded on the
Chicago Board Options Exchange, Inc.
For the purposes of 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".
In some circumstances, the duties of MLPF&S as calculation agent in
determining the existence of Market Disruption Events could conflict with the
interests of MLPF&S as a subsidiary of ML&Co.
Discontinuance of the Index
If FRC discontinues publication of the Index and FRC or another entity
publishes a successor or substitute Index that the calculation agent
determines, in its sole discretion, to be comparable to the Index, referred to
as a "Successor Index", then, upon the calculation agent's notification of its
determination to the trustee and ML&Co., the calculation agent will substitute
the Successor Index as calculated by FRC or any other entity for the Index and
calculate the Ending Value as described above under "-Payment at Maturity".
Upon any selection by the calculation agent of a Successor Index, ML&Co. shall
cause notice to be given to holders of the MITTS Securities.
If FRC discontinues publication of the Index and a Successor Index is not
selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before any discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists. If the calculation agent calculates a value as a
substitute for the Index, "Calculation Day" shall mean any day on which the
calculation agent is able to calculate the value.
If FRC discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Ending Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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 these values to be made available by
telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the 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 per unit, will be equal to the principal
amount per unit and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment 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 per unit 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 of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners of the MITTS Securities, at the rate of 6.39% 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 to DTC, 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 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 are to 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 Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
Unless otherwise stated, all information in this prospectus on the Index
is derived from FRC or other publicly available sources. This information
reflects the policies of FRC as stated in these sources and these policies are
subject to change by FRC. FRC is under no obligation to continue to publish
the Index and may discontinue publication of the Index at any time.
The Index is an index calculated, published and disseminated by FRC, and
measures the composite price performance of stocks of 2,000 companies
domiciled in the U.S. and its territories. All 2,000 stocks are traded on
either the NYSE or the AMEX or in the over-the-counter market and form a part
of the Russell 3000(R) Index. The Russell 3000 Index is composed of the 3,000
largest U.S. companies as determined by market capitalization and represents
approximately 98% of the investable U.S. equity market.
The Index consists of the smallest 2,000 companies included in the
Russell 3000 Index and represents approximately 9.51% of the total market
capitalization of the Russell 3000 Index. The Index is designed to track the
performance of the small capitalization segment of the U.S. equity market.
Only common stocks belonging to corporations domiciled in the U.S. and
its territories are eligible for inclusion in the Russell 3000 Index and the
Index. Stocks traded on U.S. exchanges but domiciled in other countries are
excluded. Preferred stock, convertible preferred stock, participating
preferred stock, paired shares, warrants and rights are also excluded. Trust
receipts, Royalty Trusts, limited liability companies, OTC Bulletin Board
companies, pink sheets, closed-end mutual funds, and limited partnerships that
are traded on U.S. exchanges, are also ineligible for inclusion. Real Estate
Investment Trusts and Beneficial Trusts are eligible for inclusion, however.
Generally, only one class of securities of a company is allowed in the Russell
3000 Index, although exceptions to this general rule have been made where FRC
has determined that each class of securities acts independent of the other.
The primary criteria used to determine the initial list of securities
eligible for the Russell 3000 Index is total market capitalization, which is
defined as the price of the shares times the total number of shares
outstanding. Based on closing values on May 31 of each year, FRC reconstitutes
the composition of the Russell 3000 Index using the then existing market
capitalizations of eligible companies. As of June 30 of each year, the Index
is adjusted to reflect the reconstitution of the Russell 3000 Index for that
year. Publication of the Index began on January 1, 1987.
As a capitalization-weighted Index, the Russell 2000 Index reflects
changes in the capitalization (market value) of the component stocks relative
to the capitalization on a base date. The current Index value is calculated by
adding the market values of the Index's component stocks, which are derived by
multiplying the price of each stock by the number of shares outstanding, to
arrive at the total market capitalization of the 2,000 stocks. The total
market capitalization is then divided by a divisor, which represents the
"adjusted" capitalization of the Index on the base date of December 31, 1986.
To calculate the Index, last sale prices will be used for exchange-traded and
NASDAQ stocks. If a component stock is not open for trading, the most recently
traded price for that security will be used in calculating the Index. In order
to provide continuity for the Index's value, the divisor is adjusted
periodically to reflect events including changes in the number of common
shares outstanding for component stocks, company additions or deletions,
corporate restructurings and other capitalization changes.
The value of the Index is reported on the AMEX under the Symbol "RUT", on
Bloomberg under the symbol "RUY" and on Reuters under the symbol ".Rut".
All disclosure contained in this prospectus regarding the Index, or its
publisher, is derived from publicly available information. All copyrights and
other intellectual property rights relating to the Index are owned by FRC. FRC
has no relationship with ML&Co., Inc. or the MITTS Securities; it does not
sponsor, endorse, authorize, sell or promote the MITTS Securities, and has no
obligation or liability in connection with the administration, marketing or
trading of the MITTS Securities.
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 Treasury Department Final 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 $5.5304 per
unit. This represents an estimated yield on the MITTS Securities equal to
6.39% 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, 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 a term of seven years and one day for the MITTS Securities
based upon the projected payment schedule for the MITTS Securities, including
both the projected Supplemental Redemption Amount and the estimated yield
equal to 6.39% per annum, compounded semiannually, as determined by ML&Co. for
purposes of application of the Final Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
Total Interest
Deemed to
Have Accrued
on the MITTS
Interest Deemed to Securities
Accrue During as of End of
Accrual Period Accrual Period
Accrual Period (per unit) (per unit)
-------------- ------------------ ----------------
<S> <C> <C>
September 29, 1997 through March 30, 1998..................... $0.3186 $0.3186
March 31, 1998 through September 30, 1998..................... $0.3315 $0.6501
October 1, 1998 through March 30, 1999........................ $0.3384 $0.9885
March 31, 1999 through September 30, 1999..................... $0.3511 $1.3396
October 1, 1999 through March 30, 2000........................ $0.3623 $1.7019
March 31, 2000 through September 30, 2000..................... $0.3739 $2.0758
October 1, 2000 through March 30, 2001........................ $0.3858 $2.4616
March 31, 2001 through September 30, 2001..................... $0.3981 $2.8597
October 1, 2001 through March 30, 2002........................ $0.4109 $3.2706
March 31, 2002 through September 30, 2002..................... $0.4240 $3.6946
October 1, 2002 through March 30, 2003........................ $0.4375 $4.1321
March 31, 2003 through September 30, 2003..................... $0.4516 $4.5837
October 1, 2003 through March 30, 2004........................ $0.4659 $5.0496
March 31, 2004 through September 30, 2004..................... $0.4808 $5.5304
</TABLE>
- -----------
Projected Supplemental Redemption Amount = $5.5304 per unit.
All prospective investors in the MITTS 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 for such information to Merrill Lynch & Co.,
Inc., Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church
Street, 12th Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
ROSPECTUS
Merrill Lynch & Co., Inc.
Telebras Indexed Callable
Protected GrowthSM Securities due May 19, 2005
"ProGroSSM 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 ProGroS
Securities .
<TABLE>
<CAPTION>
<S> <C>
The ProGroS Securities: Payment at Maturity:
o 100% principal protected if held to maturity o On the maturity date, for each unit of the ProGroS
Securities you own, we will pay you an amount equal to
o Callable prior to the stated maturity date by Merrill the sum of principal amount of each unit and an
Lynch & Co., Inc. additional amount based on the percentage increase, if
any, in the price of an American Depositary Receipt
o No payments before the stated maturity date unless which trades on the NYSE representing the common
called by Merrill Lynch & Co., Inc. stock of Telecommunicacoes Brasileiras S.A. -
Telebras and he value of securities, cash or
o Senior unsecured debt securities of Merrill Lynch & Co., property received by holders of ADR in corporate
Inc. reorganizations of Telebras over the term of the
ProGroS Securities.
o The ProGroS Securities are listed on the American Stock
Exchange under the symbol "PGT". o You will receive no less than principal amount of
your ProGroS Securities.
</TABLE>
Investing in the ProGroS Securities involves risks.
See "Risk Factors" beginning on page 3
Neither the Securities and Exchange SEC 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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 199 .
"Protected Growth" and "ProGroS" are registered service marks of Merrill Lynch
& Co., Inc.
<PAGE>
TABLE OF CONTENTS
MERRILL LYNCH & CO., INC...................................................8
RATIO OF EARNINGS TO FIXED CHARGES.........................................9
DESCRIPTION OF THE PROGROS SECURITIES......................................9
THE TELEBRAS RECEIPT......................................................21
OTHER TERMS...............................................................22
WHERE YOU CAN FIND MORE INFORMATION.......................................25
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.........................25
PLAN OF DISTRIBUTION......................................................26
EXPERTS...................................................................26
<PAGE>
RISK FACTORS
Your investment in the ProGroS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the ProGroS Securities is suitable for you.
We may call the ProGroS Securities before the stated maturity date
We may elect to call all of the ProGroS Securities in the manner and
times described in this prospectus. We are likely to call the ProGroS
Securities during the month of June 2004 when the secondary market price of
the ProGroS Securities is approximately equal to the applicable call price
during such period. We can, however, call the ProGroS Securities during the
specified periods at our option regardless of the secondary market price of
the ProGroS Securities. In the event that we elect to call the ProGroS
Securities, you will receive only the relevant call price and no additional
amount based on the price of the American Depository Receipt representing
Common Stock Telebras or Telebras Receipt.
You may not earn a return on your investment
You should be aware that if the ending value of Telebras Receipt
determined as described in this prospectus, does not exceed $115,4375 at the
stated maturity , you will only receive the principal of your ProGroS
Securities. This will be true even if the value of the Telebras Receipt, at
some time during the life of the ProGroS Securities was higher than the
$115,4375.
You should compare the features of the ProGroS Securities to other
available investments before deciding to purchase the ProGroS Securities. Due
to the uncertainty as to whether the ProGroS Securities will earn a return or
be called before the stated maturity date, the returns which you may receive
with respect to the ProGroS Securities may be higher or lower than the returns
available on other investments. You should reach an investment decision only
after carefully considering the suitability of the ProGroS Securities in light
of your particular circumstances.
Your yield may be lower than the yield on a standard debt security of comparable
maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of ML&Co. with
the same stated maturity date. Your investment may not reflect the full
opportunity cost to you when you consider the effect of factors that affect
the time value of money.
Your return will not reflect the payment of dividends
The calculation of the starting and ending values of the Telebras Receipt
does not take into consideration the value of dividends paid on the Telebras
Receipt, if any. Therefore, the return you earn on the ProGroS Securities, if
any, will not be the same as the return that you would earn if you actually
owned the Telebras Receipt and received any dividends paid on the common stock
of Telebras .
There may be an uncertain trading market for the ProGroS Securities in the
future
Although the ProGroS Securities are listed on the AMEX under the symbol
"PGT". You cannot assume that a trading market will continue to exist for the
ProGroS Securities. If a trading market in the ProGroS Securities continues to
exist, you cannot assume that there will be liquidity in the trading market.
The continued existence of a trading market for the ProGroS Securities will
depend on the financial performance and other factors such as the
appreciation, if any, of the price of Telebras Receipt.
If the trading market for the ProGroS Securities is limited, there may be
a limited number of buyers if you decide to sell your ProGroS Securities. This
may affect the price you receive. Furthermore, it is unlikely that the
secondary market price of the ProGroS Securities will correlate exactly with
the market price of the Telebras Receipt.
There are many factors affecting trading value of the ProGroS Securities
Our ability to call the ProGroS Securities before the stated maturity
date is likely to limit the secondary market price at which the ProGroS
Securities will trade. In particular, we expect that the secondary market
price of the ProGroS Securities will not exceed the applicable call price
because of our ability to call the ProGroS Securities and pay only the call
price. We believe that if we did not have the right to call the ProGroS
Securities, the secondary market price of the ProGroS Securities would likely
be significantly different.
We believe that the market value of the ProGroS Securities will be
affected by the value of the Telebras Receipt and by a number of other factors
in addition to our ability to call the ProGroS Securities before the stated
maturity date. Some of these factors are interrelated in complex ways; as a
result, the effect of any one factor may be offset or magnified by the effect
of another factor. The following paragraphs describe the expected impact on
the market value of the ProGroS Securities given a change in a specific
factor, assuming all other conditions remain constant.
o Value of the Telebras Receipt. We expect that the market value of the
ProGroS Securities will depend on the amount by which the price of
Telebras Receipt exceeds$115.4375, the value of Telebras Receipt on the
date the ProGroS Securities were initially priced for sale to the public.
If you choose to sell your ProGroS Securities when the price of Telebras
Receipt exceeds $115.4375, you may receive substantially less than the
amount that would be payable at the stated maturity date based on that
price because of the expectation that the price of Telebras Receipt will
continue to fluctuate until its final value as described in this
prospectus is determined.
If you choose to sell your ProGroS Securities when the price of Telebras
Receipt is below $115.4375, you may receive less than the principal
amount of your ProGroS Securities. As a general matter, if dividends are
ever paid on Telebras Receipt, a rising dividend rate, i.e., dividends
per share, may increase the price of Telebras Receipt while a falling
dividend rate may decrease its price. Political, economic and other
developments may also affect the price of Telebras Receipt and the value
of the ProGroS Securities.
o Interest Rates. We expect that the trading value of the ProGroS
Securities will be affected by changes in interest rates. As a general
matter during the earlier years of the ProGroS Securities, if U.S.
interest rates increase, we expect that the trading value of the ProGroS
Securities will decrease and if U.S. interest rates decrease, we expect
the trading value of the ProGroS Securities will increase. However,
interest rates in Brazil and the U.S. may also affect the economies of
Brazil and the U.S. and, in turn, the prices of the reference securities.
Rising interest rates may lower the prices of the reference securities
and the ProGroS Securities. Falling interest rates may increase the
prices of the reference securities and the value of the ProGroS
Securities.
o Volatility of the Reference Securities. Volatility is the term used to
describe the size and frequency of market fluctuations. If the volatility
of the reference securities increases, we expect that the trading value
of the ProGroS Securities will increase. If the volatility of the
reference securities decreases, we expect that the trading value of the
ProGroS Securities will decrease.
o Time Remaining to Stated Maturity Date. The ProGroS Securities may trade
at a value above that which would be expected based on the level of
interest rates and the price of the Telebras Receipt. This difference
will reflect a "time premium" due to expectations concerning the price of
the Telebras Receipt during the period prior to the stated maturity date
of the ProGroS Securities. However, as the time remaining to the stated
maturity date of the ProGroS Securities decreases, we expect that this
time premium will decrease, potentially lowering the trading value of the
ProGroS Securities.
o Dividend Yield. If dividends are ever paid on reference security, the
dividend yield that would result would likely to affect the value of the
ProGroS Securities. If the dividend yield on a reference security were to
increase, we expect that the value of the ProGroS Securities would
decrease. Conversely, if the dividend yield on a Telebras Receipt were to
decrease, we expect that the value of the ProGroS Securities would
increase.
o Changes in our credit ratings. 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 ProGroS
Securities. However, because your return on your ProGroS Securities is
dependent upon factors in addition to our ability to pay our obligations
under the ProGroS Securities, such as the percentage increase in the
value of Telebras Receipt at maturity, an improvement in our credit
ratings will not reduce investment risks related to the ProGroS
Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the ProGroS Securities
attributable to another factor, such as an increase in the value of the
Telebras Receipt.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the ProGroS Securities of a given
change in most of the factors listed above will be less if it occurs later in
the term of the ProGroS Securities than if it occurs earlier in the term of
the ProGroS Securities except that we expect that the effect on the trading
value of the ProGroS Securities of a given increase in the value of the
Telebras Receipt will be greater if it occurs later in the term of the ProGroS
Securities than if it occurs earlier in the term of the ProGroS Securities.
American Depositary Receipts
The Telebras Receipt is an ADR representing 1,000 shares of common stock
of Telebras. If Telebras is reorganized, the Telebras Receipt will be adjusted
as described below to reflect certain distributions of cash, securities and/or
other property. Some of the reference securities distributed in any such
reorganization may be ADRs. An ADR is a negotiable receipt which is issued by
a depositary, generally a bank, representing shares, such as the common stock
of Telebras, of a non-U.S. issuer that have been deposited and are held, on
behalf of the holders of the ADRs, at a custodian bank in the non-U.S.
issuer's home country. While the market for shares underlying an ADR generally
will be in the country in which the non-U.S. issuer is organized and trading
in such market generally will be based on that country's currency, ADRs will
trade in U.S. dollars.
Although ADRs are distinct securities from the shares of stock underlying
such ADRs, the trading characteristics and valuations of ADRs will usually,
but not necessarily, mirror the characteristics and valuations of such shares
represented by the ADRs. Inasmuch as holders of ADRs may surrender the ADR in
order to take delivery of and trade the shares underlying such ADR, a
characteristic that allows investors in ADRs to take advantage of price
differentials between different markets, a market for the shares of stock
underlying an ADR that is not liquid generally will result in an illiquid
market for the ADR representing such underlying shares.
The depositary bank that issues an ADR generally charges a fee, based on
the price of the ADR, upon issuance and cancellation of the ADR. This fee
would be in addition to the brokerage commissions paid upon the acquisition or
surrender of the security. In addition, the depositary bank incurs expenses in
connection with the conversion of dividends or other cash distributions paid
in local currency into U.S. dollars and such expenses are deducted from the
amount of the dividend or distribution paid to holders, resulting in a lower
payout per share of stock underlying an ADR represented by the ADR than would
be the case if such share were held directly. Certain tax considerations,
including tax rate differentials, arising from application of the tax laws of
one nation to the nationals of another and from certain practices in the ADR
market may also exist with respect to an ADR. In varying degrees, any or all
of these factors may affect the value of the ADR compared with the value of
the shares of stock underlying an ADR in the local market.
Foreign Currency Exchange Rate and Foreign Market Considerations
The ProGroS Securities are U.S. dollar-denominated securities issued by
ML&Co., a United States corporation. Investments in the ProGroS Securities do
not give the beneficial owners any right to receive a reference security or
any Telebras Receipt or any other ownership right or interest in a reference
security or any Telebras Receipt or the shares of common stock represented by
the Telebras Receipt, although the return on the investment in the ProGroS
Securities is based on the ending value of the Telebras Receipt. The price of
the common stock of Telebras underlying the Telebras Receipt is quoted in
Brazilian currency. To the extent there are other reference securities, the
prices of such other reference securities may also be quoted in currency other
than U.S. dollars. The U.S. dollar price of a reference security that is an
ADR will depend on the price of the shares underlying such ADR and the
exchange rate between the non-U.S. dollar currency and the U.S. dollar. Even
if the price of the shares underlying an ADR is unchanged, changes in the
rates of exchange between the U.S. dollar and the non-U.S. dollar currency
will affect the U.S. dollar price of such ADR. Furthermore, even if the price
in non-U.S. dollar currency of the shares underlying an ADR increases, the
U.S. dollar price of the ADR may decrease as a result of changes in the rates
of exchange between the U.S. dollar and non-U.S. dollar currency.
Rates of exchange between the U.S. dollar and a non-U.S. dollar currency
are determined by forces of supply and demand in the foreign exchange markets.
These forces are, in turn, affected by international balance of payments and
other economic and financial conditions, government intervention, speculation
and other factors. Fluctuations in foreign exchange rates, future U.S. and
non-U.S. political and economic developments and the possible imposition of
exchange controls or other foreign governmental laws or restrictions
applicable to such investments may affect the U.S. dollar value of an ADR.
Moreover, individual foreign economies, such as Brazil's, may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. There is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could affect the value of
investments in countries, such as Brazil. There may be less publicly available
information about a non-U.S. company, such as Telebras, than about a U.S.
company, and non-U.S. companies are not typically subject to accounting,
auditing and financial reporting standards and requirements comparable to
those to which U.S. entities are subject. Non-U.S. investments may be subject
to foreign withholding taxes which could affect the value of investment. In
addition, investment laws in certain non-U.S. countries such as Brazil may
limit or restrict ownership of certain securities by foreign nationals by
restricting or eliminating voting or other rights or limiting the amount of
securities that may be so owned, and such limitations or restrictions may
affect the prices of such securities.
Brazil's financial markets, while growing in volume, have substantially
less volume than U.S. markets. The securities of many non-U.S. companies
trading in foreign markets are generally less liquid and their prices more
volatile in such markets than securities of comparable U.S. companies trading
in the domestic financial markets. Foreign markets have different trading
practices that may affect the prices of securities. Non-U.S. markets have
different clearance and settlement procedures than those in the U.S., and in
certain countries, such as Brazil, there have been instances when such
procedures have been insufficient to accommodate the volume of securities
transactions, making it difficult to conduct such transactions. There is
generally less government supervision and regulation of exchanges, brokers and
issuers in Brazil than in the U.S. In addition, the terms and conditions of
depositary facilities may result in less liquidity or lower market values for
the ADRs than for the securities underlying the ADRs.
The price of the common stock of Telebras and the price of the securities
of any spin-offs from Telebras, will depend on the financial condition and
results of operations of Telebras and such spin-offs. The financial condition
and results of operations of such entities will be affected by general
economic, political, financial and social conditions in Brazil, and in
particular, by prospects for future economic growth and its impact on demand
for telecommunications services in Brazil. Brazil has in the past experienced
economic and political instability and there can be no assurance that current
government programs to stabilize the economy will succeed.
You will not have any stockholder's rights with respect to Telebras Receipt
Beneficial owners of the ProGroS Securities are not entitled to any
rights with respect to any Telebras Receipt, including, voting rights and
rights to receive any dividends or other distributions in respect of the
Telebras Receipt.
No affiliation between ML&Co. and Telebras
ML&Co. has no affiliation with Telebras, and Telebras has no obligations
with respect to the ProGroS Securities or amounts to be paid to beneficial
owners thereof, including any obligation to take the needs of ML&Co. or of
beneficial owners of the ProGroS Securities into consideration for any reason.
Telebras did not receive any of the proceeds of the initial offering of the
ProGroS Securities made hereby and is not responsible for, and has not
participated in, the determination or calculation of the amount receivable by
beneficial owners of the ProGroS Securities on the stated maturity date or
upon an earlier call. In addition, Telebras is not involved with the
administration or trading of the ProGroS Securities.
There may be state law limits on the payment of amounts payable on the ProGroS
Securities
New York State law governs the 1983 indenture under which the ProGroS
Securities are issued . New York has certain usury laws that limit the amount
of interest that can be charged and paid on loans, which includes debt
securities like the ProGroS 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 ProGroS Securities holders,
to the extent permitted by law, not to voluntarily claim the benefits of any
laws concerning usurious rates of interest.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the reference
securities, including shares of Telebras stock, for their own accounts for
business reasons or in connection with hedging our obligations under the
ProGroS Securities. These transactions could affect the price of the reference
securities.
Potential conflicts
The calculation agent is our subsidiary , the issuer of the ProGroS
Securities. Under certain circumstances, MLPF&S's role as our subsidiary and
its responsibilities as calculation agent for the ProGroS Securities could
give rise to conflicts of interests. You should be aware that because the
calculation agent is controlled by us, potential conflicts of interest could
arise.
Other Considerations
You should also consider the tax consequences of investing in the ProGroS
Securities and should consult your tax advisor.
<PAGE>
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, 250Vesey 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
ProGroS Securities described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges (a) 1.2 1.2 1.2 1.2 1.1
- -----------------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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 PROGROS SECURITIES
The ProGroS Securities were issued as a series of senior debt securities
under the 1983 indenture which is more fully described in this prospectus.
The ProGroS Securities will mature on May 19, 2005 unless called earlier
at the option of ML&Co.
Unless called, while at maturity a beneficial owner will receive the
principal amount of such ProGroS Security plus the supplemental redemption
amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "--Payment at Maturity" below.
The ProGroS Securities may be called by ML&Co. as described below, but
are not subject to redemption at the option of any beneficial owner prior to
the stated maturity date. Upon the occurrence of an Event of Default with
respect to the ProGroS Securities, beneficial owners of the ProGroS Securities
may accelerate the maturity of the ProGroS Securities, as described under
"--vents of Default and Acceleration" and "Other Terms--General--Events of
Default" in this prospectus.
The ProGroS Securities were issued in denominations of whole units.
Payment at Maturity
At the stated maturity date, a beneficial owner of a ProGroS Security
will be entitled to receive the principal amount of each unit plus a
supplemental redemption amount, if any, as provided below. If the supplemental
redemption amount is not greater than zero, a beneficial owner of a ProGroS
Security will be entitled to receive only the principal amount of its ProGroS
Securities.
The "supplemental redemption amount" for a ProGroS Security will be
determined by the calculation agent and will equal:
<TABLE>
<CAPTION>
<S> <C>
principal amount of such ProGroS Security ($10 per unit) x ending value - starting value
-----------------------------
starting value
</TABLE>
provided, however, that in no event will the supplemental redemption amount be
less than zero.
The "starting value" equals $115.4375.
The "ending value" will be determined by the calculation agent and will
equal the Reorganization Event Value with respect to a reorganization event,
if any, plus the value of the Telebras Receipt determined as follows:
(a) for any portion of the Telebras Receipt consisting of cash, the U.S.
dollar equivalent of such cash plus interest on such amount accruing
from the date of the payment of such cash to holders of the relevant
Telebras Receipt for which such cash was paid until the stated
maturity date at a fixed interest rate determined on the date of
such payment equal to the interest rate that would be paid on a
fixed rate senior non-callable debt security of ML&Co. with a term
equal to the remaining term for the ProGroS Securities as determined
by the calculation agent;
(b) for any portion of the Telebras Receipt consisting of property other
than cash or reference securities, the U.S. dollar equivalent of the
market value of such property on the date that such property was
delivered to holders of the relevant Telebras Receipt for which such
property was distributed plus interest on the U.S. dollar amount
accruing from the date of the delivery until the stated maturity
date at a fixed interest rate determined as described in (a) above;
and
(c) for any portion of the Telebras Receipt consisting of reference
securities, the average or arithmetic mean of the closing prices of
each such reference security determined on each of the first five
calculation days during the calculation period. If there are fewer
than five calculation days in the calculation period with respect to
any reference security, then the ending value shall be calculated
using the average or arithmetic mean of the closing prices of such
reference security on such calculation days, and if there is only
one calculation day, then the ending value shall be calculated using
the closing price of such reference security on such calculation
day. If no calculation days occur during the calculation period with
respect to such reference security, then the ending value shall be
calculated using the closing price of such reference security
determined on the last scheduled calculation day in the calculation
period, regardless of the occurrence of a market disruption event on
such day.
"U.S. dollar equivalent" means, with respect to cash not denominated in
U.S. dollars, such cash amount multiplied by the spot rate, defined below, for
the currency in which such cash is denominated at approximately the date of
payment or date of valuation of such cash.
The "calculation period" means the period from and including the seventh
scheduled calculation day prior to the stated maturity date to and including
the second scheduled calculation day prior to the stated maturity date.
"calculation day" means any trading day during the calculation period on
which a market disruption event has not occurred.
"trading day" means a day on which the AMEX, the New York Stock Exchange
or the "NYSE" and the NASDAQ National Market System or "NASDAQ NMS" are open
for trading.
"market disruption event" means, with respect to a reference security,
the occurrence or existence on any business day during the one-half hour
period that ends when the closing price is determined, of any suspension of,
or limitation imposed on, trading in such reference security on the NYSE (or
other market or exchange, if applicable).
"closing price" with respect to a reference security means, for a
calculation day the following:
(a) If the reference security is listed on a national securities
exchange in the United States, is a NASDAQ NMS security or is included in
the OTC Bulletin Board Service or OTC Bulletin Board operated by the
National Association of Securities Dealers, Inc., closing price means:
(1) the last reported sale price, regular way, on such day on the
principal United States securities exchange registered under the
Exchange Act, on which such reference security is listed or admitted
to trading, or
(2) if not listed or admitted to trading on any such securities exchange
or if such last reported sale price is not obtainable, the last
reported sale price on the over-the-counter market as reported on
the NASDAQ NMS or OTC Bulletin Board on such day, or
(3) if the last reported sale price is not available in accordance with
(1) and (2) above, the mean of the last reported bid and offer price
on the over-the-counter market as reported on the NASDAQ NMS or OTC
Bulletin Board on such day as determined by the calculation agent.
The term "NASDAQ NMS security" includes a security included in any
successor to such system and the term "OTC Bulletin Board" shall
include any successor service thereto.
(b) If such reference security is not listed on a national
securities exchange in the United States or is not a NASDAQ NMS security
or included in the OTC Bulletin Board operated by the NASD, closing price
means the last reported sale price on such day on the securities exchange
on which such reference security is listed or admitted to trading with
the greatest volume of trading for the calendar month preceding such day
as determined by the calculation agent, provided that if such last
reported sale price is for a transaction which occurred more than four
hours prior to the close of such exchange, then the closing price shall
mean the average of the last available bid and offer price on such
exchange. If such = reference security is not listed or admitted to
trading on any such securities exchange or if such last
================== reported sale price or bid and offer are not
obtainable, the closing price shall mean the last reported =
============= sale price for a transaction which occurred more than four
hours prior to when trading in such over-the-counter market typically
ends, then the closing price shall mean the average of the last =
============= = available bid and offer prices in such market of the
three dealers which have the highest volume of transactions in such
reference security in the immediately preceding calendar month as
determined by the = ================== calculation agent based on
information that is reasonably available to it. If such prices are quoted
in a ================= currency other than in U.S. dollars, such prices
will be translated into U.S. dollars for purposes of calculating the
average market price using the spot rate on the same calendar day as the
date of any = ==================== = ========= such price.
The "spot rate" on any date will be determined by the calculation agent
and will equal the spot rate of such currency per U.S. $1.00 on such date at
approximately 3:00 p.m., New York City time, as reported by a recognized
reporting service for such spot rate, provided that if the calculation agent
shall determine that such reported rate is not indicative of actual rates of
exchange that may be obtained in the currency exchange rate market, then the
spot rate shall equal the spot rate of such currency per U.S. $1.00 on such
date at approximately 3:00 p.m., New York City time at which the calculation
agent is able to convert such currency into U.S. dollars.
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law to close and that is a trading day on the NYSE
and the AMEX.
All determinations made by the calculation agent are at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, are conclusive for all purposes and
binding on ML&Co. and beneficial owners of the ProGroS Securities.
Early Call of the ProGroS Securities at the Option of ML&Co.
During the month of June 2004, the call period, ML&Co., in its sole
discretion, may elect to call the ProGroS Securities offered hereby, in whole
but not in part, before the stated maturity date by giving notice to the
Trustee of ML&Co.'s election on any business day within the month of June
2004, at the call price or $20 per unit.
If we elect to call your ProGroS Securities before the stated maturity
date, you will receive only the call price and you will not receive a
supplemental redemption amount based on the value of the Telebras Receipt. If
we do not call the ProGroS Securities prior to the stated maturity date, the
principal amount plus the supplemental redemption amount, if any, that you
receive at the stated maturity may be greater than or less than the call
price. ML&Co. may elect to call the ProGroS Securities on any business day
during the call period by giving notice to the Trustee and specifying the date
on which the call price shall be paid. Such Payment Date shall be no later
than the 20th Business Day after such call election. The Trustee will provide
notice of such call election to the registered holders of the ProGroS
Securities, specifying the Payment Date, no less than 15, nor more than 30,
calendar days prior to such Payment Date. While the ProGroS Securities are
held at the Depositary, the registered holder will be the Depositary, and the
Depositary will receive the notice of the call. As more fully described below
under "Description of the ProGroS Securities--Depositary", the Depositary will
forward such notice to its participants which will pass such notice on to the
beneficial owners.
Hypothetical Returns
The following table illustrates, for a range of hypothetical ending
values,
o the percentage change over the starting value;
o the total amount payable at the stated maturity date for each $10
principal amount of ProGroS Securities;
o the total rate of return to beneficial owners of the ProGroS
Securities;
o the pretax annualized rate of return to beneficial owners of ProGroS
Securities and
o the pretax annualized rate of return of the Telebras Receipt.
This table assumes that the ProGroS Securities are not called prior to
the stated maturity date.
<PAGE>
<TABLE>
<CAPTION>
Total Amount Pretax Pretax Rate
Percentage Change Payable at the Annualized of Return of
Hypothetical Over the Stated Maturity Total Rate Rate of the Telebras
Ending Value Starting Value Date per Unit of Return Return(1) Receipt(1)(2)
------------ -------------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
$46.18 -60.00% $10.00 0.00% 0.00% ,10.94%
$57.72 -50.00% $10.00 0.00% 0.00% ,7.96%
$69.26 -40.00% $10.00 0.00% 0.00% ,5.48%
$80.81 -30.00% $10.00 0.00% 0.00% ,3.35%
$92.35 -20.00% $10.00 0.00% 0.00% ,1.48%
$103.89 -10.00% $10.00 0.00% 0.00% 0.18%
$115.44 0.00% $10.00 0.00% 0.00% 1.69%
$126.98 10.00% $11.00 10.00% 1.37% 3.06%
$138.53 20.00% $12.00 20.00% 2.62% 4.33%
$150.07 30.00% $13.00 30.00% 3.78% 5.50%
$161.61 40.00% $14.00 40.00% 4.86% 6.60%
$173.16 50.00% $15.00 50.00% 5.87% 7.62%
$184.70 60.00% $16.00 60.00% 6.82% 8.58%
$196.24 70.00% $17.00 70.00% 7.72% 9.50%
$207.79 80.00% $18.00 80.00% 8.57% 10.36%
$219.33 90.00% $19.00 90.00% 9.38% 11.18%
$230.88 100.00% $20.00 100.00% 10.14% 11.96%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes
(a) a constant dividend yield of 1.69% per annum, paid quarterly from
the date of initial delivery of ProGroS Securities, applied to the
value of the Telebras Receipt at the end of each such quarter
assuming such value increases or decreases linearly from the
starting value to the applicable hypothetical ending value;
(b) no transaction fees or expenses;
(c) a term for the ProGroS Securities from May 19, 1998 to May 19, 2005;
and
(d) a final Telebras Receipt value equal to the ending value.
The above figures are for purposes of illustration only. The actual
supplemental redemption amount received by investors and the total and pretax
annualized rate of return resulting therefrom will depend entirely on the
actual ending value determined by the calculation agent as provided herein.
Dilution and Reorganization Adjustments
The Telebras Receipt is subject to adjustment if an issuer of any
reference security or the custodian in the case of reference security that is
an ADR shall:
(a) pay a stock dividend or make a distribution with respect to such
reference security in reference securities;
(b) subdivide or split the outstanding units of such reference security
into a greater number of units;
(c) combine the outstanding units of such reference security into a
smaller number of units;
(d) issue by reclassification of units of such reference security any
units of another security of such issuer;
(e) issue rights or warrants to all holders of such reference security
entitling them to subscribe for or purchase shares, in the
aggregate, for more than 5% of the number of such reference
securities outstanding prior to the issuance of such rights or
warrants at a price per share less than the then current market
price of such reference security, other than rights to purchase such
reference security pursuant to a plan for the reinvestment of
dividends or interest; or
(f) pay a dividend or make a distribution to all holders of such
reference security of evidences of its indebtedness or other assets
excluding any stock dividends or distributions referred to in clause
(a) above or any cash dividends other than any Extraordinary Cash
Dividend or issue to all holders of such reference security rights
or warrants to subscribe for or purchase any of its securities,
other than those referred to in clause (e) above. Any of the
foregoing assets are referred to as the "Distributed Assets" and any
of the foregoing events are referred to as the "dilution events".
Notwithstanding provision (f) in the foregoing sentence, if a reference
security is an ADR and the holder of such ADR would receive cash or other
property other than securities in the circumstances described in (f) above,
but the holder of the securities underlying such ADR could receive securities
as a result of a dilution event or the 'Distributed securities and the
calculation agent or its affiliates would be eligible to receive the
Distributed securities, then ML&Co. can elect for purposes of provision (f) to
include the Distributed securities in the Telebras Receipt instead of the cash
or property distributed to holders of the ADR in an amount equal to the amount
of the Distributed securities that would have been received had the Telebras
Receipt consisted of the securities underlying the ADRs instead of the ADRs.
For purposes of provision (f), if the holder of a reference security can elect
to receive securities in lieu of cash or property other than securities, then
for purposes of provision (f) the holders of the reference security shall be
deemed to receive only the securities.
In the case of the dilution events referred to in clauses (a), (b), (c)
and (d) above, the Telebras Receipt shall be adjusted to include the number of
units of such reference security and/or security of such issuer which a holder
of units of such reference security would have owned or been entitled to
receive immediately following any such event had such holder held, immediately
prior to such event, the number of units of such reference security
constituting part of the Telebras Receipt immediately prior to such event.
Each such adjustment shall become effective immediately after the effective
date for such subdivision, split, combination or reclassification, as the case
may be. Each such adjustment shall be made successively.
In the case of the dilution event referred to in clause (e) above where
the rights or warrants are for more than 5% of the number of shares
outstanding prior to the issuance of such rights or warrants, the Telebras
Receipt shall be adjusted by multiplying the number of reference securities
constituting Telebras Receipt immediately prior to the date of issuance of the
rights or warrants referred to in clause (e) above by a fraction,
o the numerator of which shall be the number of reference securities
outstanding on the date immediately prior to such issuance, plus the
number of additional reference securities offered for subscription
or purchase pursuant to such rights or warrants, and
o the denominator of which shall be the number of reference securities
outstanding on the date immediately prior to such issuance, plus the
number of additional reference securities which the aggregate
offering price of the total number of reference securities so
offered for subscription or purchase pursuant to such rights or
warrants would purchase at the current market price determined as
the average Closing Price per reference security for the 20 Trading
Days immediately prior to the date of such rights or warrants are
issued, subject to certain adjustments, which shall be determined by
multiplying such total number of reference securities by the
exercise price of such rights or warrants and dividing the product
so obtained by such current market price.
To the extent that reference securities are not delivered after the expiration
of such rights or warrants, or if such rights or warrants are not issued, the
Telebras Receipt shall be readjusted to the Telebras Receipt which would then
be in effect had such adjustments for the issuance of such rights or warrants
been made upon the basis of delivery of only the number of reference
securities actually delivered.
In the case of the dilution event referred to in clause (f) above, the
Telebras Receipt shall be adjusted to include, from and after such dividend,
distribution or issuance,
o in respect of that portion, if any, of the Distributed Assets
consisting of cash, the amount of such Distributed Assets consisting
of cash received for each unit of such reference security multiplied
by the number of units of such Reference Security constituting part
of the Telebras Receipt on the date of such dividend, distribution
or issuance, immediately prior to such dividend, distribution or
issuance, plus
o in respect of that portion, if any, of the Distributed Assets which
are other than cash, the number or amount of each type of
Distributed Assets other than cash received with respect to each
unit of such reference security multiplied by the number of units of
such reference security constituting part of the Telebras Receipt on
the date of such dividend, distribution or issuance, immediately
prior to such dividend, distribution or issuance.
For example, where a reorganization of Telebras results in the
distribution to holders of the Telebras Receipt of ADRs representing shares of
common stock in various companies formed to operate various spin-off
businesses of Telebras, then the Telebras Receipt shall include such ADRs in
amounts specified pursuant to provision (f) above. If in any such
reorganization of Telebras, holders of Telebras Receipts receive cash or
property while holders of the shares of common stock underlying the Telebras
Receipts receive distributed securities and the calculation agent or an
affiliate can receive and hold the distributed securities, then the
calculation agent can elect to have the Telebras Receipt include the
Distributed securities instead of such cash or property.
An "extraordinary cash dividend" means, with respect to any consecutive
12-month period, all cash dividends or any other distribution made by the
issuer of a reference security or made pursuant to an arrangement effecting a
distribution of distributable profits or reserves, whether in cash or in
specie, on any reference security occurring in such 12-month period or, if
such reference security was not outstanding at the commencement of such
12-month period or was not then a part of the Telebras Receipt, occurring in
such shorter period during which such reference security was outstanding and
was part of the Telebras Receipt, exceeds on a per share basis 10% of the
average of the closing prices per share of such reference security over such
12-month period or such shorter period during which such reference security
was outstanding and was part of the Telebras Receipt; provided that, for
purposes of the foregoing definition, the amount of cash dividends paid on a
per share basis will be appropriately adjusted to reflect the occurrence
during such period of any stock dividend or distribution of shares of capital
stock of the issuer of such reference security or any subdivision, split,
combination or reclassification of shares of such reference security.
All adjustments will be calculated to the nearest 1/10,000th of a share
of the reference security or if there is not a nearest 1/10,000th of a share
to the next lower 1/10,000th of a share. No adjustment shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the Closing Price; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
If any of the Distributed Assets are cash, property or reference
securities that will be distributed only to holders of the relevant Telebras
Receipt who or which can certify as to a certain nationality or formation
under the laws of a certain jurisdiction, as the case may be, and a
corporation formed in the United States or an affiliate of such corporation
formed elsewhere cannot receive such distribution, the Telebras Receipt will
reflect only those distributed assets available for distribution to such
United States corporation or its affiliates.
In the event of
(a) any consolidation or merger of an issuer of a reference security, or
any surviving entity or subsequent surviving entity of such issuer ,
a "Successor Company", with or into another entity, other than a
merger or consolidation in which the issuer is the continuing
corporation and in which the reference security outstanding
immediately before the merger or consolidation is not exchanged for
cash, securities or other property of the issuer or another
corporation,
(b) any sale, transfer, lease or conveyance to another corporation of
the property of an issuer of a reference security or any Successor
Company as an entirety or substantially as an entirety,
(c) any statutory exchange of securities of an issuer of a reference
security or any Successor Company with another corporation, other
than in connection with a merger or acquisition or
(d) any liquidation, dissolution, winding up or bankruptcy of an issuer
of a reference security or any Successor Company, any such event
described in clause (a), (b), (c) or (d), a "reorganization event",
the ending value shall be calculated by including the reorganization
event value.
The "reorganization event value" shall be determined by the calculation
agent and shall equal
o the transaction value related to the relevant reorganization event,
plus
o interest on such transaction value accruing from the date of the
payment or delivery of the consideration, if any, received in
connection with such reorganization event until the stated maturity
date at a fixed interest rate determined on the date of such payment
or delivery equal to the interest rate that would be paid on a fixed
rate senior non-callable debt security of ML&Co. with a term equal
to the remaining term of the ProGroS Securities.
The "transaction value" means
o for any cash received in any such reorganization event, the amount
of cash received per unit of reference security,
o for any property other than cash or securities received in any such
reorganization event, an amount equal to the market value of such
property per unit of reference security on the date that such
property is received by holders of such reference security as
determined by the calculation agent, and
o for any securities received in any reorganization event, an amount
equal to the closing price per unit of the securities on the date
the securities are received by holders of the reference security
multiplied by the number of such securities received for each unit
of the reference security subject to adjustment on a basis
consistent with the adjustment provisions described above.
The foregoing adjustments are made by MLPF&S, as calculation agent, and
all such adjustments are final.
No adjustments will be made for other events, such as offerings of
Deposit Reference Shares by Telebras for cash or in connection with
acquisitions.
ML&Co. will, within ten business days following the occurrence of an
event that requires an adjustment or if ML&Co. is not aware of such
occurrence, as soon as practicable after becoming so aware, provide written
notice to the Trustee, which shall provide notice to the holders of the
ProGroS Securities of the occurrence of such event and, if applicable, a
statement in reasonable detail setting forth the adjusted closing price to be
used in determining the ending value.
Events of Default and Acceleration
In case an event of default with respect to any ProGroS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a
ProGroS Security upon any acceleration permitted by the ProGroS Securities,
with respect to each $10 principal amount thereof, will be equal to the
principal amount of the ProGroS Securities and the supplemental redemption
amount, if any, calculated as though the date of early repayment were the
stated maturity date of the ProGroS Securities. See "Description of the
ProGroS Securities,Payment at Maturity" herein. If a bankruptcy proceeding is
commenced in respect of ML&Co., the claim of the beneficial owner of a ProGroS
Security may be limited, under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount of the ProGroS Security plus an
additional amount of contingent interest calculated as though the date of the
commencement of the proceeding were the stated maturity date of the ProGroS
Securities.
In case of default in payment of the ProGroS Securities whether at the
call date, at the stated maturity date, or upon acceleration, from and after
the stated maturity date the ProGroS Securities shall bear interest, payable
upon demand of the beneficial owners thereof, at the rate of 6.25% per annum
to the extent that payment of such interest shall be legally enforceable on
the unpaid amount due and payable on such date in accordance with the terms of
the ProGroS Securities to the date payment of such amount has been made or
duly provided for.
Global Securities
Description of the Global Securities.
The ProGroS Securities are represented by one or more fully registered
global securities. Each global security has been deposited with, or on behalf
of, The Depository Trust Company or 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 ProGroS 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 such 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 ProGroS Securities represented by a global security for
all purposes under the 1983 indenture. Except as provided below, the
beneficial owners of the ProGroS Securities represented by a global security
are not entitled to have the ProGroS Securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of the ProGroS Securities in definitive form and are not
considered the owners or holders under the 1983 indenture, including for
purposes of receiving any reports delivered by ML&Co. or the trustee pursuant
to the 1983 indenture. Accordingly, each person owning a beneficial interest
in a global security must rely on the procedures of DTC and, if such person is
not a participant of DTC on the procedures of the participant through which
such 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 such a global security desires to give or take any
action which a holder is entitled to give or take under the 1983 indenture,
DTC would authorize the participants holding the relevant beneficial interests
to give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners. Conveyance of
notices and other communications by DTC to participants, by participants to
indirect participants and by participants and indirect participants to
beneficial owners are 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 ProGroS Securities. The ProGroS
Securities have been issued as fully registered securities registered in the
name of Cede & Co., DTC's partnership nominee. One or more fully registered
global securities have been issued for the ProGroS Securities in the aggregate
principal amount of such issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 certain other organizations. DTC is owned by a
number of its direct participants and by the NYSE, the AMEX and the NASD.
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 ProGroS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the ProGroS
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
such beneficial owner entered into the transaction. Transfers of ownership
interests in the ProGroS Securities are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all ProGroS Securities deposited with
DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of ProGroS 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 ProGroS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the ProGroS
Securities are credited, which may or may not be the beneficial owners. The
participants are 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 are 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
ProGroS 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
to whose accounts the ProGroS 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
ProGroS 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
such date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If the depositary is at any time unwilling or unable to continue as
depositary and
(a) a successor depositary is not appointed by ML&Co. within 60 days,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, and
(c) an Event of Default under the 1983 indenture has occurred and is
continuing with respect to the ProGroS Securities,
the global securities will be exchangeable for ProGroS Securities in
definitive form of like tenor and of an equal aggregate principal amount, in
denominations of $10 and integral multiples thereof. The definitive ProGroS
Securities will be registered in such name or names as the Depositary shall
instruct the Trustee. It is expected that such 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, ProGroS Security
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 Payment
All payments of principal and the supplemental redemption amount, and
call price if any, and will be made by ML&Co. in immediately available funds
so long as the ProGroS Securities are maintained in book-entry form.
<PAGE>
THE TELEBRAS RECEIPT
Telecomunicagoes Brasileiras S.A.-Telebras
Telecomunicagoes Brasileiras S.A.-Telebras was the primary supplier of
public telecommunications services in Brazil. Telebras owned and operated all
of the inter-state and international telephone transmission facilities in
Brazil, and was the primary provider of intra-state service and provides
telephone-related services such as data transmission, cellular mobile
telephone service, and sound, image, videotext and telex transmission.
In 1998, Telebras was privatized by the federal government of Brazil and
reorganized into 12 separate corporations . These spin-offs resulted in the
distribution to holders of a Telebras Receipt of cash, securities and other
property, including common stock and/or warrants to purchase common stock in
the new corporations. An investor in the ProGroS Securities should carefully
review the adjustments to be made in the case of these reorganization events
contained in "--Dilution and Reorganization Adjustments."
Before the reorganization, Telebras was subject to the informational
requirements of the Exchange Act. Accordingly, Telebras filed reports, proxy
and other information statements and other information with the SEC. There is
no assurance that the 12 separate corporations that previously made up
Telebras will be subject to the informational requirements of the Exchange Act
or make any information relating to their business widely or publicly
available. In the event that this information, if any, is not widely or
publicly available during the term of the ProGroS Securities, pricing
information for the ProGroS Securities may be more difficult to obtain and the
value and liquidity of the ProGroS Securities may be adversely affected.
ML&Co. is not affiliated with Telebras and Telebras has no obligations
with respect to the Progros securities. This prospectus relates only to the
Progros securities offered hereby and does not relate to the Telebras receipt
or other securities of Telebras. The information contained in this prospectus
regarding Telebras has been derived from the publicly available documents
described in the preceding paragraph. ML&Co. Has not participated in the
preparation of such documents or made any due diligence inquiries with respect
to Telebras in connection with the initial offering of the Progros securities.
ML&Co. Makes no representation that such publicly available documents or any
other publicly available information regarding Telebras are accurate or
complete. Furthermore, there can be no assurance that all events occurring
prior to the date hereof, 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 Telebras receipt have
been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of or failure to disclose material future events concerning
Telebras could affect the supplemental redemption amount to be received at the
stated maturity date and therefore the trading value of the progros
securities.
From time to time, in the ordinary course of business, affiliates of
ML&Co. engaged in certain investment banking activities on behalf of the
Telebras as well as served as counterparty in certain other transactions.
<PAGE>
OTHER TERMS
ML&Co. issued the ProGroS 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 ProGroS 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 such 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 ProGroS 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.
WHERE YOU CAN FIND MORE INFORMATION
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 ProGroS Securities and other securities. For further information on ML&Co.
and the ProGroS 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.
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; 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 and March 26, 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 or after the date of this initial registration statement
and before the effectiveness of the registration statement:
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 ProGroS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the ProGroS Securities.
MLPF&S may act as principal or agent in these market-making transactions.
The ProGroS Securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the ProGroS 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
Oracle Corporation Indexed Callable Protected GrowthSM Securities
due March 31, 2003
"ProGroSSM 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 ProGros
Securities.
<TABLE>
<CAPTION>
<S> <C>
The ProGroS Securities: Payment at Maturity:
o 100% principal protected if held to maturity o On the maturity date, for each unit of the ProGroS
Securities you own, we will pay you an amount equal
o Callable before the stated maturity date by Merrill to the sum of the principal amount of each unit and
Lynch & Co., Inc. an additional amount based on the percentage
increase, if any, in the price of a share of the
o No payments before the stated maturity date unless in the price of a share of the common stock of Oracle
called by Merrill Lynch & Co., Inc. Corporation above a value of $29.1875.
o Senior unsecured debt securities of Merrill Lynch & o You will receive no less than the principal amount
Co., Inc. of your ProGroS Securities.
o The ProGroS Securities are listed on the American
Stock Exchange under the trading symbol "OPG".
</TABLE>
Investing in the ProGroS Securities involves risks.
See "Risk Factors" beginning on page 3
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if of
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 199 .
"Protected Growth" and "ProGroS" are registered service marks of Merrill
Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
Risk Factors.................................................................2
Merrill Lynch & Co., Inc.....................................................6
Ratio of Earnings to Fixed Charges...........................................7
Description of ProGroS Securities............................................8
Oracle Common Stock.........................................................16
Other Terms.................................................................16
Where You Can Find More Information.........................................19
Incorporation of Information We File With the SEC...........................20
Plan of Distribution........................................................21
Experts.....................................................................21
<PAGE>
RISK FACTORS
Your investment in the ProGroS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the ProGroS Securities is suitable for you.
We may redeem the ProGroS Securities before the stated maturity date
We may elect to redeem all of the ProGroS Securities in the manner and
times described in this prospectus. We are likely to call the ProGroS
Securities during a period when the secondary market price of the ProGroS
Securities is approximately equal to the applicable redemption price. We can,
however, call the ProGroS Securities during the specified periods described in
this prospectus at our option regardless of the secondary market price of the
ProGroS Securities. In the event that we elect to call the ProGroS Securities,
you will receive only the relevant redemption price and no additional amount
based on the price of the common stock of Oracle Corporation.
You may not earn a return on your investment
You should be aware that if the ending value of Oracle common stock,
determined as described in this prospectus, does not exceed $29.1875, the
closing price of Oracle common stock on the date the ProGroS Securities were
initially priced for sale to the public, at the stated maturity, you will only
receive the principal amount of your ProGroS Securities. This will be true
even if the value of Oracle common stock, at some time during the life of the
ProGroS Securities, was higher than $29.1875 but later falls below $29.1875.
You should compare the features of the ProGroS Securities to other
available investments before deciding to purchase the ProGroS Securities. Due
to the uncertainty as to whether the ProGroS Securities will earn a return or
be redeemed before the stated maturity date, the returns which you may receive
with respect to the ProGroS Securities may be higher or lower than the returns
available on other investments. You should reach an investment decision only
after carefully considering the suitability of the ProGroS Securities in light
of your particular circumstances.
Your yield may be lower than the yield on a standard debt security of comparable
maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. with the same stated maturity date. Your investment may not
reflect the full opportunity cost to you when you consider the effect of
factors that affect the time value of money.
Your return will not reflect the payment of dividends
The calculation of the starting and ending values of the Oracle common
stock does not take into consideration the value of dividends paid on that
stock, if any. Therefore, the return you earn on the ProGroS Securities, if
any, will not be the same as the return that you would earn if you actually
owned shares of Oracle common stock and received any dividends paid on that
stock.
There may be an uncertain trading market for the ProGroS Securities in the
future
Although the ProGroS Securities are listed on the AMEX under the symbol
"OPG", you cannot assume that a trading market will continue to exist for the
ProGroS Securities. If a trading market in the ProGroS Securities continues to
exist, you cannot assume that there will be liquidity in that trading market.
The continued existence of a trading market for the ProGroS Securities will
depend on our financial performance and other factors such as the
appreciation, if any, of the price of Oracle common stock.
If the trading market for the ProGroS Securities is limited, there may be
a limited number of buyers if you decide to sell your ProGroS Securities. This
may affect the price you receive. Furthermore, it is unlikely that the
secondary market price of the ProGroS Securities will correlate exactly with
the market price of the Oracle common stock.
There are many factors affecting trading value of the ProGroS Securities
Our ability to call the ProGroS Securities before their stated maturity
date is likely to limit the secondary market price at which the ProGroS
Securities will trade. In particular, we expect that the secondary market
price of the ProGroS Securities generally will not exceed the applicable
redemption price because of our ability to call the ProGroS Securities and pay
only that redemption price. We believe that if we did not have the right to
call the ProGroS Securities, the secondary market price of the ProGroS
Securities would likely be significantly different.
We believe that the market value of the ProGroS Securities will be
affected by the price of Oracle common stock and by a number of other factors
in addition to our ability to call the ProGroS Securities before their stated
maturity date. Some of these factors are interrelated in complex ways; as a
result, the effect of any one factor may be offset or magnified by the effect
of another factor. The following paragraphs describe the expected impact on
the market value of the ProGroS Securities given a change in a specific
factor, assuming all other conditions remain constant.
o Value of Oracle Common Stock. We expect that the market value of the
ProGroS Securities will depend on the amount by which the price of
Oracle common stock exceeds $29.1875, the value of Oracle common
stock on the date the ProGroS Securities were initially priced for
sale to the public. If you choose to sell your ProGroS Securities
when the price of Oracle common stock exceeds$29.1875, you may
receive substantially less than the amount that would be payable at
the stated maturity date based on that price because of the
expectation that the price of Oracle common stock will continue to
fluctuate until its final value as described in this prospectus is
determined.
o If you choose to sell your ProGroS Securities when the price of
Oracle common stock is below $29.1875, you may receive less than the
principal amount of your ProGroS Securities. As of the date of this
prospectus, Oracle has not paid dividends on its common stock. As a
general matter, if dividends are ever paid on Oracle common stock, a
rising dividend rate, i.e., dividends per share, may increase the
price of Oracle common stock while a falling dividend rate may
decrease its price . Political, economic and other developments may
also affect the price of Oracle common stock and the value of the
ProGroS Securities.
o Interest Rates. We expect that the trading value of the ProGroS
Securities will be affected by changes in interest rates. As a
general matter during the earlier years of the ProGroS Securities,
if U.S. interest rates increase, we expect that the trading value of
the ProGroS Securities will decrease and if U.S. interest rates
decrease, we expect the trading value of the ProGroS Securities will
increase. However, interest rates may also affect the economy and,
in turn, the price of Oracle common stock. Rising interest rates may
lower the price of Oracle common stock and the ProGroS Securities.
Falling interest rates may increase the value of Oracle common stock
and the value of the ProGroS Securities.
o Volatility of Oracle common stock. Volatility is the term used to
describe the size and frequency of market fluctuations. If the
volatility of Oracle common stock increases, we expect that the
trading value of the ProGroS Securities will increase. If the
volatility of Oracle common stock decreases, we expect that the
trading value of the ProGroS Securities will decrease.
o Time Remaining to Stated Maturity Date. The ProGroS Securities may
trade at a value above that which would be expected based on the
level of interest rates and the price of Oracle common stock. This
difference will reflect a "time premium" due to expectations
concerning the price of Oracle common stock during the period prior
to the stated maturity date of the ProGroS Securities. However, as
the time remaining to the stated maturity date of the ProGroS
Securities decreases, we expect that this time premium will
decrease, potentially lowering the trading value of the ProGroS
Securities.
o Dividend Yield. If dividends are ever paid on Oracle common stock,
the dividend yield that would result would likely affect the value
of the ProGroS Securities. If the dividend yield on Oracle common
stock were to increase, we expect that the value of the ProGroS
Securities would decrease. Conversely, if the dividend yield on
Oracle common stock were to decrease, we expect that the value of
the ProGroS Securities would increase.
o Changes in our credit ratings. 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 ProGroS Securities. However, because your return on
your ProGroS Securities is dependent upon factors in addition to our
ability to pay our obligations under the ProGroS Securities, such as
the percentage increase in the value of Oracle common stock at
maturity, an improvement in our credit ratings will not reduce
investment risks related to the ProGroS Securities
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the ProGroS Securities
attributable to another factor, such as an increase in the price of Oracle
common stock.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the ProGroS Securities of a given
change in most of the factors listed above will be less if it occurs later in
the term of the ProGroS Securities than if it occurs earlier in the term of
the ProGroS Securities except that we expect that the effect on the trading
value of the ProGroS Securities of a given increase in the value of Oracle
common stock will be greater if it occurs later in the term of the ProGroS
Securities than if it occurs earlier in the term of the ProGroS Securities.
You will not have any stockholder's rights with respect to the Oracle common
stock
Beneficial owners of the ProGroS Securities are not entitled to any
rights with respect to Oracle common stock, including, voting rights and
rights to receive any dividends or other distributions in respect of that
stock.
No affiliation between ML&Co. and Oracle Corporation
ML&Co. has no affiliation with Oracle Corporation, and Oracle Corporation
has no obligations with respect to the ProGroS Securities or amounts to be
paid to you, including any obligation to take the needs of ML&Co. or of
beneficial owners of the ProGroS Securities into consideration for any reason.
Oracle Corporation did not receive any of the proceeds of the initial offering
of the ProGroS Securities and is not responsible for, and has not participated
in, the determination or calculation of the amount receivable by beneficial
owners of the ProGroS Securities on the stated maturity date or upon an
earlier redemption. In addition, Oracle Corporation is not involved with the
administration or trading of the ProGroS Securities.
There may be state law limits on the payment of amounts payable on the ProGroS
Securities
New York State law governs the indenture under which the ProGroS
Securities are 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 ProGroS 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 ProGroS Securities holders,
to the extent permitted by law, not to voluntarily claim the benefits of any
laws concerning usurious rates of interest.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell Oracle common
stock for our own accounts for business reasons or in connection with hedging
our obligations under the ProGroS Securities. These transactions could affect
the price of Oracle common stock and the return on your ProGroS Securities.
Potential conflicts
The calculation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated
or MLPF&S, is our subsidiary. Under some circumstances, MLPF&S's role as our
subsidiary and its responsibilities as calculation agent for the ProGroS
Securities could give rise to conflicts of interests. You should be aware that
because we control the calculation agent, potential conflicts of interest
could arise.
Other Considerations
You should also consider the tax consequences of investing in the ProGroS
Securities and should consult your tax advisor.
<PAGE>
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
ProGroS Securities described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF PROGROS SECURITIES
The ProGroS Securities were issued as a series of Senior debt securities
under the 1983 indenture which is more fully described in this prospectus.
The ProGroS Securities will mature on March 31, 2003 unless called
earlier at the option of ML&Co.
Unless called, while at maturity a beneficial owner will receive the
principal amount of each ProGroS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "-Payment at Maturity" below.
The ProGroS Securities may be called by ML&Co. as described below, but
are not subject to redemption at the option of any beneficial owner before the
stated maturity date. Upon the occurrence of an Event of Default with respect
to the ProGroS Securities, beneficial owners of the ProGroS Securities may
accelerate the maturity of the ProGroS Securities, as described under "-Events
of Default and Acceleration" and "Other Terms-Events of Default" in this
prospectus.
The ProGroS Securities were issued in denominations of whole units.
Payment at Maturity
At the stated maturity date, a beneficial owner of a ProGroS Security
will be entitled to receive the principal amount of each unit plus a
Supplemental Redemption Amount, if any, all as provided below. If the
Supplemental Amount is not greater than zero, a beneficial owner of a ProGroS
Security will be entitled to receive only the principal amount of its ProGroS
Securities.
The "supplemental redemption amount" for a ProGroS Security will be
determined by the calculation agent and will equal:
<TABLE>
<CAPTION>
<S> <C>
principal amount of each proGroS Security ($10 per unit) x (Ending Value - Starting Value)
-------------------------------
Starting Value
</TABLE>
provided, however, that in no event will the supplemental redemption amount be
less than zero.
The "starting value" equals $29.1875.
The "ending value" will be determined by the calculation agent and will
equal the arithmetic average or arithmetic mean of the last prices of Oracle
common stock determined on each of the first five calculation days during the
calculation period. If there are fewer than five calculation days in the
calculation period, then the ending value will equal the arithmetic average or
arithmetic mean of the last prices of Oracle common stock on these calculation
days, and if there is only one calculation day, then the ending value will
equal the Last price of Oracle common stock on that calculation day. If no
calculation days occur during the calculation period, then the ending value
will equal the last price of Oracle common stock determined on the last
scheduled calculation day in the calculation period, regardless of the
occurrence of a Market disruption event on that day.
The "calculation period" means the period from and including the seventh
scheduled calculation day prior to the stated maturity date to and including
the second scheduled calculation day before the stated maturity date.
"calculation day" means any trading day during the calculation period on
which a Market disruption event has not occurred.
"trading day" is a day on which shares of Oracle common stock
(a) 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
(b) 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 Oracle common stock.
"market disruption event" means the occurrence or existence on any
trading day during the one-half hour period that ends when the last price is
determined of any suspension of, or limitation imposed on, trading in Oracle
common stock on the National Association of Securities Dealers, Inc. Automated
Quotation System or other market or exchange, if applicable.
"last price" means the last sales price of Oracle common stock as
reported by the NASDAQ NMS or, if that security is not trading on the NASDAQ
NMS on any date, as reported in the composite transactions for the principal
United States securities exchange on which that security is so listed, or if
that security is not so listed on a United States national or regional
securities exchange, the last quoted bid price for that security in the
over-the-counter market as reported by the National Quotation Bureau or
similar organization, or, if the bid price is not available, the market value
of that security on that date as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
calculation agent.
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law to close and that is a trading day on the NYSE.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the ProGroS Securities.
<PAGE>
Early Call of the ProGroS Securities at the Option of ML&Co.
Beginning April 1, 1999, ML&Co., in its sole discretion, may elect to
call the ProGroS Securities offered hereby, in whole but not in part, before
the stated maturity date by giving notice to the Trustee of ML&Co.'s election
on any business day within the month of April in 1999, 2000, 2001 or 2002, at
the related call price:
Call Period Call Price
----------- ------------------------
April, 1999 116% of principal amount
April, 2000 132% of principal amount
April, 2001 148% of principal amount
April, 2002 164% of principal amount
If we elect to call your ProGroS Securities prior to the stated maturity
date, you will receive only the relevant call price and you will not receive a
supplemental redemption amount based on the price of Oracle common stock. If
we do not call the ProGroS Securities prior to the stated maturity date, the
principal amount plus the supplemental redemption amount, if any, that you
receive at the stated maturity may be greater than or less than any of the
call prices. ML&Co. may elect to call the ProGroS Securities on any business
day during a call period by giving notice to the Trustee and specifying the
date on which the call price shall be paid. The call date shall be no later
than the 20th Business day after any call election. The Trustee will provide
notice of any call election to the registered holders of the ProGroS
Securities, specifying the call date, no later than 15, nor more than 30, days
before the call date. While the ProGroS Securities are held at the Depositary,
the registered holder will be the Depositary, and the Depositary will receive
the notice of the call. As more fully described below under "Description of
ProGroS Securities--Depositary", the Depositary will forward any notice to its
participants which will pass any notice on to the beneficial owners.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical ending
values:
o the total amount payable at the stated maturity date for each unit
of ProGroS Securities,
o the total rate of return to beneficial owners of the ProGroS
Securities and
o the pretax annualized rate of return to beneficial owners of ProGroS
Securities.
This table assumes that the ProGroS Securities are not called prior to
the stated maturity date.
<TABLE>
<CAPTION>
Total Amount
Payable at the Pretax
Percentage Change Stated Maturity Date Annualized
Hypothetical Over the per Total Rate Rate of
Ending value Starting value Unit of Return Returns(1)
- -------------- ---------------------- -------------------- ---------- ----------
<S> <C> <C> <C> <C>
11.68 % $10.00 0.00% 0.00%
14.60 % $10.00 0.00% 0.00%
17.51 % $10.00 0.00% 0.00%
20.43 % $10.00 0.00% 0.00%
23.35 % $10.00 0.00% 0.00%
26.27 % $10.00 0.00% 0.00%
29.19 0% $10.00 0.00% 0.00%
32.11 10% $11.00 10.00% 1.90%
35.03 20% $12.00 20.00% 3.65%
37.95 30% $13.00 30.00% 5.28%
40.87 40% $14.00 40.00% 6.79%
43.79 50% $15.00 50.00% 8.22%
46.70 60% $16.00 60.00% 9.55%
49.62 70% $17.00 70.00% 10.82%
52.54 80% $18.00 80.00% 12.02%
55.46 90% $19.00 90.00% 13.16%
58.38 100% $20.00 100.00% 14.25%
61.30 110% $21.00 110.00% 15.29%
64.22 120% $22.00 120.00% 16.29%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) The starting value equals $29.1875.
The above figures are for purposes of illustration only. The actual
supplemental redemption amount received by investors and the total and pretax
annualized rate of return resulting therefrom will depend entirely on the
actual ending value determined by the calculation agent as provided in this
prospectus.
Dilution Adjustments
The Last prices used to determine the ending value are subject to
adjustment if Oracle Corporation shall:
(a) pay a stock dividend or make a distribution with respect to Oracle
common stock in shares of Oracle common stock;
(b) subdivide or split the outstanding shares of Oracle common stock
into a greater number of shares;
(c) combine the outstanding shares of Oracle common stock into a smaller
number of shares;
(d) issue by reclassification of shares of Oracle common stock any
shares of common stock of Oracle Corporation;
(e) issue rights or warrants to all holders of Oracle common stock
entitling them to subscribe for or purchase shares of Oracle common
stock at a price per share less than the then current market price
of Oracle common stock (other than rights to purchase Oracle common
stock pursuant to a plan for the reinvestment of dividends or
interest); or
(f) pay a dividend or make a distribution to all holders of Oracle
common stock of evidences of its indebtedness or other assets,
excluding any stock dividends or distributions referred to in clause
(a) above or any cash dividends other than any extraodinary cash
dividend or issue to all holders of Oracle common stock rights or
warrants to subscribe for or purchase any of its securities, other
than those referred to in clause (e) above, any of the foregoing are
referred to as the "Distributed Assets". The effect of the foregoing
is that there will not be any adjustments to the ending value for
the issuance by Oracle Corporation of options, warrants, stock
purchase rights or securities in connection with the employee
benefit plans of Oracle Corporation.
All adjustments will be calculated to the nearest 1/10,000th of a share
of Oracle common stock or if there is not a nearest 1/10,000th of a share to
the next lower 1/10,000th of a share. No adjustment shall be required unless
any adjustment would require an increase or decrease of at least one percent
in the last price; provided, however, that any adjustments which by reason of
the foregoing are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
An "Extraodinary cash dividend" means, with respect to any
consecutive 12-month period, all cash dividends on Oracle common stock during
that period to the extent any dividends exceed on a per share basis 10% of the
average last price of Oracle common stock over that period less any dividends
for which a prior adjustment was previously made.
In the event of
(a) any consolidation or merger of Oracle Corporation, or any surviving
entity or subsequent surviving entity of Oracle Corporation, a
"Successor Company", with or into another entity, other than a
merger or consolidation in which Oracle Corporation is the
continuing corporation and in which Oracle common stock outstanding
immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of Oracle Corporation or
another corporation,
(b) any sale, transfer, lease or conveyance to another corporation of
the property of Oracle Corporation or any Successor Company as an
entirety or substantially as an entirety,
(c) any statutory exchange of securities of Oracle Corporation or any
Successor Company with another corporation, other than in connection
with a merger or acquisition or
(d) any liquidation, dissolution, winding up or bankruptcy of Oracle
Corporation or any Successor Company, any event described in clause
(a), (b), (c) or (d), a "reorganization event", the ending value
shall equal the reorganization event value.
The "reorganization event value" shall be determined by the calculation
agent and shall equal
o the transaction value related to the relevant Reorganization Event,
plus
o interest on the transaction value accruing from the date of the
payment or delivery of the consideration, if any, received in
connection with that Reorganization Event until the stated maturity
date at a fixed interest rate determined on the date of that payment
or delivery equal to the interest rate that would be paid on a
standard senior non-callable debt security of ML&Co. with a term
equal to the remaining term of the ProGroS Securities.
The "transaction value" means
o for any cash received in any reorganization event, the amount of
cash received per share of Oracle common stock,
o for any property other than cash or securities received in any
reorganization event, an amount equal to the market value of
property received per share on the date that the property is
received by holders of Oracle common stock as determined by the
calculation agent, and
o for any securities received in any reorganization event, an amount
equal to the last price per unit of securities on the date the
securities are received by holders of Oracle common stock multiplied
by the number of the securities received for each share of Oracle
common stock, subject to adjustment on a basis consistent with the
adjustment provisions described above.
The foregoing adjustments shall be made by MLPF&S, as calculation agent,
and all adjustments shall be final.
No adjustments will be made for other events, such as offerings of Oracle
common stock by Oracle Corporation for cash or in connection with
acquisitions.
ML&Co. will, within ten business days following the occurrence of an
event that requires an adjustment or if ML&Co. is not aware of occurrence, as
soon as practicable after becoming so aware, provide written notice to the
Trustee, which shall provide notice to the holders of the ProGroS Securities
of the occurrence of any event and, if applicable, a statement in reasonable
detail setting forth the adjusted last price to be used in determining the
ending value.
Events of Default and Acceleration
In case an event of default with respect to any ProGroS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a
ProGroS Security upon any acceleration permitted by the ProGroS Securities,
with respect to each unit, will be equal to the principal amount and the
supplemental redemption amount, if any, calculated as though the date of early
repayment were the stated maturity date of the ProGroS Securities. See
"Description of ProGroS Securities--Payment at Maturity" in this prospectus.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim of the
beneficial owner of a ProGroS Security may be limited, under Section 502(b)(2)
f Title 11 of the United States Code, to the principal amount of the ProGroS
Security plus an additional amount of contingent interest calculated as though
the date of the commencement of the proceeding were the stated maturity date
of the ProGroS Securities.
In case of default in payment of the ProGroS Securities whether at the
call date, at the stated maturity date, or upon acceleration, from and after
the stated maturity date the ProGroS Securities shall bear interest, payable
upon demand of their beneficial owners , at the rate of 5.96% per annum to the
extent that payment of interest shall be legally enforceable on the unpaid
amount due and payable on that date in accordance with the terms of the
ProGroS Securities to the date payment of that amount has been made or duly
provided for.
Global Securities
Description of the Global Securities.
The ProGroS Securities are represented by one or more fully registered
global securities. Each global security has been deposited with, or on behalf
of, The Depository Trust Company or 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 ProGroS 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 ProGroS Securities represented by a global security for
all purposes under the 1983 indenture. Except as provided below, the
beneficial owners of the ProGroS Securities represented by a global security
are not entitled to have the ProGroS Securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of the ProGroS Securities in definitive form and are not
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 an 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 these participants would authorize beneficial owners
owning through these participants to give or take any 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 are 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 ProGroS Securities. The ProGroS
Securities have been issued as fully registered securities registered in the
name of Cede & Co., DTC's partnership nominee. One or more fully registered
global securities have been issued for the ProGroS Securities in the aggregate
principal amount of that issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 ProGroS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the ProGroS
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
that beneficial owner entered into the transaction. Transfers of ownership
interests in the ProGroS Securities are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all ProGroS Securities deposited with
DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of ProGroS 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 ProGroS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the ProGroS
Securities are credited, which may or may not be the beneficial owners. The
participants are 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 are 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
ProGroS 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
to whose accounts the ProGroS 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
ProGroS 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 the payments to direct participants is the responsibility of
DTC, and disbursement of the payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If:
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, and
(c) an event of default under the 1983 indenture has occurred and is
continuing with respect to the ProGroS Securities,
the global securities will be exchangeable for ProGroS 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 ProGroS
Securities will be registered in the name or names as the depositary shall
instruct the trustee. It is expected that these 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 Security 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 Payment
All payments of principal and the supplemental redemption amount, and
call price if any, and will be made by ML&Co. in immediately available funds
so long as the ProGroS Securities are maintained in book-entry form.
ORACLE COMMON STOCK
Oracle Corporation
Oracle Corporation supplies software for information management. Oracle
Corporation offers its database, tools and application products, along with
related consulting, education, and support services in more than 140 countries
around the world.
Oracle Corporation is subject to the informational requirements of the
Exchange Act. Accordingly, Oracle Corporation files reports, proxy and other
information statements and other information with the SEC. Information
provided to or filed with the SEC by Oracle Corporation is available at the
offices of the Commission . ML&Co. makes no representation or warranty as to
the accuracy or completeness of these reports.
ML&Co. is not affiliated with Oracle Corporation and Oracle Corporation
has no obligations with respect to the ProGroS Securities. This prospectus
relates only to the ProGroS securities offered by this prospectus and does not
relate to Oracle common stock or other securities of Oracle Corporation. The
information contained in this prospectus regarding Oracle Corporation has been
derived from the publicly available documents described in the preceding
paragraph. ML&Co. has not participated in the preparation of these documents
or made any due diligence inquiries with respect to Oracle Corporation in
connection with the initial offering of the ProGroS Securities. ML&Co. makes
no representation that any publicly available documents or any other publicly
available information regarding Oracle Corporation 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 Oracle common stock have
been publicly disclosed. Subsequent disclosure of any events or the disclosure
of or failure to disclose material future events concerning Oracle Corporation
could affect the Supplemental Redemption Amount to be received at the stated
maturity date and therefore the trading value of the ProGroS Securities.
From time to time, in the ordinary course of business, affiliates of
ML&Co. have engaged in investment banking activities on behalf of the Oracle
Corporation as well as served as counterparty in other transactions.
Oracle common stock is traded on the NASDAQ NMS under the trading symbol
"ORCL".
OTHER TERMS
ML&Co. issued the ProGroS 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 ProGroS 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 ProGroS 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 claims of ML&Co. itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances from
some 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 of 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
The 1983 indenture may be modified and amended by ML&Co. and the trustee
with the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of debt securities affected. However, without the consent
of each holder of any outstanding debt security affected, no amendment or
modification to any 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 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 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 debt securities of that series may waive any event of default
with respect to any 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 any indenture which
cannot be modified under the terms of that indenture without the
consent of each holder of each series of 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 ProGroS 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.
WHERE YOU CAN FIND MORE INFORMATION
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 ProGroS Securities and other securities. For further information on ML&Co.
and the ProGroS 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 ProGroS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the ProGroS Securities.
MLPF&S may act as principal or agent in these market-making transactions.
The ProGroS Securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the ProGroS 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
European Portfolio Market Index Target-Term SecuritiesSM due June 30, 1999
"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.
<TABLE>
<CAPTION>
<S> <C>
The MITTS Securities: Payment at Maturity:
o No payments before the maturity date o On the maturity date, for each unit of
o Senior unsecured debt ecurities of the MITTS Securities you own, we
Merrill Lynch & Co., Inc. will pay you an amount determined based
o linked to the value of a portfolio of upon the change in value of a portfolio of
specified stocks of specified stocks of specified securities of European companies
European companies described in this prospectus.
o The MITTS Securities are listed on the o If the initial value of the portfolio is more
New York Stock Exchange under the symbol than the ending value of the portfolio, the
"MEE" amount you receive at maturity may be less than
the principal amount of your MITTS Securities,
however, the amount you receive at maturity will
not be less than $9.00 per unit of your MITTS
Securities
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
------------------------
Merrill Lynch & Co.
------------------------
The date of this prospectus is , 199 .
"MITTS" and "Market Index Target-Term Securities" are registered service
marks of Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS................................................................3
MERRILL LYNCH & CO., INC....................................................7
RATIO OF EARNINGS TO FIXED CHARGES..........................................8
DESCRIPTION OF THE MITTS SECURITIES.........................................9
THE PORTFOLIO..............................................................19
OTHER TERMS................................................................20
WHERE YOU CAN FIND MORE INFORMATION.......................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC..........................24
PLAN OF DISTRIBUTION.......................................................24
EXPERTS....................................................................25
<PAGE>
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the MITTS Securities is suitable for you.
You may not earn a return on your investment.
Your return on the MITTS Securities will depend on the return of the
specified portfolio of securities issued by European companies described in
this prospectus. You should be aware that if the average value of this
portfolio over five trading days shortly before the maturity date is less than
$100, you will receive less than the principal amount of your MITTS Securities
at maturity, but no less than $9.00 per unit of the MITTS Securities. If the
average value of the portfolio over five trading days shortly before the
maturity date equals $100, you will receive only your principal amount. This
will be true even if, at some time during the life of the MITTS Securities,
the portfolio value may have exceeded $100 but later falls below or remains
equal to $100.
Your yield may be lower than the yield on a standard debt security of
comparable maturity.
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. with the same maturity date. Your investment may not reflect
the full opportunity cost to you when you consider inflation and other factors
that affect the time value of money.
Your return will not reflect the return of owning the stocks included in the
portfolio.
Your return will not reflect the return you would realize if you actually
owned the stocks included in the portfolio and received the dividends paid on
those stocks. This is because the value of the portfolio is calculated by
reference to the prices of the common stocks included in the portfolio without
taking into consideration the value of dividends paid on those stocks.
Your return will be affected by changes in foreign currency exchange rates and
foreign markets.
Although your return on your MITTS Securities is based on value of the
securities included in the portfolio, your investment in the MITTS Securities
does not give you any right to receive any of the securities included in the
portfolio or any other ownership right or interest in those securities. In
addition, while the MITTS Securities are U.S-dollar denominated, because the
prices of some of the portfolio securities and the shares underlying the
portfolio securities are quoted in currencies other than the U.S. dollar, your
return will be affected by changes in foreign currency rates relative to the
U.S. dollar. The U.S. dollar price of a security denominated in a currency
other than the U.S. dollar will depend on the price of that security and the
exchange rate between that currency and the U.S. dollar. Even if the price in
a foreign currency of the security is unchanged, changes in the rates of
exchange between the U.S. dollar and the foreign currency will change the U.S.
dollar price of the security. Furthermore, even if the price of the security
in the foreign currency increases, the U.S. dollar price of the security may
decrease as a result of changes in the rates of exchange between the U.S.
dollar and the foreign currency. Rates of exchange between the dollar and
other currencies are determined by forces of supply and demand in the foreign
exchange markets. These forces are, in turn, affected by international balance
of payments and other economic and financial conditions, government
intervention, speculation and other factors.
You should be aware that investments in securities indexed to the value
of non-United States securities involve risks. Fluctuations in foreign
exchange rates, future foreign political and economic developments, and the
possible imposition of exchange controls or other foreign governmental laws or
restrictions applicable to these investments may affect the U.S. dollar value
of the securities, including the securities in the portfolio. Securities
prices in different countries are subject to different economic, financial,
political and social factors. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in the areas of growth of gross
national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. With respect to certain
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which
could affect the value of investments in those countries. There may be less
publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those to which
U.S. entities are subject. Some foreign investments may be subject to foreign
withholding taxes which could affect the value of investment in these
countries. In addition, investment laws in foreign countries may limit or
restrict ownership of certain securities by foreign nationals by restricting
or eliminating voting or other rights or limiting the amount of securities
that may be so owned, and these limitations or restrictions may affect the
prices of the securities.
Foreign financial markets, while currently growing in volume, may have
substantially less volume than U.S. markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable domestic companies. The foreign markets have different trading
practices that may affect the prices of securities. Some foreign markets on
which the portfolio securities trade impose trading restrictions if certain
price movements occur. The foreign markets have different clearance and
settlement procedures, and in certain countries there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct transactions. There is generally
less government supervision and regulation of exchanges, brokers and issuers
in foreign countries than there is in the U.S. In addition, the terms and
conditions of depositary facilities may result in less liquidity or lower
market values for the portfolio securities than for the stocks underlying
those securities.
There may be an uncertain trading market for the MITTS Securities in the
future.
Although the MITTS Securities are listed on the NYSE under the symbol
"MEE," 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, you cannot assume that 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 including the
appreciation, if any, of the value of the portfolio.
If the trading market for the MITTS Securities is limited and you do not
wish to hold your investment until maturity, there may be a limited number of
buyers for your MITTS Securities. This may affect the price you receive if you
sell before maturity.
There are many factors affecting the trading value of the MITTS.
We believe that the value of the portfolio and by a number of other
factors will affect the trading value of the MITTS Securities. Some of these
factors interrelate in complex ways; as a result, the effect of any one factor
may offset or magnify the effect of another factor. 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.
o Interest rates. 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 affect 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 the trading
value of the MITTS Securities will increase. Local interest rates
may also affect the economies of the countries in which issuers of
the securities included in the portfolio or the shares underlying
those securities operate, and, in turn, affect the portfolio value.
o Volatility of the portfolio value. Volatility is the term used to
describe the size and frequency of market fluctuations. If the
volatility of the portfolio value increases, we expect that the
trading value of the MITTS Securities will increase. If the
volatility of the portfolio value decreases, we expect that the
trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that before their
maturity, the MITTS Securities may trade at a value above that which
would be expected based on the level of interest rates and the
portfolio value. This difference will reflect a "time premium" due
to expectations concerning the value of the Portfolio during the
period before the maturity of the MITTS Securities. However, as the
time remaining to maturity of the MITTS Securities decreases, we
expect that this time premium will decrease, lowering the trading
value of the MITTS Securities.
o Dividend yields. If dividend yields on the securities included in
the portfolio and shares underlying the ADRs included in the
portfolio increase, we expect that the value of the MITTS Securities
will decrease. Conversely, if dividend yields on the securities
included in the portfolio and shares underlying the ADRs included in
the portfolio decrease, we expect that value of the MITTS Securities
will increase.
o Changes in our credit ratings. 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 value of the portfolio at maturity,
an improvement in our credit ratings will not reduce investment
risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any change in the trading value of the MITTS Securities
attributable to another factor, such as an increase in value of the portfolio.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the portfolio 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.
State law limits on interest paid.
New York State laws govern the indenture under which the MITTS Securities
are 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.
Under present New York law, the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to debt securities in which
$2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the MITTS holders, to the extent
permitted by law, not to voluntarily claim the benefits of any laws concerning
usurious rates of interest.
Purchases and sales by us and our affiliates may affect your return.
We and our affiliates may from time to time buy or sell the securities
included in the portfolio and shares underlying the ADRs included in the
portfolio for our own accounts for business reasons or in connection with
hedging our obligations under the MITTS Securities. These transactions could
affect the price of these securities and the value of the portfolio in a
manner adverse to your investment in the MITTS Securities.
Potential conflicts of interest.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the
portfolio and the amount payable to you at maturity. 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. These
conflicts could occur, for instance, in connection with its determination as
to whether the value of the portfolio can be calculated on a particular
trading day, or in connection with judgments that it would be required to make
in the event of a discontinuance of the portfolio. See "Description of the
MITTS Securities--Adjustments to the Portfolio; Market Disruption Events" and
"--Discontinuance of the Portfolio" in this prospectus. 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 have entered into an arrangement with one of our a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations.
We suggest that you should reach an investment decision with regard to
the MITTS Securities only after carefully considering the suitability of the
MITTS Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult your tax adviser.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On December 30, 1993, Merrill Lynch & Co., Inc. ("ML&Co.") issued an
aggregate principal amount of $31,000,000 or 3,100,000 units of the MITTS
Securities.
The MITTS Securities were issued as a series of Senior Debt Securities
under the 1983 Indenture which is more fully described in this prospectus.
The MITTS Securities will mature on June 30, 1999.
While at maturity a beneficial owner of a MITTS Security may receive an
amount in excess of the principal amount of the MITTS Security if the Closing
Portfolio Value exceeds the Original Portfolio Value, there will be no payment
of interest, periodic or otherwise, before maturity. (See "--Payment at
Maturity", below.)
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any Holder before maturity. Upon the occurrence of an Event of
Default with respect to the MITTS Securities, Holders of the MITTS Securities
may accelerate the maturity of the MITTS Securities, as described under
"--Events of Default and Acceleration" and "Other Terms--Events of Default" in
this Prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity .
The "Payment at Maturity" for a MITTS Security will be determined by the
calculation agent and will equal:
$10 X Closing Portfolio Value
-----------------------
$100
provided, however, that the amount payable at maturity will not be less than
$9 for each $10 principal amount of MITTS Securities (the "Minimum Payment").
The "Original Portfolio Value" equals 100, based on the prices and
Multipliers of the portfolio securities on December 22, 1993.
If the Closing Portfolio Value is equal to $90 or less, a beneficial
owner of a MITTS Security will receive the Minimum Payment of $9 for each $10
principal amount of the MITTS Securities at maturity. If the Closing Portfolio
Value is between $90 and $100, a beneficial owner of a MITTS Security will
receive between $9 and $10 for each $10 principal amount of the MITTS
Securities at maturity.
The "Closing Portfolio Value" will be determined by MLPF&S, an affiliate
of ML&Co., or ML&Co.'s successor (the "calculation agent"), and will equal the
sum of the products of the Average Market Price and the applicable Multiplier
for each portfolio security.
The "Average Market Price" of a portfolio security will equal the
average, or mean, of the Market Prices of that portfolio security determined
on each of the first forty-five Calculation Days with respect to that
portfolio security during the Calculation Period. If there are fewer than
forty-five Calculation Days with respect to a portfolio security, then the
Average Market Price with respect to that portfolio security will equal the
average, or mean, of the Market Prices on the Calculation Days, and if there
is only one Calculation Day, then the Average Market Price will equal the
Market Price on the Calculation Day.
The "Calculation Period" means the period from and including the
ninetieth scheduled NYSE Trading Day, as defined below, before the maturity
date to and including the fourth scheduled NYSE Trading Day before the
maturity date. "Calculation Day" with respect to a portfolio security means
any Trading Day during the Calculation Period in the country in which the
portfolio security is being priced on which a Market Disruption Event has not
occurred. If a Market Disruption Event occurs on all Trading Days in that
country during the Calculation Period then the fourth scheduled NYSE Trading
Day before the maturity date in that country will be deemed a Calculation Day,
notwithstanding the Market Disruption Event; provided, however, that if the
fourth scheduled NYSE Trading Day is not a Trading Day in that country, then
the immediately preceding Trading Day shall instead be deemed a Calculation
Day. Any reference to a specific day in this prospectus shall mean the
calendar day in each market in which portfolio securities are priced.
"Market Price" means for a Calculation Day the following:
(a) If the portfolio security is listed on a national securities
exchange in the United States, is a NASDAQ National Market System
("NASDAQ NMS") security or is included in the OTC Bulletin Board
Service ("OTC Bulletin Board") operated by the National Association
of Securities Dealers, Inc., Market Price means:
(a) the last reported sale price, regular way, on the day on
the principal United States securities exchange registered under the
Exchange Act on which the portfolio security is listed or admitted
to trading, or
(b) if not listed or admitted to trading on any securities
exchange or if the last reported sale price is not obtainable, the
last reported sale price on the over-the-counter market as reported
on the NASDAQ NMS or OTC Bulletin Board on that day, or
(c) if the last reported sale price is not available pursuant to
(a) and (b) above, the mean of the last reported bid and offer price
on the over-the-counter market as reported on the NASDAQ NMS or OTC
Bulletin Board on that day as determined by the calculation agent.
(b) The term "NASDAQ NMS security" shall include a security included in
any successor to the system and the term "OTC Bulletin Board
Service" shall include any successor service to the system.
(c) If the portfolio security is not listed on a national securities
exchange in the United States or is not a NASDAQ NMS security or
included in the OTC Bulletin Board operated by the NASD, Market
Price means the last reported sale price on the day on the
securities exchange on which the portfolio security is listed or
admitted to trading with the greatest volume of trading for the
calendar month preceding that day as determined by the calculation
agent, provided that if the last reported sale price is for a
transaction which occurred more than four hours before the close of
that exchange, then the Market Price shall mean the average, or
mean, of the last available bid and offer price on that exchange.
(d) If the portfolio security is not listed or admitted to trading on
any securities exchange or if the last reported sale price or bid
and offer are not obtainable, the Market Price shall mean the last
reported sale price on the over-the-counter market with the greatest
volume of trading as determined by the calculation agent, provided
that if the last reported sale price is for a transaction which
occurred more than four hours before the time when trading in that
over-the-counter market typically ends, then the Market Price shall
mean the average, or mean, of the last available bid and offer
prices in that market of the three dealers which have the highest
volume of transactions in the Portfolio Security in the immediately
preceding calendar month as determined by the calculation agent
based on information that is reasonably available to it. If prices
are quoted in a currency other than in U.S. Dollars, these prices
will be translated into U.S. Dollars for purposes of calculating the
Average Market Price using the Spot Rate on the same calendar day as
the date of that price.
(e) The "Spot Rate" on any date will be determined by the calculation
agent and will equal the spot rate of the currency per U.S. $1.00 on
that date at approximately 3: 00 p.m., New York City time, as
reported on the information service operated by Bloomberg, L.P.
("Bloomberg") representing the mean of certain dealers in that
currency or, if Bloomberg has not reported the rate by 3:30 p.m.,
New York City time, on that day, the offered spot rate of that
currency per U.S. $1.00 on that date for a transaction amount in an
amount customary for that market on the date quoted at approximately
3:30 p.m., New York City time, by a leading bank in the foreign
exchange markets as may be selected by the calculation agent.
If the calculation agent is required to use the bid and offer price for a
Portfolio Security to determine the Market Price of that Portfolio Security
pursuant to the foregoing, the calculation agent shall not use any bid or
offer price announced by MLPF&S or any other affiliate of ML&Co.
"NYSE Trading Day" shall mean a day on which trading is generally
conducted in the over-the-counter market for equity securities in the United
States and on the New York Stock Exchange as determined by the calculation
agent.
"Trading Day" shall mean a day on which trading is conducted on the
principal securities exchanges in the country in which the portfolio security
is being priced.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading of that portfolio
security in the country in which the portfolio security is being
priced for more than two hours of trading, or during the period
one-half hour before the time that the portfolio security is to be
priced, or
(b) the suspension or material limitation, in each case, for more than
two hours of trading, whether by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange or
otherwise, in
(1) option contracts related to the portfolio securities, or
(2) options on futures contracts, which traded on any exchange in
the country in which the portfolio security is being priced for
more than two hours of trading or for during the period one
half hour before the time that a portfolio security is to be
priced.
For the purposes of clause (a) above with respect to portfolio securities
that are priced in the United States, limitations pursuant to NYSE Rule 80A on
trading during significant market fluctuations under NYSE 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".
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, in the absence of manifest error,
shall be conclusive for all purposes and binding on ML&Co. and beneficial
owners of the MITTS Securities. All percentages resulting from any calculation
on the MITTS Securities will be rounded to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upwards, for example, 9.876545%, or .09876545, would be rounded to 9.87655%,
or .0987655, and all dollar amounts used in or resulting from that calculation
will be rounded to the nearest cent with one-half cent being rounded upwards.
In some circumstances, the duties of MLPF&S as calculation agent in
determining the existence of Market Disruption Events could conflict with the
interests of MLPF&S as a subsidiary of ML&Co.
Portfolio Securities
The securities listed below were used to calculate the Original Portfolio
Value. Holders of the MITTS will not have any right to receive the portfolio
securities or the underlying shares. The following table sets forth the
portfolio securities, the percentage of each portfolio security in the
Original Portfolio Value and their Initial Multipliers:
<PAGE>
<TABLE>
<CAPTION>
% of Portfolio
Value
Represented
Issuer of the Country in in Original Initial
Portfolio Security Which Organized ADR Portfolio Value Multiplier
<S> <C> <C> <C> <C>
Alcatel Alsthom Compagnie
Generale d'Electricite(1)..... France Yes 4.167% 0.145560
Banco de Santander S.A.(1)...... Spain Yes 4.167% 0.084388
Bayer A.G.(3)................... Germany No 4.167% 0.019832
Benetton Group S.p.A.(1)........ Italy Yes 4.167% 0.130719
The British Petroleum Co., plc.(1)
United Kingdom Yes 4.167% 0.064977
British Telecom-
Munications plc.(1)........... United Kingdom Yes 4.167% 0.056402
= ===========
Cadbury Schweppes plc(1)........ United Kingdom Yes 4.167% 0.136054
Deutsche Bank A.G.(3)........... Germany No 4.167% 0.008103
L.M. Ericsson Telephone
Co., Inc. (1)................. Sweden Yes 4.167% 0.103842
Grand Metropolitan plc(1) United Kingdom Yes 4.167% 0.148810
Hanson plc(1)................... United Kingdom Yes 4.167% 0.205761
Hoechst A.G.(3)................. Germany No 4.167% 0.023662
Nestle S.A.(3).................. Switzerland No 4.167% 0.004792
Philips Electronics N.V.(2)..... Netherlands No 4.167% 0.198413
Reuters Holdings plc(1)......... United Kingdom Yes 4.167% 0.051125
Rhone-Poulenc S.A.(1)........... France Yes 4.167% 0.166667
Royal Dutch Petroleum Co.(2) Netherlands No 4.167% 0.039683
Siemens A.G.(3)................. Germany No 4.167% 0.009207
Societe Nationale
Elf Aquitaine(1).............. France Yes 4.167% 0.115741
Telefonica de Espana, S.A.(1)... Spain Yes 4.167% 0.104167
Total S.A.(1)................... France Yes 4.167% 0.153610
Unilever plc(1)................. United Kingdom Yes 4.167% 0.057870
Vodaphone Group plc(1).......... United Kingdom Yes 4.167% 0.047755
Waste Management
International plc(1).......... United Kingdom Yes 4.167% 0.234742
- ---------------
(1) As represented in the Portfolio by American Depositary Receipts.
(2) As represented in the Portfolio by ordinary shares traded in U.S. dollars.
(3) As represented in the Portfolio by ordinary shares traded outside the U.S. and denominated in other than U.S. dollars.
</TABLE>
The initial Multiplier relating to each portfolio security indicates the
number of the portfolio security, given the market price of that portfolio
security, required to be included in the calculation of the Original Portfolio
Value so that each portfolio security represents an equal percentage of the
Original Portfolio Value on December 22, 1993.
The price of each portfolio security used to calculate the initial
Multiplier relating to each portfolio security was the closing price of that
portfolio security on December 22, 1993. The respective Multipliers will
remain constant for the term of the MITTS Securities unless adjusted for
certain corporate events, as described below.
The value of the portfolio, for any day, will equal the sum of the
products of the most recently available Market Prices, determined as described
in this prospectus, and the applicable Multipliers for the portfolio
securities. The Closing Portfolio Value, however, is calculated based on
averaging Market Prices for certain days.
The calculation agent currently intends to publish the portfolio value
once on each business day. The calculation agent currently calculates and
publishes values of approximately 1,100 specified portfolios. The calculation
agent currently provides information concerning the portfolios to the
electronic reporting services operated by Bloomberg and to newspapers and
specialized trade publications. If the calculation agent does publish
portfolio values, the calculation agent currently intends to provide these
values to similar sources described above, but there can be no assurance that
the information will ultimately be published by these sources. In addition,
the calculation agent will provide the portfolio value upon request, and will
provide the portfolio value once each business day to the NYSE which has
agreed to report the portfolio value on its electronic transaction reporting
services under the symbol "MEP".
American Depositary Receipts.
Some of the portfolio securities are in the form of American Depositary
Receipts or ADRs. An ADR is a negotiable receipt which is issued by a
depositary, generally a bank, representing shares of a foreign issuer that
have been deposited and are held, on behalf of the holders of the ADRs, at a
custodian bank in the foreign issuer's home country. While the market for
shares underlying the ADRs will generally be in the country in which the
foreign issuer is organized, and trading in the market will generally be based
on that country's currency, ADRs that are included in the portfolio will trade
in U.S. Dollars.
Although ADRs are distinct securities from their underlying shares, the
trading characteristics and valuations of ADRs will usually, but not
necessarily, mirror the characteristics and valuations of their underlying
shares. Active trading volume and efficient pricing in the principal market in
the home country for the underlying shares will usually indicate similar
characteristics in respect of the ADRs. In the case of certain ADRs, however,
there may be inadequate familiarity with or information about the foreign
issuer of the underlying shares represented by the ADR in the market in which
the ADR trades to support active volume, thus resulting in pricing
distortions. This is more likely to occur when the ADR is not listed on a U.S.
stock exchange or quoted on the National Market System of the National
Association of Securities Dealers Automated Quotations System, and trades only
in the over-the-counter market, because the foreign issuer is not required to
register these ADRs under the Securities Exchange Act of 1934, as is the case
with ADRs so listed or quoted. In addition, because of the size of an offering
of underlying shares in ADR form outside the home country and/or other factors
that have limited or increased the float of certain ADRs, the liquidity of
these securities may be less than or greater than that with respect to the
underlying shares. Inasmuch as holders of ADRs may surrender the ADR in order
to take delivery of and trade the underlying shares, a characteristic that
allows investors in ADRs to take advantage of price differentials between
different markets, a market for the underlying shares that is not liquid will
generally result in an illiquid market for the ADR representing these
underlying shares.
The depositary bank that issues an ADR generally charges a fee, based on
the price of the ADR, upon issuance and cancellation of the ADR. This fee
would be in addition to the brokerage commissions paid upon the acquisition or
surrender of the security. In addition, the depositary bank incurs expenses in
connection with the conversion of dividends or other cash distributions paid
in local currency into U.S. Dollars and these expenses are deducted from the
amount of the dividend or distribution paid to holders, resulting in a lower
payout per underlying share represented by the ADR than would be the case if
the underlying share were held directly. Furthermore, foreign investment laws
in certain countries may restrict ownership by foreign nationals of certain
classes of underlying shares. Accordingly, the ADR representing this class of
securities may not possess voting rights, if any, equivalent to those in
respect of the underlying shares. There may be tax considerations, including
tax rate differentials, arising from application of the tax laws of one nation
to the nationals of another and from certain practices in the ADR market may
also exist with respect to some ADRs. In varying degrees, any or all of these
factors may affect the value of the ADR compared with the value of the
underlying shares in the home market of the issuer.
Adjustments to the Multiplier and Portfolio.
The Multiplier with respect to any portfolio security and the portfolio
will be adjusted as follows:
1. If a portfolio security is subject to a stock split or reverse
stock split or a portfolio security that is an ADR is subject to a
similar adjustment, then once the split has become effective, the
Multiplier relating to that portfolio security will be adjusted to equal
the product of the number of shares issued with respect to one share of
that portfolio security, or the number of receipts issued with respect to
one ADR if a portfolio security is an ADR, and the prior multiplier.
2. If a portfolio security is subject to a stock dividend, i.e.
issuance of additional shares of the portfolio security, that is given
equally to all holders of shares of the issuer of that portfolio
security, then once the dividend has become effective and that portfolio
security is trading ex-dividend, the Multiplier will be adjusted so that
the new Multiplier shall equal the former Multiplier plus the product of
the number of shares of that portfolio security issued with respect to
one share of that portfolio security and the prior multiplier.
3. There will be no adjustments to the Multipliers to reflect cash
dividends or distributions paid with respect of a portfolio security
other than for Extraordinary Dividends as described below. A cash
dividend with respect to a portfolio security will be deemed to be an
"Extraordinary Dividend" if that dividend exceeds the immediately
preceding non-Extraordinary Dividend for that portfolio security by an
amount equal to at least 10% of the Market Price on the Trading Day
preceding the record day for the payment of that Extraordinary Dividend,
or the "ex-dividend date". If an Extraordinary Dividend occurs with
respect to a portfolio security, the Multiplier with respect to that
portfolio security will be adjusted on the ex-dividend date with respect
to the Extraordinary Dividend so that the new Multiplier will equal the
product of
o the then current Multiplier, and
o a fraction, the numerator of which is the sum of the
Extraordinary Dividend Amount and the Market Price on the
Trading Day preceding the ex-dividend date, and the denominator
of which is the Market Price on the Trading Day preceding the
ex-dividend date.
The "Extraordinary Dividend Amount" with respect to an Extraordinary
Dividend for a portfolio security will equal the Extraordinary Dividend
minus the amount of the immediately preceding non-Extraordinary Dividend
for the portfolio security.
4. If the issuer of a portfolio security, or, if a portfolio
security is an ADR, the issuer of the underlying share, is being
liquidated or is subject to a proceeding under any applicable bankruptcy,
insolvency or other similar law, that portfolio security will continue to
be included in the portfolio so long as a Market Price for that portfolio
security is available. If a Market Price is no longer available for a
portfolio security for whatever reason, including the liquidation of the
issuer of that portfolio security or the subjection of the issuer of that
portfolio security to a proceeding under any applicable bankruptcy,
insolvency or other similar law, then the value of that portfolio
security will equal zero in connection with calculating portfolio value
and Closing Portfolio Value for so long as no Market Price is available,
and no attempt will be made to find a replacement stock or increase the
value of the portfolio to compensate for the deletion of that portfolio
security.
5. If the issuer of a portfolio security, or, if a portfolio
security is an ADR, the issuer of the underlying share, has been subject
to a merger or consolidation and is not the surviving entity or is
nationalized, then a value for that portfolio security will be determined
at the time the issuer is merged or consolidated or nationalized and will
equal the last available Market Price for that portfolio security and
that value will be constant for the remaining term of the securities. At
that time, no adjustment will be made to the Multiplier of that portfolio
security. ML&Co. may at its sole discretion increase the last available
Market Price to reflect payments or dividends of cash, securities or
other consideration to holders of the portfolio security in connection
with any merger or consolidation which may not be reflected in the last
available Market Price.
6. If the issuer of a portfolio security issues to all of its
shareholders equity securities of an issuer other than the issuer of the
portfolio security, then these new equity securities will be added to the
portfolio as a new portfolio security. The Multiplier for these new
portfolio security will equal the product of the original Multiplier with
respect to the portfolio security for which the new portfolio security is
being issued (the "Original Portfolio Security") and the number of shares
of the new portfolio security issued with respect to one share of the
Original Portfolio Security.
7. If an ADR is no longer listed or admitted to trading on a United
States securities exchange registered under the Exchange Act, is no
longer a NASDAQ NMS security or is no longer included in the OTC Bulletin
Board operated by the NASD, then the underlying shares represented by
that ADR will be deemed to be a new portfolio security and that ADR will
no longer constitute a portfolio security. The initial Multiplier for the
new portfolio security will equal the last value of the Multiplier for
that ADR multiplied by the number of shares of underlying shares
represented by a single ADR.
No adjustments of any Multiplier of a portfolio security will be required
unless that adjustment would require a change of at least 1% in the Multiplier
then in effect. The Multiplier resulting from any of the adjustments specified
above will be rounded to the nearest one thousandth with five ten-thousandths
being rounded upward.
The calculation agent will make no adjustments to the Multiplier of any
portfolio security or to the portfolio other than those specified above.
<PAGE>
Hypothetical Payments
The following table illustrates, for a range of hypothetical Closing
Portfolio Values, the amount payable at maturity for each unit of MITTS
Securities. An investment in the portfolio securities would be significantly
different than investing in the MITTS Securities. Among other things, an
investor in the portfolio securities may realize certain dividends that are
not reflected by investing in the MITTS Securities, and currency fluctuations
may significantly increase or decrease the rate of return of the portfolio
securities versus investing in the MITTS Securities.
Payment at Maturity
Hypothetical Closing Percentage Change per $10 Principal
Portfolio Value in the Portfolio Level Amount of Securities
$ 0.00 -100.00% $ 9.00
$ 10.00 -90.00% $ 9.00
$ 20.00 -80.00% $ 9.00
$ 30.00 -70.00% $ 9.00
$ 40.00 -60.00% $ 9.00
$ 50.00 -50.00% $ 9.00
$ 60.00 -40.00% $ 9.00
$ 70.00 -30.00% $ 9.00
$ 80.00 -20.00% $ 9.00
$ 90.00 -10.00% $ 9.00
$100.00 0.00% $10.00
$110.00 10.00% $11.00
$120.00 20.00% $12.00
$130.00 30.00% $13.00
$140.00 40.00% $14.00
$150.00 50.00% $15.00
$160.00 60.00% $16.00
$170.00 70.00% $17.00
$180.00 80.00% $18.00
$190.00 90.00% $19.00
$200.00 100.00% $20.00
The above figures are for purposes of illustration only. The actual
amount payable at maturity with respect to the MITTS Securities will depend
entirely on the actual Closing Portfolio Value.
The investor will not receive their entire principal at maturity should
the portfolio decline in value. The investor will only receive $9.00 for each
$10 principal amount of MITTS Securities, or 90% of their original investment,
should the portfolio decline in value by 10% or more.
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 holder of a MITTS Security
upon any acceleration permitted by the MITTS Securities will be equal to the
amount payable calculated as though the date of early repayment were the
maturity date of the MITTS Securities. See "Description of Securities--Payment
at Maturity" in this Prospectus. If a bankruptcy proceeding is commenced in
respect of ML&Co., the claim of the holder 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, if any, 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 holders of the MITTS Securities, at the rate of 6% 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 to DTC, 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 American stock Exchange and the NASD, Inc. Access to 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 are to 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 Payment
ML&Co. will make all payments in immediately available funds so long as
the MITTS Securities are maintained in book-entry form.
THE PORTFOLIO
While the portfolio consists of securities of European issuers or ADRs
representing interests in those securities, the portfolio is not intended to
provide an indication of the pattern of price movements of common stocks of
European corporations generally. As of December 22, 1993, all of the portfolio
securities were registered under the Exchange Act, except for the portfolio
securities which are ADRs representing shares in Bayer A.G., Deutsche Bank
A.G., Hoechst A.G., Siemens A.G. and Nestle S.A. Companies with securities
registered under the Exchange Act are required to file periodically certain
financial and other information specified by the SEC, including a
reconciliation of their financial statements to United States generally
accepted accounting principles. As of December 22, 1993, Bayer A.G., Deutsche
Bank A.G., Hoechst A.G., Siemens A.G. and Nestle S.A. had qualified for an
exemption from the reporting requirements of the Exchange Act and had agreed
to provide to the SEC certain financial and other information that the issuer
provides to its shareholders or files with stock exchanges in its home country
or is otherwise required to make public. This information is not required to
contain a reconciliation of their financial statements to United States
generally accepted accounting principles. Information provided to or filed
with the SEC is available at the offices of the SEC specified under "Where you
can find more information" in this Prospectus. Information contained in the
information filed with the SEC will generally be more limited than that
available with respect to a United States issuer. ML&Co. makes no
representation or warranty as to the accuracy or completeness of these
reports. The inclusion of a portfolio security in the portfolio is not a
recommendation to buy or sell the portfolio security or its underlying shares,
and neither ML&Co. nor any of its affiliates make any representation to any
purchaser of securities as to the performance of the portfolio.
ML&Co. or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the portfolio securities or of the
underlying shares relating to the portfolio securities, including extending
loans to, or making equity investments in, the issuers or providing advisory
services to the issuers, including merger and acquisition advisory services.
In the course of this business, ML&Co. or its affiliates may acquire
non-public information with respect to the issuers and, in addition, one or
more affiliates of ML&Co. may publish research reports with respect to these
issuers. ML&Co. does not make any representation to any purchaser of MITTS
Securities with respect to any matters whatsoever relating to these issuers.
Any prospective purchaser of a MITTS Security should undertake an independent
investigation of the issuers of the underlying shares relating to the
portfolio securities as in its judgment is appropriate to make an informed
decision with respect to an investment in the MITTS Securities.
Europe
The issuers of the portfolio securities, or of the shares underlying the
portfolio securities which are ADRs, are companies which have been organized
in countries located in Europe. The amount payable at the maturity of the
Securities is dependent on the value of the portfolio securities and the value
of the portfolio securities will be affected by political and economic
developments in Europe.
The economies of individual European countries may differ favorably or
unfavorably from the U.S. economy in areas of growth of gross domestic
product, rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payments position. European countries in recent years generally
have experienced weak economic performance and suffer from relatively high
unemployment levels, slow growth, falling industrial competitiveness, and
increasing costs for social welfare programs.
The securities markets of most European countries have substantially
less trading volume than the securities markets of the United States and
Japan. Further, securities of some European companies are less liquid and more
volatile than securities of comparable U.S. companies. Accordingly, European
securities markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities or by large dispositions of securities than is the case
in the United States.
Issuers of the underlying shares
Among the issuers of portfolio securities and the underlying shares, 9
are incorporated in the United Kingdom, 4 in the Federal Republic of Germany,
4 in France, 2 in the Netherlands, 2 in Spain, 1 in Italy, 1 in Sweden and 1
in Switzerland. The following table sets forth the issuers of the portfolio
securities and underlying shares, the country in which each issuer is
organized and the primary industry in which each issuer is engaged:
<PAGE>
<TABLE>
<CAPTION>
Company Name Country Industry
- ------------ ------- --------
<S> <C> <C>
The British Petroleum Co., plc United Kingdom Energy
British Telecommunications plc United Kingdom Telecommunications
Cadbury Schweppes plc United Kingdom Beverage
Grand Metropolitan plc United Kingdom Food/Beverage
Hanson plc. United Kingdom Conglomerate
Reuters Holdings plc. United Kingdom Media/Publishing
Unilever plc. United Kingdom Foods
Vodaphone Group plc United Kingdom Telecommunications
Waste Management International plc United Kingdom Pollution Control
Alcatel Alsthom Compagnie
Generale d'Electricite France Telecommunications
Rhone-Poulenc S.A. France Chemicals
Societe Nationale Elf Aquitaine France Energy
Total S.A. France Energy
Bayer A.G. Germany Chemicals
Deutsche Bank A.G. Germany Bank
Hoechst A.G. Germany Chemicals
Siemens A.G. Germany Electrical Equipment
Philips Electronics N.V. Netherlands Electrical Equipment
Royal Dutch Petroleum Company Netherlands Energy
Banco de Santander S.A. Spain Bank
Telefonica de Espana, S.A. Spain Telecommunications
Benetton Group S.p.A. Italy Retailing
L.M. Ericsson Telephone Co., Inc. Sweden Telecommunications
Nestle S.A. Switzerland Foods
</TABLE>
A potential investor should review the historical prices of the
securities underlying the portfolio. The historical prices of these securities
should not be taken as an indication of future performance, and no assurance
can be given that the prices of these securities will increase sufficiently to
cause the beneficial owners of the Securities to receive an amount in excess
of the Minimum Payment at the maturity of the MITTS Securities.
The value of the portfolio is reported on the NYSE under the symbol "MEP"
and on Reuters under the symbol ".MGT".
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.
WHERE YOU CAN FIND MORE INFORMATION
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.
<PAGE>
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; 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 and March 26, 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 or after the date of this initial registration statement
and before the effectiveness of the registration statement:
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.
ML&Co. may offer the MITTS Securities on the NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated MARCH 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
S&P 500 MARKET INDEX TARGET-TERM SECURITIES(SM) DUE SEPTEMBER 16, 2002
"MITTS(R) SECURITIEs"
$10 PRINCIPAL AMOUNT
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.
<TABLE>
<CAPTION>
THE MITTS SECURITIES: PAYMENT AT MATURITY:
<S> <C> <C>
o 100% PRINCIPAL PROTECTION AT MATURITY o ON THE MATURITY DATE, FOR EACH UNIT OF THE
o NO PAYMENTS BEFORE THE MATURITY DATE MITTS SECURITIES YOU OWN, WE WILL PAY YOU
o Senior unsecured debt securities OF MERRILL AN AMOUNT EQUAL TO THE SUM OF THE PRINCIPAL
LYNCH & CO., INC. AMOUNT OF EACH UNIT AND AN ADDITIONAL AMOUNT
o LINKED TO THE VALUE OF THE S&P 500 INDEX based on the percentage increase, if any, in
o THE MITTS SECURITIES ARE LISTED ON THE NEW the VALUE OF THE INDEX, ADJUSTED AS DESCRIBED
YORK STOCK EXCHANGE UNDER THE SYMBOL "MIM". IN THIS PROSPECTUS.
o YOU WILL RECEIVE NO LESS THAN THE PRINCIPAL AMOUNT
OF YOUR MITTS SECURITIES.
</TABLE>
INVESTING IN THE MITTS SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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.
----------------
MERRILL LYNCH & CO.
----------------
The date of this prospectus is , 1999.
- ---------
"MITTS" AND "MARKET Index Target-Term Securities" ARE REGISTERED service
MARKS OWNED BY Merrill Lynch & Co., Inc.
"STANDARD & POOR'S(R)", "STANDARD & POOR'S 500", "S&P 500(R)", "S&P(R)" AND
"500", ARE TRADEMARKS OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN
LICensed FOR USE BY MERRILL LYNCH CAPITAL SERVICES, INC. AND ML&CO. IS AN
AUTHORIZED SUBLICENSEE.
TABLE OF CONTENTS
RISK FACTORS...................................................................6
MERRILL LYNCH & CO., INC.......................................................9
RATIO OF EARNINGS TO FIXED CHARGES............................................10
DESCRIPTION OF THE MITTS SECURITIES...........................................11
THE INDEX.....................................................................16
OTHER TERMS...................................................................19
PROJECTED PAYMENT SCHEDULE....................................................23
WHERE YOU CAN FIND MORE INFORMATION...........................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.............................24
PLAN OF DISTRIBUTION..........................................................25
EXPERTS.......................................................................25
RISK FACTORS
YOUR INVESTMENT IN MITTS SECURITIES WILL INVOLVE RISKS. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING DISCUSSION OF RISKS BEFORE DECIDING WHETHER AN
INVESTMENT IN MITTS SECURITIES IS SUITABLE FOR YOU.
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 DATE IS LESS THAN 813.65, THE
VALUE OF THE INDEX ON THE DATE THE MITTS SECURITIES WERE PRICED. This will be
true even if AT SOME TIME DURING THE LIFE OF THE MITTS SECURITIES, THE VALUE OF
THE INDEX WAS HIGHER THAN 813.65 BUT LATER FALLS BELOW 813.65.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF COMPARABLE
MATURITY
THE AMOUNT WE PAY YOU AT MATURITY MAY BE LESS THAN THE RETURN YOU COULD
EARN ON OTHER INVESTMENTS. YOUR YIELD MAY BE LESS THAN THE YIELD YOU WOULD EARN
IF YOU BOUGHT A STANDARD SENIOR NON-CALLABLE DEBT SECURITY OF MERRILL LYNCH &
CO., INC. 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.
THE YIELD ON THE MITTS SECURITIES WILL NOT REFLECT THE DIVIDENDS ON THE STOCKS
INCLUDED IN THE INDEX
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the INDEX and received the dividends paid
on those stocks because the INDEX does not reflect the payment of dividends on
the stocks underlying it.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW
New York State laws govern 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 your benefit, to the extent permitted by law, not to
voluntarily claim the benefits of any laws concerning usurious rates of
interest.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES
THE MITTS Securities are listed on the New York Stock Exchange under
the symbol "MIM".
WE EXPECT THAT THE CREDITWORTHINESS OF ML&CO. AND A NUMBER OF OTHER
FACTORS WILL AFFECT the trading value of the MITTS Securities in the secondary
market . We expect that the trading value of the MITTS Securities will depend
substantially on the extent of the appreciation, if any, of the INDEX OVER
813.65. If, however, you sell your MITTS Securities prior to the maturity date
at a time when the INDEX exceeds 813.65, the price you receive may be at a
substantial discount from the amount expected to be payable if THE excess of the
INDEX OVER 813.65 were to prevail until maturity of the MITTS Securities because
of the possible fluctuation of the INDEX between the time of THE sale and the
time AT WHICH THE MITTS SECURITIES MATURE. Furthermore, the price at which you
will be able to sell MITTS Securities prior to maturity may be at a discount,
which could be substantial, from the principal amount , if, at THAT time, the
INDEX is below, equal to, or not sufficiently above 813.65. A discount could
also result from rising interest rates.
In addition to the value of the INDEX, a number of interrelated
factors, including the creditworthiness of ML&CO. and those factors listed below
MAY AFFECT THE TRADING VALUE OF THE MITTS SECURITIES. The relationship among
these factors is complex, including how these factors affect the relative value
of the MITTS SECURITIES. Accordingly, you should be aware that factors other
than the level of the INDEX are likely to affect the MITTS Securities' trading
value. The expected effect on the trading value of the MITTS Securities of each
of the factors listed below, assuming in each case that all other factors are
held constant, is as follows:
Interest RATES. Because WE WILL PAY, at a minimum, the principal amount
PER UNIT OF MITTS SECURITIES at maturity, WE EXPECT the trading value
of the MITTS Securities will likely be affected by changes in interest
rates. In general, we anticipate that if U.S. interest rates increase,
the trading value of the MITTS Securities will decrease. If U.S.
interest rates decrease, we expect the trading value of the MITTS
Securities to increase. Interest rates may also affect the U.S.
economy, and, in turn, the value of the INDEX. Rising interest rates
may lower the value of the INDEX and, thus, the MITTS Securities.
Falling interest rates may increase the value of the INDEX and, thus,
may increase the value of the MITTS Securities.
Volatility of the INDEX. If the volatility of the INDEX increases, we
expect THAT the trading value of the MITTS Securities WILL increase. If
the volatility of the INDEX decreases, we expect THAT the trading value
of the MITTS Securities WILL decrease.
Time REMAINING TO MATURITY. We believe that before maturity the MITTS
Securities may trade at a value above that which may be inferred from
the level of interest rates and the INDEX. This difference will reflect
a "time premium" due to expectations concerning the value of the INDEX
during the period prior to maturity of the MITTS Securities. As the
time remaining to maturity of the MITTS Securities decreases, however,
we expect this time premium to decrease, thus decreasing the trading
value of the MITTS Securities. In addition, the price at which you may
be able to sell MITTS Securities prior to maturity may be at a
discount, which may be substantial, from the principal amount of the
MITTS Securities if the value of the INDEX is below, equal to, or not
sufficiently above 813.65.
Dividend RATES in the United States. If dividend rates on the stocks
INCLUDED IN the INDEX increase, we expect the value of the MITTS
Securities to decrease. Conversely, if dividend rates on the stocks
INCLUDED IN the INDEX decrease, we expect the value of the MITTS
Securities to increase. However, in general, rising U.S. corporate
dividend rates may increase the value of the INDEX and, in turn,
increase the value of the MITTS Securities. Conversely, falling U.S.
dividend rates may decrease the value of the INDEX and, in turn,
decrease the value of the MITTS Securities.
The impact of the factors specified above, excluding the value of the
INDEX, may offset, partially or in whole, any increase in the trading value of
the MITTS Securities that is attributable to an increase in the value of the
INDEX. For example, an increase in U.S. interest rates may cause the MITTS
Securities to trade at a discount from their initial offering price, even if the
INDEX has appreciated significantly.
In general, assuming all relevant factors are held constant, the effect
on the trading value of the MITTS Securities of a given change in interest
rates, INDEX volatility and/or dividend rates of stocks comprising the INDEX is
expected to 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. WE EXPECT THAT THE
effect on the trading value of the MITTS Securities of a given appreciation of
the INDEX VALUE in excess of 813.65 to 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, assuming all other relevant factors are held constant.
THE S&P 500 INDEX
POLITICAL, economic and other developments that affect the stocks
underlying the INDEX MAY ADVERSELY AFFECT THE VALUE OF THE INDEX AND THEREFORE
THE VALUE OF THE MITTS SECURITIES.
OTHER CONSIDERATIONS
It is suggested that you should reach an investment decision regarding
the MITTS Securities only after YOU carefully considering the suitability of the
MITTS Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult your tax advisor.
OUR WHOLLY-OWNED SUBSIDIARY, MERRILL LYNCH, PIERCE, FENNER & SMITH OR
MLPF&S, or its affiliates may from time to time engage in transactions involving
the stocks underlying the INDEX for their proprietary accounts and for other
accounts under their management, which may influence the value of THOSE stocks
and therefore the value of the MITTS Securities. MLPF&S and its affiliates will
also be the counterparties to the hedge of ML&CO.'S obligations under the MITTS
Securities. Accordingly, under SOME circumstances, conflicts of interest may
arise between MLPF&S's responsibilities as CALCULATION AGENT with respect to the
MITTS Securities and its obligations under its hedge and its status as a
subsidiary of ML&CO. Under SOME circumstances, the duties of MLPF&S as
CALCULATION AGENT could conflict with the interests of MLPF&S as an affiliate of
the issuer of the MITTS Securities, Merrill Lynch & Co., Inc., and with the
interests of the holders of the MITTS SECURITIES.
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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES(A)......... 1.2 1.2 1.2 1.2 1.1
</TABLE>
- ----------
(A) THE EFFECT OF COMBINING MIDLAND WALWYN DID NOT CHANGE THE RATIOS REPORTED
FOR THE FISCAL YEARS 1994 THROUGH 1997.
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. "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 MARCH 14, 1997, ML&CO. ISSUED $175,000,000 AGGREGATE PRINCIPAL
AMOUNT OF S&P 500 MITTS SECURITIES DUE SEPTEMBER 16, 2002. THE MITTS SECURITIES
WERE issued as a series of SENIOR DEBT SECURITIES under the 1983 Indenture which
is more fully described IN THIS PROSPECTUS.
The MITTS Securities will mature on SEPTEMBER 16, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of THAT MITTS Security plus the Supplemental Redemption
Amount DESCRIBED BELOW, if any, there will be no other payment of interest,
periodic or otherwise. SEE "- PAYMENT at Maturity" BELOW.
The MITTS Securities are not subject to redemption by ML&CO. or at the
option of any beneficial owner BEFORE 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 "- EVENTS of Default and Acceleration" and "Other TERMS - EVENTS of
Default" in this PROSPECTUS.
The MITTS Securities were issued in denominations of whole UNITS.
PAYMENT AT MATURITY
At THE maturity DATE, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount OF EACH UNIT plus THE Supplemental
Redemption Amount, if any, all as provided below. If the Ending Index Value does
not exceed the Starting Index Value, a beneficial owner of a MITTS Security will
be entitled to receive only the principal amount OF ITS MITTS SECURITIES.
THE "SUPPLEMENTAL REDEMPTION AMOUNT" FOR A MITTS SECURITY WILL BE
DETERMINED BY THE CALCULATION AGENT AND WILL EQUAL:
Principal Amount X Ending Index Value-Starting Index Value X Participation Rate
---------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "STARTING INDEX VALUE" equals 813.65, which was the closing value
of the S&P 500 Index (THE "INDEX") on the date the MITTS Securities were priced
by ML&CO. for initial sale to the public (THE "PRICING DATE").
THE "PARTICIPATION RATE" equals 101%.
The "ENDING INDEX VALUE" will be determined by THE CALCULATION AGENT
and will equal the average OR ARITHMETIC MEAN of the closing values of the Index
determined on each of the first five Calculation Days during the Calculation
Period. If there are fewer than five BUT MORE THAN ONE Calculation Days, then
the Ending Index Value will equal the average OR ARITHMETIC MEAN of the closing
values of the Index on THESE Calculation Days. IF there is only one Calculation
Day, then the Ending Index Value will equal the closing value of the Index on
THAT Calculation Day. If no Calculation Days occur during the Calculation Period
because of Market Disruption Events, then the Ending Index Value will equal the
closing value of the Index determined on the last scheduled Index Business Day
in the Calculation Period, regardless of the OCCURRENCE of a Market Disruption
Event on THAT day.
The "CALCULATION PERIOD" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and including
the second scheduled Index Business Day prior to the maturity date.
"CALCULATION DAY" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
For purposes of determining the Ending Index Value, an "INDEX BUSINESS
DAY" is a day on which the NYSE and the American Stock Exchange are open for
trading and the Index or any Successor Index, as defined ON PAGE 10 below, is
calculated and published.
All determinations made by the CALCULATION AGENT shall be at the sole
discretion of the CALCULATION AGENT and, absent a determination by the
CALCULATION AGENT of a manifest error, shall be conclusive for all purposes and
binding on ML&CO. and beneficial owners of the MITTS Securities.
The following table illustrates, for a range of hypothetical Ending
Index Values,
o the total amount payable at maturity for each $10 principal amount of MITTS
Securities,
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 the stocks
underlying the Index, which includes an assumed aggregate dividend yield of
1.80% per annum, as more fully described below.
<TABLE>
<CAPTION>
PRETAX
TOTAL AMOUNT ANNUALIZED
PAYABLE AT MATURITY PRETAX RATE OF RETURN
PERCENTAGE CHANGE PER $10 PRINCIPAL TOTAL RATE OF ANNUALIZED RATE OF STOCKS
HYPOTHETICAL ENDING OVER THE STARTING AMOUNT OF RETURN ON OF RETURN ON UNDERLYING THE
INDEX VALUE INDEX VALUE MITTS SECURITIES THE MITTS THE MITTS INDEX(1)(2)
SECURITIES SECURITIES(1)
<S> <C> <C> <C> <C> <C> <C>
406.83 -50% $10.00 0.00% 0.00% -10.43%
488.19 -40% $10.00 0.00% 0.00% -7.30%
569.56 -30% $10.00 0.00% 0.00% -4.60%
650.92 -20% $10.00 0.00% 0.00% -2.23%
732.29 -10% $10.00 0.00% 0.00% -0.12%
813.65(3) 0% $10.00 0.00% 0.00% 1.80%
895.02 10% $11.01 10.10% 1.76% 3.56%
976.38 20% $12.02 20.20% 3.37% 5.18%
1,057.75 30% $13.03 30.30% 4.87% 6.69%
1,139.11 40% $14.04 40.40% 6.26% 8.10%
1,220.48 50% $15.05 50.50% 7.56% 9.41%
1,301.84 60% $16.06 60.60% 8.79% 10.66%
1,383.21 70% $17.07 70.70% 9.95% 11.83%
1,464.57 80% $18.08 80.80% 11.05% 12.95%
1,545.94 90% $19.09 90.90% 12.10% 14.01%
1,627.30 100% $20.10 101.00% 13.09% 15.02%
1,708.67 110% $21.11 111.10% 14.04% 16.00%
1,790.03 120% $22.12 121.20% 14.95% 16.83%
</TABLE>
-----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis. (2) This rate of return
assumes
o an investment of a fixed amount in the stocks underlying the Index
with the allocation of THAT amount reflecting the current relative
weights of THE stocks in the Index;
o a percentage change in the aggregate price of THE stocks that equals
the percentage change in the Index from the Starting Index Value to
the relevant hypothetical Ending Index Value;
o a constant dividend yield of 1.80% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter assuming THE value increases or
decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value;
o no transaction fees or expenses;
o a term for the MITTS Securities from March 14, 1997 to September 16,
2002; and
o a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks INCLUDED IN the Index as of March 10,
1997 was approximately 1.80%.
(3) This is the Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the RESULTING total and
pretax annualized rate of return will depend entirely on the actual Ending Index
Value determined by the CALCULATION AGENT as provided IN THIS PROSPECTUS.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index, or ITS value , is
changed in any material respect, or if the Index is in any other way modified so
that THE Index does not, in the opinion of the CALCULATION AGENT, fairly
represent the value of the Index had ANY changes or modifications not been made,
then, from and after THAT time, the CALCULATION AGENT shall, at the close of
business in New York, New York, on each date that the closing value with respect
to the Ending Index Value is to be calculated, make ANY adjustments as, in the
good faith judgment of the CALCULATION AGENT, may be necessary in order to
arrive at a calculation of a value of a stock index comparable to the Index as
if THE changes or modifications had not been made, and calculate THE closing
value with reference to the Index, as adjusted. Accordingly, if the method of
calculating the Index is modified so that the value of THE Index is a fraction
or a multiple of what it would have been if it had not been modified, FOR
EXAMPLE, due to a split in the Index, then the CALCULATION AGENT shall adjust
THE Index in order to arrive at a value of the Index as if it had not been
modified, FOR EXAMPLE, as if A split had not occurred.
"MARKET DISRUPTION EVENT" means either of the following events, as
determined by the CALCULATION AGENT:
(A) the suspension or material limitation FOR MORE THAN TWO HOURS OF
TRADING IN 100 OR MORE OF THE SECURITIES INCLUDED IN THE S&P 500 INDEX, OR
(B) THE SUSPENSION OR MATERIAL LIMITATION, in each case, for more than
two hours of trading, whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise, in
(1) futures contracts related to the Index which are traded on the Chicago
Mercantile Exchange or
(2) option contracts related to the Index which are traded on the Chicago
Board Options Exchange, Inc.
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".
DISCONTINUANCE OF THE INDEX
If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index that the CALCULATION AGENT determines,
in its sole discretion, to be comparable to THE INDEX, ANY SUCCESSOR OR
SUBSTITUTE INDEX IS REFERRED TO AS A "SUCCESSOR INDEX", THEN, UPON THE
CALCULATION AGENT'S NOTIFICATION OF THE determination to the TRUSTEE AND ML&CO.,
THE CALCULATION AGENT will substitute the Successor Index as calculated by S&P
or ANY other entity for the Index . Upon any selection by the CALCULATION AGENT
of a Successor Index, ML&CO. shall cause notice to be given to HOLDERS of the
MITTS Securities.
If S&P discontinues publication of the Index and a Successor Index is
not selected by the CALCULATION AGENT or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any Calculation
Day used to calculate the Supplemental Redemption Amount at maturity will be a
value computed by the CALCULATION AGENT for each Calculation Day in accordance
with the procedures last used to calculate the Index BEFORE THE discontinuance.
If a Successor Index is selected or the CALCULATION AGENT calculates a value as
a substitute for the Index as described below, THE Successor Index or value
shall be substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If S&P discontinues publication of the Index BEFORE the period during
which the Supplemental Redemption Amount is to be determined and the CALCULATION
AGENT determines that no Successor Index is available at THAT time, then on each
Business Day until the earlier to occur of:
O the determination of the Ending Index Value and
O a determination by the CALCULATION AGENT that a Successor Index is
available,
the CALCULATION AGENT shall determine the value that would be used in computing
the Supplemental Redemption Amount as described in the preceding paragraph as if
THAT day were a Calculation Day. 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.
DESPITE these alternative arrangements, discontinuance of the
publication of the 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 PER UNIT, will be equal to the initial issue price
($10) PER UNIT AND an additional amount of contingent interest calculated as
though the date of early repayment were the STATED maturity date of the MITTS
Securities. See "- PAYMENT 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 PER UNIT 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 of the MITTS Securities, whether at THE
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 6.75% 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 ARE TO 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 PAYMENT
ML&CO. WILL MAKE ALL payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
All DISCLOSURES contained in this PROSPECTUS regarding the Index, including
its make-up, method of calculation and changes in its components, ARE derived
from publicly available information prepared by S&P AS OF March 22, 1999. ML&CO.
AND MLPF&S DO NOT ASSUME any responsibility for the accuracy or completeness of
THE information.
The Index is published by S&P, and is intended to provide an indication of
the pattern of common stock price movement. The calculation of the value of the
Index, discussed below in further detail, is based on the relative value of the
aggregate Market Value of the common stocks of 500 companies as of a particular
time compared to the aggregate average Market Value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943. As of
March 22, 1999 the 500 companies included in the Index represented approximately
78% of the aggregate Market Value of common stocks traded on THE NYSE; however,
these 500 companies are not the 500 largest companies listed on THE NYSE and not
all of these 500 companies are listed on THE exchange. As of March 22, 1999, the
aggregate MARKET VALUE of the 500 companies included in the Index represented
approximately 79% of the aggregate MARKET VALUE of United States domestic,
public companies. S&P chooses companies for inclusion in the Index with the aim
of achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the common stock population of THE NYSE,
which S&P uses as an assumed model for the composition of the total market.
Relevant criteria employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to which it
is assigned,
o the extent to which the market price of that COMPANY'S common stock is
generally responsive to changes in the affairs of the respective industry,
and
o the Market Value and trading activity of the common stock of that company.
FOUR main groups of companies COMPRISE THE INDEX, with the number of
companies currently included in each group indicated in parentheses: Industrials
(380), Utilities (39), Transportation (10) and Financial (71). S&P may from time
to time, in its sole discretion, add companies to, or delete companies from, the
Index to achieve the objectives stated above.
THE INDEX DOES NOT REFLECT THE PAYMENT OF DIVIDENDS ON THE STOCKS
UNDERLYING IT. THE RETURN BASED ON THE MITTS SECURITIES WILL NOT BE THE SAME
RETURN YOU WOULD RECEIVE IF YOU WERE TO PURCHASE THE UNDERLYING STOCKS AND HOLD
THEM FOR A PERIOD EQUAL TO THE MATURITY OF THE MITTS SECURITIES.
COMPUTATION OF THE INDEX
S&P currently computes the Index as of a particular time as follows:
(A) the product of the market price per share and the number of then
outstanding shares of each component stock is determined AT A PARTICULAR
TIME (the "Market Value" of THE stock);
(B) the Market Value of all component STOCK AS OF THAT TIME are
aggregated;
(C) the mean average of the Market Values as of each week in the base
period of the years 1941 through 1943 of the common stock of each company
in a group of 500 substantially similar companies is determined;
(D) the mean average Market Values of all THESE common stocks over THE
base period are aggregated (THE aggregate amount being referred to as the
"Base Value");
(E) the CURRENT aggregate Market Value of all component stocks is
divided by the Base Value; and
(F) the resulting quotient, expressed in decimals, is multiplied by
ten.
While S&P currently employs the above methodology to calculate the
Index, no assurance can be given that S&P will not modify or change THIS
methodology in a manner that may affect the Supplemental Redemption Amount, if
any, payable to beneficial owners of MITTS Securities upon maturity or
otherwise.
S&P adjusts the foregoing formula to negate the EFFECTS of changes in
the Market Value of component STOCKS that are determined by S&P to be arbitrary
or not due to true market fluctuations. CHANGES may result from causes SUCH as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares of
stock,
o the purchase OF SHARES by employees pursuant to employee benefit plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities of
ML&CO.,
o the substitution by S&P of particular component stocks in the Index, and
o other reasons.
In THESE cases, S&P first recalculates the aggregate Market Value of all
component stocks, after taking account of the new market price per share of the
particular component stock or the new number of outstanding shares thereof or
both, and then determines the New Base Value in accordance with the following
formula:
New Market Value
----------------
Old Base Value X OLD MARKET VALUE = New Base Value
The result is that the Base Value is adjusted in proportion to any
change in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of THESE
causes upon the Index.
HISTORICAL DATA ON THE INDEX
THE FOLLOWING TABLE SETS FORTH THE VALUE OF THE INDEX AT THE END OF
EACH MONTH, IN THE PERIOD FROM JANUARY 1990 THROUGH FEBRUARY 1999. THESE
HISTORICAL DATA ON THE INDEX ARE NOT NECESSARILY INDICATIVE OF THE FUTURE
PERFORMANCE OF THE INDEX OR WHAT THE VALUE OF THE MITTS SECURITIES MAY BE. ANY
HISTORICAL UPWARD OR DOWNWARD TREND IN THE VALUE OF THE INDEX DURING ANY PERIOD
SET FORTH BELOW IS NOT ANY INDICATION THAT THE INDEX IS MORE OR LESS LIKELY TO
INCREASE OR DECREASE AT ANY TIME DURING THE TERM OF THE MITTS SECURITIES.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
FEBRUARY...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
MARCH......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
APRIL......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
MAY........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
JUNE.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
JULY.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
AUGUST........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
SEPTEMBER..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
OCTOBER....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
NOVEMBER...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
DECEMBER...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
</TABLE>
LICENSE AGREEMENT
STANDARD & POOR'S ("S&P") DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED IN THE INDEX. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY ML&CO., MLPF&S,
HOLDERS OF THE MITTS SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P INDEX OR ANY DATA INCLUDED IN THE INDEX IN CONNECTION WITH THE RIGHTS
LICENSED UNDER THE LICENSE AGREEMENT DESCRIBED IN THIS PROSPECTUS OR FOR ANY
OTHER USE. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE S&P INDEX OR ANY DATA INCLUDED IN THE INDEX. WITHOUT
LIMITING ANY OF THE ABOVE INFORMATION, IN NO EVENT SHALL S&P HAVE ANY LIABILITY
FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGE, INCLUDING LOST
PROFITS, EVEN IF NOTIFIED OF THE POSSIBILITY OF THESE DAMAGES.
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., 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 MERRILL LYNCH CAPITAL
SERVICES, INC.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this PROSPECTUS:
"The MITTS Securities 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
the ability of the Index to track general stock market performance. S&P's only
relationship to Merrill Lynch Capital Services, Inc. and ML&CO. (other than
transactions entered into in the ordinary course of business) is the licensing
of certain servicemarks and trade names of S&P and of the Index which is
determined, composed and calculated by S&P without regard to ML&CO. or the MITTS
Securities. S&P has no obligation to take the needs of ML&CO. or the HOLDERS of
the MITTS Securities into consideration in determining, composing or calculating
the Index. S&P is not responsible for and has not participated in the
determination of the timing of the sale of the MITTS Securities, prices at which
the MITTS Securities are to initially be sold, or quantities of the MITTS
Securities to be issued or in the determination or calculation of the equation
by which the MITTS Securities are to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the MITTS Securities."
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 such 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 final Treasury 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 thereof and a
Supplemental Redemption Amount equal to $4.3254 per UNIT. This represents an
estimated yield on the MITTS Securities equal to 6.64% 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
not a prediction 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 the term of the MITTS Securities based upon the
projected payment schedule for the MITTS Securities (including both the
projected Supplemental Redemption Amount and the estimated yield equal to 6.64%
per annum (compounded semiannually)) as determined by ML&CO. for purposes of the
application of the Final Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
INTEREST DEEMED TO TOTAL INTEREST DEEMED
ACCRUE DURING ACCRUAL TO HAVE ACCRUED ON
ACCRUAL PERIOD PERIOD (PER UNIT) SECURITIES AS OF END
OF ACCRUAL PERIOD
(PER UNIT)
<S> <C> <C>
March 14, 1997 through March 16, 1997........... $0.0018 $0.0018
March 17, 1997 through September 16, 1997....... $0.3338 $0.3356
September 17, 1997 through March 16, 1998....... $0.3413 $0.6769
March 17, 1998 through September 16, 1998....... $0.3545 $1.0314
September 17, 1998 through March 16, 1999....... $0.3662 $1.3976
March 17, 1999 through September 16, 1999....... $0.3785 $1.7761
September 17, 1999 through March 16, 2000....... $0.3909 $2.1670
March 17, 2000 through September 16, 2000....... $0.4040 $2.5710
September 17, 2000 through March 16, 2001....... $0.4173 $2.9883
March 17, 2001 through September 16, 2001....... $0.4312 $3.4195
September 17, 2001 through March 16, 2002....... $0.4456 $3.8651
March 17, 2002 through September 16, 2002....... $0.4603 $4.3254
</TABLE>
Projected Supplemental Redemption Amount = $4.3254 per UNIT
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 for
information to Merrill Lynch & Co., Inc., Attn: Darryl W. Colletti, Office of
the Corporate Secretary, 100 Church Street, New York, New York 10080.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 AND MARCH 26, 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 OR AFTER THE DATE OF THIS INITIAL REGISTRATION STATEMENT AND BEFORE
THE EFFECTIVENESS OF THE REGISTRATION STATEMENT:
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 NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to by these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Healthcare/Biotechnology Portfolio Market Index Target-Term Securities(R)
due October 31, 2001
"MITTS(R) Securities"
$10 principal amount
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.
<TABLE>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before to the maturity date MITTS Securities you own, we will pay you
o Senior unsecured debt securities Merrill an amount equal to the sum of the principal
Lynch & Co., Inc. amount of each unit and an additional
o Linked to the value of the amount based on the percentage increase, if
Healthcare/Biotechnology Portfolio, as any, in the value of the portfolio, adjusted
described in this prospectus as described in this prospectus.
o The MITTS Securities are listed on the o You will receive no less than the principal
American Stock Exchange under the amount of your MITTS Securities
symbol "MLH".
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 1999.
(R)"MITTS" and (R) Market Index Target-Term Securities" are registered
service marks of Merrill Lynch & Co., Inc.
<PAGE>
Table of Contents
Page
RISK FACTORS.................................................................1
MERRILL LYNCH & CO., INC.....................................................4
RATIO OF EARNINGS TO FIXED CHARGES...........................................5
DESCRIPTION OF SECURITIES....................................................6
THE PORTFOLIO...............................................................13
OTHER TERMS.................................................................16
PROJECTED PAYMENT SCHEDULE..................................................20
WHERE YOU CAN FIND MORE INFORMATION.........................................20
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................21
PLAN OF DISTRIBUTION........................................................22
EXPERTS.....................................................................22
<PAGE>
RISK FACTORS
Payment at Maturity
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
portfolio over five trading days shortly before the maturity date is less than
115. This will be true even if at some time during the life of the MITTS
Securities, the value of the portfolio was higher than 115 but later falls
below 115.
Your yield may be lower than the yield on a standard debt security of
comparable maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. with the same maturity date. Your investment may not reflect
the full opportunity cost to you when you take into account factors that
affect the time value of money.
Your return will not reflect the return of owning the stocks included in the
portfolio
The portfolio does not reflect the payment of dividends on the stocks
underlying it. Therefore your yield you receive based on the value of
portfolio at the maturity of the MITTS Securities will not be the same as the
yield you would receive if you had purchased the underlying stocks and held
them for a similar period.
Amounts payable on the MITTS Securities may be limited by state law
New York State laws govern 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 your benefit, to the extent permitted by law,
not to voluntarily claim the benefits of any laws concerning usurious rates of
interest.
There are many factors affecting the trading value of the MITTS Securities
We expect that the trading value of the MITTS Securities will depend
substantially on the extent of the appreciation, if any, of the portfolio
value over 115. If, however, you sell your MITTS Securities prior to the
maturity date at a time when the portfolio value exceeds 115, the price you
receive may be at a substantial discount from the amount expected to be
payable if the excess of the portfolio value over 115 were to prevail until
maturity of the MITTS Securities because of the possible fluctuation of the
portfolio between the time of the sale and the time that the MITTS Securities
mature. Furthermore, the price at which you will be able to sell MITTS
Securities prior to maturity may be at a discount, which could be substantial,
from the principal amount thereof, if, at that time, the portfolio is below,
equal to, or not sufficiently above 115. A discount could also result from
rising interest rates.
In addition to the value of the portfolio, a number of interrelated
factors, including those factors listed below may affect the trading value of
the MITTS Securities. The relationship among these factors is complex. The
expected effect on the trading value of the MITTS Securities of each of the
factors listed below, assuming in each case that all other factors are held
constant, is as follows:
<PAGE>
Interest Rates. Because we will pay, at a minimum, the principal amount
per unit of the MITTS Securities at maturity, changes in interest rates will
likely affect the trading value of the MITTS Securities. In general, if U.S.
interest rates increase, we expect the trading value of the MITTS Securities
to decrease. Conversely, if U.S. interest rates decrease, we expect the
trading value of the MITTS Securities to increase. Interest rates may also
affect the U.S. economy, and, in turn, the value of the portfolio. Rising
interest rates may lower the value of the portfolio and, thus, may decrease
the trading value of the MITTS Securities. Falling interest rates may increase
the value of the portfolio and, thus, may increase the trading value of the
MITTS Securities.
Volatility of the portfolio. If the volatility of the portfolio value
increases, we expect the trading value of the MITTS Securities to increase. If
the volatility of the portfolio value decreases, we expect the trading value
of the MITTS Securities to decrease.
Time Remaining to Maturity. We anticipate that prior to maturity the
MITTS Securities may trade at a value above that which you may expect based on
the level of interest rates and the portfolio. This difference will reflect a
"time premium" due to expectations concerning the value of the portfolio
during the period prior to maturity of the MITTS Securities. As the time
remaining to maturity of the MITTS Securities decreases, however, this time
premium is expected to decrease, thus decreasing the trading value of the
MITTS Securities. In addition, the price at which you may be able to sell the
MITTS Securities prior to maturity may be at a discount, which may be
substantial, from the principal amount of the MITTS Securities if the value of
the portfolio is below, equal to, or not sufficiently above 115.
Dividend Rates in the United States. If dividend rates on the stocks
included in the portfolio increase, we expect the trading value of the MITTS
Securities to decrease. Conversely, if dividend rates on the stocks included
in the portfolio decrease, we expect the value of the MITTS Securities to
increase. However, in general, rising U.S. corporate dividend rates may
increase the value of the portfolio and, in turn, increase the trading value
of the MITTS Securities. Conversely, falling U.S. corporate dividend rates may
decrease the value of the portfolio and, in turn, decrease the trading value
of the MITTS Securities.
The impact of the factors specified above, excluding the value of the
portfolio, may offset, partially or in whole, any increase in the trading
value of the MITTS Securities that is attributable to an increase in the value
of the portfolio. For example, an increase in U.S. interest rates may cause
the MITTS Securities to trade at a discount from their initial offering price,
even if the portfolio has appreciated significantly. In general, assuming all
relevant factors are held constant, the effect on the trading value of the
MITTS Securities of a given change in interest rates, portfolio volatility
and/or dividend rates of stocks comprising the portfolio is expected to 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, the effect on the
trading value of the MITTS Securities of a given appreciation of the portfolio
in excess 115 is expected to 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, assuming all other relevant factors are held constant.
Many factors affecting the stocks in the portfolio value will affect your
return
Political, economic and other developments that affect the stocks
underlying the portfolio may adversely affect the value of the portfolio and
the value of the MITTS Securities. Since the stocks underlying the portfolio
are of companies involved in various segments of the healthcare industry and
the biotechnology industry, factors affecting these industries may affect the
value of the portfolio and therefore the trading value of the MITTS
Securities. See "The Portfolio--Healthcare and Biotechnology Industries".
Other Considerations
We suggest that you reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities, and should consult your tax advisor.
<PAGE>
Our wholly-owned subsidiary, Merrill Lynch, Pierce, Fenner and Smith
Incorporated, or MLPF&S, or its affiliates may from time to time engage in
transactions involving the stocks included in the portfolio for their
proprietary accounts and for other accounts under their management, which may
influence the value of these stocks and therefore the value of the MITTS
Securities. MLPF&S and its affiliates will also be the counterparties to the
hedge of ML&Co.'s obligations under the MITTS Securities. Accordingly, in some
circumstances, conflicts of interest may arise between MLPF&S's
responsibilities as calculation agent for the MITTS Securities and its
obligations under its hedge and its status as a subsidiary of ML&Co. At times,
the duties of MLPF&S as calculation agent could conflict with the interests of
MLPF&S as an affiliate of the issuer of the MITTS Securities, Merrill Lynch &
Co., Inc., and with the interests of the holders of the MITTS Securities.
<PAGE>
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.
<PAGE>
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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)....... 1.2 1.2 1.2 1.2 1.1
</TABLE>
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF SECURITIES
On October 30, 1996, ML&Co. issued $15,000,000 aggregate principal amount
of Healthcare/Biotechnology MITTS Securities due October 31, 2001. The MITTS
Securities were issued as a series of senior debt securities under the 1983
Indenture which is more fully described in this prospectus.
The MITTS Securities will mature on October 31, 2001.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of the MITTS Security plus the Supplemental Redemption Amount
described below, if any, there will be no other payment of interest, periodic
or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before maturity. Upon the occurrence of an
Event of Default, as defined below, with respect to the MITTS Securities,
beneficial owners of the MITTS Securities may accelerate the maturity of the
MITTS Securities, as described under "- Events of Default and Acceleration"
and "Other Terms - Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of that unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Ending Portfolio
Value does not exceed the Benchmark Portfolio Value, a beneficial owner of a
MITTS Security will be entitled to receive only the principal amount of its
MITTS Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<S> <C> <C>
Principal Amount ($10 per unit) x ( Value--Benchmark Portfolio Value)
----------------------------------------------------
Benchmark Portfolio Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Portfolio" means the Healthcare/Biotechnology Portfolio.
The "Benchmark Portfolio Value" equals 115. The Benchmark Portfolio Value
was determined on the date the MITTS securities were priced for initial sale
to the public (the "Pricing Date"), by multiplying the Starting Portfolio
Value by a factor equal to 115%. Based on the individual prices of the stocks
included in the Portfolio (the "Portfolio Securities") on the Pricing Date,
the Multiplier for each Portfolio Security was initially set by the AMEX so
that, on the Pricing Date, the Portfolio Securities were equally
dollar-weighted in the Portfolio and the Portfolio Value equaled 100 (the
"Starting Portfolio Value").
The "Ending Portfolio Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the
Portfolio determined on each of the first five Calculation Days during the
Calculation Period. If there are fewer than five Calculation Days, then the
Ending Portfolio Value will equal the average or arithmetic mean of the
closing values of the Portfolio on those Calculation Days. If there is only
one Calculation Day, then the Ending Portfolio Value will equal the closing
value of the Portfolio on that Calculation Day. If no Calculation Days occur
during the Calculation Period because of Market Disruption Events, then the
Ending Portfolio Value will equal the closing value of the Portfolio
determined on the last scheduled Portfolio Business Day in the Calculation
Period, regardless of the occurrence of a Market Disruption Event on that day.
<PAGE>
The "Calculation Period" means the period from and including the seventh
scheduled Portfolio Business Day prior to the maturity date to and including
the second scheduled Portfolio Business Day prior to the maturity date.
"Calculation Day" means any Portfolio Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
For purposes of determining the Ending Portfolio Value, a "Portfolio
Business Day" is a day on which the AMEX is open for trading and trading
generally occurs in the over-the-counter market for equity securities and the
Portfolio or any Successor Portfolio, as defined below on page 10, is
calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Portfolio Values,
o the total amount payable at maturity for each $10 principal amount of
MITTS Securities, based on the Benchmark Portfolio Value, which equals
115% of the Starting Portfolio Value;
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 the stocks
underlying the Portfolio, which includes an assumed aggregate dividend
yield of 0.23% per annum, as more fully described below.
<TABLE>
<CAPTION>
Total Pretax Pretax Annualized
Hypothetical Percentage Change Amount Annualized Rate of Rate of Return of
Ending Over the Starting Payable at Return on the Stock Underlying
Portfolio Value Portfolio Value Maturity(1) Securities(2) the Portfolio(2)(3)
- --------------- ----------------- ----------- ------------------ -------------------
<S> <C> <C> <C> <C>
50 -50% $ 10.00 0.00% -13.09%
60 -40% $ 10.00 0.00% -9.66%
70 -30% $ 10.00 0.00% -6.71%
80 -20% $ 10.00 0.00% -4.11%
90 -10% $ 10.00 0.00% -1.79%
100(4) 0% $ 10.00 0.00% 0.23%
110 10% $ 10.00 0.00% 2.23%
120 20% $ 10.43 0.85% 4.00%
130 30% $ 11.30 2.47% 5.64%
140 40% $ 12.17 3.97% 7.17%
150 50% $ 13.04 5.39% 8.60%
160 60% $ 13.91 6.72% 9.96%
170 70% $ 14.78 7.97% 11.23%
180 80% $ 15.65 9.16% 12.45%
190 90% $ 16.52 10.30% 13.60%
200 100% $ 17.39 11.38% 14.70%
210 110% $ 18.26 12.41% 15.75%
220 120% $ 19.13 13.40% 16.76%
230 130% $ 20.00 14.35% 17.77%
240 140% $ 20.87 15.27% 18.66%
250 150% $ 21.74 16.15% 19.56%
</TABLE>
(1) The total amount payable at maturity is based on the Benchmark Portfolio
Value, which equals 115% of the Starting Portfolio Value.
(2) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(3) This rate of return assumes:
o an investment of a fixed amount in the stocks underlying
the Portfolio with the allocation of that amount reflecting the
relative weights of the stocks in the Portfolio;
o a percentage change in the aggregate price of the stocks
that equals the percentage change in the Portfolio from the
Starting Portfolio Value to the relevant hypothetical Ending
Portfolio Value;
o a constant dividend yield of 0.23% per annum, paid
quarterly from the date of initial delivery of MITTS
Securities, applied to the value of the Portfolio at the end of
each quarter assuming this value increases or decreases
linearly from the Starting Portfolio Value to the applicable
hypothetical Ending Portfolio Value;
<PAGE>
o no transaction fees or expenses;
o a five year maturity of the MITTS Securities from the date
of issuance; and
o a final Portfolio value equal to the Ending Portfolio
Value. The aggregate dividend yield of the stocks underlying
the Portfolio as of October 24, 1996 was approximately 0.23%
per annum.
(4) The Starting Portfolio Value was set at 100 based on the closing prices
on the Pricing Date.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting pretax
annualized rate of return will depend entirely on the actual Ending Portfolio
Value determined by the calculation agent as provided in this prospectus.
Adjustments to the Portfolio; Market Disruption Events
If at any time the method of calculating the Portfolio Value is changed
in any material respect, or if the Portfolio is in any other way modified so
that the Portfolio Value does not, in the opinion of the calculation agent,
fairly represent the Portfolio Value had these changes or modifications not
been made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Ending Portfolio Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Portfolio Value as if any changes or modifications had not
been made, and calculate the closing value with reference to the Portfolio
Value, as adjusted. Accordingly, if the method of calculating the Portfolio
Value is modified so that the Portfolio Value is a fraction or a multiple of
what it would have been if it had not been modified, for example, due to a
split in the Portfolio Value, then the calculation agent shall adjust the
Portfolio Value in order to arrive at a Portfolio Value as if it had not been
modified, for example, as if the split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on the trading of three or more
of the Portfolio Securities on any exchange in the United States or in the
over-the-counter market for more than two hours of trading or during the
period one-half hour prior to the close of trading, or
(b) the suspension or material limitation, whether by reason of movements
in price otherwise exceeding levels permitted by the relevant exchange or
otherwise, in the trading of option contracts related to three or more of the
Portfolio Securities traded on any exchange for more than two hours of trading
or during the period one-half hour prior to the close of trading.
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".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
Discontinuance of the Portfolio
If the AMEX discontinues publication of the Portfolio Value and the AMEX
or another entity publishes a successor or substitute index that the
calculation agent determines, in its sole discretion, to be comparable to the
Portfolio Value (the "Successor Portfolio Value"), then, upon the calculation
agent's notification of this determination to the trustee and ML&Co., the
calculation agent will substitute the Successor Portfolio Value as calculated
by the AMEX or any other entity for the Portfolio Value and calculate the
Ending Portfolio Value as described above under "Payment at Maturity". Upon
any selection by the calculation agent of a Successor Portfolio Value, ML&Co.
shall cause notice to be given to holders of the MITTS Securities.
If the AMEX discontinues publication of the Portfolio Value and a
Successor Portfolio Value is not selected by the calculation agent or is no
longer published on any of the Calculation Days, the value to be substituted
for the Portfolio Value for any Calculation Day used to calculate the
Supplemental Redemption Amount at maturity will be a value computed by the
calculation agent for each Calculation Day in accordance with the procedures
last used to calculate the Portfolio Value prior to any discontinuance. If a
Successor Portfolio Value is selected or the calculation agent calculates a
value as a substitute for the Portfolio Value as described below, the
Successor Portfolio Value or value calculated by the calculation agent shall
be substituted for the Portfolio Value for all purposes, including for
purposes of determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the Portfolio Value prior to the
period during which the Supplemental Redemption Amount is to be determined and
the calculation agent determines that no Successor Portfolio Value is
available at that time, then on each Business Day until the earlier to occur
of
o the determination of the Ending Portfolio Value and
o a determination by the calculation agent that a Successor Portfolio
Value is available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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 to be made available by telephone.
Despite these alternative arrangements, discontinuance of the publication
of the Portfolio Value 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
occured 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, will be equal to: the principal amount plus an
additional amount of contingent interest calculated as though the date of
early repayment were the maturity date of the MITTS Securities. See
"Description of Securities--Payment 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 7.7% per annum to the
extent that payment of the 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, 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 are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners.
<PAGE>
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 Payment
ML&CO. will make all payments of principal and the Supplemental
Redemption Amount, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE PORTFOLIO
While the Portfolio consists of stocks of companies involved in various
segments of the healthcare industry and the biotechnology industry, the
Portfolio is not intended to provide an indication of the pattern of price
movements of common stocks of healthcare and biotechnology corporations
generally. All of the Portfolio Securities are registered under the Exchange
Act. Companies with securities registered under the Exchange Act are required
to file periodically financial and other information specified by the SEC.
Information provided to or filed with the SEC is available at the offices of
the SEC. Neither ML&Co. nor MLPF&S makes any representation or warranty as to
the accuracy or completeness of the reports. The inclusion of a Portfolio
Security in the Portfolio is not a recommendation to buy or sell that
Portfolio Security and neither ML&Co. nor any of its affiliates make any
representation to any purchaser of MITTS Securities as to the performance of
the Portfolio.
ML&Co. or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the Portfolio Securities,
including extending loans to, or making equity investments in, these issuers
or providing advisory services to these issuers, including merger and
acquisition advisory services. In the course of business, ML&Co. or its
affiliates may acquire non-public information about the issuers and, in
addition, one or more affiliates of ML&Co. may publish research reports about
the issuers. ML&Co. does not make any representation to any purchaser of MITTS
Securities with respect to any matters whatsoever relating to these issuers.
Any prospective purchaser of a MITTS Security should undertake an independent
investigation of the issuers of the Portfolio Securities as in its judgment is
appropriate to make an informed decision about an investment in the MITTS
Securities.
Healthcare and Biotechnology Industries
The healthcare industry is subject to various federal, state and local
laws and regulations which are frequently subject to change in many ways that
can affect the price of the stocks of companies involved in the industry.
The biotechnology industry segment is subject to many of the same factors
that affect the healthcare industry. In addition, the products produced by
biotechnology companies often entail costly research and development and can
be subject to extensive regulatory review prior to approval for sale.
Computation of the Portfolio Value
The AMEX will generally calculate and disseminate the value of the
Portfolio based on the most recently reported prices of the Portfolio
Securities, as reported by the Exchanges, at approximately 15-second intervals
during the AMEX's business hours and at the end of each Portfolio Business Day
via the Consolidated Tape Association's Network B. The Portfolio Value, at any
time, will equal the sum of the products of these prices and the applicable
Multipliers for the Portfolio Securities. The Ending Portfolio Value, however,
is calculated by the calculation agent based on averaging the Portfolio Values
reported by the AMEX at the end of particular Portfolio Business Days. See
"Description of Securities--Payment at Maturity". The securities listed below
are the Portfolio Securities and will be used to calculate the value of the
Portfolio. Holders of the MITTS will not have any right to receive the
Portfolio Securities. The following table sets forth the issuers of the
Portfolio Securities, the exchanges, the percentage of each Portfolio Security
in the Starting Portfolio Value and the initial Multipliers:
<PAGE>
<TABLE>
<CAPTION>
Approximate
Market % of
Capitalization Starting
Issuer of the Industry as of Portfolio Initial
Portfolio Security Exchanges Segment October 23, 1996 Value Multiplier
------------------- --------- -------- ---------------- --------- ----------
(In Millions)
<S> <C> <C> <C> <C> <C>
Amgen Inc..................... Nasdaq Biotechnology 16,312.14 4% 0.0640000
Apria Healthcare Group Inc. . NYSE Health--Specialty 874.73 4% 0.2269504
Baxter International Inc...... NYSE Hospital Supplies 11,718.40 4% 0.0981595
Beverly Enterprises........... NYSE Health--Long Term Care 1,166.27 4% 0.3368421
Biogen, Inc. ................. Nasdaq Biotechnology 2,870.02 4% 0.0487805
Chiron Corporation............ Nasdaq Biotechnology 3,270.62 4% 0.2077922
Columbia/HCA Healthcare
Corporation................ NYSE Hospital Management 24,148.37 4% 0.1126761
Emcare Holdings Inc. ......... Nasdaq Health--Specialty 215.90 4% 0.1502347
Genzyme Corporation........... Nasdaq Biotechnology 1,629.46 4% 0.1649485
Genesis Health Ventures, Inc.. NYSE Health--Long Term Care 730.63 4% 0.1675393
Health Management Associates,
Inc........................ NYSE Hospital Management 2,495.82 4% 0.1729730
Healthsource, Inc. ........... NYSE Health Maintenance Organization 741.34 4% 0.3440860
Healthsouth Corporation....... NYSE Health--Specialty 5,909.69 4% 0.1038961
Humana Inc.................... NYSE Health Maintenance Organization 3,086.40 4% 0.2105263
Johnson & Johnson............. NYSE Hospital Supplies 66,327.34 4% 0.0822622
Medpartners/Mullikin, Inc..... NYSE Health Maintenance Organization 1,205.26 4% 0.1720430
Neuromedical Systems, Inc..... Nasdaq Health--Specialty 516.75 4% 0.2162162
Olsten Corporation............ NYSE Health--Specialty 1,283.15 4% 0.1739130
Oxford Health Plans, Inc...... Nasdaq Health Maintenance Organization 3,441.59 4% 0.0871935
Phycor, Inc. ................. Nasdaq Health Maintenance Organization 1,759.06 4% 0.1216730
Quorum Health Group, Inc. .... Nasdaq Hospital Management 1,291.42 4% 0.1428571
Renal Treatment Centers, Inc.. NYSE Health--Specialty 683.50 4% 0.1361702
Tenet Healthcare Corporation.. NYSE Hospital Management 4,476.70 4% 0.1893491
Total Renal Care Holdings,
Inc. ...................... NYSE Health--Specialty 1,119.74 4% 0.0932945
United Healthcare Corporation. NYSE Health maintenance Organization 6,657.24 4% 0.1126761
</TABLE>
The initial Multiplier relating to each Portfolio Security indicates the
number of shares of the Portfolio Security, given the market price of the
Portfolio Security, required to be included in the calculation of the Starting
Portfolio Value so that each Portfolio Security represents an equal percentage
of the Starting Portfolio Value. The price of each Portfolio Security used to
calculate the initial Multiplier relating to each Portfolio Security was the
closing price of the Portfolio Security on the Pricing Date. The respective
Multipliers will remain constant for the term of the MITTS Securities unless
adjusted for particular corporate events, as described below.
Adjustments to the Multiplier and Portfolio
The AMEX will adjust the Multiplier with respect to any Portfolio
Security and the Portfolio as follows:
1. If a Portfolio Security is subject to a stock split or reverse stock
split, then once the split has become effective, the Multiplier relating to
the Portfolio Security will be adjusted to equal the product of the number of
shares issued with respect to one share of the Portfolio Security and the
prior multiplier.
2. If a Portfolio Security is subject to a stock dividend, issuance of
additional shares of the Portfolio Security, that is given equally to all
holders of shares of the issuer of that Portfolio Security, then once the
dividend has become effective and that Portfolio Security is trading
ex-dividend, the Multiplier will be adjusted so that the new Multiplier shall
equal the former Multiplier plus the product of the number of shares of that
Portfolio Security issued with respect to one share of that Portfolio Security
and the prior multiplier.
3. There will be no adjustments to the Multipliers to reflect cash
dividends or distributions paid on a Portfolio Security other than for
Extraordinary Dividends as described below. A cash dividend with respect to a
Portfolio Security will be deemed to be an "Extraordinary Dividend" if that
dividend exceeds the immediately preceding non-Extraordinary Dividend for the
Portfolio Security by an amount equal to at least 10% of the market price on
the Portfolio Business Day preceding the record day for the payment of the
Extraordinary Dividend (the "ex-dividend date"). If an Extraordinary Dividend
occurs with respect to a Portfolio Security, the Multiplier of the Portfolio
Security will be adjusted on the ex-dividend date with respect to that
Extraordinary Dividend so that the new Multiplier will equal the product of
the then current Multiplier and a fraction, the numerator of which is the sum
of the Extraordinary Dividend Amount and the market price on the Trading Day
preceding the ex-dividend date, and the denominator of which is the market
price on the Trading Day preceding the ex-dividend date. The "Extraordinary
Dividend Amount" with respect to an Extraordinary Dividend for a Portfolio
Security will equal the Extraordinary Dividend minus the amount of the
immediately preceding non-Extraordinary Dividend for that Portfolio Security.
4. If the issuer of a Portfolio Security is being liquidated or is
subject to a proceeding under any applicable bankruptcy, insolvency or other
similar law, the Portfolio Security will continue to be included in the
Portfolio so long as a market price for the Portfolio Security is available.
If a market price is no longer available for a Portfolio Security for whatever
reason, including the liquidation of the issuer of the Portfolio Security or
the subjection of the issuer of the Portfolio Security to a proceeding under
any applicable bankruptcy, insolvency or other similar law, then the value of
that Portfolio Security will equal zero in connection with calculating the
Portfolio Value and the Ending Portfolio Value for so long as no market price
is available, and no attempt will be made to find a replacement stock or
increase the value of the Portfolio to compensate for the deletion of the
Portfolio Security.
5. If the issuer of a Portfolio Security has been subject to a merger or
consolidation and is not the surviving entity or is nationalized, then a value
for that Portfolio Security will be determined at the time the issuer is
merged or consolidated or nationalized and will equal the last available
market price for the Portfolio Security and that value will be constant for
the remaining term of the MITTS Securities. At that time, no adjustment will
be made to the Multiplier of the Portfolio Security. ML&Co. may at its sole
discretion increase the last available market price to reflect payments or
dividends of cash, securities or other consideration to holders of the
Portfolio Security in connection with the merger or consolidation which may
not be reflected in the last available market price.
6. If the issuer of a Portfolio Security issues to all of its
shareholders equity securities that are publicly traded of an issuer other
than the issuer of the Portfolio Security, then the new equity securities will
be added to the Portfolio as a new Portfolio Security. The Multiplier for the
new Portfolio Security will equal the product of the original Multiplier of
the Portfolio Security for which the new Portfolio Security is being issued
(the "Original Portfolio Security") and the number of shares of the new
Portfolio Security issued with respect to one share of the Original Portfolio
Security.
No adjustments of any Multiplier of a Portfolio Security will be required
unless the adjustment would require a change of at least 1% in the Multiplier
then in effect. The Multiplier resulting from any of the adjustments specified
above will be rounded to the nearest one thousandth with five ten-thousandths
being rounded upward.
The AMEX expects that no adjustments to the Multiplier of any Portfolio
Security or to the Portfolio will be made other than those specified above,
however, the AMEX may at its discretion make adjustments to maintain the
economic intent of the Portfolio.
The value of the Portfolio is reported on the AMEX and Bloomberg under the
symbol "MXH" and on Reuters under the symbol ".MXH".
A potential investor should review the historical performance of the
Portfolio. The historical performance of the Portfolio should not be taken as
an indication of future performance, and no assurance can be given that the
Portfolio will increase sufficiently to cause the beneficial owners of the
MITTS Securities to receive an amount in excess of the principal amount at the
maturity of the MITTS Securities.
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.
<PAGE>
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 such 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
<PAGE>
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.
<PAGE>
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.
<PAGE>
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying final Treasury regulations (the "Final
Regulations") concerning the United States Federal income tax treatment of
contingent payment debt instruments to the 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 thereof and a
Supplemental Redemption Amount equal to $3.8425 per unit. This represents an
estimated yield on the MITTS Securities equal to 6.61% 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
not a prediction 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 the term of the MITTS Securities based upon the projected
payment schedule for the MITTS Securities (including both the projected
Supplemental Redemption Amount and the estimated yield equal to 6.61% per
annum (compounded semiannually)) as determined by ML&Co. for purposes of the
application of the Final Regulations to the MITTS Securities:
<PAGE>
<TABLE>
<CAPTION>
Total Interest Deemed
to Have Accrued on
Interest Deemed to Securities as of End
Accrue During Accrual of Accrual Period
Accrual Period Period (per unit) (per unit)
-------------- --------------------- ----------------------
<S> <C> <C>
October 30, 1996 through April 30, 1997.... $0.3305 $0.3305
May 1, 1997 through October 31, 1997....... $0.3414 $0.6719
November 1, 1997 through April 30, 1998.... $0.3527 $1.0246
May 1, 1998 through October 31, 1998..... $0.3644 $1.3890
November 1, 1998 through April 30, 1999.... $0.3764 $1.7654
May 1, 1999 through October 31, 1999....... $0.3888 $2.1542
November 1, 1999 through April 30, 2000.... $0.4017 $2.5559
May 1, 2000 through October 31, 2000....... $0.4150 $2.9709
November 1, 2000 through April 30, 2001.... $0.4287 $3.3996
May 1, 2001 through October 31, 2001....... $0.4429 $3.8425
</TABLE>
- ---------
Projected Supplemental Redemption Amount = $3.8425 per unit
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 for the
information to Merrill Lynch & Co., Inc., Attn: Darryl W. Colletti, Office of
the Corporate Secretary, 100 Church Street, New York, New York 10080.
WHERE YOU CAN FIND MORE INFORMATION
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.
<PAGE>
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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.
<PAGE>
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 are listed on the AMEX and may be offered on the
CBOE and NYSE or off an 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Technology Market Index Target-Term Securities(R) due August 15, 2001
"MITTS(R) Securities"
$10 principal amount
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.
<TABLE>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before the maturity date MITTS Securities you own, we will pay you
o Senior unsecured debt securities of Merrill an amount equal to the sum of the principal
Lynch & Co., Inc. amount of each unit and an additional
o Linked to the value of the Chicago Board of amount based on the percentage increase, if
Options Exchange Technology Index, as any, in the value of the index, adjusted as
further described in this prospectus described in this prospectus.
o The MITTS Securities are listed on the o At maturity you will receive no less than
Chicago Board of Options Exchange and the principal amount of your MITTS
the New York Stock Exchange under the Securities and no more than $20.
symbol "TKM".
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 1999.
- --------------------
(R)"MITTS" and "Market Index Target-Term Securities" are service marks
of Merrill Lynch & Co., Inc.
* The use and reference of the term "CBOE Technology Index" in this
prospectus has been consented to by the CBOE.
The "CBOE Technology Index" is a service mark of the CBOE.
<PAGE>
Table of Contents
Page
RISK FACTORS.................................................................3
MERRILL LYNCH & CO., INC.....................................................5
RATIO OF EARNINGS TO FIXED CHARGES...........................................6
DESCRIPTION OF SECURITIES....................................................7
THE INDEX...................................................................14
OTHER TERMS.................................................................17
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................21
PLAN OF DISTRIBUTION........................................................22
EXPERTS.....................................................................22
<PAGE>
RISK FACTORS
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 date is less than 189.48.
Your yield may be lower than the yield on a standard debt security of
comparable maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. 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.
Yield on the MITTS Securities is subject to a maximum amount
Because the amount, in addition to the principal amount of the MITTS
Securities, if any, we will pay you at maturity, will not exceed $10 per unit
of MITTS Securities, you will not benefit from index increases in excess of
approximately 125% of the closing index value on the date the MITTS Securities
were priced for initial sale to the public.
Your return will not reflect the return of owning the stocks included in
the index
The index does not reflect the payment of dividends on the stocks
underlying it and therefore the yield based on the index to the maturity of
the MITTS Securities will not produce the same yield as if you purchased the
underlying stocks and held them for a similar period.
There are many factors affecting the trading value of the MITTS Securities
The trading value of the MITTS Securities is expected to depend
substantially on the extent of the appreciation, if any, of the index over
189.48. If, however, you sell your MITTS Securities prior to the maturity date
at a time when the index exceeds 189.48, the price you receive may be at a
substantial discount from the amount expected to be payable if the excess of
the index over 189.48 were to prevail until maturity of the MITTS Securities
because of the possible fluctuation of the index between the time of the sale
and the time that the MITTS Securities mature. Furthermore, the price at which
you will be able to sell the MITTS Securities prior to maturity may be at a
discount, which could be substantial, from the principal amount thereof, if,
at that time, the index is below, equal to, or not sufficiently above 189.48.
The $20 limitation on payment at maturity of the MITTS Securities may
adversely affect the secondary market value of the MITTS Securities. A
discount could also result from rising interest rates.
In addition to the value of the index, a number of interrelated factors,
including the creditworthiness of ML&Co. and those factors listed below, may
affect the trading value of the MITTS Securities. The relationship among these
factors is complex, including how these factors affect the amount to be repaid
at maturity. Accordingly, you should be aware that factors other than the
level of the index are likely to affect the MITTS Securities' trading value.
The expected effect on the trading value of the MITTS Securities of each of
the factors listed below, assuming in each case that all other factors are
held constant, is as follows:
Interest Rates. Because we will pay, at a minimum, the principal amount
per unit of MITTS Securities at maturity, we expect the trading value of the
MITTS Securities will likely be affected by changes in interest rates. In
general, we anticipate that if U.S. interest rates increase, the trading value
of the MITTS Securities is expected to decrease. Conversely, if U.S. interest
rates decrease, the trading value of the MITTS Securities is expected to
increase. Interest rates may also affect the U.S. economy, and, in turn, the
value of the Index. Rising interest rates may lower the value of the index
and, thus, may decrease the trading value of the MITTS Securities. Falling
interest rates may increase the value of the index and, thus, may increase the
trading value of the MITTS Securities.
<PAGE>
Volatility of the Index. If the volatility of the index increases, we
expect that the trading value of the MITTS Securities will increase. If the
volatility of the index decreases, we expect that the trading value of the
MITTS Securities will decrease.
Time Remaining to Maturity. We believe that before maturity the MITTS
Securities may trade at a value above that which you may expect from the level
of interest rates and the index. This difference will reflect a "time premium"
due to expectations concerning the value of the index during the period prior
to maturity of the MITTS Securities. As the time remaining to maturity of the
MITTS Securities decreases, however, we expect this time premium to decrease,
thus decreasing the trading value of the MITTS Securities. In addition, the
price at which you may be able to sell your MITTS Securities prior to maturity
may be at a discount, which may be substantial, from the principal amount of
the MITTS Securities if the value of the index is below, equal to, or not
sufficiently above 189.48.
Dividend Rates in the United States. If dividend rates on the stocks
included in the index increase, we expect the trading value of the MITTS
Securities to decrease. Conversely, if dividend rates on the stocks included
in the index decrease, we expect the value of the MITTS Securities to
increase. However, in general, rising U.S. corporate dividend rates may
increase the value of the index and, in turn, increase the trading value of
the MITTS Securities. Conversely, falling U.S. corporate dividend rates may
decrease the value of the index and, in turn, decrease the trading value of
the MITTS Securities.
The impact of the factors specified above, excluding the value of the
index, may offset, partially or in whole, any increase in the trading value of
the MITTS Securities that is attributable to an increase in the value of the
index. For example, an increase in U.S. interest rates may cause the MITTS
Securities to trade at a discount from their initial offering price, even if
the index has appreciated significantly. In addition, the impact of a given
factor may change depending on the prevailing value of the index relative to
189.48 and on the time remaining to maturity. In general, assuming all
relevant factors are held constant, the effect on the trading value of the
MITTS Securities of a given change in interest rates, index volatility and/or
dividend rates of stocks comprising the index is expected to 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. We expect that the effect on the trading
value of the MITTS Securities of a given appreciation of the index in excess
of value of the MITTS Securities to 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, assuming all other relevant factors are held constant.
Many factors affect the value of the index
Political, economic and other developments that affect the stocks
included in the index may adversely affect the value of the index and the
value of the MITTS Securities. Since the stocks included in the index are of
companies involved in various aspects of the high technology industry segment,
factors affecting this industry segment may affect the value of the index and
therefore the trading value of the MITTS Securities.
Other Considerations
It is suggested that you should reach an investment decision with regard
to the MITTS Securities only after carefully considering the suitability of
the MITTS Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult your tax advisor.
Our wholly-owned subsidiary, Merrill Lynch, Pierce, Fenner and Smith, or
MLPF&S, or its affiliates may from time to time engage in transactions
involving the stocks underlying the index for their proprietary accounts and
for other accounts under their management, which may influence the value of
the stocks and therefore the value of the MITTS Securities. MLPF&S and its
affiliates will also be the counterparties to the hedge of ML&Co.'s
obligations under the MITTS Securities. Accordingly, in some circumstances,
conflicts of interest may arise between MLPF&S's responsibilities as
calculation agent with respect to the MITTS Securities and its obligations
under its hedge and its status as a subsidiary of ML&Co. In Some
circumstances, the duties of MLPF&S as calculation agent could conflict with
the interests of MLPF&S as an affiliate of the issuer of the MITTS Securities,
Merrill Lynch & Co., Inc., and with the interests of the holders of the MITTS
Securities.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)....... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF SECURITIES
On August 12, 1996, ML&Co. issued $25,000,000 aggregate principal amount
of Technology MITTS Securities due August 15, 2001. The MITTS Securities were
issued as a series of senior debt securities under the 1983 Indenture which is
more fully described in this prospectus.
The MITTS Securities will mature on August 15, 2001.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of that MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Ending Index Value
does not exceed the Benchmark Index Value, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount X Ending Index Value-Benchmark Index Value
-----------------------------------------
Benchmark Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero or more than $10 per $10 principal amount of MITTS Securities.
The "Benchmark Index Value" equals 189.48. The Benchmark Index Value was
determined on the date the MITTS Securities were priced for initial sale to
the public (the "Pricing Date") by multiplying the closing value of the CBOE
Technology Index (the "Index") on the Pricing Date by a factor equal to
112.5%.
The "Ending Index Value" will be determined by calculation agent and will
equal the average or arithmetic mean of the closing values of the Index
determined on each of the first five Calculation Days during the Calculation
Period. If there are fewer than five Calculation Days, then the Ending Index
Value will equal the average or arithmetic mean of the closing values of the
Index on those Calculation Days. If there is only one Calculation Day, then
the Ending Index Value will equal the closing value of the Index on that
Calculation Day. If no Calculation Days occur during the Calculation Period
because of Market Disruption Events, then the Ending Index Value will equal
the closing value of the Index determined on the last scheduled Index Business
Day in the Calculation Period, regardless of the occurrence of a Market
Disruption Event on that day.
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day before the maturity date to and including the
second scheduled Index Business Day before the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
<PAGE>
For purposes of determining the Ending Index Value, an "Index Business
Day" is a day on which the NYSE is open for trading and trading generally
occurs in the over-the-counter market for equity securities and the Index or
any Successor Index, as defined on page 11 below, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending Index
Values,
o the total amount payable at maturity for each $10 principal
amount of 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 the
stocks underlying the Index, which includes an assumed aggregate
dividend yield of 0.20% per annum, as more fully described below.
<TABLE>
<CAPTION>
Total Pretax Pretax Annualized
Percentage Change Amount Annualized Rate of Rate of Return of
Hypothetical Ending Over the Starting Payable at Return on the Stocks Underlying
Index Value Index Value Maturity MITTS Securities(1) the Index(1)(2)
------------------- ----------------- ---------- ------------------- -----------------
<S> <C> <C> <C> <C>
84.22 -50% $ 10.00 0.00% -13.20%
101.06 -40% $ 10.00 0.00% -9.77%
117.90 -30% $ 10.00 0.00% -6.81%
134.74 -20% $ 10.00 0.00% -4.22%
151.59 -10% $ 10.00 0.00% -1.90%
168.43(3) 0% $ 10.00 0.00% 0.20%
185.27 10% $ 10.00 0.00% 2.12%
202.12 20% $ 10.67 1.30% 3.88%
218.96 30% $ 11.56 2.92% 5.52%
235.80 40% $ 12.44 4.41% 7.05%
252.65 50% $ 13.33 5.82% 8.49%
269.49 60% $ 14.22 7.15% 9.84%
286.33 70% $ 15.11 8.41% 11.12%
303.17 80% $ 16.00 9.61% 12.33%
320.02 90% $ 16.89 10.74% 13.48%
336.86 100% $ 17.78 11.83% 14.58%
353.70 110% $ 18.67 12.86% 15.63%
370.55 120% $ 19.56 13.85% 16.64%
387.39 130% $ 20.00 14.33% 17.60%
404.23 140% $ 20.00 14.33% 18.53%
421.08 150% $ 20.00 14.33% 19.43%
</TABLE>
- -----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes
o an investment of a fixed amount in the stocks underlying the Index
with the allocation of that amount reflecting the relative weights of the
stocks in the Index;
o a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the closing value of the Index on
the Pricing Date to the relevant hypothetical Ending Index Value;
o a constant dividend yield of 0.20% per annum, paid quarterly from
the date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter assuming the value increases or
decreases linearly from the closing value of the Index on the Pricing
Date to the applicable hypothetical Ending Index Value;
o no transaction fees or expenses;
o an investment term equal to the term of the MITTS Securities; and
o a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Index as of August 7, 1996
was approximately 0.20%.
<PAGE>
(3) The closing value of the Index on the Pricing Date.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting pretax
annualized rate of return will depend entirely on the actual Ending Index
Value determined by the calculation agent as provided in this prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating its Index, or its value, is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Ending Index Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if the changes or modifications had not been made,
and calculate the closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of the Index is a fraction or a multiple of what it would have been if
it had not been modified for example, due to a split in the Index, then the
calculation agent shall adjust the Index in order to arrive at a value of the
Index as if it had not been modified for example, as if the split had not
occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more than two
hours of trading in 5 or more of the securities included in the Index, or
(b) the suspension or material limitation, in each case, for more than
two hours of trading, whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise, in option
contracts on the Index which are traded on the Chicago Board Options Exchange,
Inc.
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".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
Discontinuance of the Index
If the CBOE discontinues publication of the Index and the CBOE or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (a
"Successor Index"), then, upon the calculation agent's notification of the
determination to the Trustee and ML&Co., the calculation agent will substitute
the Successor Index as calculated by the CBOE or any other entity for the
Index and calculate the Ending Index Value as described above under "Payment
at Maturity". Upon any selection by the calculation agent of a Successor
Index, ML&Co. shall cause notice to be given to holders of the MITTS
Securities.
If the CBOE discontinues publication of the Index and a Successor Index
is not selected by the calculation agent or is no longer published on any of
the Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before any discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists.
<PAGE>
If the CBOE discontinues publication of the Index before the period
during which the calculation agent is to calculate the Supplemental Redemption
Amount and the calculation agent determines that no Successor Index is
available at that time, then on each Business Day until the earlier to occur
of the determination of the Ending Index Value and a determination by the
calculation agent that a Successor Index is available, the calculation agent
shall determine the value that would be used in computing the Supplemental
Redemption Amount as described in the preceding paragraph as if that day were
a Calculation Day. 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 these values to be made available by telephone. Despite these
alternative arrangements, discontinuance of the publication of the 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 shall
have occurred and be continuing, the amount payable to a beneficial owner of a
Security upon any acceleration permitted by the MITTS Securities, with respect
to each $10 principal amount thereof, will be equal to the principal amount
plus an additional amount of contingent interest calculated as though the date
of early repayment were the maturity date of the MITTS Securities. See
"Description of Securities--Payment at Maturity" in this prospectus. If a
bankruptcy proceeding is commenced in respect of ML&Co., the claim of the
beneficial owner of a Security may be limited, under Section 502(b)(2) of
Title 11 of the United States Code, to the principal amount of the Security
plus an additional amount of contingent interest calculated as though the date
of the commencement of the proceeding were the maturity date of the 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 7.76%, 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 that 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, 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.
<PAGE>
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 are to 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.
<PAGE>
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 Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
Unless otherwise stated, all information in this prospectus on the Index
is derived from the CBOE or other publicly available sources. This information
reflects the policies of the CBOE as stated in those sources and the policies
are subject to change by the CBOE.
The Index is a price-weighted stock index designed, developed, maintained
and operated by, and is a service mark of, the CBOE. The Index is designed to
provide an indication of the composite price performance of the common stocks
of companies involved in the U.S. high technology industry segment for
example, companies involved in the design and manufacture of high technology
components and systems. The Index consists of the stocks of 30 issuers
involved in various aspects of the high technology industry segment,
including:
o computer services,
o telecommunications equipment,
o server software and hardware,
o design software,
o PC software and hardware,
<PAGE>
o networking, peripherals, and
o semiconductors.
See the table below for a list of the stocks underlying the Index as of
August 5, 1996. The CBOE selects companies for inclusion in the Index with the
aim of representing the spectrum of companies that develop components and
systems that define high technology. Relevant criteria employed by the CBOE
include
o the viability of the particular company,
o the extent to which that company represents the high technology
sector,
o the extent to which the market price of that company's common stock
is generally responsive to changes in the affairs of the technology sector, and
the market value and trading activity of the common stock of that
company.
As of August 5, 1996, the 30 companies included in the Index were divided
into five main individual groups. These individual groups comprised the
following, with the number of companies currently included in each group
indicated in parentheses: Computer Hardware (8), Computer Software (6),
Computer Systems & Services (6), Telecommunications (5) and Semiconductors
(5). The CBOE may from time to time, in its sole discretion, add companies to,
or delete companies from, the Index to achieve the objectives stated above.
The Index has a base date of January 3, 1995.
The common stocks included in the Index are currently listed either on
the New York Stock Exchange or traded through the facilities of the National
Association of Securities Dealers Automated Quotation System and reported as
National Market System securities. As of August 5, 1996, the 30 companies
included in the Index had an aggregate market value of $445.9 billion, with an
average capitalization of $14.86 billion. The Index components ranged in size
from $906.6 million to $72.3 billion, with a median capitalization of $4.81
billion. All of the stocks are currently the subject of listed options trading
in the U.S.
The average monthly trading volumes per Index component over the six
month period ending July 31, 1996 ranged from a low of 5.65 million shares to
a high of 177.6 million shares. As of August 5, 1996, the largest stock in the
Index, by value, accounted for 8.88% of the Index, while the smallest
represented 0.78% of the Index. Also on that date, the top five stocks in the
Index accounted for 32.26% of the Index by value.
The Index satisfies the CBOE's generic maintenance standards for options
on narrow-based stock indexes.
Computation of the Index
The Index is a price-weighted index for example, the weight in the Index
of a stock underlying the Index (an "Underlying Stock") is based on its price
per share rather than the total market capitalization of the issuer of that
stock, and reflects changes in the prices of the Underlying Stocks relative to
the index base date, January 3, 1995, when the Index equaled 100.00.
Specifically, the Index value is calculated by
o totaling the prices of a single share of each of the Underlying Stocks
(the "Market Price Aggregate"), and
o dividing the Market Price Aggregate by the Index Divisor.
The Index Divisor was originally chosen to result in an Index value of 100 on
January 3, 1995, and is subject to periodic adjustments as set forth below.
The stock prices used to calculate the Index are those reported by a primary
market for the Underlying Stocks.
The CBOE adjusts the foregoing Index Divisor to negate the effects of
changes in the price of an Underlying Stock that are determined by the CBOE to
be arbitrary and not due to market fluctuations. These adjustments may result
from stock splits, consolidations and acquisitions, the grant to shareholders
of the right to purchase other securities of the issuer for example, spinoffs
and rights issuances. The CBOE may also adjust the Index Divisor because of
the substitution of an Underlying Security. The CBOE first recalculates the
Market Price Aggregate and then determines a new Index Divisor based on the
following formula:
<PAGE>
Old Divisor X New Market Price Aggregate = New Divisor
--------------------------
Old Market Price Aggregate
The Index will be maintained by the CBOE. The Index is reviewed on
approximately a monthly basis by the CBOE staff. The CBOE may change the
composition of the Index at any time to reflect changes affecting the
components of the Index or the technology industry generally. If it becomes
necessary to remove a stock from the Index for example, because of a takeover
or merger, the CBOE will only add a stock having characteristics that will
permit the Index to remain within the maintenance criteria specified in CBOE
Rules and within the applicable rules of the Commission. These maintenance
criteria currently provide, among other things, that each component security
must have
o a market capitalization of at least $75 million, except that
securities accounting for the bottom 10% of the weight of the Index
may have market capitalizations of at least $50 million, and
o trading volume of at least 500,000 shares in each of the last six
months, except that securities accounting for the bottom 10% of the
weight of the Index may have trading volumes of at least 400,000
shares in each of the last six months.
Additionally, as of the first trading day of each January and July, no
single security may account for over 25% of the weight of the Index and no
five securities may account for over 50% of the weight of the Index.
Furthermore, each component security must be a reported security as defined in
Rule 11Aa3-1 of the Exchange Act. Finally, at least 90% of the weight of the
Index and 80% of the number of components in the Index must be eligible for
standardized options trading pursuant to CBOE Rules or, if currently listed
for options trading, must meet the applicable maintenance standards specified
in CBOE Rules. The CBOE will also take into account the capitalizations,
liquidity, volatility, and name recognition of any proposed replacement stock.
Absent prior approval of the SEC, the CBOE will not increase to more than
40, or decrease to fewer than 20, the number of stocks in the Index.
Additionally, the CBOE will not make any change in the composition of the
Index that would cause fewer than 90% of the stocks by weight, or fewer than
80% of the total number of stocks in the index, to qualify as stocks eligible
for equity options trading under CBOE rules.
The CBOE is under no obligation to continue the calculation and
dissemination of the Index and the method by which the Index is calculated and
the name "CBOE Technology Index" may be changed at the discretion of the CBOE.
The MITTS Securities are not sponsored, endorsed, sold or promoted by the
CBOE. No inference should be drawn from the information contained in this
prospectus that the CBOE makes any representation or warranty, implied or
express, to ML&Co., the beneficial owners of MITTS Securities or any member of
the public regarding the advisability of investing in securities generally or
in the MITTS Securities in particular or the ability of the Index to track
general stock market performance. The CBOE has no obligation to take the needs
of ML&Co. or the beneficial owners of MITTS Securities into consideration in
determining, composing or calculating the Index. The CBOE is not responsible
for, and has not participated in the determination of the timing of prices for
or quantities of, the MITTS Securities to be issued or in the determination or
calculation of the equation by which the Supplemental Redemption Amount is
determined. The CBOE has no obligation or liability in connection with the
administration, marketing or trading of the MITTS Securities.
The use of and reference to the Index in connection with the MITTS
Securities have been consented to by the CBOE.
Except in the limited circumstance described in this prospectus, none of
ML&Co., the Trustee, the calculation agent or the Underwriter has undertaken
independent diligence of the calculation, maintenance or publication of the
Index or any Successor Index. The CBOE disclaims all responsibility for any
inaccuracies in the data on which the Index is based and any mistakes or
errors or omissions in the calculation or dissemination of the Index and for
the manner in which the Index is used in determining the Supplemental
Redemption Amount, if any.
<PAGE>
The value of the Index is reported on the AMEX and Bloomberg under the
symbol "TXX" and on Reuters under the symbol ".TXX".
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the Index
will increase sufficiently to cause the beneficial owners of the MITTS
Securities to receive an amount in excess of the principal amount at the
maturity of the MITTS Securities.
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.
<PAGE>
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 such transaction, LPF&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;
<PAGE>
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.
<PAGE>
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.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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.
<PAGE>
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 CBOE or NYSE or off the
exchanges 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
S&P 500 Market Index Target-Term Securities(R) due May 10, 2001
"MITTS(R) Securities"
$10 principal amount
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.
<TABLE>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before the maturity date MITTS Securities you own, we will pay you
o Senior unsecured debt securities of Merrill an amount equal to the sum of the principal
Lynch & Co., Inc. amount of each unit and an additional
o Linked to the value of the S&P 500 Index amount based on the percentage increase, if any,
o The MITTS Securities are listed on the New in the value of the index, adjusted as
York Stock Exchange under the symbol described in this prospectus.
"MIX". o You will receive no less than the principal
amount of your MITTS Securities
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is , 1999.
- ---------------------
"MITTS" and "Market Index Target-Term Securities" are registered service
marks owned by Merrill Lynch & Co., Inc.
"Standard & Poor's(R)", "Standard & Poor's 500", "S&P 500(R)", "S&P(R)"
and "500", are trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use by Merrill Lynch Capital Services, Inc. and ML&Co.
is an authorized sublicensee.
<PAGE>
Table of Contents
Page
RISK FACTORS.................................................................4
MERRILL LYNCH & CO., INC.....................................................6
RATIO OF EARNINGS TO FIXED CHARGES...........................................7
DESCRIPTION OF THE MITTS SECURITIES..........................................8
THE INDEX...................................................................15
OTHER TERMS.................................................................17
PROJECTED PAYMENT SCHEDULE..................................................22
WHERE YOU CAN FIND MORE INFORMATION.........................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................23
PLAN OF DISTRIBUTION........................................................24
EXPERTS.....................................................................25
<PAGE>
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the MITTS Securities is suitable for you.
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 date is less than 638.26,
the value of the index on the date the MITTS Securities were priced. This will
be true even if at some time during the life of the MITTS Securities, the
value of the index, as adjusted, was higher than 638.26 but later falls below
638.26.
Your yield may be lower than the yield on a standard debt security of
comparable maturity
The amount we pay you at maturity may be less than the return you could
earn on other investments. Your yield may be less than the yield you would
earn if you bought a standard senior non-callable debt security of Merrill
Lynch & Co., Inc. with the same maturity date. Your investment may not reflect
the full opportunity cost to you when you take into account factors that
affect the time value of money.
Your return will not reflect the return of owning the stocks included in the
index
Your return will not reflect the return you would realize if you actually
owned the stock underlying the index and received the dividends paid on those
stocks because the index does not reflect the payment of dividends on the
stocks underlying it.
Amounts payable on the MITTS Securities may be limited by state law
New York State laws govern 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 your benefit, to the extent permitted by law,
not to voluntarily claim the benefits of any laws concerning usurious rates of
interest.
There are many factors affecting the trading value of the MITTS Securities
We expect that the creditworthiness of ML&Co. and a number of other
factors will affect the trading value of the MITTS Securities in the secondary
market. We expect that the trading value of the MITTS Securities will depend
substantially on the extent of the appreciation, if any, of the index over
638.26. If, however, you sell your MITTS Securities prior to the maturity date
at a time when the index exceeds 638.26, the price you receive may be at a
substantial discount from the amount expected to be payable if the excess of
the index over 638.26 were to prevail until maturity of the MITTS Securities
because of the possible fluctuation of the index between the time of the sale
and the time at which the MITTS Securities mature. Furthermore, the price at
which you will be able to sell MITTS Securities prior to maturity may be at a
discount, which could be substantial, from the principal amount, if, at that
time, the index is below, equal to, or not sufficiently above 638.26. A
discount could also result from rising interest rates.
In addition to the value of the index, a number of interrelated factors,
including the creditworthiness of ML&Co. and those factors listed below may
affect the trading value of the MITTS Securities. The relationship among these
factors is complex, including how these factors affect the relative value of
the MITTS Securities. Accordingly, you should be aware that factors other than
the level of the index are likely to affect the MITTS Securities' trading
value. The expected effect on the trading value of the MITTS Securities of
each of the factors listed below, assuming in each case that all other factors
are held constant, is as follows:
<PAGE>
Interest rates. Because we will pay, at a minimum, the principal amount
per unit of MITTS Securities at maturity, we expect the trading value of
the MITTS Securities will likely be affected by changes in interest
rates. In general, we anticipate that if U.S. interest rates increase,
the trading value of the MITTS Securities will decrease. If U.S. interest
rates decrease, we expect the trading value of the MITTS Securities to
increase. Interest rates may also affect the U.S. economy, and, in turn,
the value of the index. Rising interest rates may lower the value of the
index and, thus, the MITTS Securities. Falling interest rates may
increase the value of the index and, thus, may increase the value of the
MITTS Securities.
Volatility of the index. If the volatility of the index increases, we
expect that the trading value of the MITTS Securities will increase. If
the volatility of the index decreases, we expect that the trading value
of the MITTS Securities will decrease.
Time remaining to maturity. We believe that before maturity the MITTS
Securities may trade at a value above that which you may expect based
upon the level of interest rates and the index. This difference will
reflect a "time premium" due to expectations concerning the value of the
index during the period prior to maturity of the MITTS Securities. As the
time remaining to maturity of the MITTS Securities decreases, however, we
expect this time premium to decrease, thus decreasing the trading value
of the MITTS Securities. In addition, the price at which you may be able
to sell MITTS Securities prior to maturity may be at a discount, which
may be substantial, from the principal amount of the MITTS Securities if
the value of the index is below, equal to, or not sufficiently above
638.26.
Dividend rates in the United States. If dividend rates on the stocks
included in the index increase, we expect the value of the MITTS
Securities to decrease. Conversely, if dividend rates on the stocks
included in the index decrease, we expect the value of the MITTS
Securities to increase. However, in general, rising U.S. corporate
dividend rates may increase the value of the index and, in turn, increase
the value of the MITTS Securities. Conversely, falling U.S. dividend
rates may decrease the value of the index and, in turn, decrease the
value of the MITTS Securities.
We want you to understand that the impact of the factors specified above,
excluding the value of the index, may offset, partially or in whole, any
increase in the trading value of the MITTS Securities that is attributable to
an increase in the value of the index. For example, an increase in U.S.
interest rates may cause the MITTS Securities to trade at a discount from
their initial offering price, even if the index has appreciated significantly.
In general, assuming all relevant factors are held constant, the effect
on the trading value of the MITTS Securities of a given change in interest
rates, index volatility and/or dividend rates of stocks comprising the index
is expected to 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. We expect that
the effect on the trading value of the MITTS Securities of a given
appreciation of the index in excess of 638.26 to 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, assuming all other relevant factors are held constant.
The Index
Political, economic and other developments that affect the stocks
included in the index may adversely affect the value of the index and
therefore the value of the MITTS Securities.
Other Considerations
It is suggested that you should reach an investment decision regarding
the MITTS Securities only after carefully considering the suitability of the
MITTS Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult your tax advisor.
Our wholly-owned subsidiary, Merrill Lynch, Pierce, Fenner & Smith or
MLPF&S, or its affiliates may from time to time engage in transactions
involving the stocks underlying the index for their proprietary accounts and
for other accounts under their management, which may influence the value of
these stocks and therefore the value of the MITTS Securities. MLPF&S and its
affiliates will also be the counterparties to the hedge of ML&Co.'s
obligations under the MITTS Securities. Accordingly, under some circumstances,
conflicts of interest may arise between MLPF&S's responsibilities as
calculation agent with respect to the MITTS Securities and its obligations
under its hedge and its status as a subsidiary of ML&Co. Under some
circumstances, the duties of MLPF&S as calculation agent could conflict with
the interests of MLPF&S as an affiliate of the issuer of the MITTS Securities,
Merrill Lynch & Co., Inc., and with the interests of the holders of the MITTS
Securities.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
--------------------------------
Ratio of earnings to fixed charges(a)..... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On May 13, 1996, ML&Co. issued $110,000,000 aggregate principal amount of
S&P 500 MITTS Securities due May 10, 2001. The MITTS Securities were issued as
a series of senior debt securities under the 1983 Indenture which is more
fully described in this prospectus.
The MITTS Securities will mature on May 10, 2001.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of the MITTS Security plus the Supplemental Redemption Amount
described below, if any, there will be no other payment of interest, periodic
or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Ending Index Value
does not exceed the Starting Index Value, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount X Ending Index Value--Starting Index Value X Participation Rate
----------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Index Value" equals 638.26, which was the closing value of
the S&P 500 Index (the "Index") on the date the MITTS Securities were priced
by ML&Co. for initial sale to the public (the "Pricing Date").
The "Participation Rate" equals 110%.
The "Ending Index Value" will be determined by the calculation agent and
will equal the average or arithmetic mean of the closing values of the Index
determined on each of the first five Calculation Days during the Calculation
Period. If there are fewer than five Calculation Days, then the Ending Index
Value will equal the average or arithmetic mean of the closing values of the
Index on these Calculation Days. If there is only one Calculation Day, then
the Ending Index Value will equal the closing value of the Index on that
Calculation Day. If no Calculation Days occur during the Calculation Period
because of Market Disruption Events, then the Ending Index Value will equal
the closing value of the Index determined on the last scheduled Index Business
Day in the Calculation Period, regardless of the occurrences of a Market
Disruption Event on that day.
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day prior to the maturity date to and including the
second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
<PAGE>
For purposes of determining the Ending Index Value, an "Index Business
Day" is a day on which the New York Stock Exchange and the American Stock
Exchange are open for trading and the Index or any Successor Index, as defined
below, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purpose and
binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending Index
Values,
o the total amount payable at maturity for each $10 principal amount of
MITTS Securities,
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 the stocks
underlying the Index, which includes an assumed aggregate dividend
yield of 2.20% per annum, as more fully described below.
<TABLE>
<CAPTION>
Total Amount Pretax Pretax Annualized
Percentage Change Payable at Maturity Annualized Rate Rate of Return of
Hypothetical Ending Over the Starting Per $10 Principal of Return on Stocks Underlying
Index Value Index Value Amount of Securities the Securities(1) the Index(1)(2)
------------------ ----------------- -------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
319.13 -50% $10.00 0.00% -11.41%
382.96 -40% $10.00 0.00% -7.89%
446.78 -30% $10.00 0.00% -4.89%
510.61 -20% $10.00 0.00% -2.25%
574.43 -10% $10.00 0.00% 0.09%
638.26(3) 0% $10.00 0.00% 2.21%
702.09 10% $11.10 2.10% 4.15%
765.91 20% $12.20 4.02% 5.94%
829.74 30% $13.30 5.80% 7.61%
893.56 40% $14.40 7.44% 9.16%
957.39 50% $15.50 8.97% 10.62%
1,021.22 60% $16.60 10.42% 12.00%
1,085.04 70% $17.70 11.77% 13.30%
1,148.87 80% $18.80 13.05% 14.54%
1,212.69 90% $19.90 14.27% 15.72%
1,276.52 100% $21.00 15.43% 16.84%
1,340.35 110% $22.10 16.53% 17.92%
1,404.17 120% $23.20 17.59% 18.95%
</TABLE>
- -------------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes
o an investment of a fixed amount in the stocks underlying the Index
with the allocation of the amount reflecting the current relative
weights of the stocks in the Index;
o a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the Starting Index Value to
the relevant hypothetical Ending Index Value;
o a constant dividend yield of 2.20% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter assuming the value increases or
decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value;
o no transaction fees or expenses;
o a term for the MITTS Securities from May 13, 1996 to May 10, 2001; and
o a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Index as of May 7, 1996
was approximately 2.20%.
(3) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this
prospectus.
<PAGE>
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value, is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had these changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Ending Index Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if the changes or modifications had not been made,
and calculate the closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of the Index is a fraction or a multiple of what it would have been if
it had not been modified, for example, due to a split in the Index, then the
calculation agent shall adjust the Index in order to arrive at a value of the
Index as if it had not been modified, for example, as if the split had not
occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation in trading for more than two
hours of trading in 100 or more of the securities included in the S&P 500
Index, or
(b) the suspension or material limitation on trading for more than two
hours of trading, whether by reason of movements in price otherwise exceeding
levels permitted by the relevant exchange or otherwise, in
(1) futures contracts related to the Index which are traded on the
Chicago Mercantile Exchange or
(2) option contracts related to the Index which are traded on the
Chicago Board Options Exchange, Inc.
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".
Discontinuance of the Index
If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of the determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by S&P or any other entity for the Index. Upon any selection by
the calculation agent of a Successor Index, ML&Co. shall cause notice to be
given to holders of the MITTS Securities.
If S&P discontinues publication of the Index and a Successor Index is not
selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before the discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists.
<PAGE>
If S&P discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Ending Index Value and
o a determination by the calculation agent that a Successor Index
is available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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.
Despite these alternative arrangements, discontinuance of the publication
of the 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 per unit, will be equal to the initial
issue price ($10) per unit and an additional amount of contingent interest
calculated as though the date of early repayment were the stated maturity date
of the MITTS Securities. See "- Payment 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 per unit 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 of the MITTS Securities, whether at the
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 8% 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.
<PAGE>
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 are to 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.
<PAGE>
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 conc0erning 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 Payment
All payments of principal and the Supplemental Redemption Amount, if any,
will be made by ML&Co. in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
<PAGE>
THE INDEX
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components,
are derived from publicly available information prepared by S&P as of March 22,
1999. ML&Co. and MLPF&S do not assume any responsibility for the accuracy or
completeness of this information.
The Index is published by S&P, and is intended to provide an indication
of the pattern of common stock price movement. The calculation of the value of
the Index, discussed below in further detail, is based on the relative value
of the aggregate Market Value of the common stocks of 500 companies as of a
particular time compared to the aggregate average Market Value of the common
stocks of 500 similar companies during the base period of the years 1941
through 1943. As of March 22, 1999 the 500 companies included in the Index
represented approximately 78% of the aggregate Market Value of common stocks
traded on the NYSE; however, these 500 companies are not the 500 largest
companies listed on the NYSE and not all of these 500 companies are listed on
the exchange. As of March 22, 1999, the aggregate Market Value of the 500
companies included in the Index represented approximately 79% of the aggregate
Market Value of United States domestic, public companies. S&P chooses
companies for inclusion in the Index with the aim of achieving a distribution
by broad industry groupings that approximates the distribution of these
groupings in the common stock population of the NYSE, which S&P uses as an
assumed model for the composition of the total market. Relevant criteria
employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to
which it is assigned,
o the extent to which the market price of that company's common stock is
generally responsive to changes in the affairs of the respective
industry, and
o the Market Value and trading activity of the common stock of that
company.
Four main groups of companies comprise the Index, with the number of
companies currently included in each group indicated in parentheses:
Industrials (380), Utilities (39), Transportation (10) and Financial (71). S&P
may from time to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated above.
The Index does not reflect the payment of dividends on the stocks
underlying it. The return based on the MITTS Securities will not be the same
return you would receive if you were to purchase the underlying stocks and
hold them for a period equal to the maturity of the MITTS Securities.
Computation of the Index
S&P currently computes the Index as of a particular time as follows:
(a) the product of the market price per share and the number of then
outstanding shares of each component stock is determined at a particular
time (the "Market Value" of the stock);
(b) the Market Value of all component stock as of that time is
aggregated;
(c) the mean average of the Market Values as of each week in the
base period of the years 1941 through 1943 of the common stock of each
company in a group of 500 substantially similar companies is determined;
(d) the mean average Market Values of all these common stocks over
the base period are aggregated (the aggregate amount being referred to as
the "Base Value");
<PAGE>
(e) the current aggregate Market Value of all component stocks is
divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is multiplied by
ten.
While S&P currently employs the above methodology to calculate the Index,
no assurance can be given that S&P will not modify or change this methodology
in a manner that may affect the Supplemental Redemption Amount, if any,
payable to beneficial owners of MITTS Securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effects of changes in the
Market Value of component stocks that are determined by S&P to be arbitrary or
not due to true market fluctuations. Changes may result from such causes as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities of
ML&Co.,
o the substitution by S&P of particular component stocks in the Index,
and
o other reasons.
In these cases, S&P first recalculates the aggregate Market Value of all
component stocks, after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares thereof
or both, and then determines the New Base Value in accordance with the
following formula:
Old Base Value X New Market Value = New Base Value
----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
these causes upon the Index.
Historical Data on the Index
The following table sets forth the value of the Index at the end of each
month, in the period from January 1990 through February 1999. These historical
data on the Index are not necessarily indicative of the future performance of
the Index or what the value of the MITTS Securities may be. Any historical
upward or downward trend in the value of the Index during any period set forth
below is not any indication that the Index is more or less likely to increase
or decrease at any time during the term of the MITTS Securities.
<PAGE>
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
April......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
May........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
June.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
July.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
August........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
September..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
October....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
November...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
December...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
</TABLE>
License Agreement
Standard & Poor's ("S&P") does not guarantee the accuracy and/or the
completeness of the Index or any data included in the Index. S&P makes no
warranty, express or implied, as to results to be obtained by ML&Co., MLPF&S,
holders of the MITTS Securities, or any other person or entity from the use of
the S&P Index or any data included in the Index in connection with the rights
licensed under the license agreement described in this prospectus or for any
other use. S&P makes no express or implied warranties, and hereby expressly
disclaims all warranties of merchantability or fitness for a particular
purpose with respect to the S&P Index or any data included in the Index.
Without limiting any of the above information, in no event shall S&P have any
liability for any special, punitive, indirect or consequential damage,
including lost profits, even if notified of the possibility of these damages.
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., 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 Merrill Lynch
Capital Services, Inc.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this prospectus:
"The MITTS Securities 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 the ability of the Index to track general stock market
performance. S&P's only relationship to Merrill Lynch Capital Services, Inc.
and ML&Co. (other than transactions entered into in the ordinary course of
business) is the licensing of certain servicemarks and trade names of S&P and
of the Index which is determined, composed and calculated by S&P without
regard to ML&Co. or the MITTS Securities. S&P has no obligation to take the
needs of ML&Co. or the holders of the MITTS Securities into consideration in
determining, composing or calculating the Index. S&P is not responsible for
and has not participated in the determination of the timing of the sale of the
MITTS Securities, prices at which the MITTS Securities are to initially be
sold, or quantities of the MITTS Securities to be issued or in the
determination or calculation of the equation by which the MITTS Securities are
to be converted into cash. S&P has no obligation or liability in connection
with the administration, marketing or trading of the MITTS Securities."
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components,
are derived from publicly available information prepared by S&P. 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 such transaction, MLPF&S
remains a Controlled Subsidiary.
<PAGE>
"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
<PAGE>
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.
<PAGE>
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 Treasury Department Final 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 $5.0390 per
unit. This represents an estimated yield on the MITTS Securities equal to
5.90% 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 a term of seven years and one day for the MITTS Securities
based upon the projected payment schedule for the MITTS Securities, including
both the projected Supplemental Redemption Amount and the estimated yield
equal to 5.90% per annum, compounded semiannually, as determined by ML&Co. for
purposes of application of the Final Regulations to the MITTS Securities:
<PAGE>
<TABLE>
<CAPTION>
Total Interest
Deemed to
Have Accrued
on the MITTS
Interest Deemed to Securities
Accrue During as of End of
Accrual Period Accrual Period
Accrual Period (per unit) (per unit)
<S> <C> <C>
June 26, 1998 through January 1, 1999........................ $0.3057 $0.3057
January 2, 1999 through July 1, 1999........................ $0.3040 $0.6097
July 2, 1999 through January 1, 2000......................... $0.3130 $0.9227
January 2, 2000 through July 1, 2000......................... $0.3222 $1.2449
July 2, 2000 through January 1, 2001......................... $0.3317 $1.5766
January 2, 2001 through July 1, 2001......................... $0.3415 $1.9181
July 2, 2001 through January 1, 2002......................... $0.3516 $2.2697
January 2, 2002 through July 1, 2002......................... $0.3620 $2.6317
July 2, 2002 through January 1, 2003......................... $0.3726 $3.0043
January 2, 2003 through July 1, 2003......................... $0.3836 $3.3879
July 2, 2003 through January 1, 2004......................... $0.3950 $3.7829
January 2, 2004 through July 1, 2004......................... $0.4066 $4.1895
July 2, 2004 through January 1, 2005......................... $0.4186 $4.6081
January 2, 2005 through July 1, 2005......................... $0.4309 $5.0390
</TABLE>
------------------
Projected Supplemental Redemption Amount = $5.0390 per unit.
All prospective investors in the MITTS 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 for the information to Merrill Lynch & Co., Inc.,
Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street,
12th Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 offered on the NYSE 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission if effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Top Ten Yield Market Index Target-Term Securities(R) due August 15, 2006
"MITTS(R) Securities"
$10 principal amount per unit
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the MITTS Securities.
<TABLE>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before the maturity date MITTS Securities you own, we will pay you
o Senior unsecured debt securities of an amount equal to the sum of the principal
Merrill Lynch & Co., Inc. amount of each unit and an additional
o Linked to the value of the Top Ten Yield amount based on the percentage increase, if
Index any, in the value of the index as described
o The MITTS Securities are listed on the in this prospectus
American Stock Exchange under the o You will receive the principal amount of
symbol "MTT" your MITTS Securities, plus an amount no
less than $2.40 per unit, representing a
minimum yield-to-maturity of 2.16% per
year
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
------------------------
Merrill Lynch & Co.
------------------------
The date of this prospectus is , 199 .
"MITTS" and "Market Index Target-Term Securities" are registered service
marks of Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS.................................................................3
MERRILL LYNCH & CO., INC.....................................................7
RATIO OF EARNINGS TO FIXED CHARGES...........................................8
DESCRIPTION OF THE MITTS SECURITIES..........................................9
THE INDEX...................................................................17
OTHER TERMS.................................................................21
WHERE YOU CAN FIND MORE INFORMATION.........................................24
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................24
PLAN OF DISTRIBUTION........................................................25
EXPERTS.....................................................................25
<PAGE>
RISK FACTORS
You may not earn a return on your investment.
You may not earn a return on your investment. You should be aware that
at maturity if the average value of the index over five trading days shortly
before the maturity date does not exceed 100 by more than 24%, we will pay you
no more than $10 plus $2.40 for each unit of your MITTS Securities. This will
be true even if, at some time during the life of the MITTS Securities the
value of the index exceeded 124.
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. Your investment may not reflect the full
opportunity cost to you when you take into account factors that affect the
time value of money.
Your return will not reflect the return of owning the stocks included in the
index.
While the index does reflect the payment of dividends on the stocks
underlying the index as described in more detail below, the yield based on the
index to the maturity of the MITTS Securities will not produce the same yield
as if you purchased the underlying stocks and held them for a similar period.
At the end of each calendar quarter, the dividends accrued on the stocks
underlying the index will be incorporated into the index by adjusting the
share multipliers of these stocks and these amounts will then be subject to
the price movements of the stocks. In addition, as described in more detail
below, at the end of each calendar quarter, an amount equal to 0.4375% of the
current value of the index will be deducted from the value of the index,
provided that
o there was no deduction at the end of the calendar quarter ending in
September 1996 and the deduction at the end of the calendar quarter
ending in December 1996 was increased to reflect the quarterly rate of
0.4375% prorated for the period from the date of the issuance of the
MITTS Securities through the end of the calendar quarter in December
1996, and
o there will be a prorated amount deducted on July 31, 2006 equal to
0.1507% of the then current index value to reflect the quarterly rate
of 0.4375% for the period from July 1, 2006 through July 31, 2006.
Although the index is based on stocks that are selected based on dividends
paid, you will not receive any interest, periodic or otherwise, on the MITTS
Securities before their maturity.
There may be an uncertain trading market for the MITTS Securities in the
future.
Although the MITTS Securities are listed on the NYSE under the symbol
"MTT," 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, you cannot assume 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
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited and you do not
wish to hold your investment until maturity, there may be a limited number of
buyers for your MITTS Securities. This may affect the price you receive if you
sell before maturity.
<PAGE>
There are many factors affecting trading value of the MITTS.
We believe that the value of the index and by a number of other factors
will affect the trading value of the MITTS Securities. Some of these factors
interrelate in complex ways; as a result, the effect of any one factor may
offset or magnify the effect of another factor. 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.
o The value of the index. We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the index
exceeds the starting index value. If you choose to sell your MITTS
Securities when the value of the index exceeds the starting index
value, you may receive substantially less than the amount that would
be payable at maturity based on that index value because of the
expectation that the index will continue to fluctuate until the ending
index value is determined. If you choose to sell your MITTS Securities
when the value of the index is below the starting index value, you may
receive less than the $10 principal amount per unit of MITTS
Securities. In general, rising Japanese dividend rates, or dividends
per share, may increase the value of the index while falling Japanese
dividend rates may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying the
index may also affect the value of the index and the value of the
MITTS Securities.
o Interest rates. 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 affect 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 the trading
value of the MITTS Securities will increase. Interest rates may also
affect the U.S. economy, and, in turn, the value of the index. Rising
interest rates may lower the value of the index and, thus, may
decrease the trading value of the MITTS Securities. Falling interest
rates may increase the value of the index, and, thus may increase the
trading value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. If the volatility of the
index increases, we expect that the trading value of the MITTS
Securities will increase. If the volatility of the index decreases, we
expect that the trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that before the maturity of
the MITTS Securities, the MITTS Securities may trade at a value above
that which would be expected based on the level of interest rates and
the index. This difference will reflect a "time premium" due to
expectations concerning the value of the index during the period prior
to maturity of the MITTS Securities. However, as the time remaining to
maturity of the MITTS Securities decreases, we expect that this time
premium will decrease, lowering the trading value of the MITTS
Securities.
o Dividend yields. If dividend yields on the stocks comprising the index
increase, we expect that the value of the MITTS Securities will
decrease. Conversely, if dividend yields on the stocks comprising the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in our credit ratings. 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 value of the index at maturity, an improvement in our
credit ratings will not reduce investment risks related to the MITTS
Securities.
<PAGE>
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
change in the trading value of the MITTS Securities attributable to another
factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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 except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the index 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.
Amounts payable on the MITTS Securities may be limited by state law
New York State laws govern the indenture under which the MITTS Securities
are 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.
Under present New York law, the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to debt securities in which
$2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the MITTS holders, to the extent
permitted by law, not to voluntarily claim the benefits of any laws concerning
usurious rates of interest.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the stocks
underlying the index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS. These transactions
could affect the price of these stocks and the value of the index in a manner
that be adverse to your investment in the MITTS Securities.
Potential conflicts of interest
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our subsidiaries to hedge
the market risks associated with our obligation to pay amounts due at maturity
on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult with your tax adviser.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
--------------------------------
Ratio of earnings to fixed charges(a)...... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
On August 26, 1996, ML&Co. issued $35,000,000 aggregate principal amount,
or 3,500,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture which is more fully described in this prospectus.
The MITTS Securities will mature on August 15, 2006.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of each MITTS Security plus the Supplemental Redemption
Amount described below, if any, ML&Co. will make no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus a supplemental
redemption amount as provided below. If the ending index value does not exceed
the starting index value by more than 24%, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities and the minimum supplemental redemption amount.
The "Index" is the Top Ten Yield Index, described more fully on pages
15-19.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Ending Index Value - Starting Index Value
Principal Amount X -----------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than $2.40 per $10 principal amount of the MITTS Securities.
The "Starting Index Value" was set at 100.
The "Minimum Supplemental Redemption Amount" is equivalent to a rate of
return of 2.16% per annum calculated on a semi-annual bond equivalent basis.
The "Ending Index Value" will be determined by the calculation agent and
will equal the average or arithmetic mean of the closing values of the Index
determined on each of the first five Calculation Days during the Calculation
Period. If there are fewer than five Calculation Days, then the Ending Index
Value will equal the average, or arithmetic mean, of the closing values of the
Index on these Calculation Days, and if there is only one Calculation Day,
then the Ending Index Value will equal the closing value of the Index on that
Calculation Day. If no Calculation Days occur during the Calculation Period,
then the Ending Index Value will equal the closing value of the Index
determined on the last scheduled Index Business Day in the Calculation Period,
regardless of the occurrence of a Market Disruption Event on that day.
<PAGE>
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day prior to the maturity date to and including the
second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are open
for trading and the index or any successor index, as defined on page 11 below,
is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending Index
Values:
o the percentage change from the Starting Index Value to the
Ending Index Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities;
and
o the pretax annualized rate of return of an investment in the
stocks underlying the Index, as adjusted from time to time,
that experience the same price changes and dividend payments
necessary to produce the indicated hypothetical ending index
value, which reflects a deduction from the value of the Index
at the end of each calendar quarter equal to 0.4375% of the
then current Index value.
The pretax annualized rate of return of the stocks underlying the Index
illustrated below is intended to reflect the return that might be earned by an
investor who seeks to replicate the Index return by trading in the actual
stocks underlying the Index and differs from the pretax annualized rate of
return on the MITTS Securities because of the percentage deducted from the
value of the Index each calendar quarter equal to 0.4375% of the then current
Index value. Investors seeking to replicate the Index return by trading in the
actual underlying stocks would not incur this periodic deduction although they
might incur commissions and other transaction-related costs.
<PAGE>
<TABLE>
<CAPTION>
Total Pretax Pretax Annualized
Percentage Change Amount Annualized Rate of Rate of Return of
Hypothetical Ending Over the Starting Payable at Return on the MITTS Stock Underlying
Index Value Index Value Maturity Securities(1) Index(1)(2)
----------- ----------- -------- ------------- -----------
<S> <C> <C> <C> <C>
50 -50% $ 12.40 2.16% -5.09%
60 -40% $ 12.40 2.16% -3.31%
70 -30% $ 12.40 2.16% -1.80%
80 -20% $ 12.40 2.16% -0.47%
90 -10% $ 12.40 2.16% 0.70%
100(3) 0% $ 12.40 2.16% 1.75%
110 10% $ 12.40 2.16% 2.71%
120 20% $ 12.40 2.16% 3.59%
130 30% $ 13.00 2.64% 4.41%
140 40% $ 14.00 3.39% 5.16%
150 50% $ 15.00 4.10% 5.87%
160 60% $ 16.00 4.76% 6.53%
170 70% $ 17.00 5.38% 7.15%
180 80% $ 18.00 5.97% 7.74%
190 90% $ 19.00 6.52% 8.30%
200 100% $ 20.00 7.05% 8.84%
210 110% $ 21.00 7.56% 9.35%
220 120% $ 22.00 8.04% 9.83%
230 130% $ 23.00 8.50% 10.30%
240 140% $ 24.00 8.94% 10.74%
250 150% $ 25.00 9.37% 11.17%
260 160% $ 26.00 9.78% 11.58%
270 170% $ 27.00 10.17% 11.98%
280 180% $ 28.00 10.56% 12.37%
290 190% $ 29.00 10.93% 12.74%
300 200% $ 30.00 11.28% 13.10%
310 210% $ 31.00 11.63% 13.44%
320 220% $ 32.00 11.97% 13.78%
330 230% $ 33.00 12.29% 14.11%
340 240% $ 34.00 12.61% 14.43%
350 250% $ 35.00 12.92% 14.74%
360 260% $ 36.00 13.22% 15.04%
370 270% $ 37.00 13.51% 15.33%
380 280% $ 38.00 13.80% 15.62%
390 290% $ 39.00 14.07% 15.90%
400 300% $ 40.00 14.34% 16.17%
</TABLE>
<PAGE>
- ---------
(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, in addition to the price changes and
dividend payments described above:
(a) an initial investment of a fixed amount in the Top Ten Yield
Stocks with the allocation of this amount reflecting an equal
dollar-weighted portfolio of the stocks in the Index;
(b) a reconstruction of this portfolio investment on each Anniversary
Date so as to be an equal-dollar weighted portfolio of the ten common
stocks in the DJIA having the highest Dividend Yield on the second
scheduled Index Business Day prior to each Anniversary Date,
(c) a compounded quarterly rate of return on the stocks which is
greater than the compounded quarterly return on the Index by 0.4375%,
the amount of the quarterly deduction applied to the Index, with
dividends being reinvested on a quarterly basis
(d) no transaction fees or expenses;
(e) an investment term equal to the term of the securities; and
(f) a final Index value equal to the Ending Index Value. (3) The Starting
Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the pretax annualized
rate of return resulting therefrom will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this
prospectus. Historical data regarding the Index is included in this prospectus
under "The Index--Historical Data on the Index".
Adjustments to the Index; Market Disruption Events
If at any time the AMEX changes its method of calculating the Index, or
the Index's value changes in any material respect, or if the Index is in any
other way modified so that the Index does not, in the opinion of the
calculation agent, fairly represent the value of the Index had these changes
or modifications not been made, then, from and after that time, the
calculation agent shall, at the close of business in New York, New York, on
each date that the closing value with respect to the Ending Index Value is to
be calculated, make any adjustments as, in the good faith judgment of the
calculation agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the Index as if any changes or
modifications had not been made, and calculate the closing value with
reference to the Index, as adjusted. Accordingly, if the method of calculating
the Index is modified so that the value of the Index is a fraction or a
multiple of what it would have been if it had not been modified, for example,
due to a split in the Index, then the calculation agent shall adjust the Index
in order to arrive at a value of the Index as if it had not been modified, for
example, as if the split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more than
two hours of trading or during the period one-half hour prior to the
close of trading, or
(b) the suspension or material limitation, in each case, for more
than two hours of trading, whether by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange or
otherwise, in
(1) futures contracts related to the Index, or options on futures
contracts, which traded on any major U.S. exchange, or
<PAGE>
(2) Option contracts related to the Index which are traded on any
major U.S. 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".
In some circumstances, the duties of MLPF&S as calculation agent in
determining the existence of Market Disruption Events could conflict with the
interests of MLPF&S as a subsidiary of ML&Co.
Discontinuance of the Index
If the AMEX discontinues publication of the Index and the AMEX or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (that index
being referred to as a "Successor Index"), then, upon the calculation agent's
notification of its determination to the Trustee, as defined below, and
ML&Co., the calculation agent will substitute the Successor Index as
calculated by the AMEX or other entity for the Index and calculate the Ending
Index Value as described above under "Payment at Maturity". Upon any selection
by the calculation agent of a Successor Index, ML&Co. shall cause notice
thereof to be given to Holders of the MITTS Securities.
If the AMEX discontinues publication of the Index and a Successor Index
is not selected by the calculation agent or is no longer published on any of
the Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index prior to any discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, that Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists.
If the AMEX discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
(a) the determination of the Ending Index Value, and
(b) a determination by the calculation agent that a Successor Index
is available.
The calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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, (the
"WSJ"), and arrange for information with respect to these values to be made
available by telephone. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect trading in
the MITTS Securities.
Events of Default and Acceleration
If 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 per unit, will be equal to the principal amount
per unit and the Supplemental Redemption Amount, if any, calculated as though
the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment 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 per unit 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.
<PAGE>
In case of default in payment of the MITTS Securities, whether at the
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 7.76% 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, together with any successor, (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.
<PAGE>
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 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 are to 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.
<PAGE>
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 Payment
All payments of principal and the Supplemental Redemption Amount, if any,
will be made by ML&Co. in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
<PAGE>
THE INDEX
Top Ten Yield Index
AMEX will calculate and disseminate the value of the Index on any Index
Business Day; the Index will equal the Top Ten Yield Portfolio Value plus the
Current Quarter Dividends (as defined below) as of that Index Business Day.
The Top Ten Yield Portfolio Value will equal the sum of the products of the
most recently available market price and the applicable Share Multiplier for
each Top Ten Yield Stock. The AMEX will generally calculate and disseminate
the value of the Index based on the most recently reported prices of the
stocks underlying the Index, as reported by the exchange or trading system on
which the underlying stocks are listed or traded, at approximately 15-second
intervals during the AMEX's business hours and the end of each Index Business
Day via the Consolidated Tape Association's Network B. The Index is reported
on the AMEX and Bloomberg under the symbol "XMT" and on Reuters under the
symbol ".XMT".
The "Dividend Yield" for each common stock is determined by the AMEX by
annualizing the last quarterly or semi-annual ordinary cash dividend for which
the ex-dividend date has occurred, excluding any extraordinary dividend as
determined by the AMEX in its sole discretion, and dividing the result by the
last available sale price for each stock on its primary exchange on the date
the Dividend Yield is to be determined.
Annual Top Ten Yield Portfolio Reconstitution
As of the close of business on each Anniversary Date, as defined below,
through the applicable Anniversary Date in 2005, the content of the Top Ten
Yield Portfolio shall be reconstituted to include the ten common stocks in the
DJIA having the highest Dividend Yield (the "New Stocks") on the second
scheduled Index Business Day prior to the Anniversary Date (the "Annual
Determination Date"), provided, however, that the AMEX will only add a stock
having characteristics as of the Annual Determination Date that will permit
the Index to remain within the criteria specified in the AMEX rules and within
the applicable rules of the Securities and Exchange Commission. These criteria
and rules will apply only on an Annual Determination Date to exclude a
proposed New Stock. If a proposed New Stock does not meet these criteria or
rules, the AMEX will replace it with the common stock in the DJIA with the
next highest Dividend Yield which does meet these criteria and rules. These
criteria currently provide, among other things:
o that each component stock must have a minimum market value of at least
$75 million, except that up to 10% of the component securities in the
Index may have a market value of $50 million;
o that each component stock must have an average monthly trading volume
in the preceding six months of not less than 1,000,000 shares, except
that up to 10% of the component stocks in the Index may have an
average monthly trading volume of 500,000 shares or more in the last
six months;
o 90% of the Index's numerical Index value and at least 80% of the total
number of component stocks will meet the then current criteria for
standardized option trading set forth in the rules of the AMEX; and
o all component stocks will either be listed on the AMEX, the NYSE, or
traded through the facilities of the National Association of
Securities Dealers Automated Quotation System and reported as National
Market System securities.
The AMEX will determine the Share Multiplier for each New Stock and will
indicate the number of shares of each New Stock, given the closing market
price of the New Stock on the Anniversary Date, required to be included in the
calculation of the Top Ten Yield Portfolio Value so that each New Stock
represents approximately an equal percentage of a value equal to the Index in
effect at the close of business on the Anniversary Date. As an example, if the
Index in effect at the close of business on an Anniversary Date equaled 200,
then each of the ten New Stocks relating to the Anniversary Date would be
allocated a portion of the value of the Index equal to 20 and if the closing
market price of one the New Stock on the Anniversary Date was 40, the
applicable Share Multiplier would be 0.5. If the Index equaled 80, then each
of the ten New Stocks would be allocated a portion of the value of the Index
equal to 8 and if the closing market price of one New Stock on the Anniversary
Date was 40, the applicable Share Multiplier would be 0.2. The last
Anniversary Date on which this reconstitution will occur will be the
Anniversary Date in 2005, which will be approximately one year prior to the
maturity date of the MITTS Securities. "Anniversary Date" shall mean the
anniversary date of the date the MITTS Securities are initially issued;
provided, however, that if this date is not an Index Business Day or a Market
Disruption Event occurs on that date, then the Anniversary Date for that year
shall mean the immediately succeeding Index Business Day on which a Market
Disruption Event does not occur. "Top Ten Yield Stock" at any time shall mean
the stocks contained in the Top Ten Yield Portfolio at that time.
<PAGE>
Dow Jones Industrial Average
The DJIA is comprised of 30 common stocks chosen by the editors of the
WSJ as representative of the broad market of American industry generally. The
companies are major factors in their industries and their stocks are typically
widely held by individuals and institutional investors. Changes in the
composition of the DJIA are made entirely by the editors of the WSJ without
consultation with the companies, the stock exchange or any official agency or
ML&Co. For the sake of continuity, changes are made infrequently. Most
substitutions have result from mergers, but from time to time, changes may be
made to achieve a better representation. The components of the DJIA may be
changed at any time for any reason. Dow Jones & Company, Inc., publisher of
the WSJ, is not affiliated with ML&Co, has not participated in any way in the
creation of the MITTS Securities or in the selection of stocks to be included
in the Top Ten Yield Portfolio and has not reviewed or approved any
information included in this prospectus.
The first DJIA, consisting of 12 stocks, was published in the WSJ in
1896. The list grew to 20 stocks in 1916 and to 30 stocks on October 1, 1928.
For two periods of 17 consecutive years each, there were no changes to the
list; March 15, 1939-July 2, 1956 and June 2, 1959-August 8, 1976.
ML&Co or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the Top Ten Yield Portfolio
stocks, including extending loans to, or making equity investments in, these
issuers or providing advisory services to these issuers, including merger and
acquisition advisory services. In the course of this business, ML&Co or its
affiliates may acquire non-public information with respect to these issuers
and, in addition, one or more affiliates of ML&Co may publish research reports
with respect to these issuers. ML&Co does not make any representation to any
purchaser of MITTS Securities with respect to any matters whatsoever relating
to these issuers. Any prospective purchaser of MITTS Securities should
undertake an independent investigation of the issuers of the Top Ten Yield
Portfolio stocks as in its judgment is appropriate to make an informed
decision with respect to an investment in the MITTS Securities. The
composition of the Index does not reflect any investment or sell
recommendations of ML&Co or its affiliates.
Cash Dividends
Current Quarter Dividend
As described above, the value of the Index will include an amount
reflecting Current Quarter Dividends. "Current Quarter Dividends" for any day
will be determined by the AMEX and will equal the sum of the Dividend Payment
for each Top Ten Yield Stock. The "Dividend Payment" with respect to a Top Ten
Yield Stock for any day will equal the sum of the products of:
o each dividend paid by the issuer of that Top Ten Yield Stock on one
share of that Top Ten Yield Stock during the Current Quarter, not
including any reinvestment thereof, multiplied by
o the Share Multiplier applicable to that Top Ten Yield Stock at the
time each dividend is paid. A dividend will be considered paid by an
issuer at the open of business on the ex-dividend date, generally, the
trading day on which the market price of the stock reflects the
payment of the dividend. "Current Quarter" shall mean the period from
and including August 9, 1996 through December 31, 1996, and after
December 31, 1996, from and including the first day of the then
current calendar quarter containing the day on which the applicable
Dividend Payment is being determined to and including the day on which
the applicable Dividend Payment is being determined.
<PAGE>
Quarterly Stock Dividend
As of the first day of the start of each calendar quarter, the AMEX will
allocate the Current Quarter Dividends as of the end of the immediately
preceding calendar quarter to each then outstanding Top Ten Yield Stock. The
amount of the Current Quarter Dividends allocated to each Top Ten Yield Stock
will equal the percentage of the value of that Top Ten Yield Stock contained
in the Top Ten Yield Portfolio relative to the value of the entire Top Ten
Yield Portfolio based on the closing market price on the last Index Business
Day in the immediately preceding calendar quarter. The AMEX will increase the
Share Multiplier of each outstanding Top Ten Yield Stock to reflect the number
of shares, or portion of a share, that the amount of the Current Quarter
Dividend allocated to that Top Ten Yield Stock can purchase of each Top Ten
Yield Stock based on the closing market price on the last Index Business Day
in the immediately preceding calendar quarter.
Quarterly Deduction
At the end of each calendar quarter, the Index will be reduced by a value
equal to 0.4375% of the then current Index, provided that:
o there will be no deduction at the end of the calendar quarter ending
in September 1996 and the deduction at the end of the calendar quarter
ending in December 1996 will be increased to reflect the quarterly
rate of 0.4375% prorated for the period from the date of the issuance
of the MITTS Securities through the end of the calendar quarter in
December 1996, and
o the Index will be reduced at the close of business on July 31, 2006 by
a value equal to 0.1507% of the closing value of the Index on that
date. With respect to the period ending December 31, 1996, the
quarterly rate of 0.4375% will be prorated by multiplying it by a
factor equal to the result of dividing the number of days in the
period from the date the MITTS Securities are issued through the
calendar quarter ending in December 1996 by 90
Adjustments to the Share Multiplier and Top Ten Yield Portfolio
The Share Multiplier with respect to any Top Ten Yield Stock and the Top
Ten Yield Portfolio will be adjusted as follows:
1. If a Top Ten Yield Stock is subject to a stock split or reverse stock
split, then once the split has become effective, the Share Multiplier relating
to that Top Ten Yield Stock will be adjusted to equal the product of the
number of shares issued with respect to one share of that Top Ten Yield Stock
and the prior multiplier.
2. If a Top Ten Yield Stock is subject to a stock dividend, defined as an
issuance of additional shares of the Top Ten Yield Stock, that is given
equally to all holders of shares of the issuer of that Top Ten Yield Stock,
then once the dividend has become effective and that Top Ten Yield Stock is
trading ex-dividend, AMEX will adjust the Share Multiplier so that the new
Share Multiplier shall equal the former Share Multiplier plus the product of
the number of shares of that Top Ten Yield Stock issued with respect to one
share of that Top Ten Yield Stock and the prior multiplier.
3. If the issuer of a Top Ten Yield Stock is being liquidated or is
subject to a proceeding under any applicable bankruptcy, insolvency or other
similar law, that Top Ten Yield Stock will continue to be included in the Top
Ten Yield Portfolio so long as a Market Price for that Top Ten Yield Stock is
available. If a market price is no longer available for a Top Ten Yield Stock
for whatever reason, including the liquidation of the issuer of Top Ten Yield
Stock or the subjection of the issuer of that Top Ten Yield Stock to a
proceeding under any applicable bankruptcy, insolvency or other similar law,
then the value of that Top Ten Yield Stock will equal zero in connection with
calculating the Top Ten Yield Portfolio Value for so long as no market price
is available, and no attempt will be made to immediately find a replacement
stock or increase the value of the Top Ten Yield Portfolio to compensate for
the deletion of that Top Ten Yield Stock. If a market price is no longer
available for a Top Ten Yield Stock as described above, the Top Ten Yield
Portfolio Value will be computed based on the remaining Top Ten Yield Stocks
for which market prices are available and no new stock will be added to the
Top Ten Yield Portfolio until the annual reconstitution of the Top Ten Yield
Portfolio. As a result, there may be periods during which the Top Ten Yield
Portfolio contains fewer than ten Top Ten Yield Stocks.
4. If the issuer of a Top Ten Yield Stock has been subject to a merger or
consolidation and is not the surviving entity or is nationalized, then a value
for that Top Ten Yield Stock will be determined at the time the issuer is
merged or consolidated or nationalized and will equal the last available
market price for that Top Ten Yield Stock and that value will be constant
until the Top Ten Yield Portfolio is reconstituted. At that time, no
adjustment will be made to the Share Multiplier of that Top Ten Yield Stock.
5. If the issuer of a Top Ten Yield Stock issues to all of its
shareholders equity securities that are publicly traded of an issuer other
than the issuer of the Top Ten Yield Stock, then the new equity securities
will be added to the Top Ten Yield Portfolio as a new Top Ten Yield Stock. The
Share Multiplier for that new Top Ten Yield Stock will equal the product of
the original Share Multiplier with respect to the Top Ten Yield Stock for
which the new Top Ten Yield Stock is being issued (the "Original Top Ten Yield
Stock") and the number of shares of the new Top Ten Yield Stock issued with
respect to one share of the Original Top Ten Yield Stock.
No adjustments of any Share Multiplier of a Top Ten Yield Stock will be
required unless the adjustment would require a change of at least 1% in the
Share Multiplier then in effect. The Share Multiplier resulting from any of
the adjustments specified above will be rounded to the nearest ten-thousandth
with five hundred-thousandths being rounded upward.
The AMEX expects that no adjustments to the Share Multiplier of any Top
Ten Yield Stock or to the Top Ten Yield Portfolio will be made other than
those specified above, however, the AMEX may at its discretion make
adjustments to maintain the value of the Index if events would otherwise alter
the value of the Index despite no change in the market prices of the Top Ten
Yield Stocks.
Historical Performance of the Index
You should review the historical performance of the Index. The historical
performance of the Index should not be taken as an indication of future
performance, and no assurance can be given that the Index will increase
sufficiently to cause the beneficial owners of the MITTS Securities to receive
an amount in excess of the principal amount at the maturity of the MITTS
Securities.
<PAGE>
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:
<PAGE>
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".
<PAGE>
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.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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.
<PAGE>
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
Stock Market Annual Reset Term(SM) Notes due December 31, 1999
(Series A)
"SMART Notes(SM)"
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 SMART Notes.
The SMART Notes:
o 100% principal protection at maturity
o Interest payment on each June 30 and December 30
o We will pay interest on the SMART Notes at a rate equal to the
product of 65% and the percentage increase, if any, in the S&P MidCap
400 Composite Stock Price Index.
o For each $1,000 principal amount of the SMART Notes that you own, on
the maturity date, you will receive not less than $30 and not more
than $100
o The SMART Notes are listed on the New York Stock Exchange under the
symbol "MERIQ99"
Investing in the SMART Notes involves risks.
See "Risk Factors" beginning on page 3.
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.
---------------------
Merrill Lynch & Co.
---------------------
The date of this prospectus is ___________, 199_.
"SMART Notes" and "Stock Market Annual Reset Term" are registered service
marks of Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS.................................................................3
MERRILL LYNCH & CO., INC.....................................................6
RATIO OF EARNINGS TO FIXED CHARGES...........................................7
DESCRIPTION OF THE SMART NOTES...............................................8
THE STANDARD & POOR'S MIDCAP 400 COMPOSITE STOCK PRICE INDEX................15
OTHER TERMS.................................................................17
WHERE YOU CAN FIND MORE INFORMATION.........................................21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................22
PLAN OF DISTRIBUTION........................................................22
EXPERTS.....................................................................23
<PAGE>
RISK FACTORS
You may not earn a return on your investment.
If the closing value of the S&P MidCap 400 Composite Stock Price Index
applicable to a December payment date as described in this prospectus does not
exceed the starting value of the index applicable to that December payment date
as described in this prospectus by more than approximately 4.62%, you will
receive only $30 for each $1,000 principal amount of your SMART Notes on that
December payment date. This will be true even if at some point during the time
the calculation agent determines the interest payable on the SMART Notes for
each December payment date, the value of the S&P MidCap 400 Composite Stock
Price Index for that year exceeded the starting value of the S&P MidCap 400
Stock Price Index for that year by more than 4.62%. The amount we will pay you
annually on the SMART Notes is limited to the product of 65% and the percentage
increase in S&P MidCap Composite Stock Price Index during the period between
the date of the determination of the starting value of the index for that year
and the date of the determination of the applicable closing value of the index
for that year, and in no event will that amount exceed only $100 for each
$1,000 principal amount of your SMART Notes. If the closing value of the index
for a December payment date exceeds the starting value for that December
payment date by more than approximately 15.38%, you would receive no more than
$100 for each $1,000 principal amount of your SMART Notes for that payment
period.
You will receive no less than the $30 for each $1,000 principal amount of
your SMART Notes, and we will repay you 100% of the principal amount of the
SMART Notes at maturity. Therefore, the amount that 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 senior non-callable debt
security of Merrill Lynch & Co., Inc. with the same maturity date. The payment
of additional amounts on the SMART Notes is subject to the conditions described
under "Description of Notes--Interest Payments". Your investment may not
reflect the full opportunity cost to you when you take into account factors
that affect the time value of money.
The amount payable on the SMART Notes based on the S&P MidCap 400
Composite Stock Price Index will not produce the same return as if you
purchased the stocks underlying the S&P MidCap 400 Composite Stock Price Index
and held them for a similar period because of the following:
o the S&P MidCap 400 Composite Stock Price Index does not reflect the
payment of dividends on the stocks underlying the index,
o the annual amount we will pay you on the SMART Notes reflects only
the change in the S&P MidCap 400 Composite Stock Price Index for the
period between the determination of the starting value and the
closing value of the S&P Midcap 400 Composite Stock Price Index
applicable to each December payment date, and
o the annual amount we will pay you is limited to 65% of the percentage
increase, if any, in the S&P MidCap Composite Stock Price 400 Index
during any relevant period, but will not be less than $30 per $1,000
principal amount of the SMART Notes or more than $100 per $1,000
principal amount of the SMART Notes.
There may be an uncertain trading market for the SMART Notes in the future
The SMART Notes are listed on the New York Stock Exchange under the symbol
"MERIQ 99". We expect that the secondary market for the SMART Notes, including
prices in that market, will likely be affected by our creditworthiness and by a
number of other factors. It is possible to view the SMART Notes as the economic
equivalent of a debt obligation plus a series of cash settlement options;
however, the SMART Notes may trade in the secondary market at a discount from
the aggregate value of these economic components, if these economic components
were valued and capable of being traded separately.
The trading values of the SMART Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected theoretical effect on the trading value of the SMART Notes of each of
the factors listed below. The following discussion of each separate factor
generally assumes that all other factors are held constant, although the actual
interrelationship between some of these factors is complex.
o Relative Level of the S&P MidCap 400 Index. We expect that the
trading value of the SMART Notes will depend significantly on the
extent of the excess of the expected average of the closing value of
the S&P MidCap Composite Stock Price Index for a calendar year over
the closing value of the S&P MidCap 400 Composite Stock Price Index
on the last business day of the preceding calendar year. If, however,
you sell your SMART Notes at a time this excess exists, the sale
price may nevertheless be at a discount from the amount expected to
be payable if this excess were to prevail until the next December
payment date. Furthermore, the price at which you will be able to
sell SMART Notes before a December payment date may be at a discount,
which could be substantial, from the principal amount of your SMART
Notes, if, at that time, the S&P MidCap 400 Composite Stock Price
Index is below, equal to or not sufficiently above the closing value
of the S&P MidCap 400 Composite Stock Price Index on the last
business day of the immediately preceding calendar year before that
December payment date. The value of the SMART Notes may also be
affected by the fact that the maximum interest payment for any year
is $100 for each $1,000 principal amount of the SMART Notes.
o Volatility of the S&P MidCap 400 Composite Stock Price Index. If the
volatility of S&P MidCap 400 Composite Stock Price Index increases,
we expect the trading value of the SMART Notes to increase. If the
volatility of the S&P MidCap 400 Composite Stock Price Index
decreases, we expect the trading value of the SMART Notes to
decrease.
o U.S. Interest Rates. In general, if U.S. interest rates increase, we
expect the value of the SMART Notes to decrease. If U.S. interest
rates decrease, we expect the value of the Notes to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
level of the S&P MidCap 400 Composite Stock Price Index. Rising
interest rates may lower the level of the S&P MidCap 400 Composite
Stock Price Index and, thus, the value of the SMART Notes. Falling
interest rates may increase the level of the S&P MidCap 400 Composite
Stock Price Index and, thus, may increase the value of the SMART
Notes.
o Time Remaining to December Payment Dates. We anticipate that before
each December payment date, the SMART Notes may trade at a value
above that which may be inferred from the level of U.S. interest
rates and the S&P MidCap 400 Composite Stock Price Index. This
difference will reflect a "time premium" due to expectations
concerning the level of the S&P MidCap 400 Composite Stock Price
Index during the period before each December payment date. As the
time remaining to each December payment date decreases, however, this
time premium may decrease, thus decreasing the trading value of the
SMART Notes.
o Time Remaining to Maturity. As the number of remaining December
payment dates decreases, the cumulative value of all the annual
rights to receive an amount that reflects participation in the
payments in excess of the minimum annual interest payment of $30 per
$1,000 principal amount will decrease, thus decreasing the value of
the SMART Notes. Furthermore, as the time to maturity decreases, the
value of the right to receive the Minimum Annual Payment and the
principal amount is expected to increase, thus increasing the value
of the Note.
o Dividend Rates. A number of complex relationships between the
relative values of the SMART Notes and dividend rates are likely to
exist. If dividend rates on the stocks comprising the S&P MidCap 400
Composite Stock Price Index increase, the value of the annual right
to receive an amount that reflects participation in the appreciation
of the S&P MidCap 400 Index above the Starting Annual Value is
expected to decrease, and consequently we expect the value of the
SMART Notes to decrease. Conversely, if dividend rates on the stocks
comprising the S&P MidCap 400 Composite Stock Price Index decrease,
the value of the annual right to receive this amount is expected to
increase and, therefore, the value of the SMART Notes is expected to
increase. In general, however, rising U.S. corporate dividend rates
may increase the S&P MidCap 400 Composite Stock Price Index and, in
turn, increase the value of the SMART Notes. Conversely, falling U.S.
dividend rates may decrease the S&P MidCap 400 Composite Stock Price
Index and, in turn, decrease the value of the SMART Notes.
Amounts payable on the MITTS Securities may be limited by state law
The indenture under which the SMART Notes are issued is governed by New
York State law. 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 SMART
Notes. Under present New York law, the maximum rate of interest is 25% per
annum on a simple interest basis. This limit may not apply to debt securities
in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the holders of the SMART Notes,
to the extent permitted by law, not to voluntarily claim the benefits of any
laws concerning usurious rates of interest.
Other Considerations
We suggest that you should reach an investment decision only after
carefully considering the suitability of the SMART Notes in the light of your
particular circumstances.
You should also consider the tax consequences of investing in the SMART
Notes and should consult your tax adviser.
<PAGE>
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
SMART Notes described in this prospectus.
<PAGE>
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
1994 1995 1996 1997 1998
----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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.
<PAGE>
DESCRIPTION OF THE SMART NOTES
The SMART Notes were issued as a series of senior debt securities under
the 1983 Indenture which is more fully described in this prospectus.
The SMART Notes will mature, and the principal of the SMART Notes will be
repayable at par, on December 31, 1999.
The SMART Notes are not subject to redemption before maturity by ML&Co. or
at the option of any beneficial owner. Upon the occurrence of an Event of
Default with respect to the SMART Notes, however, beneficial owners of the
SMART Notes or the trustee may accelerate the maturity of the SMART Notes, as
described under "Description of Notes--Events of Default and Acceleration" and
"Other Terms--Events of Default" in this prospectus.
The SMART Notes were issued in denominations of $1,000 and integral
multiples of $1,000.
Interest Payments
For each full calendar year, ML&Co. will pay interest in an amount equal
to the following for each $1,000 principal amount of SMART Notes:
$1,000 X Annual Percent Appreciation X Participation Rate
provided, however, that the per annum amount payable as a result of the
foregoing on the SMART Notes will not be less than the Minimum Annual Payment
or greater than the Maximum Annual Payment. The table below specifies the
Minimum Annual Payment and the Maximum Annual Payment on a per annum basis or
2% per annum per $1,000 principal amount of SMART Notes as well as the
Participation Rate.
Minimum Annual Payment............................... $30 (3%)
Maximum Annual Payment............................... $100 (10%)
Participation Rate................................... 65%
The "Annual Percent Appreciation" applicable to the determination of the
amount payable in any year will equal:
o the Ending Annual Value minus the Starting Annual Value, divided by
o the Starting Annual Value.
The "Starting Annual Value" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the S&P MidCap 400
Composite Stock Price Index on the first NYSE Business Day in that year on
which a Market Disruption Event has not occurred as determined by State Street
Bank and Trust Company, the calculation agent; provided, however, that if a
Market Disruption Event shall have occurred on each of the first ten NYSE
Business Days in any year, then, the "Starting Annual Value" applicable to the
determination of the amount payable in that year will equal the closing value
of the S&P MidCap 400 Composite Stock Price Index on the tenth NYSE Business
Day regardless of whether a Market Disruption Event occurs on that day.
The "Ending Annual Value" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the S&P MidCap 400
Composite Stock Price Index on the seventh scheduled NYSE Business Day
preceding the end of that year, including December 31 if it is a scheduled NYSE
Business Day, as determined by the calculation agent, unless a Market
Disruption Event has occurred on that day. In the event that a Market
Disruption Event has occurred on the seventh scheduled NYSE Business Day
preceding the end of that year, the "Ending Annual Value" applicable to the
determination of the amount payable in that year will equal the closing value
of the S&P MidCap 400 Composite Stock Price Index on the sixth scheduled NYSE
Business Day preceding the end of that year regardless of whether that day is a
NYSE Business Day or a Market Disruption Event occurs on that day. The
calculation agent will determine the seventh scheduled NYSE Business Day, and,
if necessary, the sixth scheduled NYSE Business Day before each December
payment date.
If the Ending Annual Value applicable to that December payment date does
not exceed the Starting Annual Value applicable to that December payment date
by more than approximately 4.62%, beneficial owners of the SMART Notes will
receive only the Minimum Annual Payment on that December payment date, even if
the value of the S&P MidCap 400 Index at some point between the determination
of the applicable Starting Annual Value and the determination of the applicable
Ending Annual Value exceeded that Starting Annual Value by more than
approximately 4.62%. If the Ending Annual Value applicable to a December
payment date exceeds the Starting Annual Value applicable to that December
payment date by more than approximately 15.38%, the beneficial owners of the
SMART Notes would receive only the Maximum Annual Payment for the applicable
payment period.
"Calculation Day" is any day on which a Starting Annual Value or an Ending
Annual Value is required to be calculated .
A "NYSE Business Day" is a day on which The New York Stock Exchange is
open for trading. All determinations made by the calculation agent shall be at
the sole discretion of the calculation agent and, in the absence of manifest
error, shall be conclusive for all purposes and binding on ML&Co. and
beneficial owners of the SMART Notes.
All percentages resulting from any calculation on the SMART Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upward, e.g., 9.876545%, or
.09876545, would be rounded to 9.87655%, or, .0987655, and all dollar amounts
used in or resulting from that calculation will be rounded to the nearest cent
with one-half cent being rounded upwards.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading during significant
market fluctuations shall be considered "material" for purposes of
this definition, in each case, for more than two hours of trading in
80 or more of the securities included in the S&P MidCap 400 Index, or
(b) the suspension or material limitation, in each case for more than two
hours of trading in
(1) futures contracts related to the S&P MidCap 400 Composite Stock
Price Index which are traded on the Chicago Mercantile
Exchange or
(2) option contracts related to the S&P MidCap 400 Composite Stock
Price Index which are traded on the American Stock 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".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular business
hours of the relevant exchange.
Interest Payment Dates
ML&Co. will make semiannual interest payments on the SMART Notes on June
30 and December 31 of each year ("June Payment Dates" and "December Payment
Dates", respectively), except as described in this prospectus, to the persons
in whose names the SMART Notes are registered on the next preceding June 29 or
December 30. For each SMART Note, ML&Co. will pay half of the Minimum Annual
Payment for each calendar year on the June Payment Date, and will pay the
balance of the annual amount payable on each SMART Note for that year on the
December Payment Date.
Notwithstanding the foregoing, if it is known at least three Business Days
before December 31 that December 31 will not be a Business Day, the amount
payable by ML&Co. with respect to a December Payment Date for Series A SMART
Notes will be made on the Business Day immediately preceding that December 31
to the persons in whose names the SMART Notes are registered on the second
Business Day immediately preceding that December 31.
S&P MidCap 400 Index
The following table illustrates hypothetical annual payments on the SMART
Notes using assumed changes in the S&P MidCap 400 Composite Stock Price Index.
The numbers below are shown for illustrative purposes only and are not intended
to predict either the future levels of the S&P MidCap 400 Index or the payments
to be received on the SMART Notes.
Hypothetical SMART Note Payments
<TABLE>
<CAPTION>
Hypothetical
Hypothetical Index Annualized
Starting Hypothetical Ending Percent Participation SMART
Year Annual Value(1) Annual Value(2) Change Rate Note Payment Rate(3)
- ---- --------------- --------------- ------ ---- --------------------
<S> <C> <C> <C> <C> <C>
1 ............. 163 180 10.43% 65% 6.78%
2 ............. 178 206 15.73% 65% 10.00%**
3 ............. 208 174 -16.35% 65% 3.00%*
4 ............. 174 218 25.29% 65% 10.00%**
5 ............. 217 216 -0.46% 65% 3.00%*
6 ............. 219 284 29.68% 65% 10.00%**
7 ............. 283 310 9.54% 65% 6.20%
</TABLE>
(1) Assumed closing value of the S&P MidCap 400 Index on the first NYSE
Business Day of each year.
(2) Assumed closing value of the S&P MidCap 400 Index on the seventh scheduled
NYSE Business Day before the end of each year.
(3) Simple interest basis.
* Minimum Annual Payment, $30 per $1,000 principal amount (3% per annum).
** Maximum Annual Payment, $100 per $1,000 principal amount (10% per annum).
The above figures are for purposes of illustration only. The actual amount
payable in any year on the SMART Notes will depend entirely on the Starting
Annual Value and Ending Annual Value applicable to that year determined by the
calculation agent as provided in this prospectus and the Minimum Annual
Payment, Maximum Annual Payment and Participation Rate.
You should review the historical performance of the S&P MidCap 400
Composite Stock Price Index. The historical performance of the S&P MidCap 400
Composite Stock Price Index should not be taken as an indication of future
performance, and no assurance can be given that the S&P MidCap 400 Composite
Stock Price Index will increase sufficiently during any calendar year to cause
the beneficial owners of the SMART Notes to receive an amount in excess of the
Minimum Annual Payment during any that calendar year.
Discontinuance of the S&P MidCap 400 Composite Stock Price Index
If S&P discontinues publication of the S&P MidCap 400 Index and S&P or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the S&P MidCap
400 Composite Stock Price Index (that index being referred to in this
prospectus as a "Successor Index"), then, upon the calculation agent's
notification of its determination to the trustee and ML&Co., the calculation
agent will substitute the Successor Index as calculated by S&P or that other
entity for the S&P MidCap 400 Composite Stock Price Index and calculate the
Starting Annual Value and/or the Ending Annual Value as described above. Upon
any selection by the calculation agent of a Successor Index, ML&Co. shall cause
notice to be published in The Wall Street Journal or another newspaper of
general circulation within three Business Days of that selection.
If the S&P MidCap 400 Composite Stock Price Index is unavailable or S&P
discontinues publication of the S&P MidCap 400 Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the S&P MidCap 400 Composite
Stock Price Index for that Calculation Day used to calculate the Starting
Annual Value or Ending Annual Value, as the case may be, will be calculated as
described below.
If a Successor Index is selected or the calculation agent calculates a
value as a substitute for the S&P MidCap 400 Composite Stock Price Index as
described below, the Successor Index or value shall be substituted for the S&P
MidCap 400 Composite Stock Price Index for all purposes.
If at any time the method of calculating the S&P MidCap 400 Composite
Stock Price Index, or its value , is changed in a material respect, or if the
S&P MidCap 400 Composite Stock Price Index is in any other way modified so that
the Index does not, in the opinion of the calculation agent, fairly represent
the value of the S&P MidCap 400 Composite Stock Price Index had the changes or
modifications not been made, then, from and after that time, the calculation
agent shall, at the close of business in New York, New York, on each
Calculation Date, make any adjustments as, in the good faith judgment of the
calculation agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the S&P MidCap 400 Composite Stock Price
Index as if the changes or modifications had not been made, and calculate the
closing value with reference to the S&P MidCap 400 Composite Stock Price Index,
as adjusted. Accordingly, if the method of calculating the S&P MidCap 400
Composite Stock Price Index is modified so that the value of the Index is a
fraction or a multiple of what it would have been if it had not been modified,
e.g., due to a split in the Index, then the calculation agent shall adjust the
Index in order to arrive at a value of the S&P MidCap 400 Composite Stock Price
Index as if it had not been modified, e.g., as if the split had not occurred.
If the S&P MidCap 400 Composite Stock Price Index is unavailable or the
publication of the S&P MidCap 400 Composite Stock Price Index is discontinued
and S&P or another entity does not publish a Successor Index on any of the
Calculation Days, the value to be substituted for the S&P MidCap 400 Composite
Stock Price Index for any Calculation Day will be the value computed by the
calculation agent for each that Calculation Day in accordance with the
following procedures:
(c) (a) identifying the component stocks of the S&P MidCap 400 Composite
Stock Price Index or any Successor Index as of the last date on which either of
the indices was calculated by S&P or another entity and published by S&P or
that other entity (each component stock is a "Last Component Stock");
(d) (b) for each Last Component Stock, calculating as of each that NYSE
Business Day the product of the market price per share and the number
of the then outstanding shares (that product referred to as the
"Market Value" of that stock), by reference to
o the closing market price per share of that Last Component Stock
as quoted by the New York Stock Exchange or the American Stock
Exchange or any other registered national securities exchange
that is the primary market for that Last Component Stock, or if
no quotation is available, then the closing market price as
quoted by any other registered national securities exchange or
the National Association of Securities Dealers Automated
Quotation National Market System, or if no price is quoted, then
the market price from the best available source as determined by
the calculation agent and
o the most recent publicly available statement of the number of
outstanding shares of that Last Component Stock;
(e) (c) aggregating the Market Values obtained in clause (b) for all Last
Component Stocks;
(f) (d) ascertaining the Base Value, as defined below under "The Standard
& Poor's MidCap 400 Index--Computation of the S&P MidCap 400 Index",
in effect as of the last day on which either the S&P MidCap 400 Index
or any Successor Index was published by S&P or another entity,
adjusted as described below;
(g) (e) dividing the aggregate Market Value of all Last Component Stocks
by the Base Value, adjusted as described above;
(h) (f) multiplying the resulting quotient, expressed in decimals, by
100.
If any Last Component Stock is no longer publicly traded on any registered
national securities exchange or in the over-the-counter market, the last
available market price per share for that Last Component Stock as quoted by any
registered national securities exchange or in the over-the-counter market, and
the number of outstanding shares at that time, will be used in computing the
last available Market Value of that Last Component Stock. That Market Value
will be used in all computations of the S&P MidCap 400 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new company,
the common stock of the new company will be considered a Last Component Stock
and the common stocks of the constituent companies will no longer be considered
Last Component Stocks. If any company that has issued a Last Component Stock
merges with, or acquires, a company that has not issued a Last Component Stock,
the common stock of the surviving corporation will, upon the effectiveness of
that merger or acquisition, be considered a Last Component Stock. In each that
case, the Base Value will be adjusted so that the Base Value immediately after
that consolidation, merger or acquisition will equal:
o the Base Value immediately before that event, multiplied by
o the quotient of the aggregate Market Value of all Last Component
Stocks immediately after that event, divided by the aggregate Market
Value for all Last Component Stocks immediately before that event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted in accordance with the formula described below so that the Base Value
immediately after the time the particular Last Component Stock commences
trading ex-dividend, the effectiveness of the stock split or the time new
shares of that Last Component Stock commence trading equals:
o the Base Value immediately before that event, multiplied by
o the quotient of the aggregate Market Value for all Last Component
Stocks immediately after that event, divided by the aggregate Market
Value of all Last Component Stocks immediately before that event.
The Base Value used by the calculation agent to calculate the value described
above will not necessarily be adjusted in all cases in which S&P, in its
discretion, might adjust the Base Value, as described below under "The Standard
& Poor's MidCap 400 Composite Stock Price Index--Computation of the S&P MidCap
400 Composite Stock Price Index".
If S&P discontinues publication of the S&P MidCap 400 Composite Stock
Price Index before the period during which the amount payable with respect to
any year is to be determined and the calculation agent determines that no
Successor Index is available at that time, then on each NYSE Business Day until
the earlier to occur of
o the determination of the amount payable with respect to that year or
o a determination by the calculation agent that a Successor Index is
available, the calculation agent shall determine the value that would
be used in computing the amount payable with respect to that year by
reference to the method set forth in clauses (a) through (f) in the
fourth preceding paragraph above as if that day were a Calculation
Day. 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 these values to be made available by
telephone. Notwithstanding these alternative arrangements,
discontinuance of the publication of the S&P MidCap 400 Composite
Stock Price Index may adversely affect trading in the SMART Notes.
Events of Default and Acceleration
In case an Event of Default with respect to any SMART Notes has occurred
and is continuing, the amount payable to a beneficial owner of a SMART Note
upon any acceleration permitted by the SMART Notes, will equal:
o the principal amount of the SMART Note, plus
o an additional amount, if any, of interest calculated as though the
date of early repayment were a December payment date and prorated
through that date of early repayment based on the ratio of the number
of days from and including the date the Starting Annual Value
applicable to that year is determined to but excluding the date of
early repayment, computed on the basis of a year consisting of 360
days of twelve 30-day months, divided by 360.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim of
the beneficial owner of a Note may be limited, under Section 502(b)(2) of Title
11 of the United States Code, to the principal amount of the Note plus an
additional amount, if any, of contingent interest calculated as though the date
of the commencement of the proceeding were the maturity date of the Notes.
Global Securities
Description of the Global Securities
Beneficial owners of the SMART Notes may not receive physical delivery of
the securities nor may they be entitled to have the securities registered in
their names. The SMART Notes are represented by one or more fully registered
global securities. Each global security has been deposited with, or on behalf
of, The Depository Trust Company or DTC (DTC, together with any successor,
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 SMART Notes 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 that 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 SMART Notes represented by a global security for all
purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the securities represented by a global security are not entitled to
have the SMART Notes represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of the
SMART Notes in definitive form and are not 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 action, and those
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 are 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 securities. The securities have
been issued as fully registered securities registered in the name of Cede &
Co., DTC's partnership nominee. One or more fully registered global securities
have been issued for the SMART Notes in the aggregate principal amount of that
issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. 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 certain 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 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 securities under DTC's system must be made by or through
direct participants, which will receive a credit for the 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 securities are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the direct
participants to whose accounts the securities are credited, which may or may
not be the beneficial owners. The participants are 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 are governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
securities. Under its usual procedures, DTC mails an omnibus proxy to 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
securities are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the SMART
Notes 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 that 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
these payments to direct participants is the responsibility of DTC, and
disbursement of these payments to the beneficial owners is the responsibility
of direct and indirect participants.
Exchange for Certificated Securities
If
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable , and
(c) an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the securities,
the global securities will be exchangeable for securities in definitive form of
like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples of $1,000. The definitive securities will be
registered in the name or names as the depositary shall instruct the trustee.
It is expected that these 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, SMART Notes 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.
THE STANDARD & POOR'S MIDCAP 400 COMPOSITE STOCK PRICE INDEX
All disclosure contained in this prospectus regarding the S&P MidCap
400 Composite Stock Price Index, including, without limitation, its make-up,
method of calculation and changes in its components, is derived from publicly
available information prepared by S&P as of April 16, 1993. Neither ML&Co. nor
MLPF&S take any responsibility for that information.
The S&P MidCap 400 Composite Stock Price Index is published by S&P and is
intended to provide an indication of the pattern of price movements of common
stocks of corporations having mid-market capitalization. The calculation of the
value of the S&P MidCap 400 Composite Stock Price Index is based on the
relative value of the aggregate Market Value of the common stocks of 400
companies as of a particular time as compared to the aggregate average Market
Value of the common stocks of 400 substantially similar companies on December
31, 1990.
The 400 companies are not the largest companies listed on The New York
Stock Exchange.
S&P chooses companies for inclusion in the S&P MidCap 400 Composite Stock
Price Index with the aim of achieving for companies of mid-market
capitalization a distribution by broad industry groupings that approximates the
distribution of these groupings in the common stock population of the NYSE,
which S&P uses as an assumed model for the composition of the total market with
respect to these mid-market corporations. Relevant criteria employed by S&P in
selecting companies for the S&P MidCap 400 Composite Stock Price Index include
the viability of the particular company, the extent to which that company
represents the industry group to which it is assigned, the extent to which the
market price of that company's common stock is generally responsive to changes
in the affairs of the respective industry and the Market Value and trading
activity of the common stock of that company.
The value of the S&P MidCap 400 Composite Stock Price Index is available
through S&P's website located at http://www.spglobal.com.
Computation of the S&P MidCap 400 Composite Stock Price Index
As of April 16, 1993, S&P computed the S&P MidCap 400 Composite Stock
Price Index as of a particular time as follows:
(c) (a) the Market Value of each component stock is determined as of that
time;
(d) (b) the Market Values of all component stocks as of that time, as
determined under clause (1) above, are aggregated;
(e) (c) the Market Values as of December 31, 1990 (the "Base Period") of
the common stock of each company in a group of 400 substantially
similar companies is determined;
(f) (d) the Market Values of all common stocks as of the Base Period, as
determined under clause (c) above, are aggregated, the aggregate
amount being referred to as the "Base Value";
(g) (e) the aggregate Market Value of all component stocks as of that
time, as determined under clause (b) above, is divided by the Base
Value; and
(h) (f) the resulting quotient or expressed in decimals is multiplied by
100.
While S&P currently employs the above methodology to calculate the S&P
MidCap 400 Composite Stock Price Index, no assurance can be given that S&P will
not modify or change the methodology in a manner that may affect the amounts
payable on any December Payment Date to beneficial owners of the SMART Notes.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be arbitrary or
not due to true market fluctuations. These changes may result from events
including the issuance of stock dividends, the granting to shareholders of
rights to purchase additional shares of stock, the purchase of additional
shares of stock by employees pursuant to employee benefit plans, certain
consolidations and acquisitions, the granting to shareholders of rights to
purchase other securities of ML&Co., the substitution by S&P of particular
component stocks in the S&P MidCap 400 Composite Stock Price Index and other
reasons. In all these cases, S&P first recalculates the aggregate Market Value
of all component stocks, after taking account of the new market price per share
of the particular component stock or the new number of outstanding shares of
that component stock or both, as the case may be, and then determines the New
Base Value in accordance with the following formula:
New Market Value
Old Base Value X -------------------- = New Base Value
Old Market Value
The result is that the Base Value is adjusted in proportion to any change in
the aggregate Market Value of all component stocks resulting from the causes
referred to above to the extent necessary to negate the effects of these causes
upon the S&P MidCap 400 Composite Stock Price Index.
You should review the historical performance of the S&P MidCap 400
Composite Stock Price Index. The historical performance of the S&P MidCap 400
Composite Stock Price Index should not be taken as an indication of future
performance, and no assurance can be given that the S&P MidCap 400 Composite
Stock Price Index will increase sufficiently to cause the beneficial owners of
the SMART Notes to receive an amount in excess of the principal amount at the
maturity of the SMART Notes.
License Agreement
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with certain securities, including the
Notes, and ML&Co. is an authorized sub-licensee of S&P.
The license agreement between S&P and Merrill Lynch Capital Services, Inc.
provides that the following language must be stated in this prospectus:
"The Notes 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
Notes or any member of the public regarding the advisability of investing
in securities generally or in the Notes particularly or the ability of the
S&P MidCap 400 Index to track general stock market performance. S&P's only
relationship to Merrill Lynch Capital Services, Inc. and ML&Co., other
than transactions entered into in the ordinary course of business, is the
licensing of certain service marks and trade names of S&P and of the S&P
MidCap 400 Index which is determined, composed and calculated by S&P
without regard to ML&Co. or the SMART Notes. S&P has no obligation to take
the needs of ML&Co. or the Holders of the Notes into consideration in
determining, composing or calculating the S&P MidCap 400 Composite Stock
Price Index. S&P is not responsible for and has not participated in the
determination or calculation of the equation by which the Notes are to be
converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Notes."
S&P does not guarantee the accuracy and/or the completeness of the S&P
MidCap 400 Index or any data included in the S&P MidCap 400 Index. S&P makes no
warranty, express or implied, as to results to be obtained by ML&Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, holders of the SMART Notes, or any
other person or entity from the use of the S&P MidCap 400 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 hereby expressly disclaims all warranties of
merchantability or fitness for a particular purpose with respect to the S&P
MidCap 400 Index or any data included in the S&P MidCap 400 Index without
limiting any 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 such damages.
OTHER TERMS
ML&Co. issued the SMART Notes 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 SMART
Notes 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 SMART Notes are governed by and are 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.
<PAGE>
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 interes 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 SMART Notes 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.
WHERE YOU CAN FIND MORE INFORMATION
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 SMART Notes and other securities. For further information on ML&Co. and the
SMART Notes, 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.
<PAGE>
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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 SMART Notes and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the SMART Notes.
MLPF&S may act as principal or agent in these market-making transactions.
The SMART Notes may be offered on the NYSE or off the exchange in
negotiated transactions or otherwise.
The distribution of the SMART Notes 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
Equity Participation Securities with Minimum Return Protection
due June 30, 1999
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 securities.
<TABLE>
<CAPTION>
The Securities: Payment at Maturity:
<S> <C>
o 100% principal protection at maturity o On the maturity date, for each $1,000
o No payments before the maturity date principal amount of the securities you
o Not redeemable before maturity own, we will pay you an amount equal to the
o Senior unsecured debt securities of Merrill sum of $1,000 and an additional amount based on the
Lynch & Co., Inc. percentage increase, if any, in the value of the
o Linked to the value of S&P 500 Index S&P 500 Index as described in this prospectus.
o The securities are listed on the New York Stock o You will receive no less than $1200 per $1,000
Exchange under the symbol "MERP ZR99". principal amount of your securities.
</TABLE>
Investing in the Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
---------------
Merrill Lynch & Co.
---------------
The date of this prospectus is _______________, 199__ .
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS.........................................................3
MERRILL LYNCH & CO., INC.............................................5
RATIO OF EARNINGS TO FIXED CHARGES...................................6
DESCRIPTION OF SECURITIES............................................7
THE INDEX...........................................................14
OTHER TERMS.........................................................17
WHERE YOU CAN FIND MORE INFORMATION.................................20
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...................20
PLAN OF DISTRIBUTION................................................21
EXPERTS.............................................................21
<PAGE>
RISK FACTORS
You may not earn a return on your investment.
In addition to the principal amount of your securities, we will pay you an
amount at maturity based on the percentage increase, if any, in the value of
the S&P 500 Index. We will determine this additional amount, if any, by
calculating the final average value of the S&P 500 Index shortly before the
stated maturity date. You should be aware that if the final average value of
the index, calculated as described in this prospectus, does not exceed 447.43,
the closing value of the index on June 16, 1993, by more than approximately
15.63%, you will receive only the principal amount of your securities and an
additional amount equal to $200 for each $1,000 principal amount of your
securities. Therefore, the amount that 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 senior non-callable debt security of
Merrill Lynch & Co., Inc. 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.
The S&P 500 Index does not reflect the payment of dividends on the stocks
underlying it and therefore, in addition to the considerations regarding
averaging discussed below, the yield based on the S&P 500 Index to the maturity
of the securities will not produce the same yield as if you purchased those
underlying stocks and held them for a similar period.
Because the final average value of the S&P 500 Index will be based upon
average values of the S&P 500 Index during specified periods in three
successive years, a significant increase in the S&P 500 Index as measured by
the average values during the specified period in the final year, or in any
single earlier year, may be substantially or entirely offset by the average
values of the S&P 500 Index during the specified periods in the other two
years.
There may be an uncertain trading market for the securities in the future.
The securities are listed on the NYSE under the symbol "MERP ZR99". We
cannot predict whether the securities will continue to trade in the secondary
market or whether any market will be liquid. We expect that the secondary
market for the securities will be affected by our creditworthiness and by a
number of other factors. Because the final average value of the S&P 500 Index
is an average of the three values as described in this prospectus, the price at
which you will be able to sell your securities in the secondary market may be
at a discount if the first or second value is below 447.43, the initial value
of the S&P 500 Index.
We expect that the trading value of the securities will depend primarily
on the extent of the appreciation, if any, of the S&P 500 Index over its
initial value of 447.43. If, however, you sell your securities before the
maturity date at a time when the S&P 500 Index exceeds its initial value, the
price you receive may be at a discount from the amount payable if that excess
were to exist at maturity of the securities because of the possible fluctuation
in the value of the S&P 500 Index between the time of that sale and the
maturity date and the effect of the value of the S&P 500 Index on the days used
to calculate the final average value of the S&P 500 Index, if any. Furthermore,
the price at which you will be able to sell your securities before maturity may
be at a discount, which could be substantial, from the principal amount of your
securities, if, at that time, the S&P 500 Index is below, equal to, or not
sufficiently above, the initial value of the S&P 500 Index and/or if the value
of the S&P 500 Index on the days used to calculate the final average value, if
any, was below, equal to or not sufficiently above the initial value. A
discount could also result from rising interest rates.
The trading values of the securities may be affected by a number of
interrelated factors, including our creditworthiness and those factors listed
below. The relationship among these factors is complex, including how these
factors affect the relative value of the principal amount of the securities and
any additional amounts to be paid at maturity. Accordingly, you should be aware
that factors other than the level of the S&P 500 Index are likely to affect the
securities' trading value. The expected effect on the trading value of the
securities of each of the factors listed below, assuming in each case that all
other factors are held constant, is as follows:
Interest Rates. In general, if U.S. interest rates increase, we expect the
value of the securities to decrease. If U.S. interest rates decrease, we
expect the value of the securities to increase. Interest rates may also
affect the U.S. economy, and, in turn, the value of the S&P 500 Index.
Rising interest rates may lower the value of the S&P 500 Index and, thus,
the securities. Falling interest rates may increase the value of the S&P
500 Index and, thus, may increase the value of the securities.
Volatility of the S&P 500 Index. If the volatility of the S&P 500 Index
increases, we expect the trading value of the securities to increase. If
the volatility of the S&P 500 Index decreases, we expect the trading value
of the securities to decrease.
Time Remaining to Maturity. We anticipate that before their maturity, the
securities may trade at a value above that which may be inferred from the
level of interest rates and the S&P 500 Index. This difference will
reflect a "time premium" due to expectations concerning the value of the
S&P 500 Index during the period before maturity of the securities. As the
time remaining to maturity of the securities decreases, however, this time
premium is expected to decrease, thus decreasing the trading value of the
securities. In addition, the price at which you may be able to sell
securities before maturity may be at a discount, which may be substantial,
from the minimum expected value at maturity if one or more values of the
S&P 500 Index used to calculate the final average value were below, equal
to or not sufficiently above the initial value.
Dividend Rates. If dividend rates on the stocks comprising the S&P 500
Index increase, the value of the securities is expected to decrease.
Conversely, if dividend rates on the stocks comprising the S&P 500 Index
decrease, the value of the securities is expected to increase. However, in
general, rising U.S. corporate dividend rates may increase the value of
the S&P 500 Index and, in turn, increase the value of the securities.
Conversely, falling U.S. dividend rates may decrease the value of the S&P
500 Index and, in turn, decrease the value of the securities.
Other Considerations
You should reach an investment decision with regard to securities only
after carefully considering the suitability of the securities in light of your
particular circumstances.
You should also consider the tax consequences of investing in the
securities and should consult your tax advisors.
<PAGE>
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
Securities described in this prospectus.
<PAGE>
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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (a)......... 1.2 1.2 1.2 1.2 1.1
- --------
(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. "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.
<PAGE>
DESCRIPTION OF SECURITIES
The securities were issued as a series of senior debt securities under the
1983 Indenture, which is more fully described under the section entitled "Other
Terms" in this prospectus.
The securities will mature on June 30, 1999.
No periodic payments of interest will be payable with respect to the
securities. See "Payment at Maturity", below.
The securities are not subject to redemption by ML&Co. or at the option of
any beneficial owner before maturity. Upon the occurrence of an Event of
Default with respect to the securities, beneficial owners of the securities may
accelerate the maturity of the securities, as described under "Description of
securities--Events of Default and Acceleration" and "Other Terms--Events of
Default" in this prospectus.
The securities are transferable in denominations of $1,000 and integral
multiples of $1,000.
Payment at Maturity
At maturity, a beneficial owner of a security will be entitled to receive
the principal amount of that security plus a Supplemental Redemption Amount,
all as provided below. If the final average value, as defined below, of the S&P
500 Index does not exceed the initial value by more than approximately 15.63%,
a beneficial owner of a security will be entitled to receive only the principal
amount of that Security and the Minimum Supplemental Redemption Amount.
At maturity, a beneficial owner of a security will be entitled to receive,
with respect to each security,
o the principal amount of the security, and
o the "Supplemental Redemption Amount" equal in amount to:
(final average value-initial value)
principal amount X --------------------------------- x 128%
initial value
provided, that the Supplemental Redemption Amount will not be less than the
Minimum Supplemental Redemption Amount of $200 per $1,000 principal amount of
securities.
The initial value equals 447.43, the closing value of the S&P 500 Index on
June 16, 1993.
The final average value of the S&P 500 Index will be determined by State
Street Bank and Trust Company or the calculation agent and will equal the
arithmetic average or arithmetic mean of the Yearly Values, as defined below,
for 1997, 1998 and 1999. The Yearly Value for any year will be calculated
during the Calculation Period for that year which will be from and including
June 18 in 1997, June 18 in 1998 and June 17 in 1999 to and including the fifth
scheduled Business Day after each date. The Yearly Value for each year will
equal the arithmetic average or arithmetic mean of the closing values of the
S&P 500 Index on the first day in the applicable Calculation Period, provided
that a Market Disruption Event, as defined below, shall not have occurred on
that day and on each succeeding Business Day, provided that a Market Disruption
Event shall not have occurred on the applicable day up to and including the
last Business Day in the applicable Calculation Period (each, a "Calculation
Date") until the calculation agent has determined the closing values for five
Business Days. If a Market Disruption Event occurs on two or more of the
Business Days during a Calculation Period, the Yearly Value for the relevant
year will equal the average of the values on Business Days on which a Market
Disruption Event did not occur during the Calculation Period or, if there is
only one Business Day, the value on that day. If Market Disruption Events occur
on all of the Business Days during a Calculation Period, the Yearly Value for
the relevant year shall equal the closing value of the S&P 500 Index on the
last Business Day of the Calculation Period regardless of whether a Market
Disruption Event shall have occurred on that day.
A "Business Day" is a day on which the NYSE is open for trading.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the securities.
If S&P discontinues publication of the S&P 500 Index and S&P or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the S&P 500 Index (a
"Successor Index"), then, upon the calculation agent's notification of such
determination to the Trustee and ML&Co., the calculation agent will substitute
the Successor Index as calculated by S&P or any other entity for the S&P 500
Index and calculate the final average value as described in the preceding
paragraph. Upon any selection by the calculation agent of a Successor Index,
ML&Co. shall cause notice to be published in The Wall Street Journal or another
newspaper of general circulation within three Business Days of any selection.
If S&P discontinues publication of the S&P 500 Index and a Successor Index
is not selected by the calculation agent or is no longer published on any of
the Calculation Dates, the value to be substituted for the S&P 500 Index for
any Calculation Date used to calculate the Supplemental Redemption Amount at
maturity will be calculated as described below under "Discontinuance of the S&P
500 Index".
If a Successor Index is selected or the calculation agent calculates a
value as a substitute for the S&P 500 Index as described below, the Successor
Index or value shall be substituted for the S&P 500 Index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
If at any time the method of calculating the S&P 500 Index, or its value ,
is changed in a material respect, or if the S&P 500 Index is in any other way
modified so that it does not, in the opinion of the calculation agent, fairly
represent the value of the S&P 500 Index had the changes or modifications not
been made, then, from and after such time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the final average value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the S&P 500 Index as if the changes or modifications had not been
made, and calculate the closing value with reference to the S&P 500 Index, as
adjusted. Accordingly, if the method of calculating the S&P 500 Index is
modified so that the value of the S&P 500 Index is a fraction or a multiple of
what it would have been if it had not been modified, e.g., due to a split in
the S&P 500 Index, then the calculation agent shall adjust such Index in order
to arrive at a value of the S&P 500 Index as if it had not been modified, e.g.,
as if such split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more than two
hours of trading in 100 or more of the securities included in the S&P 500
Index, or
(b) the suspension or material limitation, in each case, for more than two
hours of trading whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise in
o futures contracts related to the S&P 500 Index which are traded
on the Chicago Mercantile Exchange or
o option contracts related to the S&P 500 Index which are traded
on the Chicago Board Options Exchange, Inc.
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". For the purposes of this
definition, a limitation on the hours in a trading day and/or number of days of
trading will not constitute a Market Disruption Event if it results from an
announced change in the regular business hours of the relevant exchange.
The following table illustrates, for a range of hypothetical final average
values, the total amount payable at maturity for each $1,000 principal amount
of securities.
<TABLE>
<CAPTION>
Total
Hypothetical Final Percentage Change Amount
Average Value of Over Initial Payable at
the S&P 500 Index Value Maturity
- -------------------------------- ---------------------- -------------------
<S> <C> <C>
223.72 -50% $1,200
268.46 -40% $1,200
313.20 -30% $1,200
357.94 -20% $1,200
402.69 -10% $1,200
447.43(1) 0% $1,200
492.17 10% $1,200
536.92 20% $1,256
581.66 30% $1,384
626.40 40% $1,512
671.15 50% $1,640
715.89 60% $1,768
760.63 70% $1,896
805.37 80% $2,024
850.12 90% $2,152
894.86 100% $2,280
939.60 110% $2,408
984.35 120% $2,536
</TABLE>
(1) initial value.
The above figures are for purposes of illustration only. The actual Total
Redemption Amount received by investors will depend entirely on the actual
final average value determined by the calculation agent as provided herein.
Because the final average value will be based upon average values of the S&P
500 Index during specified periods in three successive years, a significant
increase or decrease in the S&P 500 Index as measured by the average values
during the specified period in any year may be substantially or entirely offset
by the average values of the S&P 500 Index during the specified periods in the
other two years.
The 1983 Indenture provides that the securities are governed by and
construed in accordance with the laws of the state of New York. 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 securities in which $2,500,000 or
more has been invested. While ML&Co. believes that New York law would be given
effect by a state or federal court sitting outside of New York, state laws
frequently regulate the amount of interest that may be charged to and paid by a
borrower, including, in some cases, corporate borrowers. It is suggested that
prospective investors consult their personal advisors with respect to the
applicability of these laws. ML&Co. will agree for the benefit of the
beneficial owners of the securities, to the extent permitted by law, not to
claim voluntarily the benefits of any laws concerning usurious rates of
interest against a beneficial owner of the securities.
Discontinuance of the S&P 500 Index and Successor Index
If S&P discontinues publication of the S&P 500 Index and a Successor Index
is available, then the amount payable at maturity or upon earlier acceleration
will be determined by reference to the Successor Index, as provided above.
If the publication of the S&P 500 Index is discontinued and S&P or another
entity does not publish a Successor Index on any of the Calculation Dates, the
value to be substituted for the S&P 500 Index for any Calculation Date used to
calculate the Supplemental Redemption Amount at maturity will be the value
computed by the calculation agent for each Calculation Date in accordance with
the following procedures:
(a) identifying the component stocks of the S&P 500 Index or any Successor
Index as of the last date on which either of the indices was calculated by S&P
or another entity and published by S&P or any other entity (each component
stock is a "Last Component Stock");
(b) for each Last Component Stock, calculating as of each Calculation Date
the product of the market price per share and the number of the then
outstanding shares (referred to as the "Market Value" of the stock), by
reference to
o the closing market price per share of the Last Component Stock as
quoted by the NYSE or the American Stock Exchange or any other
registered national securities exchange that is the primary market
for the Last Component Stock, or if no such quotation is available,
then the closing market price as quoted by any other registered
national securities exchange or the National Association of
securities Dealers Automated Quotation National Market System, or if
no such price is quoted, then the market price from the best
available source as determined by the calculation agent
(collectively, the "Exchanges") and
o the most recent publicly available statement of the number of
outstanding shares of the Last Component Stock;
(c) aggregating the Market Values obtained in clause (b) for all Last
Component Stocks;
(d) ascertaining the Base Value (as defined below under "The Standard &
Poor's 500 Index--Computation of the Index") in effect as of the last day on
which either the S&P 500 Index or any Successor Index was published by S&P or
another entity, adjusted as described below;
(e) dividing the aggregate Market Value of all Last Component Stocks by
the Base Value (adjusted as aforesaid);
(f) multiplying the resulting quotient (expressed in decimals) by ten.
If any Last Component Stock is no longer publicly traded on any registered
national securities exchange or in the over-the-counter market, the last
available market price per share for such Last Component Stock as quoted by any
registered national securities exchange or in the over-the-counter market, and
the number of outstanding shares thereof at such time, will be used in
computing the last available Market Value of such Last Component Stock. This
Market Value will be used in all computations of the S&P 500 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new company,
the common stock of such new company will be considered a Last Component Stock
and the common stocks of the constituent companies will no longer be considered
Last Component Stocks. If any company that has issued a Last Component Stock
merges with, or acquires, a company that has not issued a Last Component Stock,
the common stock of the surviving corporation will, upon the effectiveness of
such merger or acquisition, be considered a Last Component Stock. In each case,
the Base Value will be adjusted so that the Base Value immediately after such
consolidation, merger or acquisition will equal:
(a) the Base Value immediately prior to the event, multiplied by
(b) the quotient of the aggregate Market Value of all Last Component
Stocks immediately after the event, divided by the aggregate Market Value for
all Last Component Stocks immediately prior to that event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted in accordance with the formula described below so that the Base Value
immediately after the time the particular Last Component Stock commences
trading ex-dividend, the effectiveness of the stock split or the time new
shares of the Last Component Stock commence trading equals
(a) the Base Value immediately prior to such event, multiplied by
(b) the quotient of the aggregate Market Value for all Last Component
Stocks immediately after that event, divided by the aggregate Market Value of
all Last Component Stocks immediately prior to that event. The Base Value used
by the calculation agent to calculate the value described above will not
necessarily be adjusted in all cases in which S&P, in its discretion, might
adjust the Base Value as described below under "The Standard & Poor's 500
Index--Computation of the S&P 500 Index".
If S&P discontinues publication of the S&P 500 Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at such time,
then on each Business Day until the earlier to occur of
o the determination of the final average value and
o a determination by the calculation agent that a Successor Index is
available, the calculation agent shall determine the value that would
be used in computing the Supplemental Redemption Amount by reference
to the method set forth in clauses (a) through (f) in the fourth
preceding paragraph above as if that day were a Calculation Date. The
calculation agent will cause notice of each such value to be
published not less often than once each month in The Wall Street
Journal (or another newspaper of general circulation), and arrange
for information with respect to such values to be made available by
telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the S&P 500 Index may adversely affect trading in the
securities.
Events of Default and Acceleration
In case an Event of Default with respect to any securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
security upon any acceleration permitted by the securities, with respect to
each $1,000 principal amount thereof, will be equal to:
(a) the initial issue price ($1,000), plus
(b) an additional amount of contingent interest calculated as though the
date of early repayment were the maturity date of the securities. The
Calculation Period used to calculate the final Yearly Value of the Notes so
accelerated will begin on the eighth scheduled Business Day next preceding the
scheduled date for any early redemption. If the final Yearly Value is the only
Yearly Value which shall have been calculated with respect to the Notes, the
final Yearly Value will be the final average value. If one or two other Yearly
Values shall have been calculated with respect to the Notes for prior years
when the Notes shall have been outstanding, the average of the final Yearly
Value and one other Yearly Value or two other Yearly Values, as the case may
be, will be the final average value. The Minimum Supplemental Redemption Amount
with respect to any early redemption date will be an amount equal to the
interest which would have accrued on the securities from and including the date
of original issuance to but excluding the date of early redemption at an
annualized rate of 3.06%, calculated on a semiannual bond equivalent basis. See
"Description of Securities--Payment at Maturity" in this prospectus.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim of
the beneficial owner of a security may be limited, under Section 502(b)(2) of
Title 11 of the United States Code, to the principal amount of the security
plus an additional amount of contingent interest calculated as though the date
of the commencement of the proceeding were the maturity date of the securities.
In case of default in payment at the maturity date of the securities
whether at their stated maturity or upon acceleration, from and after the
maturity date the securities shall bear interest, payable upon demand of the
beneficial owners thereof, at the rate of 7% per annum to the extent that
payment of such interest shall be legally enforceable on the unpaid amount due
and payable on such date in accordance with the terms of the securities to the
date payment of such amount has been made or duly provided for.
Global Securities
Description of the Global Securities.
Beneficial owners of the securities may not receive physical delivery of
the securities nor may they be entitled to have the securities registered in
their names. The securities are represented by one or more fully registered
global securities. Each global security has been 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 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 securities represented by a global security for all
purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the securities represented by a global security are not entitled to
have the securities represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of the
securities in definitive form and are not 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 such person is not a participant of DTC on the
procedures of the participant through which such 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 such a global
security desires to give or take any action which a Holder is entitled to give
or take under the 1983 Indenture, DTC would authorize the participants holding
the relevant beneficial interests to give or take action, and such participants
would authorize beneficial owners owning through such 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 are 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 securities. The securities have
been issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One or more fully registered global securities
have been issued for the securities in the aggregate principal amount of such
issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. 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 certain 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 securities under DTC's system must be made by or through
direct participants, which will receive a credit for the 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 such
beneficial owner entered into the transaction. Transfers of ownership interests
in the securities are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the direct
participants to whose accounts such securities are credited, which may or may
not be the beneficial owners. The participants are 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 are governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
securities. Under its usual procedures, DTC mails an omnibus proxy to 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
securities are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
securities will be made in immediately available funds to DTC. DTC's practice
is to credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the 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 such 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
such payments to direct participants is the responsibility of DTC, and
disbursement of such payments to the beneficial owners is the responsibility of
direct and indirect participants.
Exchange for Certificated Securities
If
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable , and
(c) an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the securities,
the global securities will be exchangeable for securities in definitive form
of like tenor and of an equal aggregate principal amount, in denominations
of $10 and integral multiples of $10. The definitive securities will be
registered in such name or names as the depositary shall instruct the trustee.
It is expected that such 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 Security 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.
THE INDEX
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components, are
derived from publicly available information prepared by S&P as of March 22,
1999. ML&Co. and MLPF&S do not assume any responsibility for the accuracy or
completeness of this information.
The S&P 500 Index is published by S&P, and is intended to provide an
indication of the pattern of common stock price movement. The calculation of
the value of the Index, discussed below in further detail, is based on the
relative value of the aggregate Market Value of the common stocks of 500
companies as of a particular time compared to the aggregate average Market
Value of the common stocks of 500 similar companies during the base period of
the years 1941 through 1943. As of March 22, 1999 the 500 companies included in
the Index represented approximately 78% of the aggregate Market Value of common
stocks traded on the NYSE; however, these 500 companies are not the 500 largest
companies listed on the NYSE and not all of these 500 companies are listed on
the exchange. As of March 22, 1999, the aggregate Market Value of the 500
companies included in the Index represented approximately 79% of the aggregate
Market Value of United States domestic, public companies. S&P chooses companies
for inclusion in the Index with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
common stock population of the NYSE, which S&P uses as an assumed model for the
composition of the total market. Relevant criteria employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to
which it is assigned,
o the extent to which the market price of that company's common stock
is generally responsive to changes in the affairs of the respective
industry, and
o the Market Value and trading activity of the common stock of that
company.
Four main groups of companies comprise the Index, with the number of
companies currently included in each group indicated in parentheses:
[Industrials (380), Utilities (39), Transportation (10) and Financial (71)].
S&P may from time to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated above.
Computation of the Index
S&P currently computes the Index as of a particular time as follows:
(a) the product of the market price per share and the number of then
outstanding shares of each component stock is determined at a certain time
(the "Market Value" of the stock);
(b) the Market Value of all component stock as of that time are
aggregated;
(c) the mean average of the Market Values as of each week in the base
period of the years 1941 through 1943 of the common stock of each company
in a group of 500 substantially similar companies is determined;
(d) the mean average Market Values of all these common stocks over
the base period are aggregated (the aggregate amount being referred to as
the "Base Value");
(e) the current aggregate Market Value of all component stocks is
divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is multiplied by
ten.
While S&P currently employs the above methodology to calculate the Index,
no assurance can be given that S&P will not modify or change this methodology
in a manner that may affect the Supplemental Redemption Amount, if any, payable
to beneficial owners of the securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effects of changes in the
Market Value of a component stock that are determined by S&P to be arbitrary or
not due to true market fluctuations. Changes may result from such causes as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o certain consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities
of ML&Co.,
o the substitution by S&P of particular component stocks in the Index,
and
o other reasons.
In these cases, S&P first recalculates the aggregate Market Value of all
component stocks, after taking account of the new market price per share of the
particular component stock or the new number of outstanding shares thereof or
both, and then determines the New Base Value in accordance with the following
formula:
New Market Value
Old Base Value X ---------------- = New Base Value
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the causes
referred to above to the extent necessary to negate the effects of these causes
upon the Index.
Historical Data on the Index
The following table sets forth the value of the Index at the end of each
month, in the period from January 1990 through February 1999. These historical
data on the Index are not necessarily indicative of the future performance of
the Index or what the value of the MITTS Securities may be. Any historical
upward or downward trend in the value of the Index during any period set forth
below is not any indication that the Index is more or less likely to increase
or decrease at any time during the term of the MITTS Securities.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
April......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
May........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
June.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
July.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
August........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
September..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
October....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
November...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
December...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
</TABLE>
License Agreement
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with certain securities, including the
securities, and ML&Co. is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services, Inc.
provides that the following language must be stated in this prospectus:
"The securities 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 securities or any member of the public regarding the advisability of
investing in securities generally or in the securities particularly or the
ability of the S&P 500 Index to track general stock market performance.
S&P's only relationship to Merrill Lynch Capital Services, Inc. and
ML&Co,. other than transactions entered into in the ordinary course of
business, is the licensing of certain servicemarks 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 ML&Co. or the securities. S&P has no obligation to
take the needs of ML&Co. or the Holders of the securities into
consideration in determining, composing or calculating the S&P 500 Index.
S&P is not responsible for and has not participated in the determination
of the timing of the sale of the securities, prices at which the
securities are to initially be sold, or quantities of the securities to be
issued or in the determination or calculation of the equation by which the
securities are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of
the securities.
Standard & Poor's Corporation ("S&P") does not guarantee the accuracy
and/or the completeness of the S&P 500 Index or any data included in the S&P
500 Index. S&P makes no warranty, express or implied, as to results to be
obtained by ML&Co., MLPF&S, holders of the securities, or any other person or
entity from the use of the S&P 500 Index or any data included in the S&P 500
Index in connection with the rights licensed under the license agreement
described in this prospectus or for any other use. S&P makes no express or
implied warranties, and hereby expressly disclaims all warranties of
merchantability or fitness for a particular purpose with respect to the S&P 500
Index or any data included in the S&P 500 Index without limiting any 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 such damages."
OTHER TERMS
The securities were issued 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 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.
Series of senior debt securities may from time to time be issued 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 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 is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of ML&Co. itself as a creditor of the subsidiary may
be recognized. 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 such 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 of 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 debt securities affected. However, without the consent of each holder
of any outstanding debt security affected, no amendment or modification to any
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 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 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 debt securities of any series of senior debt securities may
waive an 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 any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of 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 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.
WHERE YOU CAN FIND MORE INFORMATION
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 securities offered by this prospectus and other securities. For further
information on ML&Co. and the 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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 securities and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the securities.
MLPF&S may act as principal or agent in these market-making transactions.
The securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospective is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
Japan Index(SM)
Equity Participation Securities with Minimum Return Protection due January 31,
2000
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 securities.
<TABLE>
<CAPTION>
<S> <C>
The Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each security
o No payments before the maturity date you own, we will pay you an amount
o Senior unsecured debt securities of Merrill Lynch & equal to the sum of the principal amount
Co., Inc. of each security and an additional
o Linked to the value of the Japan Index amount based on the percentage
o The securities are listed on the American Stock increase, if any, in the value of the Japan
Exchange under the symbol "MJP.A". Index as described in this prospectus.
o You will receive no less than $1,150 per
$1,000 principal amount of your
securities.
</TABLE>
Investing in the Securities involves risks.
See "Risk Factors" beginning on page 3.
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.
---------------
Merrill Lynch & Co.
---------------
The date of this prospectus is , 1999.
(SM) "Japan Index" is a service mark of The American Stock Exchange.
<PAGE>
TABLE OF CONTENTS
Page
----
RISK FACTORS................................................................3
MERRILL LYNCH & CO., INC....................................................6
RATIO OF EARNINGS TO FIXED CHARGES..........................................7
DESCRIPTION OF SECURITIES...................................................8
THE INDEX..................................................................17
OTHER TERMS................................................................20
WHERE YOU CAN FIND MORE INFORMATION........................................24
INCORPORATION OF INFORMATION WE FILE WITH THE SEC..........................24
PLAN OF DISTRIBUTION.......................................................25
EXPERTS....................................................................25
<PAGE>
RISK FACTORS
Your investment in the securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the securities is suitable for you.
You may not earn a return on your investment
In addition to the principal amount of your securities, we will pay you
an amount at maturity based on the percentage increase, if any, in the value
of the Japan Index. We will determine this additional amount, if any, by
calculating the final average value of the Japan Index shortly before the
stated maturity date. You should be aware that if the final average value of
the Japan Index, calculated as described in this prospectus, does not exceed
195.46, the closing value of the Japan Index on January 20, 1994, by more than
approximately 13.04%, you will receive only the principal amount of your
securities and an additional amount equal to $150 for each $1,000 principal
amount of your securities. Therefore, the amount that 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 senior non-callable
debt security of Merrill Lynch & Co., Inc. 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.
The Japan Index does not reflect the payment of dividends on the stocks
underlying it and therefore, in addition to the considerations regarding
averaging discussed below, the yield based on the Japan Index to the maturity
of the securities will not produce the same yield as if you purchased those
underlying stocks and held them for a similar period.
Because the final average value of the Japan Index will be based upon
average values of the Japan Index during specified periods in three successive
years, a significant increase in the Japan Index as measured by the average
values during the specified period in the final year, or in any single earlier
year, may be substantially or entirely offset by the average values of the
Japan Index during the specified periods in the other two years.
The index used to calculate any additional amounts payable to you on the
maturity date will initially be the Japan Index, which is currently calculated
and published by the AMEX. Upon the occurrence of certain events described
under "Description of Securities--Substitution of the Index", a New Japan
Index which will also relate to the trading of equity securities in Japan,
will be substituted for the Japan Index . The required characteristics of the
New Japan Index are described in this prospectus; however, the New Japan Index
does not currently exist, and the New Japan Index may be calculated and
published by a United States stock exchange other than the AMEX. In the event
that a New Japan Index is substituted for the Japan Index, no assurance can be
given as to whether any additional amounts payable to you on the maturity date
calculated on the basis of any New Japan Index will be more than or less than
or equal to the additional amount which would have been payable had any
substitution not occurred.
Your return may be affected by factors affecting the value of Japanese stocks
Because the underlying stocks included in the Japan Index have been
issued by Japanese companies, the return on your securities will be affected
by risks relating to an investment in Japanese equity securities. The Japanese
securities markets may be more volatile than U.S. or other securities markets
and may be affected by market developments in different ways than U.S. or
other securities markets. Direct or indirect government intervention to
stabilize the Japanese securities markets and cross-shareholdings in Japanese
companies on those markets may affect prices and volume of trading on those
markets. Also, there is generally less publicly available information about
Japanese companies than about those U.S. companies that are subject to the
reporting requirements of the U.S. Securities and Exchange Commission, and
Japanese companies are subject to accounting, auditing and financial reporting
standards and requirements that differ from those applicable to U.S. reporting
companies.
Securities prices in Japan are subject to political, economic, financial
and social factors that apply in Japan. In addition, recent or future changes
in the Japanese government's economic and fiscal policies, the possible
imposition of, or changes in, currency exchange laws or other Japanese laws or
restrictions applicable to Japanese companies or investments in Japanese
equity securities and fluctuations in the rate of exchange between currencies
may negatively affect the Japanese securities markets. Moreover, the Japanese
economy may differ favorably or unfavorably from the U.S. economy in economic
factors such as growth in gross national product, rates of inflation, capital
reinvestment, resources and self-sufficiency.
There are many factors affecting the trading value of the securities
The securities are listed on the AMEX. We expect that the secondary
market for the securities will be affected by our creditworthiness and by a
number of other factors. Because the final average value is an average of the
three values as described below, the price at which you will be able to sell
your securities in the secondary market may be at a discount if the first or
second value of the Japan Index is below the initial value.
We expect that the trading value of the securities will depend primarily
on the extent of the appreciation, if any, of the Japan Index over its initial
value of 195.46. If, however, you sell your securities before the maturity
date at a time when the Japan Index exceeds its initial value, the price you
receive may be at a discount from the amount payable if that excess were to
exist at maturity of the securities because of the possible fluctuation in the
value of the Japan Index between the time of that sale and the maturity date
and the effect of the value of the Japan Index on the days used to calculate
the final average value of the Japan Index, if any. Furthermore, the price at
which you will be able to sell your securities before maturity may be at a
discount, which could be substantial, from the principal amount of your
securities, if, at that time, the Japan Index is below, equal to, or not
sufficiently above , the initial value of the Japan Index and/or if the value
of the Japan Index on the days used to calculate the final average value, if
any, was below, equal to or not sufficiently above the initial value. A
discount could also result from rising interest rates in the U.S.
The trading values of the securities may be affected by a number of
interrelated factors, including our creditworthiness and those factors listed
below. The relationship among these factors is complex, including how these
factors affect the relative value of the principal amount of the securities
and any additional amounts to be paid at maturity. Accordingly, you should be
aware that factors other than the level of the Japan Index are likely to
affect the securities' trading value. The expected effect on the trading value
of the securities of each of the factors listed below, assuming in each case
that all other factors are held constant, is as follows:
o Interest Rates. In general, if U.S. interest rates increase, we
expect the value of the securities to decrease. If U.S. interest
rates decrease, we expect the value of the securities to increase.
In general, if Japanese interest rates increase, we expect the value
of the securities to increase. If Japanese interest rates decrease,
we expect the value of the securities to decrease. Interest rates
may also affect the Japanese economy, and, in turn, the value of the
Japan Index. Rising interest rates may lower the value of the index
and, thus, the securities. Falling interest rates may increase the
value of the Japan Index and, thus, may increase the value of the
securities.
o Volatility of the Japan Index. If the volatility of the Japan Index
increases, we expect the trading value of the securities to
increase. If the volatility of the Japan Index decreases, we expect
the trading value of the securities to decrease.
o Time Remaining to Maturity. We anticipate that before their
maturity, the securities may trade at a value above that which may
be inferred from the level of interest rates and the index. This
difference will reflect a "time premium" due to expectations
concerning the value of the Japan Index during the period before the
maturity of the securities. As the time remaining to maturity of the
securities decreases, however, this time premium is expected to
decrease, thus decreasing the trading value of the securities. In
addition, the price at which you may be able to sell your securities
before maturity may be at a discount, which may be substantial, from
the minimum expected value at maturity if one or more values of the
Japan Index used to calculate any additional amounts payable at
maturity were below, equal to or not sufficiently above the initial
value.
o Dividend Rates in Japan. If dividend rates on the stocks comprising
the Japan Index increase, we expect the value of the securities to
decrease. Conversely, if dividend rates on the stocks comprising the
Japan Index decrease, we expect the value of the securities to
increase. However, in general, rising Japanese corporate dividend
rates may increase the value of the Japan Index and, in turn,
increase the value of the securities. Conversely, falling Japanese
dividend rates may decrease the value of the Japan Index and, in
turn, decrease the value of the securities.
Although the stocks comprising the Japan Index are traded in Japanese yen
and the securities are denominated in U.S. dollars, any additional amounts
payable at the maturity date will not be adjusted for the currency exchange
rate in effect at the maturity of the securities. This additional amount is
based upon the percentage increase in the Japan Index. The Japan Index is
calculated using a constant U.S.$/Japanese Yen exchange rate. The value of the
securities should not, therefore, be directly affected by the currency
exchange rate. For example, if the Japan Index were to increase by 25% from
its initial value to the final average value, you would receive $287.50 per
$1,000 principal amount of your securities at maturity regardless of the
U.S.$/Japanese Yen exchange rate prevailing at maturity. Changes in the
exchange rate, however, may reflect changes in the Japanese economy which, of
course, would affect the value of the index and the securities.
Amounts payable on the MITTS Securities may be limited by state law
New York State laws govern the 1983 Indenture under which the securities
were issued. New York has certain usury laws that limit the amount of interest
that can be charged and paid on loans, which includes debt securities like the
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 securities holders, to the
extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
Other Considerations
You should reach an investment decision with regard to the securities
only after carefully considering the suitability of the securities in light of
your particular circumstances.
You should also consider the tax consequences of investing in the
securities and should consult your tax advisors.
<PAGE>
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
Securities described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed
charges(a) ........................ 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF SECURITIES
The securities were issued as a series of senior debt securities under
the 1983 Indenture, dated as of April 1, 1983, as amended and restated, which
is more fully described in this prospectus.
The securities will mature on January 31, 2000.
While at maturity a beneficial owner of a security will receive the
principal amount of that security plus the Supplemental Redemption Amount,
there will be no payment of interest, periodic or otherwise. See "Payment at
Maturity", below.
The securities are not subject to redemption by ML&Co. or at the option
of any beneficial owner before maturity. Upon the occurrence of an Event of
Default with respect to the securities, beneficial owners of the securities
may accelerate the maturity of the securities, as described under "Description
of Securities--Events of Default and Acceleration" and "Other Terms--Events of
Default" in this prospectus.
The securities were issued in denominations of $1,000 and integral
multiples of $1,000.
Payment at Maturity
At maturity, a beneficial owner of a security will be entitled to receive
the principal amount of each security plus a Supplemental Redemption Amount,
if any, all as provided below. If the Final Average Value of the index does
not exceed the Initial Value by more than approximately 13.04% a beneficial
owner of a Security will be entitled to receive only the principal amount of
each security and the Minimum Supplemental Redemption Amount. Although the
index will initially be the Japan Index, under certain circumstances described
herein a New Japan Index may be substituted for the Japan Index.
At maturity, a beneficial owner of a security will be entitled to
receive, with respect to each security:
o the principal amount , and
o the "Supplemental Redemption Amount" equal in amount to:
principal amount x Final Average Value-Initial Value x 115%
---------------------------------
Initial Value
provided, that the Supplemental Redemption Amount will not be less than the
Minimum Supplemental Redemption Amount of $150 per $1,000 principal amount of
securities.
The "Initial Value" equals 195.46, the closing value of the Japan Index
on January 20, 1994; provided, however, that a new Initial Value will be
calculated as described in this prospectus if a New Japan Index is substituted
for the Japan Index.
The "Final Average Value" of the Japan Index will be determined by State
Street Bank and Trust Company, the calculation agent and will equal the
arithmetic average or the arithmetic mean of the Yearly Values, as defined
below, for 1998, 1999 and 2000. The Yearly Value for any year will be
calculated during the Calculation Period for that year which will be from and
including January 22 in 1998, January 21 in 1999 and January 20 in 2000 to and
including the fifth scheduled Business Day after each date. The Yearly Value
for each year will equal the arithmetic average or arithmetic mean of the
closing values of the index on the first Business Day in the applicable
Calculation Period, provided that a Market Disruption Event shall not have
occurred on that day and on each succeeding Business Day, provided that a
Market Disruption Event shall not have occurred on the applicable day up to
and including the last Business Day in the applicable Calculation Period
(each, a "Calculation Date") until the calculation agent has so determined the
closing values for five Business Days. If a Market Disruption Event occurs on
two or more of the Business Days during a Calculation Period, the Yearly Value
for the relevant year will equal the average of the values on Business Days on
which a Market Disruption Event did not occur during the Calculation Period
or, if there is only one Business Day, the value on such day. If a Market
Disruption Event occurs on all Business Days during a Calculation Period, the
Yearly Value for the relevant year shall equal the closing value of the Index
on the last Business Day of the Calculation Period regardless of whether a
Market Disruption Event shall have occurred on that day. A Yearly Value may be
restated if the Substitution Event occurs after the determination of the
Yearly Value, see "Substitution of the Index".
A "Business Day", for purposes of determining the Final Average Value, is
a day on which the Relevant Stock Exchange is open for trading.
"Relevant Stock Exchange" means the American Stock Exchange or, if a New
Japan Index has been substituted for the Japan Index, the U.S. stock exchange
that publishes such New Japan Index. All determinations made by the
calculation agent shall be at the sole discretion of the calculation agent
and, absent a determination by the calculation agent of a manifest error,
shall be conclusive for all purposes and binding on ML&Co. and beneficial
owners of the securities.
The following table illustrates, for a range of hypothetical Final
Average Values, the total amount payable at maturity for each $1,000 principal
amount of securities.
Total
Hypothetical Final Percentage Amount
Average Value of Change Over Payable at
the Japan Index Initial Value Maturity
------------------ ------------- ----------
97.73 -50% $1,150
117.28 -40% $1,150
136.82 -30% $1,150
156.37 -20% $1,150
175.91 -10% $1,150
195.46(1) 0% $1,150
215.01 10% $1,150
234.55 20% $1,230
254.10 30% $1,345
273.64 40% $1,460
293.19 50% $1,575
312.74 60% $1,690
332.28 70% $1,805
351.83 80% $1,920
371.37 90% $2,035
390.92 100% $2,150
410.47 110% $2,265
430.01 120% $2,380
(1) The Initial Value.
The above figures are for purposes of illustration only. The actual total
redemption amount received by investors will depend entirely on the actual
Final Average Value determined by the calculation agent as provided herein.
Because the Final Average Value will be based upon average values of the index
which may be a New Japan Index substituted for the Japan Index, during
specified periods in three successive years, a significant increase or
decrease in the index as measured by the average values during the specified
period in any year may be substantially or entirely offset by the average
values of the Index during the specified periods in the other two years.
You should review the historical performance of the Japan Index. The
historical performance of the Japan Index should not be taken as an indication
of future performance, and no assurance can be given that the Japan Index will
increase sufficiently to cause the beneficial owners of the securities to
receive an amount in excess of the principal amount and the Minimum
Supplemental Redemption Amount at the maturity of the securities.
Adjustments to the Index; Market Disruption Event
If at any time the method of calculating the index, or its value , is
changed in a material respect, or if the index is in any other way modified so
that the index does not, in the opinion of the calculation agent, fairly
represent the value of the index had these changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Final Average Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the index as if no changes or modifications had been made, and
calculate the closing value with reference to the index, as adjusted.
Accordingly, if the method of calculating the index is modified so that the
value of the index is a fraction or a multiple of what it would have been if
it had not been modified, e.g., due to a split in the index, then the
calculation agent shall adjust the index in order to arrive at a value of the
index as if it had not been modified, e.g., as if the split had not occurred.
"Market Disruption Event" means either of the following events on a
Business Day during a Calculation Period, as determined by the calculation
agent:
(a) a suspension or absence of trading on the TSE of 20% or more of the
Underlying Stocks which then comprise the index or a Successor Index
during the one-half hour period preceding the close of trading on
the TSE; or
(b) the suspension or material limitation on the Singapore International
Monetary Exchange Ltd. (the "SIMEX"), Osaka Securities Exchange (the
"OSE") or the Relevant Stock Exchange or any other major securities
market of trading in futures or options contracts related to the
index during the one-half hour period preceding the close of trading
on the applicable exchange.
For purposes of determining whether a Market Disruption Event has
occurred:
o a limitation on the hours 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,
o a decision to permanently discontinue trading in the relevant
contract will not constitute a Market Disruption Event,
o a suspension of trading in a futures or options contract on the
index by the Relevant Stock Exchange or other major securities
market by reason of
o a price change exceeding limits set by the Relevant Stock
Exchange or securities market,
o an imbalance of orders relating to any contracts or
o a disparity in bid and ask quotes relating to any contracts
will constitute a suspension or material limitation of trading
in futures or options contracts related to the index and
o an "absence of trading" on the SIMEX, OSE, the Relevant Stock
Exchange or a major securities market on which futures or options
contracts related to the index are traded will not include any time
when the SIMEX, OSE, the Relevant Stock Exchange or such securities
market, as the case may be, itself is closed for trading under
ordinary circumstances.
Substitution of the Index
Movements in the Japan Index correspond generally to movements in the
Nikkei 225 Index published by Nihon Keizai Shimbun, Inc. ("NKS"), which is
currently the most widely utilized index relating to Japanese equity
securities, as measured by trading volume and open interest relating to the
futures contract on the index or also known as the "Nikkei 225 Futures
Contract". In October of 1993, NKS commenced the calculation and publication
of a new broad-based, capitalization-weighted index referred to as the Nikkei
300 Index or also known as the "Nikkei 300 Index". Unlike the Nikkei 225
Index, which is a price-weighted index of 225 Japanese companies listed in the
First Section of the TSE, the Nikkei 300 Index is a capitalization-weighted
index of 300 Japanese companies listed in the First Section of the TSE. See
"The Index--The New Japan Index" for a description of the Nikkei 300 Index.
The OSE announced that, if a broad-based, capitalization-weighted index were
introduced on the TSE, the OSE expected to establish a new futures contract on
that index. Although the OSE has not as of the date of this prospectus
introduced a new futures contract on the Nikkei 300 Index, any such contract
which it may introduce at some future date is referred to in this prospectus
as the "Nikkei 300 Futures Contract".
If the Nikkei 300 Futures Contract is introduced and publicly traded on
an exchange in Japan, and such contract develops trading volume and open
interest exceeding that of the Nikkei 225 Futures Contract, ML&Co. believes
this would indicate that the Nikkei 300 Futures Contract will have become more
widely utilized than the Nikkei 225 Futures Contract. Therefore, in the event
that a Nikkei 300 Futures Contract is publicly traded at some future date on
an exchange in Japan and each of the additional conditions described below are
fulfilled, a New Japan Index will be substituted for the Japan Index. From and
after that time, the index used to determine the Supplemental Redemption
Amount with respect to the securities will be the New Japan Index. Upon the
substitution of the New Japan Index for the Japan Index, ML&Co. will cause
notice thereof to be given to holders of the securities. Such notice will also
state that, for purposes of calculating the Supplemental Redemption Amount, an
adjusted Initial Value will be substituted for the original Initial Value. The
adjusted Initial Value will be calculated as follows:
Initial Value of Japan Index x current value of New Japan Index
----------------------------
current value of Japan Index
where the current values of the Japan Index and of the New Japan Index will
equal their respective levels reported by the relevant exchange at the close of
business on the day that the calculation agent substitutes the New Japan Index
for the Japan Index. If the Substitution Event occurs after the determination of
a Yearly Value, the Yearly Value will be restated in terms of the New Japan
Index under the following formula:
Yearly Value prior to restatement x adjusted Initial Value
---------------------------------
original Initial Value
The Supplemental Redemption Amount will then be calculated using the restated
Yearly Value.
A "Substitution Event" will have occurred if, as determined by the
calculation agent, whose opinion shall be conclusive and binding on ML&Co. and
on the holders of the Securities, the following conditions are fulfilled:
(a) Nikkei 300 Futures Contracts shall be introduced and publicly traded
on an exchange in Japan; and
(b) The AMEX or another United States securities exchange publishes on a
basis not less regularly than each day on which such exchange and
the TSE are open for trading an index (the "New Japan Index") which:
o for a period of 90 days immediately preceding the date of the
Substitution Event has a correlation based on daily, closing
value to closing value, percentage changes of not less than 90%
with the Nikkei 300 Index; and
o an option, warrant or other security which has payments
determined by reference to the New Japan Index has been
approved to be listed on a national securities exchange by the
SEC; and
(c) Either of the following has occurred:
o the Nikkei 225 Index is no longer published and/or the Nikkei
225 Futures have been delisted from trading on the OSE; or
o the Nikkei 300 Futures Contracts publicly traded on exchanges
in Japan have
o greater average daily volume and
o greater average daily open interest than the Nikkei 225
Futures Contracts which trade on the OSE, each for any
three-month period before the date of the Substitution
Event, commencing on a futures expiration date on the OSE
and ending on the following futures expiration date; and
(d) To the extent required, ML&Co. shall have obtained any license
necessary to use the New Japan Index as described in this
prospectus. ML&Co. has agreed in the securities to use its
reasonable efforts to obtain any such license.
Notwithstanding the above, unless the Nikkei 225 Index is no longer
published and/or the Nikkei 225 Futures Contracts shall have been delisted
from trading on the OSE, a Substitution Event will not be deemed to have
occurred on any of the 180 days next preceding the maturity date of the
securities.
All disclosure contained in this prospectus regarding the Nikkei 225
Index, Nikkei 225 Futures Contract, Nikkei 300 Index, Nikkei 300 Futures
Contract, or their publisher, NKS, is derived from publicly available
information as of January 20, 1994. NKS has no relationship with ML&Co. or the
securities; it does not sponsor, endorse, authorize, sell or promote the
securities, and has no obligation or liability in connection with the
administration, marketing or trading of the securities.
Discontinuance of the Index
If the AMEX discontinues publication of the Japan Index or, if a New
Japan Index has been substituted for the Japan Index, publication of the New
Japan Index has been discontinued and the AMEX or another entity publishes a
successor or substitute index that the calculation agent determines, in its
sole discretion, to be comparable to the index (a "Successor Index"), then,
upon the calculation agent's notification of any determination to the Trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by the American Stock Exchange or any other entity for the Japan
Index or the New Japan Index, as the case may be, and calculate the Final
Average Value as described above under "Payment at Maturity". Upon any
selection by the calculation agent of a Successor Index, ML&Co. shall cause
notice to be given to holders of the securities.
If the AMS discontinues publication of the Japan Index or, if a New Japan
Index has been substituted for the Japan Index, publication of the New Japan
Index has been discontinued and a Successor Index is not selected by the
calculation agent or is no longer published on any of the Calculation Dates,
the value to be substituted for the index for any Calculation Date used to
calculate the Supplemental Redemption Amount at maturity will be a value
computed by the calculation agent for each Calculation Date in accordance with
the procedures last used to calculate the index before any discontinuance. If
a Successor Index is selected or the calculation agent calculates a value as a
substitute for the index as described below, the Successor Index or value
shall be substituted for the index for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the Japan Index or, if a New
Japan Index has been substituted for the Japan Index, publication of the New
Japan Index has been discontinued, before the period during which the
Supplemental Redemption Amount is to be determined and the calculation agent
determines that no Successor Index is available at such time, then on each
Business Day until the earlier to occur of
o the determination of the Final Average Value; and
o a determination by the Calculation Agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation 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 these values to be made available by
telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the index may adversely affect trading in the Securities.
Events of Default and Acceleration
In case an Event of Default with respect to any securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
security upon any acceleration permitted by the securities will be equal to:
o the principal amount , plus
o an additional amount of contingent interest calculated as though the
date of early repayment were the maturity date of the Securities.
The Calculation Period used to calculate the final Yearly Value of the
securities so accelerated will begin on the eighth scheduled Business Day next
preceding the scheduled date for early redemption. If the final Yearly Value
is the only Yearly Value which shall have been calculated with respect to the
securities, the final Yearly Value will be the Final Average Value. If one or
two other Yearly Values shall have been calculated with respect to the
securities for prior years when the securities shall have been outstanding,
the average (arithmetic mean) of the final Yearly Value and one other Yearly
Value or two other Yearly Values, as the case may be, will be the Final
Average Value. The Minimum Supplemental Redemption Amount with respect to any
early redemption date will be an amount equal to the interest which would have
accrued on the Securities from and including the date of original issuance to
but excluding the date of early redemption at an annualized rate of 2.33%,
calculated on a semiannual bond equivalent basis. See "Description of
Securities--Payment at Maturity" in this prospectus.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim
of the beneficial owner of a security may be limited, under Section 502(b)(2)
of Title 11 of the United States Code, to the principal amount of the security
plus an additional amount of contingent interest calculated as though the date
of the commencement of the proceeding were the maturity date of the
securities.
In case of default in payment at the maturity date of the securities
whether at their stated maturity or upon acceleration, from and after the
maturity date the securities shall bear interest, payable upon demand of their
beneficial owners , at the rate of 5.5% per annum, to the extent that payment
of such interest shall be legally enforceable, on the unpaid amount due and
payable on such date in accordance with the terms of the securities to the
date payment of this amount has been made or duly provided for.
Global Securities
Description of the Global Securities
Beneficial owners of the securities may not receive physical delivery of
the securities nor may they be entitled to have the securities registered in
their names. The 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 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 such 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 securities represented by a global security for all
purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the securities represented by a global security will not be entitled
to have the securities represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of the
securities in definitive form and will not be considered the owners or holders
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 such 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 securities. The 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 securities in the aggregate principal amount of the 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
New York Stock Exchange, 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 securities under DTC's system must be made by or through
direct participants, which will receive a credit for the 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 securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the
direct participants to whose accounts the 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
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
securities are credited on the record date identified in a listing attached to
the omnibus proxy.
Principal, premium, if any, and/or interest, if any, payments on the
securities will be made in immediately available funds to DTC. DTC's practice
is to credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the 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 securities,
the global securities will be exchangeable for securities in definitive form
of like tenor and of an equal aggregate principal amount, in denominations of
$10 and integral multiples of $10. The definitive 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, 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 Payment
All payments of principal and the Supplemental Redemption Amount, if any,
will be made by ML&Co. in immediately available funds so long as the
securities are maintained in book-entry form.
<PAGE>
THE INDEX
The Japan Index
The index for purposes of calculating the Supplemental Redemption Amount
will initially be the Japan Index. This information reflects the policies of
the American Stock Exchange; such policies are subject to change in the
discretion of the American Stock Exchange.
The Japan Index is a stock index calculated, published and disseminated
by the American Stock Exchange that measures the composite price performance
of selected Japanese stocks. The Japan Index is based on highly capitalized
Underlying Stocks trading on the TSE representing a broad cross-section of
Japanese industries. All the Underlying Stocks are stocks listed in the First
Section of the TSE. Stocks listed in the First Section are among the most
actively traded stocks on the Tokyo Stock Exchange. Options contracts on the
Japan Index are traded on the American Stock Exchange.
The level of the Japan Index is disseminated via the Consolidated Tape
Authority Network-B, commonly referred to as the "American Stock Exchange
Tape". The American Stock Exchange Tape symbol for the Japan Index is "JPN".
The level of the Japan Index is calculated once per day using last sale prices
only, i.e., not "special bid quotes" or "special ask quotes" which are used in
connection with other stock indices, for transactions in Underlying Stock on
the TSE.
The Japan Index is a modified, price-weighted index, i.e., an Underlying
Stock's weight in the index is based on its price per share rather than the
total market capitalization of the issuer, which is calculated by
o multiplying the per share price of each Underlying Stock by the
corresponding weighing factor for such Underlying Stock (a "Weight
Factor"),
o calculating the sum of all these products, and
o dividing such sums by a divisor.
The divisor, initially set in September 1990 at 9,799,460, was 9,608,946
as of January 20, 1994, and is subject to periodic adjustments as set forth
below. Each Weight Factor is computed by dividing Y50 by the par value of the
relevant Underlying Stock and multiplying the result by 100, so that the share
price of each Underlying Stock when multiplied by its Weight Factor
corresponds to a share price based on a uniform par value of Y50. Each Weight
Factor represents the number of shares of the related Underlying Stock which
are included in one trading unit of the Japan Index.
In order to maintain continuity in the level of the Japan Index in the
event of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stocks,
stock dividends, stock splits or distributions of assets to stockholders, the
divisor used in calculating the Japan Index is adjusted in a manner designed
to prevent any instantaneous change or discontinuity in the level of the Japan
Index. Thereafter, the divisor remains at the new value until a further
adjustment is necessary as the result of another change. As a result of each
change affecting any Underlying Stock, the divisor is adjusted in such a way
that the sum of all share prices immediately after such change multiplied by
the applicable Weight Factor and divided by the new divisor, i.e., the level
of the Japan Index immediately after such change, will equal the level of the
Japan Index immediately before the change.
Underlying Stocks may be deleted or added by the AMEX. However, to
maintain continuity in the Japan Index, the policy of the AMEX is generally
not to alter the composition of the Underlying Stocks except when an
Underlying Stock is deleted due to
o bankruptcy of the issuer,
o merger of the issuer with, or acquisition of the issuer by, another
company,
o delisting of such stock, or
o failure of such stock to meet, upon periodic review by the AMEX,
market value and trading volume criteria established by the AMEX (as
such may change from time to time).
Upon deletion of a stock from the Underlying Stocks, the AMEX may select a
suitable replacement for the deleted Underlying Stock. The policy of the AMEX
is to announce any change in advance via distribution of an information
circular.
The AMEX is under no obligation to continue the calculation and
dissemination of the Japan Index. The securities are not sponsored, endorsed,
sold or promoted by the AMEX. No inference should be drawn from the
information contained in this prospectus that the AMEX makes any
representation or warranty, implied or express, to ML&Co., beneficial owners
of the securities or any member of the public regarding the advisability of
investing in securities generally or in the securities in particular or the
ability of the Japan Index to track general stock market performance. The AMEX
has no obligation to take the needs of ML&Co. or beneficial owners of the
securities into consideration in determining, composing or calculating the
Japan Index. The AMEX is not responsible for, and has not participated in the
determination or calculation of the equation by which the Supplemental
Redemption Amount with respect to the securities will be determined. The AMEX
has no obligation or liability in connection with the administration,
marketing or trading of the securities.
The use of and reference to the Japan Index in connection with the
Securities has been consented to by the AMEX, the publisher of the Japan
Index. "Japan Index" is a service mark of the AMEX.
None of ML&Co., the calculation agent and MLPF&S accepts any
responsibility for the calculation, maintenance or publication of the Japan
Index or any Successor Index. The AMEX disclaims all responsibility for any
errors or omissions in the calculation and dissemination of the Japan Index or
the manner in which such index is applied in determining the Supplemental
Redemption Amount with respect to the securities.
You should review the historical performance of the index. The historical
performance of the index should not be taken as an indication of future
performance, and no assurance can be given that the index will increase
sufficiently to cause the beneficial owners of the securities to receive an
amount in excess of the principal amount and the Minimum Supplemental
Redemption Amount at the maturity of the securities.
The Tokyo Stock Exchange
The TSE is one of the world's largest securities exchanges in terms of
market capitalization. Trading hours are from 9:00 A.M. to 11:00 A.M. and from
12:30 P.M. to 3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day the TSE will
close prior to the opening of business in New York City on the same calendar
day. Therefore, the closing level of the Japan Index on such trading day will
generally be available in the United States by the opening of business on the
same calendar day.
The TSE has adopted measures intended to prevent any extreme short-term
price fluctuation resulting from order imbalances. These include daily price
floors and ceilings intended to prevent extreme fluctuations in individual
stock prices. Any stock listed on the TSE cannot be traded at a price outside
of these limits which are stated in absolute Japanese yen, and not percentage,
limits from the closing price of the stock on the previous day. In addition,
when there is a major order imbalance in a listed stock, the TSE posts a
"special bid quote" or a "special asked quote" for that stock at a specified
higher or lower price level than the stock's last sale price in order to
solicit counter orders and balance supply and demand for the stock. You should
also be aware that the TSE may suspend the trading of individual stocks in
certain limited and extraordinary circumstances including, for example,
unusual trading activity in that stock. As a result, variations in the Japan
Index may be limited by price limitations on, or by suspension of trading in,
individual stocks which comprise the Japan Index which may, in turn, adversely
affect the value of the securities or result in a Market Disruption Event. See
"Description of Securities--Adjustments to the Index; Market Disruption
Event".
The New Japan Index
Under certain circumstances, a New Japan Index may be substituted for the
Japan Index for purposes of calculating the Supplemental Redemption Amount.
The New Japan Index would be an index published by the AMEX or another United
States securities exchange with a high correlation to the Nikkei Stock Index
300. See "Substitution of the Index".
The Nikkei Stock Index 300 is an index calculated, published and
disseminated by NKS, that measures the composite price performance of stocks
of 300 Japanese companies. All 300 stocks are listed in the First Section of
the TSE. Stocks listed in the First Section are among the most actively traded
stocks on the TSE. Publication of the Nikkei Stock Index 300 began on October
8, 1993.
The Nikkei Stock Index 300 is a market capitalization-weighted index
which is calculated by
o multiplying the per share price of each stock included in the Nikkei
Stock Index 300 by the number of outstanding shares, excluding
shares held by the Japanese Government,
o calculating the sum of all these products, such sum being
hereinafter referred to as the "Aggregate Market Price",
o dividing the Aggregate Market Price by the Base Aggregate Market
Price, i.e. the Aggregate Market Price as of October 1, 1982, and
o multiplying the result by 100. Larger companies' shares have a
larger effect on moving the entire index than smaller companies'
shares.
Although the Nikkei Stock Index 300 was first published in October 1993,
NKS has calculated values for the Nikkei Stock Index 300 for the period from
October 1, 1982 through October 8, 1993. The stocks included in the Nikkei
Stock Index 300, such stocks being hereinafter referred to as the "Underlying
Stocks", were selected from a reference group of stocks which were selected by
excluding stocks listed in the First Section of the TSE that have relatively
low market liquidity or extremely poor financial results. The Underlying
Stocks were selected from this reference group by
o selecting from the remaining stocks in this reference group the
stocks with the largest aggregate market value in each of 36
industrial sectors and
o selecting additional stocks, with priority within each industrial
sector given to the stock with the largest aggregate market value,
so that the selection ratios, i.e. the ratio of the aggregate market
value of the included stocks to that of the stocks in the reference
group, with respect to all 36 industry sectors will be as nearly
equal as possible and the total number of companies with stocks
included in the Nikkei Stock Index 300 will be 300.
In order to maintain continuity in the level of the Nikkei Stock Index
300, the Nikkei Stock Index 300 will be reviewed annually by NKS and the
Underlying Stocks may be replaced, if necessary, in accordance with the
"deletion/addition rule". The "deletion/addition" rule provides generally for
the deletion of a stock from the Nikkei Stock Index 300 if such stock is no
longer included in the reference group or if the aggregate market value of
such stock is low relative to other stocks in the relevant industry sector.
Stocks deleted pursuant to the "deletion/addition" rule will be replaced by
stocks included in the reference group which have relatively high aggregate
market values. In addition, stocks may be added or deleted from time to time
for extraordinary reasons.
All disclosure contained in this prospectus regarding the Nikkei 225
Index, Nikkei 225 Futures Contract, Nikkei Stock Index 300, Nikkei 300 Futures
Contract, or their publisher, NKS, is derived from information publicly
available as of January 20, 1994. NKS has no relationship with ML&Co. or the
securities; it does not sponsor, endorse, authorize, sell or promote the
securities, and has no obligation or liability in connection with the
administration, marketing or trading of the securities.
OTHER TERMS
The securities were issued 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
securities of which this prospectus is a part. The following summaries of
certain 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.
Series of senior debt securities may from time to time be issued 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 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 claims of ML&Co. itself as a creditor of the
subsidiary may be recognized. 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 such 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 of 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 debt securities affected. However, without the consent of each
holder of any outstanding debt security affected, no amendment or modification
to any 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 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 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 debt securities of any series of senior debt securities may
waive an 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 any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of 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 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.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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 securities and other securities. For further information on ML&Co. and the
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 securities and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the securities.
MLPF&S may act as principal or agent in these market-making transactions.
The securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the 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.
<PAGE>
This information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
AMEX Oil Index(SM)
Stock Market Annual Reset Term(SM) Notes due December 29, 2000
"SMART Notes(SM)"
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 SMART Notes.
The SMART Notes:
o 100% principal protection at maturity
o Interest payment on each June 30 and December 30
o We will pay interest on the SMART Notes at a rate
equal to the product of 85% and the percentage
increase, if any, in the AMEX Oil Index
o For each $1,000 principal amount of the SMART Notes
that you own, you will receive not less than $20 per
year
o The SMART Notes are listed on the American Stock
Exchange under the symbol "MOI.F"
Investing in the SMART Notes involves risks.
See "Risk Factors" beginning on page 3.
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.
-----------
Merrill Lynch & Co.
-----------
The date of this prospectus is , 199 .
(SM)"SMART Notes" and "Stock Market Annual Reset Term" are service marks of
Merrill Lynch & Co., Inc. (SM)"Oil Index" is a registered service mark
of the American Stock Exchange, Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS....................................................... 3
MERRILL LYNCH & CO................................................. 6
RATIO OF EARNINGS TO FIXED CHARGES................................. 7
DESCRIPTION OF THE SMART NOTES..................................... 8
THE AMEX OIL INDEX................................................. 15
OTHER TERMS........................................................ 17
WHERE YOU CAN FIND MORE INFORMATION................................ 21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.................. 21
PLAN OF DISTRIBUTION............................................... 22
EXPERTS............................................................ 22
<PAGE>
RISK FACTORS
You may not earn a return on your investment
If the arithmetic mean of the quarterly closing values of the AMEX Oil
Index applicable to each December payment date, determined in the manner set
forth in this prospectus, does not exceed the closing value of the AMEX Oil
Index on the last business day of the immediately preceding calendar year by
more than approximately 2.35%, at maturity you receive no more than $20 for
each $1,000 principal amount of your SMART Notes on that December payment
date. This will be true even if at some point during the time the calculation
agent determines the interest payable on the SMART Notes for each December
payment date, the arithmetic mean of the quarterly closing values of the AMEX
Oil Index for that year exceeded the closing value of the AMEX Oil Index on
the last business day of the immediately preceding calendar year by more than
2.35%.
You will receive no less than $20 for each $1,000 principal amount of
your SMART Notes and we will repay you 100% of the principal amount of your
SMART Notes at maturity. Therefore, the amount that 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 senior non-callable debt
security of Merrill Lynch & Co., Inc. 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.
The amount payable on the SMART Notes based on the AMEX Oil Index will
not produce the same return as if you purchased the stocks underlying the AMEX
Oil Index and held them for a similar period because of the following:
o the AMEX Oil Index does not reflect the payment of dividends on the
stocks underlying it,
o the annual amount payable is limited to 85% multiplied by the
percentage increase in the AMEX Oil Index during any relevant
period, but will not be less than $20 per $1,000 principal amount of
the SMART Notes,
o the arithmetic mean of the quarterly closing values of the AMEX Oil
Index for each calendar year may not reflect the full percentage
increase in the AMEX Oil Index during any relevant period because it
is an average of the AMEX Oil Index at various points in time, and
o the amounts payable on the SMART Notes do not reflect changes in the
AMEX Oil Index for the period between the determination of the
arithmetic mean of the quarterly closing values of the AMEX Oil
Index applicable to each December payment date and the determination
of the closing value of the AMEX Oil Index on the last business day
of the preceding calendar year for the next December payment date.
There may be an uncertain trading market for the SMART Notes in the future
The SMART Notes are listed on the AMEX under the symbol "MOI.F". We
expect that the secondary market for the SMART Notes, including prices in that
market will likely be affected by our creditworthiness and by a number of
other factors. It is possible to view the SMART Notes as the economic
equivalent of a debt obligation plus a series of cash settlement options;
however, the SMART Notes may trade in the secondary market at a discount from
the aggregate value of these economic components, if these economic components
were valued and capable of being traded separately.
The trading values of the SMART Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected theoretical effect on the trading value of the SMART Notes of each of
the factors listed below. The following discussion of each separate factor
generally assumes that all other factors are held constant, although the
actual interrelationship between certain of such factors is complex.
o Relative Level of the AMEX Oil Index. We expect that the trading
value of the SMART Notes will depend significantly on the extent of
the excess of the expected average of the quarterly closing values
of the AMEX Oil Index for a calendar year over the closing value of
the AMEX Oil Index on the last business day of the preceding
calendar year. If, however, you sell your SMART Notes at a time when
this excess exists, the price you receive may nevertheless be at a
discount from the amount expected to be payable if this excess were
to prevail until the next December payment date. Furthermore, the
price at which you will be able to sell SMART Notes before a
December payment date may be at a discount, which could be
substantial, from the principal amount of your SMART Notes, if, at
that time, the AMEX Oil Index is below, equal to or not sufficiently
above the closing value of the AMEX Oil Index on the last business
day of the immediately preceding calendar year before that December
payment date. The level of the AMEX Oil Index will depend on the
prices of the stocks underlying the AMEX Oil Index which, in turn,
will be affected by factors affecting the oil industry, see "The
AMEX Oil Index--Oil Industry Sector".
o Volatility of the AMEX Oil Index. If the volatility of the AMEX Oil
Index increases, we expect the trading value of the SMART Notes to
increase. If the volatility of the AMEX Oil Index decreases, we
expect the trading value of the SMART Notes to decrease.
o U.S. Interest Rates. In general, if U.S. interest rates increase, we
expect the value of the SMART Notes to decrease. If U.S. interest
rates decrease, we expect the value of the SMART Notes to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
level of the AMEX Oil Index. Rising interest rates may lower the
level of the AMEX Oil Index and, thus, the value of the SMART Notes.
Falling interest rates may increase the level of the AMEX Oil Index
and, thus, may increase the value of the SMART Notes.
o Time Remaining to December Payment Dates. We anticipate that before
each December payment date, the SMART Notes may trade at a value
above which may be inferred from the level of U.S. interest rates
and the AMEX Oil Index. This difference will reflect a "time
premium" due to expectations concerning the level of the AMEX Oil
Index during the period before each December payment date. As the
time remaining to each December payment date decreases, however,
this time premium may decrease, thus decreasing the trading value of
the SMART Notes.
o Time Remaining to Maturity. As the number of remaining December
payment dates decreases, the cumulative value of all the annual
rights to receive an amount that reflects participation in the
payments in excess of the minimum annual interest payment of $20 per
$1,000 principal amount will decrease, thus decreasing the value of
the SMART Notes.
o Dividend Rates. A number of complex relationships between the
relative values of the SMART Notes and dividend rates are likely to
exist. If dividend rates on the stocks comprising the AMEX Oil Index
increase, the value of the annual right to receive an amount that
reflects participation in the average appreciation of the AMEX Oil
Index above the annual starting value is expected to decrease, and
consequently, we expect the value of the SMART Notes to decrease.
Conversely, if dividend rates on the stocks comprising the AMEX Oil
Index decrease, the value of the annual right to receive such an
amount is expected to increase and, therefore, the value of the
SMART Notes is expected to increase. In general, however, because
the majority of issuers of stocks underlying the AMEX Oil Index are
organized in the United States, rising U.S. corporate dividend rates
may increase the AMEX Oil Index and, in turn, increase the value of
the SMART Notes. Conversely, falling U.S. dividend rates may
decrease the AMEX Oil Index and, in turn, decrease the value of the
SMART Notes.
Amounts payable on the MITTS Securities may be limited by state law
The indenture under which the SMART Notes are issued is governed by New
York State law. 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
SMART Notes. Under present New York law, the maximum rate of interest is 25%
per annum on a simple interest basis. This limit may not apply to debt
securities in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the holders of the SMART Notes,
to the extent permitted by law, not to voluntarily claim the benefits of any
laws concerning usurious rates of interest.
Other Considerations
You should reach an investment decision with regard to the SMART Notes
only after carefully considering the suitability of the SMART Notes in light
of your particular circumstances.
You should also consider the tax consequences of investing in the SMART
Notes and should consult your tax advisors.
<PAGE>
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
SMART Notes described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
DESCRIPTION OF THE SMART NOTES
The SMART Notes were issued as a series of Senior Debt Securities under
the 1983 Indenture which is more fully described this prospectus.
The SMART Notes will mature, and the principal of the SMART Notes will be
repayable at par, on December 29, 2000.
The SMART Notes are not subject to redemption before maturity by ML&Co.
or at the option of any beneficial owner. Upon the occurrence of an Event of
Default with respect to the SMART Notes, however, beneficial owners of the
SMART Notes or the Trustee may accelerate the maturity of the SMART Notes, as
described under "Description of SMART Notes--Events of Default and
Acceleration" and "Other Terms--Events of Default" in this prospectus.
The SMART Notes are transferable in denominations of $1,000 and integral
multiples of $1,000.
Interest Payments
For each full calendar year, ML&Co. will pay interest in an amount equal
to the following for each $1,000 principal amount of SMART Notes:
$1,000 x Average Percent Change x Participation Rate
provided, however, that the per annum amount payable as a result of the
foregoing on the SMART Notes will not be less than the Minimum Annual Payment
of $20 per $1,000 principal amount of SMART Notes on a per annum basis or 2%
per annum.
The "Participation Rate" equals 85%.
The "Average Percent Change" applicable to the determination of the
amount payable in any calendar year will equal:
Ending Average Value - Starting Annual Value
--------------------------------------------
Starting Annual Value
The "Starting Annual Value" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the AMEX Oil Index
on the last AMEX Business Day in the immediately preceding calendar year as
determined by State Street Bank and Trust Company or the calculation agent.
The "Ending Average Value" applicable to the determination of the amount
payable in a calendar year will equal the arithmetic average or arithmetic
mean of the Quarterly Values of the AMEX Oil Index for each calendar quarter
during such year as determined by the calculation agent.
The "Quarterly Value" for any of the first three calendar quarters in a
calendar year will be the closing value of the AMEX Oil Index on the last
scheduled AMEX Business Day in any such calendar quarter; provided, however,
that if a Market Disruption Event has occurred on the last scheduled AMEX
Business Day in that calendar quarter, the Quarterly Value for that calendar
quarter will be the closing value of the AMEX Oil Index on the next succeeding
scheduled AMEX Business Day regardless of whether a Market Disruption Event
occurs on that day.
The "Quarterly Value" for the fourth calendar quarter in a calendar year
will be the closing value of the AMEX Oil Index on the seventh scheduled AMEX
Business Day preceding the end of that calendar quarter; provided, however,
that if a Market Disruption Event has occurred on the seventh scheduled AMEX
Business Day, the Quarterly Value for that calendar quarter will be the
closing value of the AMEX Oil Index on the sixth scheduled AMEX Business Day
preceding the end of that calendar quarter regardless of whether a Market
Disruption Event occurs on that day. The calculation agent will determine
scheduled AMEX Business Days.
If the Ending Average Value applicable to the applicable December payment
date does not exceed the Annual Starting Value by more than approximately
2.35%, beneficial owners of the SMART Notes will receive only the Minimum
Annual Payment on that December payment date, even if the value of the AMEX
Oil Index at some point between the determination of the applicable Starting
Annual Value and the determination of the applicable Ending Average Value
exceeded that Starting Annual Value by more than approximately 2.35%.
"Calculation Day" is any day on which a Starting Annual Value or a
closing value of the AMEX Oil Index for a calendar quarter is required to be
calculated.
An "AMEX Business Day" is a day on which the AMEX is open for trading.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, in the absence of manifest error,
shall be conclusive for all purposes and binding on ML&Co. and beneficial
owners of the SMART Notes.
All percentages resulting from any calculation on the SMART Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one millionths of a percentage point rounded upwards, e.g., 9.876545% or
.09876545 would be rounded to 9.87655% or .0987655, and all dollar amounts
used in or resulting from any calculation will be rounded to the nearest cent
with one-half cent being rounded upwards.
Adjustments to the Index; Market Disruption Event
If at any time the method of calculating the AMEX Oil Index, or its value,
is changed in a material respect, or if the AMEX Oil Index is in any other
way modified so that the index does not, in the opinion of the calculation
agent, fairly represent the value of the AMEX Oil Index had no changes or
modifications been made, then, from and after that time, the calculation agent
shall, at the close of business in New York, New York, on each Calculation
Day, make any adjustments as, in the good faith judgment of the calculation
agent, may be necessary in order to arrive at a calculation of a value of a
stock index comparable to the AMEX Oil Index as if no changes or modifications
had been made, and calculate the closing value with reference to the AMEX Oil
Index, as adjusted. Accordingly, if the method of calculating the AMEX Oil
Index is modified so that the value of the index is a fraction or a multiple
of what it would have been if it had not been modified, e.g., due to a split
in the index, then the calculation agent shall adjust the index in order to
arrive at a value of the AMEX Oil Index as if it had not been modified, e.g.,
as if a split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading during the
last half hour of trading in any of the component stocks, or
depository receipts representing those stocks, included in the
AMEX Oil Index on any national securities exchange in the
United States, or
(b) the suspension or material limitation, in each case during the
last half hour of trading whether by reason of movements in
price exceeding levels permitted by the relevant exchange or
otherwise, in
o futures contracts related to the AMEX Oil Index which are
traded on any exchange or board of trade in the United
States or
o option contracts related to the AMEX Oil Index which are
traded on the AMEX.
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, the AMEX or
any other self regulatory organization or the SEC of similar scope as
determined by the calculation agent, will be considered "material".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
Interest Payment Dates
ML&Co. will make semiannual interest payments on the SMART Notes on June
30 of each year ("June Payment Dates") and December 31 of each year and at
maturity ("December Payment Dates"), except as described in this prospectus,
to the persons in whose names the SMART Notes are registered on the
immediately preceding June 29 or December 30, and, at maturity, to the person
to whom the principal is payable. For each Note, ML&Co. will pay half of the
Minimum Annual Payment for each calendar year on the June Payment Date, and
will pay the balance of the annual amount payable on each Note for that year
on the December Payment Date.
Notwithstanding the foregoing, if it is known at least three Business
Days before December 31 that December 31 will not be a Business Day, the
amount payable by ML&Co. with respect to a December Payment Date for the SMART
Notes will be made on the Business Day immediately preceding that December 31
to the persons in whose names the SMART Notes are registered on the second
Business Day immediately preceding that December 31.
Discontinuance of the AMEX Oil Index
If the AMEX discontinues publication of the AMEX Oil Index and the AMEX
or another entity publishes a successor or substitute index that the
calculation agent determines, in its sole discretion, to be comparable to the
AMEX Oil Index (a "Successor Index"), then, upon the calculation agent's
notification of any determination to the Trustee and ML&Co., the calculation
agent will substitute the Successor Index as calculated by the AMEX or any
other entity for the AMEX Oil Index and calculate the annual amount payable as
described above under "Interest Payments". Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the SMART Notes.
If the AMEX discontinues publication of the AMEX Oil Index and a
Successor Index is not selected by the calculation agent or is no longer
published on any of the Calculation Days, the value to be substituted for the
AMEX Oil Index for any Calculation Day used to calculate the annual amount
payable will be a value computed by the calculation agent for each Calculation
Day in accordance with the procedures last used to calculate the AMEX Oil
Index before any discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the AMEX Oil Index
the Successor Index or value shall be substituted for the AMEX Oil Index for
all purposes, including for purposes of determining whether a Market
Disruption Event exists.
If the AMEX discontinues publication of the AMEX Oil Index before the
period during which the amount payable with respect to any year is to be
determined and the calculation agent determines that no Successor Index is
available at that time, then on each AMEX Business Day until the earlier to
occur of
(a) the determination of the amount payable with respect to that year or
(b) a determination by the calculation agent that a Successor Index is
available, the calculation agent shall determine the value that
would be used in computing the amount payable with respect to that
year as described in the preceding paragraph as if that day were a
Calculation Day.
The calculation agent will cause notice of each such value to be published not
less often than once each month in The Wall Street Journal or another
newspaper of general circulation, and arrange for information with respect to
these values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the AMEX Oil
Index may adversely affect trading in the SMART Notes.
Events of Default and Acceleration
In case an Event of Default with respect to any SMART Notes shall have
occurred and be continuing, the amount payable to a beneficial owner of a Note
upon any acceleration permitted by the SMART Notes, will equal:
(a) the principal amount of each SMART Note, plus
(b) an additional amount, if any, of interest calculated as though the
date of early repayment were a December Payment Date and prorated
through the date of early repayment on the basis of a year
consisting of 360 days of twelve 30-day months.
If Quarterly Values have been calculated before the early redemption date for
the calendar year in which any early redemption date occurs, these Quarterly
Values shall be averaged with the value of the AMEX Oil Index determined with
respect to that date of early redemption. If no Quarterly Values have been
calculated before the early redemption date for the calendar year in which the
early redemption date occurs, the Ending Average Value for that calendar year
will be the value of the AMEX Oil Index determined with respect to the date of
early redemption. The Minimum Supplemental Redemption Amount with respect to
any early redemption date will be an amount equal to the interest which would
have accrued on the SMART Notes from and including January 1 in the calendar
year in which the early redemption date occurs, to but excluding the date of
early redemption at an annualized rate of 2%, calculated on a semiannual bond
equivalent basis.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim
of the beneficial owner of a Note may be limited, under Section 502(b)(2) of
Title 11 of the United States Code, to the principal amount of the Note plus
an additional amount, if any, of contingent interest calculated as though the
date of the commencement of the proceeding were the maturity date of the SMART
Notes.
In case of default in payment at the maturity date of the SMART Notes
whether at their stated maturity or upon acceleration, from and after the
maturity date the SMART Notes shall bear interest, payable upon demand of the
holders, at the rate of 7% per annum to the extent that payment of interest
shall be legally enforceable, on the unpaid amount due and payable on that
date in accordance with the terms of the SMART Notes to the date payment of
that amount has been made or duly provided for.
Global Securities
Description of the Global Securities.
Beneficial owners of the SMART Notes may not receive physical delivery of
the securities nor may they be entitled to have the securities registered in
their names. The SMART Notes are represented by one or more fully registered
global securities. Each global security has been 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 SMART Notes 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 such depositary or another nominee of the
depositary or by the depositary or any nominee to a successor of such
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 SMART Notes represented by a global security for all
purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the securities represented by a global security are not entitled to
have the SMART Notes represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of the
SMART Notes in definitive form and are not 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 action, and those
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 are 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 securities. The securities have
been issued as fully registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One or more fully registered global
securities have been issued for the SMART Notes in the aggregate principal
amount of that issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. 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 certain 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 securities under DTC's system must be made by or through
direct participants, which will receive a credit for the 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 such
beneficial owner entered into the transaction. Transfers of ownership
interests in the securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the
direct participants to whose accounts such securities are credited, which may
or may not be the beneficial owners. The participants are 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 are governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
securities. Under its usual procedures, DTC mails an omnibus proxy to 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
securities are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
SMART Notes 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 such
date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable , and
(c) an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the securities,
the global securities will be exchangeable for securities in definitive form
of like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples of $1,000. The definitive securities will be
registered in such name or names as the depositary shall instruct the trustee.
It is expected that such 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, SMART Notes 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.
THE AMEX OIL INDEX
The AMEX Oil Index is a price-weighted stock index, i.e., an Underlying
Stock's weight in the index is based on its price per share rather than the
total market capitalization of the issuer, calculated, published and
disseminated by the AMEX that measures the composite price performance of
selected common stocks of widely-held corporations involved in various
segments of the oil industry. The AMEX Oil Index was originally published by
the AMEX as the Oil and Gas Index. In September 1984, the AMEX changed the Oil
and Gas Index from a market-weighted index to a price-weighted index and
deleted all companies engaged exclusively in gas exploration and production
activities. The Oil and Gas Index was then renamed the Oil Index. At March 24,
1994, the calculation of the value of the AMEX Oil Index was based on the
relative value of the aggregate market price of the common stocks of sixteen
companies engaged in various segments of the oil industry.
The AMEX may from time to time, with approval of the SEC, add companies
to, or delete companies from, the AMEX Oil Index to fulfill the above-stated
intention of providing an indication of price movements of common stock of
corporations engaged in various segments of the oil industry. The level of the
AMEX Oil Index is calculated once per day using last sale prices only, i.e.,
not special "bid quotes" or special "ask quotes" which are used in connection
with other stock indices.
The level of the AMEX Oil Index is disseminated via the Consolidated Tape
Authority Network-B, also known as the "AMEX Tape". The AMEX Tape Symbol for
the AMEX Oil Index is "XOI".
Computation of the AMEX Oil Index
At March 24, 1994, the AMEX computed the AMEX Oil Index as of a
particular time as follows:
(a) the market price of one share of each component stock is determined
as of such time;
(b) the market prices of all component stocks as of such time (as
determined under clause (a) above) are aggregated;
(c) the aggregate amount (as determined under clause (b) above) is
divided by 3.47874.
While the AMEX employed the above methodology to calculate the AMEX Oil
Index at March 24, 1994, no assurance can be given that the AMEX will not
modify or change such methodology in a manner that may affect the amounts
payable on any December Payment Date to beneficial owners of the SMART Notes.
In order to maintain continuity in the level of the AMEX Oil Index in the
event of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stocks,
stock dividends, stock splits or distributions of assets to stockholders, the
divisor used in calculating the AMEX Oil Index is adjusted in a manner
designed to prevent any instantaneous change or discontinuity in the level of
the AMEX Oil Index. Thereafter, the divisor remains at the new value until a
further adjustment is necessary as the result of another change. As a result
of each such change affecting any component stock, the divisor is adjusted in
such a way that the level of the AMEX Oil Index immediately after any change
will equal the level of the AMEX Oil Index immediately prior to the change.
Component stocks may be deleted or added by the AMEX with approval of the
SEC. However, to maintain continuity in the AMEX Oil Index, the policy of the
AMEX is generally not to alter the composition of the component stocks except
when a component stock is deleted due to
(a) bankruptcy of the issuer,
(b) merger of the issuer with, or acquisition of the issuer by, another
company,
(c) delisting of such stock, or
(d) failure of such stock to meet, upon periodic review by the AMEX,
market value and trading volume criteria established by the AMEX (as
such may change from time to time).
Upon deletion of a stock from the component stocks, the AMEX may select a
suitable replacement for such deleted component stock. The policy of the AMEX
is to announce any such change in advance via distribution of an information
circular.
The use of and reference to the AMEX Oil Index in connection with the
SMART Notes has been consented to by the AMEX, the publisher of the AMEX Oil
Index and, in connection with that consent, the AMEX has requested that the
following information appear in this prospectus. The AMEX is under no
obligation to continue the calculation and dissemination of the AMEX Oil
Index. The SMART Notes are not sponsored, endorsed, sold or promoted by the
AMEX. No inference should be drawn from the information contained in this
prospectus that the AMEX makes any representation or warranty, implied or
express, to ML&Co., beneficial owners of the SMART Notes or any member of the
public regarding the advisability of investing in securities generally or in
the SMART Notes in particular or the ability of the AMEX Oil Index to track
general stock market performance. The AMEX has no obligation to take the needs
of ML&Co. or beneficial owners of the SMART Notes into consideration in
determining, composing or calculating the AMEX Oil Index. The AMEX is not
responsible for, and has not participated, in the determination or calculation
of the equation by which the SMART Notes with respect to the annual payments
will be determined. The AMEX has no obligation or liability in connection with
the administration, marketing or trading of the SMART Notes. The AMEX
disclaims all responsibility for any errors or omissions in the calculation
and dissemination of the AMEX Oil Index or the manner in which the index is
applied in determining the annual payments with respect to the SMART Notes.
None of ML&Co., the calculation agent, MLPF&S nor the trustee accepts any
responsibility for the calculation, maintenance or publication of the AMEX Oil
Index or any Successor Index.
You should review the historical prices of the securities underlying the
Amex Oil Index. The historical prices of the securities should not be taken as
an indication of future performance, and no assurance can be given that the
prices of the securities will increase sufficiently to cause the beneficial
owners of the SMART Notes to receive an amount in excess of the Minimum Annual
Payment on any December Payment Date and at the maturity of the SMART Notes.
Oil Industry Sector
The oil industry is subject to varying degrees of regulatory, political
and economic risk which may affect the price of the stocks of the companies in
the industry. These risks depend on a number of factors including the
countries in which a particular company conducts its activities, evolving
levels of governmental regulation, and litigation with respect to
environmental and other matters. All segments of the oil industry are
competitive, including manufacturing, distribution and marketing of petroleum
products and petrochemicals. In addition, the oil industry competes with other
industries in supplying the energy needs of various types of consumers.
Refining margins or the difference between the price of products and the price
of crude oil, and marketing margins or the difference between the wholesale
and retail price of petroleum products, also affect companies engaged in the
oil industry.
The profitability of companies engaged in the oil industry is directly
affected by the worldwide price of oil and related petroleum products which,
in turn, depends upon the worldwide demand for oil and related petroleum
products.
Environmental regulation is a significant factor affecting profitability
of companies engaged in the oil industry. In the U.S., companies engaged in
the oil industry are subject to substantial environmental regulation by
federal, state, and local authorities. Federal regulations include the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended or also known as CERCLA or Superfund, the Superfund Amendments and
Reauthorizations Act of 1986, and the Resource Conservation Recovery Act of
1976.
In the United States and elsewhere, various laws and regulations are
either now in force, in standby status or under consideration, with respect to
such matters as price controls, crude oil and refined product allocations,
refined product specifications, environmental, health and safety regulations,
retroactive and prospective tax increases, cancellation of contract rights,
expropriation of property, divestiture of certain operations, foreign exchange
rate restrictions as to the convertibility of currencies, tariffs and other
international trade restrictions. Other regulations such as the U.S. Federal
Clean Air Act Amendments of 1990 may have a substantial impact on companies
engaged in the oil industry despite the fact that they do not impose direct
regulations. Finally, regional regulations like those proposed by California's
South Coast Air Quality Management District may have substantial effects on
the oil industry as well.
OTHER TERMS
The SMART Notes were issued 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
SMART Notes 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.
Series of senior debt securities may from time to time be issued 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 SMART Notes 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
is necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of ML&Co. itself as a creditor of the
subsidiary may be recognized. 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 such 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 of 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 debt securities affected. However, without the consent of each
holder of any outstanding debt security affected, no amendment or modification
to any 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 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 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 debt securities of any series of senior debt securities may
waive an Event of Default for 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 any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of 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 SMART Notes 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.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
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 SMART Notes and other securities. For further information on ML&Co. and
the SMART Notes, 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 SMART Notes and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the SMART Notes.
MLPF&S may act as principal or agent in these market-making transactions.
The SMART Notes may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the SMART Notes 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
6% Structured Yield Product Exchangeable for Stock SM due June 1, 1999
"STRYPES SM"
Payable with Shares of Class A Common Stock of Cox Communications, Inc.
or cash with an equal value
-------------
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the STRYPES.
The issue price of each STRYPES was $22.875, which was the last sale
price of the class A common stock, par value $1.00 per share, of Cox, on May
22, 1996, as reported on the New York Stock Exchange. The STRYPES will mature
on June 1, 1999.
What you will receive before June 1, 1999:
o On each March 1, June 1, September 1 and December 1, beginning September
1, 1996, we will pay you interest on the STRYPES in cash at the rate of
6% per year.
o We may redeem the STRYPES, in whole but not in part, at any time after a
tax event date at the tax event redemption price, which is more fully
described in this prospectus.
What you will receive on June 1, 1999:
o For each STRYPES you own, you will receive a number of shares of class A
common stock of Cox or an equivalent amount in cash based on (1) the
average closing price per share of the class A common stock of Cox during
a certain number of trading days before the maturity date and (2) the
fair market value of any dividends, distributions or other distributed
assets for one share of class A common stock of Cox.
If the price on June 1, 1999 is: You will receive:
(a) greater than $27.91 .8196 shares of class A common
(b) less than $27.91 but greater stock a fractional share of
than $22.875 class A common stock equal to
(c) less than $22.875 $22.875 one share of class A
common stock
Investing in the STRYPES involves risks, including the risk that your investment
may result in a loss. See "Risk Factors" beginning on page 3.
The STRYPES are listed on the NYSE under the symbol "CML".
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 STRYPES will be the prevailing price at the time of
sale.
---------------------------
Merrill Lynch & Co.
---------------------------
The date of this prospectus is , 1999.
"STRYPES" and "Structured Yield Product Exchangeable for Stock" are registered
service marks owned by ML&Co.
<PAGE>
TABLE OF CONTENTS
RISK FACTORS...........................................................3
MERRILL LYNCH & CO., INC...............................................7
RATIO OF EARNINGS TO FIXED CHARGES.....................................8
COX COMMUNICATIONS, INC................................................9
DESCRIPTION OF THE STRYPES.............................................9
OTHER TERMS...........................................................20
CERTAIN ARRANGEMENTS WITH CEI.........................................23
WHERE YOU CAN FIND MORE INFORMATION...................................24
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.....................24
PLAN OF DISTRIBUTION..................................................25
EXPERTS...............................................................26
<PAGE>
RISK FACTORS
Your investment in the STRYPES will involve risks. You should carefully
consider the following discussion of risks before deciding whether an
investment in the STRYPES is suitable for you.
You may suffer a loss on your investment
You should be aware that at maturity the amount you will receive may be
less than the amount you paid for the STRYPES, which was $22.875 per STRYPES.
If the maturity price of the class A common stock of Cox is less than $22.875,
the amount you will receive will be less than the amount you paid for the
STRYPES and, therefore, your investment in the STRYPES will result in a loss
to you. When you invest in the STRYPES, you assume the risk that the market
value of the class A common stock of Cox may decline, and that the decline
could be substantial.
Your investment in the STRYPES may differ from an investment in other debt
securities
The terms of the STRYPES differ from those of ordinary debt securities
because the maturity price of the class A common stock of Cox or the
equivalent amount in cash that you will receive on the maturity date is not
fixed, but is based on the maturity price of the class A common stock of Cox.
Please review the section entitled "Description of the STRYPES".
There may be a limited opportunity for equity appreciation
Your opportunity for equity appreciation may be greater if you made a
direct investment in the class A common stock of Cox because the price of the
class A common stock of Cox is subject to market fluctuations. The amount you
will receive on the maturity date will only exceed the amount you paid for the
STRYPES, which was $22.875 per STRYPES, if the maturity price of the class A
common stock of Cox exceeds the threshold appreciation price of $27.91. The
threshold appreciation price of $27.91 represents an appreciation of 22% over
the initial price of $22.875. In addition, you will only be entitled to
receive on the maturity date 81.96%, which is the percentage equal to the
initial price of $22.875 divided by the threshold appreciation price of
$27.91, of any appreciation of the value of the class A common stock of Cox in
excess of the threshold appreciation price of $27.91. Please review the
section entitled "Description of the STRYPES".
There are many factors affecting the trading prices of the STRYPES
The trading prices of the STRYPES in the secondary market will be
directly affected by the trading prices of the class A common stock of Cox in
the secondary market. It is impossible to predict whether the price of the
class A common stock of Cox will rise or fall because several factors may
influence the trading prices of the class A common stock of Cox. These factors
include:
o Cox's operating results and prospects,
o complex and interrelated political, economic, financial and other
factors and market conditions that can affect (1) the capital
markets generally, (2) the market segment of which Cox is a part, or
(3) the NYSE, on which the class A common stock of Cox is traded,
including the level of, and fluctuations in, the trading prices of
stocks generally and sales of substantial amounts of the class A
common stock of Cox in the market subsequent to the offering of the
STRYPES or the perception that these sales could occur, and
o other events that are difficult to predict and are beyond our
control.
Investing in the STRYPES may affect the market for the class A common stock of
Cox
Any market that develops for the STRYPES is likely to influence and be
influenced by the market for the class A common stock of Cox. For example, the
price of class A common stock of Cox could become more volatile and could be
depressed by investors' anticipation of the potential distribution into the
market of substantial amounts of class A common stock of Cox on the maturity
date, by possible sales of class A common stock of Cox by investors who view
the STRYPES as a more attractive means of equity participation in Cox, and by
hedging or arbitrage trading activity that may develop involving the STRYPES
and the class A common stock of Cox. In addition, Cox Enterprises, Inc. is not
precluded from selling shares of class A common stock of Cox, either under
Rule 144 of the Securities Act or by causing Cox to register shares of common
stock. These activities could adversely affect the market price of the class A
common stock of Cox and the STRYPES and could affect the payment rate formula.
There may be illiquidity of the STRYPES in the secondary market
It is not possible to predict how the STRYPES will trade in the secondary
market or whether the secondary market for the STRYPES will be liquid or
illiquid. The STRYPES are novel securities and there is currently no secondary
market for the STRYPES. Although the STRYPES are listed on the NYSE under the
symbol "CML", you cannot assume (a) that an active trading market for the
STRYPES will develop, (b) that listing on the NYSE will provide you with
liquidity of investment, (c) that the STRYPES will not later be delisted or
(d) that trading of the STRYPES on the NYSE will not be suspended. If the NYSE
delists the STRYPES or suspends the trading of the STRYPES, we will apply for
listing of the STRYPES on another national securities exchange or for
quotation on another trading market. If the STRYPES are not listed or traded
on any securities exchange or trading market, or if trading of the STRYPES is
suspended, pricing information for the STRYPES may be more difficult to obtain
and the liquidity of the STRYPES may be adversely affected.
As a holder of STRYPES, you have no stockholder's rights with respect to the
class A common stock of Cox
You will not be entitled to any rights, including voting rights and
rights to receive any dividends or other distributions for the class A common
stock of Cox, until we have delivered the shares of class A common stock of
Cox on the maturity date or the redemption date. In addition, you will not be
entitled to any rights if the applicable record date for the exercise of any
rights occurs before the maturity date or the redemption date. For example, if
an amendment is proposed to the certificate of incorporation of Cox and the
record date for determining the stockholders of record entitled to vote on the
amendment occurs before we deliver the class A common stock of Cox, you, as a
holder of the STRYPES, will not be entitled to vote on the proposed amendment.
Cox has no obligations with respect to the STRYPES
We are not affiliated with Cox. Cox has no obligations with respect to
the STRYPES or amounts to be paid to you, including any obligation to take our
needs or yours, as a holder of the STRYPES, into consideration for any reason.
Cox will not receive any of the proceeds of this offering of the STRYPES. Cox
is not responsible for, and has not participated in, the determination of the
timing of, prices for or quantities of the STRYPES to be issued, or the
determination or calculation of the amount you may receive on the maturity
date or the redemption date. In addition, Cox is not involved with the
administration or trading of the STRYPES.
There may be a dilution of common stock of Cox
The number of shares of class A common stock of Cox or the equivalent
amount of cash that you are entitled to receive on the maturity date or the
redemption date is subject to adjustment for events such as:
o a merger or consolidation in which Cox is not the surviving or
resulting corporation,
o a sale or transfer of all or substantially all of the assets of Cox,
o the liquidation, dissolution, winding up or bankruptcy of Cox,
o stock splits and combinations, stock dividends, and
o other actions of Cox that modify its capital structure.
Please review the section entitled "Description of the STRYPES--Dilution
Adjustments" and "--Special Redemption Upon Tax Event".
The number of shares of class A common stock of Cox or the equivalent
amount of cash that you may receive on the maturity date or redemption date
will not be adjusted for other events, such as offerings of class A common
stock of Cox for cash or in connection with acquisitions. Cox is not
restricted from issuing additional shares of class A common stock during the
term of the STRYPES and has no obligation to consider the interests of the
holders of the STRYPES for any reason. Additional issuances may materially and
adversely affect the price of the class A common stock of Cox. Because of the
relationship of the number of shares of class A common stock of Cox or cash to
be received on the maturity date or redemption date to the price of the class
A common stock of Cox, other events may adversely affect the trading price of
the STRYPES.
The tax treatment of STRYPES is uncertain
Because of an absence of authority as to the proper characterization of
the STRYPES, their ultimate tax treatment is uncertain. Accordingly, you
cannot assume that any particular characterization and treatment of the
STRYPES will be accepted by the Internal Revenue Service or upheld by a court.
However, it is the opinion of Brown & Wood LLP, counsel to ML&Co., that the
characterization and tax treatment of the STRYPES described in this
prospectus, while not the only reasonable characterization and tax treatment,
is based on reasonable interpretations of law currently in effect and, even if
successfully challenged by the IRS, will not result in the imposition of
penalties.
Under the 1983 indenture, which is more fully described in this
prospectus, if you are subject to U.S. Federal income tax, you are required to
include currently in income, for U.S. Federal income tax purposes, payments
denominated as interest that are made with respect to a STRYPES in accordance
with your regular method of tax accounting. You, as a holder of the STRYPES,
and ML&Co. are also required to treat each STRYPES for tax purposes as a unit
consisting of
o a debt instrument with a fixed principal amount unconditionally
payable on the maturity date equal to the issue price of the STRYPES
and bearing interest at the stated interest rate on the STRYPES, and
o a forward purchase contract under which you agree to use the
principal payment due on the debt instrument to purchase on the
maturity date or redemption date the class A common stock of Cox
which ML&Co. is obligated to deliver at that time, subject to
ML&Co.'s right to deliver cash instead of the class A common stock
of Cox.
The 1983 indenture also requires that upon the acquisition of a STRYPES and
upon your sale or other disposition of a STRYPES before the maturity date, the
amount paid or realized be allocated between the debt instrument and the
forward purchase contract based upon their relative fair market values, as
determined on the date of acquisition or disposition. For these purposes, with
respect to acquisitions of STRYPES in connection with the original issuance
thereof, ML&Co. and you agree to allocate $22.555 of the entire initial
purchase price of a STRYPES, which is the issue price of a STRYPES, to the
debt instrument and to allocate the remaining $.32 of the entire initial
purchase price of a STRYPES to the forward purchase contract. As a result of
this allocation, the debt instrument will be treated as having been issued
with original issue discount for U.S. Federal income tax purposes.
The appropriate character and timing of income, gain or loss to be
recognized on a STRYPES is uncertain. You should consult your own tax adviser
concerning the application of the U.S. Federal income tax laws to your
particular situation as well as any consequences of the purchase, ownership
and disposition of the STRYPES arising under the laws of any other taxing
jurisdiction.
Our holding company structure may affect your right to participate in any
distribution of assets of any subsidiary
Since we are a holding company, our right and the right of our creditors,
including you, as a holder of STRYPES, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent a bankruptcy court may recognize our claims
as a creditor of the subsidiary. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to us are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Other Considerations
We suggest that you reach an investment decision only after carefully
considering the suitability of the STRYPES in the light of your particular
circumstances.
<PAGE>
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
STRYPES described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
COX COMMUNICATIONS, INC.
Cox is the fifth largest operator of cable television systems in the
United States and is a fully integrated, diversified media and broadband
communications company with operations and investments in three related areas:
(1) U.S. broadband networks; (2) United Kingdom broadband networks; and (3)
cable television programming.
Cox is subject to the informational requirements of the Exchange Act.
Accordingly, Cox files reports, proxy and information statements and other
information with the SEC. Copies of such material can be inspected and copied
at the public reference facilities maintained by the SEC at the addresses
specified under "Where You Can Find More Information". Reports, proxy and
information statements and other information concerning Cox may also be
inspected at the offices of the NYSE.
ML&Co. is not affiliated with Cox, and Cox has no obligations with
respect to the STRYPES. This prospectus relates only to the STRYPES offered
hereby and does not relate to the class A common stock of Cox. Cox has filed a
registration statement on Form S-3 with the SEC covering the shares of class A
common stock of Cox that may be received by a holder of STRYPES on the
maturity date or upon redemption. The prospectus of Cox constituting a part of
the registration statement includes information relating to Cox and its class
A common stock, including important factors relevant to an investment in the
class A common stock of Cox. The prospectus of Cox does not constitute a part
of this prospectus, nor is it incorporated by reference herein or therein.
DESCRIPTION OF THE STRYPES
ML&Co. issued the STRYPES as a series of senior debt securities under the
1983 indenture, which is more fully described in this prospectus. The
following summary of material provisions of the 1983 indenture does not
purport to be complete and is qualified in its entirety by reference to the
1983 indenture. A copy of the 1983 indenture is filed as an exhibit to the
registration statement of which this prospectus is a part.
Each STRYPES, which was issued at a price of $22.875 (the "Initial
Price"), bears interest at the rate of 6% of the issue price per annum, or
$1.37 per annum, from May 29, 1996, or from the most recent Interest Payment
Date to which interest has been paid or provided for, until the maturity date
or such earlier date on which the STRYPES is redeemed or the issue price of
the STRYPES is repaid pursuant to the terms of the STRYPES. Interest on the
STRYPES will be payable in cash quarterly in arrears on March 1, June 1,
September 1 and December 1, beginning September 1, 1996, and on the maturity
date (each, an "Interest Payment Date"), to the persons in whose names the
STRYPES are registered at the close of business on the last day (whether or
not a Business Day) of the calendar month immediately preceding such Interest
Payment Date. Interest on the STRYPES will be computed on the basis of a
360-day year of twelve 30-day months. If an Interest Payment Date falls on a
day that is not a Business Day, the interest payment to be made on such
Interest Payment Date will be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date, and no
additional interest will accrue as a result of the delayed payment.
The maturity date of the STRYPES is June 1, 1999. On the maturity date,
unless previously redeemed, ML&Co. will pay and discharge each STRYPES by
delivering to the holder thereof a number of shares (the number of shares is
referred to in this prospectus as the "Payment Rate") of class A common stock
of Cox, subject to ML&Co.'s right to deliver, with respect to all, but not
less than all, shares of class A common stock of Cox deliverable on the
maturity date, cash with an equal value, as determined in accordance with the
"Payment Rate Formula" described below. The Payment Rate Formula is subject to
adjustment as a result of dilution events described in this prospectus.
(a) If the Maturity Price (as defined below) per share of class A common
stock of Cox is greater than or equal to the Threshold Appreciation
Price, the holder of the STRYPES will receive .8196 shares of class
A common stock of Cox per STRYPES;
(b) If the Maturity Price is less than the Threshold Appreciation Price
but is greater than the Initial Price, the holder of the STRYPES
will receive a fractional share of class A common stock of Cox per
STRYPES so that the value, which is determined based on the Maturity
Price, is equal to the Initial Price; and
(c) If the Maturity Price is less than or equal to the Initial Price,
the holder of the STRYPES will receive one share of class A common
stock of Cox per STRYPES.
Accordingly, you, as a holder of the STRYPES, cannot assume that the amount
you will receive on the maturity date will be equal to or greater than the
issue price of the STRYPES. If the Maturity Price of the class A common stock
of Cox is less than the Initial Price, the amount you will receive on the
maturity date will be less than the issue price you paid for the STRYPES, in
which case an investment in STRYPES will result in a loss. The numbers of
shares of class A common stock of Cox per STRYPES specified in clauses (a) and
(c) of the Payment Rate Formula are referred to in this prospectus as the
"Share Components".
Notwithstanding the foregoing, ML&Co. may, in lieu of delivering shares
of class A common stock of Cox, deliver cash in an amount equal to the value
of the number of shares of class A common stock of Cox at the Maturity Price,
subject to ML&Co.'s agreement contained in the STRYPES Agreement (as defined
below) to deliver on the maturity date the form of consideration that the
ML&Co. Subsidiary (as defined below) receives from Cox Enterprises, Inc.
("CEI"). The right to deliver cash, if exercised by ML&Co., must be exercised
with respect to all shares of class A common stock of Cox otherwise
deliverable on the maturity date in payment of all outstanding STRYPES. On or
before the sixth Business Day before the maturity date, ML&Co. will notify The
Depository Trust Company and the trustee and publish a notice in The Wall
Street Journal or another daily newspaper of national circulation stating
whether the STRYPES will be paid and discharged with shares of class A common
stock of Cox or cash. At the time the notice is published, the Maturity Price
will not have been determined. If ML&Co. elects to deliver shares of class A
common stock of Cox, holders of the STRYPES will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of such stock.
The "Maturity Price" is defined as the sum of
(A) the average Closing Price per share of class A common stock of Cox
on the 20 Trading Days immediately before, but not including, the
second Trading Day preceding the maturity date and
(B) the fair market value, as determined by the Board of Directors of
ML&Co., whose determination shall be conclusive and described in a
resolution adopted with respect thereto, as of the third Trading Day
preceding the maturity date of the Distributed Assets (as defined
below) applicable to one share of class A common stock of Cox.
The "Closing Price" of any security on any date of determination means
(1) the closing sale price or, if no closing price is reported, the last
reported sale price of the security on the NYSE on the date of determination
or, (2) if the security is not listed for trading on the NYSE on any date, as
reported in the composite transactions for the principal United States
securities exchange on which the security is so listed, or (3) if the security
is not so listed on a United States national or regional securities exchange,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System, or (4) if the security is not so reported, the last quoted
bid price for the security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or (5) if a bid price is
not available, the market value of the security on the date of determination
as determined by a nationally recognized independent investment banking firm
retained for this purpose by ML&Co. In the event that the Payment Rate Formula
is adjusted as described under "--Dilution Adjustments" below, each of the
Closing Prices used in determining the Maturity Price will be similarly
adjusted to derive, for purposes of determining which of clauses (a), (b) or
(c) of the Payment Rate Formula will apply on the maturity date, a Maturity
Price stated on a basis comparable to the Initial Price and the Threshold
Appreciation Price.
A "Trading Day" is defined as a day on which the security the Closing
Price of which is being determined (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the security.
For illustrative purposes only, the following table shows the number of
shares of class A common stock of Cox or the amount of cash that a holder of
STRYPES would receive for each STRYPES at various Maturity Prices. The table
assumes that there will be no dilution adjustments to the Payment Rate Formula
as described below. A holder of STRYPES cannot assume that the Maturity Price
will be within the range set forth below. Given the Initial Price of $22.875
and the Threshold Appreciation Price of $27.91, a STRYPES holder would receive
on the maturity date the following number of shares of class A common stock of
Cox or, if ML&Co. elects to pay and discharge the STRYPES with cash, the
amount of cash per STRYPES:
<PAGE>
Maturity Price Number of
of Class A Shares of Class A
Common Stock of Cox Common Stock of Cox Amount of Cash
$20.000 1.0000 $20.000
22.875 1.0000 22.875
25.000 0.9150 22.875
27.910 0.8196 22.875
30.000 0.8196 24.588
Dilution Adjustments
The Payment Rate Formula is subject to adjustment if Cox shall:
(1) pay a stock dividend or make a distribution with respect to the
class A common stock of Cox in shares of
such stock;
(2) subdivide or split the outstanding shares of class A common stock of
Cox into a greater number of shares;
(3) combine the outstanding shares of class A common stock of Cox into a
smaller number of shares;
(4) issue by reclassification of shares of class A common stock of Cox
any shares of class A common stock of Cox;
(5) issue rights or warrants to all holders of class A common stock of
Cox entitling them to subscribe for or purchase shares of class A
common stock of Cox at a price per share less than the then current
market price of the class A common stock of Cox, other than rights
to purchase class A common stock of Cox pursuant to a plan for the
reinvestment of dividends or interest; or
(6) pay a dividend or make a distribution to all holders of class A
common stock of Cox of evidences of its indebtedness or other
assets, excluding any stock dividends or distributions referred to
in clause (1) above or any cash dividends other than any
Extraordinary Cash Dividend (as defined below), or issue to all
holders of class A common stock of Cox rights or warrants to
subscribe for or purchase any of its securities (other than those
referred to in clause (5) above). Any of the foregoing are referred
to in this prospectus as the "Distributed Assets". The effect of the
foregoing is that there will not be any adjustments to the Payment
Rate Formula for the issuance by Cox of options, warrants, stock
purchase rights or securities in connection with Cox's employee
benefit plans.
In the case of the events referred to in clauses (1), (2), (3) and (4)
above, the Payment Rate Formula shall be adjusted so that each holder of any
STRYPES shall thereafter be entitled to receive, upon payment and discharge or
redemption of the STRYPES, the number of shares of class A common stock of Cox
which a holder would have owned or been entitled to receive immediately
following any event in clauses (1), (2), (3) and (4) had the STRYPES been paid
and discharged or redeemed immediately before the event or any record date
with respect to the event.
In the case of the event referred to in clause (5) above, the Payment
Rate Formula shall be adjusted by multiplying each of the Share Components in
the Payment Rate Formula in effect immediately before the date of issuance of
the rights or warrants referred to in clause (5) above by a fraction, the
numerator of which shall be the number of shares of class A common stock of
Cox outstanding on the date of issuance of the rights or warrants, immediately
before the issuance, plus the number of additional shares of class A common
stock of Cox offered for subscription or purchase pursuant to the rights or
warrants, and the denominator of which shall be the number of shares of class
A common stock of Cox outstanding on the date of issuance of the rights or
warrants, immediately before the issuance, plus the number of additional
shares of class A common stock of Cox which the aggregate offering price of
the total number of shares of class A common stock of Cox so offered for
subscription or purchase pursuant to the rights or warrants would purchase at
the current market price, determined as the average Closing Price per share of
class A common stock of Cox on the 20 Trading Days immediately before the date
the rights or warrants are issued, subject to certain adjustments, which shall
be determined by multiplying the total number of shares by the exercise price
of the rights or warrants and dividing the product so obtained by the current
market price. To the extent that shares of class A common stock of Cox are not
delivered after the expiration of the rights or warrants, or if the rights or
warrants are not issued, the Payment Rate Formula shall be readjusted to the
Payment Rate Formula which would then be in effect had the adjustments for the
issuance of the rights or warrants been made upon the basis of delivery of
only the number of shares of class A common stock of Cox actually delivered.
In the case of the event referred to in clause (6) above, the Payment
Rate Formula shall be adjusted by multiplying each of the Share Components in
the Payment Rate Formula in effect on the record date by a fraction, (A) the
numerator of which shall be the market price per share of the class A common
stock of Cox, which shall be the average Closing Price per share of class A
common stock of Cox on the 20 Trading Days immediately before such record
date, subject to certain adjustments, on the record date for the determination
of stockholders entitled to receive the dividend or distribution referred to
in clause (6) above, and (B) the denominator of which shall be the market
price per share of class A common stock of Cox less the fair market value, as
determined by the Board of Directors of ML&Co., whose determination shall be
conclusive, and described in a resolution adopted with respect thereto, as of
the record date of the portion of the Distributed Assets so distributed
applicable to one share of class A common stock of Cox; provided, however,
that in the event that the then fair market value of the portion of the
Distributed Assets so distributed applicable to one share of class A common
stock of Cox is equal to or greater than the market price per share of class A
common stock of Cox as of the record date, in lieu of the foregoing
adjustment, ML&Co. shall reserve the Distributed Assets or, in the case of
Distributed Assets of a kind described in (c) below, an amount in cash equal
to the fair market value thereof, determined in the manner and as of the date
described in clause (c) below, for delivery to the holders of the STRYPES on
the maturity date and, on the maturity date, shall deliver to each holder, in
addition to the shares of class A common stock of Cox or cash in lieu thereof
to which the holder is otherwise entitled,
(a) in respect of that portion, if any, of the Distributed Assets
consisting of cash, the amount of the Distributed Assets consisting
of cash which the holder would have received had each STRYPES held
by the holder been paid and discharged immediately before the record
date for the determination of stockholders entitled to receive the
dividend or distribution or the rights or warrants, without
interest, plus
(b) in respect of that portion, if any, of the Distributed Assets
consisting of securities for which there is an actual or when issued
trading market ("marketable securities"), the amount of the
Distributed Assets consisting of marketable securities which the
holder would have received had each STRYPES held by the holder been
paid and discharged immediately before the record date for the
determination of stockholders entitled to receive the dividend or
distribution or the rights or warrants, plus
(c) in respect of that portion, if any, of the Distributed Assets which
are of a kind other than that described in clause (a) or (b) above,
an amount in cash equal to the fair market value, as determined by
the Board of Directors of ML&Co., whose determination shall be
conclusive, and described in a resolution adopted with respect
thereto, as of the record date for determination of stockholders
entitled to receive the dividend or distribution or the rights or
warrants, of the Distributed Assets consisting of other assets which
the holder would have received had each STRYPES held by the holder
been paid and discharged immediately before the record date, without
interest thereon.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, all cash dividends on the class A common stock of Cox during
the period to the extent the dividends exceed on a per share basis 10% of the
average Closing Price of the class A common stock of Cox over the period, less
any dividends for which a prior adjustment to the Payment Rate Formula was
previously made. All adjustments to the Payment Rate Formula will be
calculated to the nearest 1/10,000th of a share of class A common stock of Cox
or, if there is not a nearest 1/10,000th of a share, to the next lower
1/10,000th of a share. No adjustment in the Payment Rate Formula shall be
required unless the adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. If an adjustment is made
to the Payment Rate Formula as described above, an adjustment will also be
made to the Maturity Price solely to determine which of clauses (a), (b) or
(c) of the Payment Rate Formula will apply on the maturity date. The required
adjustment to the Maturity Price will be made by multiplying each of the
Closing Prices used in determining the Maturity Price by a fraction, the
numerator of which shall be the Share Component in clause (c) of the Payment
Rate Formula immediately after the adjustment described above, and the
denominator of which shall be the Share Component in clause (c) of the Payment
Rate Formula immediately before the adjustment described above. Each the
adjustment to the Payment Rate Formula shall be made successively.
In the event of a "Reorganization Event", which is
(A) any consolidation or merger of Cox, or any surviving entity or
subsequent surviving entity of Cox (a "Cox Successor"), with or into
another entity (other than a merger or consolidation in which Cox is
the continuing corporation and in which the class A common stock of
Cox outstanding immediately before the merger or consolidation is
not exchanged for cash, securities or other property of Cox or
another corporation),
(B) any sale, transfer, lease or conveyance to another corporation of
the property of Cox or any Cox Successor as an entirety or
substantially as an entirety,
(C) any statutory exchange of securities of Cox or any Cox Successor
with another corporation, other than in connection with a merger or
acquisition, or
(D) any liquidation, dissolution, winding up or bankruptcy of Cox or any
Cox Successor,
the Payment Rate Formula used to determine the amount payable on the maturity
date for each STRYPES will be adjusted to provide that each holder of STRYPES
will receive on the maturity date for each STRYPES cash in an amount equal to
(a) if the Transaction Value (as defined below) is greater than or equal to
the Threshold Appreciation Price, .8196 multiplied by the Transaction Value,
(b) if the Transaction Value is less than the Threshold Appreciation Price but
greater than the Initial Price, the Initial Price and (c) if the Transaction
Value is less than or equal to the Initial Price, the Transaction Value.
"Transaction Value" means
(1) for any cash received in any Reorganization Event, the amount of
cash received per share of class A common stock of Cox,
(2) for any property other than cash or securities received in any
Reorganization Event, an amount equal to the market value on the
maturity date of the property received per share of class A common
stock of Cox as determined by a nationally recognized independent
investment banking firm retained for this purpose by ML&Co. and
(3) for any securities received in any Reorganization Event, an amount
equal to the average Closing Price per unit of the securities on the
20 Trading Days immediately before the second Trading Day preceding
the maturity date multiplied by the number of the securities
received for each share of class A common stock of Cox.
Notwithstanding the foregoing, in the event that property or securities,
or a combination of cash, on the one hand, and property or securities, on the
other, are received in a Reorganization Event, ML&Co. may, in lieu of
delivering cash as described above, deliver the amount of cash, securities and
other property received per share of class A common stock of Cox in the
Reorganization Event determined in accordance with clause (1), (2) or (3)
above, as applicable. If ML&Co. elects to deliver securities or other
property, holders of the STRYPES will be responsible for the payment of any
and all brokerage and other transaction costs upon any subsequent sale of the
securities or other property. The kind and amount of securities with which the
STRYPES shall be paid and discharged after consummation of the transaction
shall be subject to adjustment as described above following the date of
consummation of the transaction.
No adjustments will be made for other events, such as the offerings of
class A common stock of Cox by Cox for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of class A
common stock of Cox by CEI.
ML&Co. is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Payment Rate Formula, or, if
ML&Co. is not aware of the occurrence of an event, as soon as practicable
after becoming so aware, to provide written notice to the trustee and to the
holders of the STRYPES of the occurrence of the event and a statement in
reasonable detail setting forth the adjusted Payment Rate Formula and the
method by which the adjustment to the Payment Rate Formula was determined;
provided that, in respect of any adjustment to the Maturity Price, the notice
will only disclose the factor by which each of the Closing Prices used in
determining the Maturity Price is to be multiplied in order to determine the
Payment Rate on the maturity date. Until the maturity date, the Payment Rate
itself cannot be determined.
Fractional Shares
No fractional shares of class A common stock of Cox will be delivered if
ML&Co. pays and discharges the STRYPES by delivering shares of class A common
stock of Cox. In lieu of any fractional share otherwise deliverable in respect
of all STRYPES of any holder on the maturity date, the holder shall be
entitled to receive an amount in cash equal to the value of the fractional
share at the Maturity Price.
Special Redemption Upon Tax Event
The STRYPES will be redeemable at the option of ML&Co., in whole but not
in part, at any time from and after the date (the "Tax Event Date") on which a
Tax Event (as defined below) shall occur at a price per STRYPES (the "Tax
Event Redemption Price") equal to (a) an amount of cash equal to the sum of
(1) all accrued and unpaid interest on the STRYPES to the date fixed for
redemption (the "Redemption Date"), (2) the sum of all interest payments on
the STRYPES due after the Redemption Date and on or before the maturity date
and (3) $1.37, which is equal to the interest payable on such STRYPES for one
year, plus (b) a number of shares of class A common stock of Cox determined in
accordance with the Payment Rate Formula. The Redemption Date will be deemed
to be the maturity date for purposes of calculating the Maturity Price.
A "Tax Event" means that CEI shall have delivered to ML&Co. an opinion
(the "Tax Event Opinion") from independent tax counsel experienced in such
matters to the effect that, as a result of
(a) any amendment or proposed amendment to, or change, including any
announced prospective change or proposed change in the laws or any
regulations thereunder, of the United States or any taxing authority
thereof or therein or
(b) any amendment to, or change in, an interpretation or application of
such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, enacted, promulgated,
introduced, issued or announced or which interpretation is issued or
announced or which action is taken, on or after the date of this
Prospectus Supplement,
there is more than an insubstantial risk that a corporation that sells or
otherwise disposes of stock in another corporation on a date that is after the
date of this Prospectus Supplement and that is on or before the maturity date
would not be permitted to specifically identify the stock sold or disposed of
for purposes of determining the amount of such corporation's gain or loss on
the stock sold or disposed of for United States Federal income tax purposes.
On March 19, 1996, the U.S. Treasury Department proposed a series of tax
law changes as part of President Clinton's 1997 Budget proposal. These
proposed tax law changes would, among other things, require taxpayers,
including corporations, that sell or otherwise dispose of securities, which
includes stock in a corporation, that are substantially identical to
securities which they continue to hold to determine their tax basis in the
substantially identical securities using the average basis of all of their
holdings in the securities. The proposed tax law changes also would prevent
the taxpayers from specifically identifying the securities sold or disposed of
for purposes of determining the amount of their gain or loss on the securities
sold or disposed of for United States Federal income tax purposes. As
originally proposed, this "average cost basis" rule would apply to
determinations, such as tax basis determinations made at the time of sale or
disposition, made more than 30 days after the date on the which the proposal
is enacted. Thus, if this "average cost basis" rule is ultimately adopted in
its current form on a date that is 31 or more days before the maturity date,
the enactment could result in a Tax Event. Furthermore, if there are future
legislative developments which would result in more than an insubstantial risk
that this "average cost basis" rule or a provision with similar effect will be
adopted and effective for determinations made on or before the maturity date,
the legislative developments could result in a Tax Event. ML&Co. cannot
predict whether or not these proposed tax law changes will ultimately become
law or whether or not any other future change or proposed change in the tax
law will occur which could give rise to a Tax Event. Moreover, ML&Co. cannot
predict whether CEI will elect to cause a Tax Event by delivering the Tax
Event Opinion to ML&Co. in the event that a change or proposed change in the
tax law occurs which could give rise to a Tax Event.
ML&Co. will provide notice of any call for redemption of STRYPES to
holders of record of the STRYPES not less than 10 nor more than 30 calendar
days before the related Redemption Date. The notice will state the following
and may contain other information as ML&Co. deems advisable: (a) the
Redemption Date; (b) the place or places where certificates for the STRYPES
are to be surrendered for redemption; and (c) that interest will cease to
accrue on the STRYPES on the Redemption Date, except as otherwise provided in
the 1983 indenture. The notice will be provided by mail, sent to each holder
of record of STRYPES at the holder's address as it appears on the security
register for the STRYPES, first class postage prepaid; provided, however, that
failure to give notice or any defect therein shall not affect the validity of
the proceeding for redemption of any STRYPES except as to the holder to whom
ML&Co. has failed to give said notice or whose notice was defective. At or
before the mailing of the notice of redemption, ML&Co. will publish a public
announcement of redemption in The Wall Street Journal or another daily
newspaper of national circulation.
ML&Co. will not be required to deliver any fractional share of class A
common stock of Cox on the Redemption Date. ML&Co. will instead pay an amount
in cash equal to the value of the fractional share of class A common stock of
Cox based on the average Closing Price per share of class A common stock of
Cox on the 20 Trading Days immediately before, but not including, the second
Trading Day before the Redemption Date.
On and after the Redemption Date, all rights of a holder of STRYPES will
terminate except the right to receive for each STRYPES so redeemed the Tax
Event Redemption Price, unless there is a default on the payment of the Tax
Event Redemption Price.
No Sinking Fund
The STRYPES do not contain sinking fund or other mandatory redemption
provisions. The STRYPES are not subject to payment before the maturity date at
the option of the holder.
Ranking
The STRYPES will be unsecured obligations and will rank pari passu with
all other unsecured and unsubordinated indebtedness of ML&Co.
There are no contractual restrictions on the ability of ML&Co. or its
subsidiaries to incur additional secured or unsecured debt. However,
borrowings by certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Securities Depository
Description of the Global Securities
The STRYPES are represented by one or more fully registered global
securities. Each global security has been 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 STRYPES 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 STRYPES represented by a global security for all
purposes under the 1983 indenture. Except as provided below, the beneficial
owners of the STRYPES represented by a global security are not entitled to
have the STRYPES represented by the global security registered in their names,
will not receive or be entitled to receive physical delivery of the STRYPES in
definitive form and are not considered the owners or holders under the 1983
indenture, including for purposes of receiving any reports delivered by ML&Co.
or the trustee pursuant to the 1983 indenture. Accordingly, each person owning
a beneficial interest in a global security must rely on the procedures of DTC
and, if the person is not a participant of DTC on the procedures of the
participant through which the 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 action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants and by participants and indirect
participants to beneficial owners are 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 STRYPES. The STRYPES have been
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One or more fully registered global securities
have been issued for the STRYPES in the aggregate principal amount of such
issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 certain 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 STRYPES under DTC's system must be made by or through direct
participants, which will receive a credit for the STRYPES 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 such beneficial owner
entered into the transaction. Transfers of ownership interests in the STRYPES
are to be accomplished by entries made on the books of participants acting on
behalf of beneficial owners.
To facilitate subsequent transfers, all STRYPES deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
STRYPES 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 STRYPES; DTC's records reflect only the identity of the direct
participants to whose accounts such STRYPES are credited, which may or may not
be the beneficial owners. The participants are 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 are 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
STRYPES. 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
STRYPES are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
STRYPES 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 such
date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If:
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, and
(c) an Event of Default under the 1983 indenture has occurred and is
continuing with respect to the STRYPES,
the global securities will be exchangeable for STRYPES in definitive form of
like tenor and of an equal aggregate principal amount. The definitive STRYPES
will be registered in such name or names as the depositary shall instruct the
trustee. It is expected that such 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, STRYPES 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.
Governing Law
The 1983 indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
Listing
The STRYPES have been listed on the NYSE under the symbol CML.
OTHER TERMS
ML&Co. issued the STRYPES 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 STRYPES
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 STRYPES 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 such 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 debt securities affected. However, without the consent of each
holder of any outstanding debt security affected, no amendment or modification
to any 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 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 any indenture which
cannot be modified under the terms of that indenture without the
consent of each holder of each series of 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 STRYPES 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.
CERTAIN ARRANGEMENTS WITH CEI
Pursuant to an agreement (the "STRYPES Agreement"), CEI is obligated to
deliver to Merrill Lynch Capital Services, Inc., a wholly-owned subsidiary of
ML&Co. (the "ML&Co. Subsidiary"), immediately before the maturity date a
number of shares of class A common stock of Cox equal to the number required
by ML&Co. to pay and discharge all of the STRYPES. In lieu of delivering
shares of class A common stock of Cox immediately before the maturity date,
CEI has the right to satisfy its obligation under the STRYPES Agreement by
delivering cash in an amount equal to the value of the number of shares of
class A common stock of Cox at the Maturity Price. The right to deliver cash,
if exercised by CEI, must be exercised with respect to all shares of class A
common stock of Cox then deliverable pursuant to the STRYPES Agreement. Under
the STRYPES Agreement, ML&Co. has agreed to pay and discharge the STRYPES by
delivering to the holders thereof on the maturity date the form of
consideration that the ML&Co. Subsidiary receives from CEI. CEI also has the
option, exercisable on or after a Tax Event Date, to satisfy and discharge its
obligations under the STRYPES Agreement by delivering to the ML&Co.
Subsidiary, on a date fixed by CEI for early settlement, cash and shares of
class A common stock of Cox in an amount and number, respectively, equal to
the amount and number required by ML&Co. to redeem all of the STRYPES. Under
the STRYPES Agreement, ML&Co. has agreed to redeem all of the STRYPES in the
event that CEI exercises the option. The consideration paid by the ML&Co.
Subsidiary under the STRYPES Agreement is $188,572,500 in the aggregate, and
was paid to CEI on May 29, 1996. No other consideration is payable by the
ML&Co. Subsidiary to CEI in connection with its acquisition of the class A
common stock of Cox or the performance of the STRYPES Agreement by CEI. ML&Co.
has agreed with CEI that, without the prior consent of CEI, it will not amend
the 1983 indenture to increase the consideration that CEI is obligated to
deliver pursuant to the STRYPES Agreement.
Until the time, if any, as CEI shall have delivered shares of class A
common stock of Cox to the ML&Co. Subsidiary under the terms of the STRYPES
Agreement, CEI will retain all ownership rights with respect to the class A
common stock of Cox held by it. The ownership rights include, among others,
voting rights and rights to receive any dividends or other distributions.
CEI has no obligations with respect to the STRYPES or amounts to be paid
to holders thereof, including any obligation to take the needs of ML&Co. or
holders of the STRYPES into consideration in determining whether to deliver
shares of class A common stock of Cox or cash or for any other reason. The
STRYPES Agreement between the ML&Co. Subsidiary and CEI is a commercial
transaction and does not create any rights in, or for the benefit of, any
third party, including any holder of STRYPES.
In the event CEI does not perform under the STRYPES Agreement, ML&Co.
will be required to otherwise acquire shares of class A common stock of Cox
for delivery to holders of the STRYPES on the maturity date or upon
redemption, unless, in the case of shares deliverable on the maturity date, it
elects to exercise its option to deliver cash with an equal value.
WHERE YOU CAN FIND MORE INFORMATION
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 STRYPES and other securities. For further information on ML&Co. and the
STRYPES, 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 STRYPES and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the STRYPES.
MLPF&S may act as principal or agent in these market-making transactions.
The STRYPES may be offered on the NYSE or off the exchange in negotiated
transactions or otherwise.
The distribution of the STRYPES 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
7-1/4% STRUCTURED YIELD PRODUCT EXCHANGEABLE FOR STOCKSM
Due June 15, 1999
"STRYPES SM"
Payable with Shares of Common Stock of SunAmerica Inc.
or cash with an equal value
------------------------
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the STRYPES.
The issue price of each STRYPES was $56.375, which was the last sale
price of the common stock, par value $1.00 per share, of SunAmerica on June 6,
1996, as reported on the New York Stock Exchange. The STRYPES will mature on
June 15, 1999.
What you will receive before June 15, 1999:
o On each March 15, June 15, September 15 and December 15, beginning
September 15, 1996, we will pay you interest on the STRYPES in cash at
the rate of 7 1/4% per year.
o We may redeem the STRYPES at any time before June 15, 1999, in whole or
in part. We will pay a redemption price either in (i) shares of common
stock of SunAmerica or (ii) if we choose to pay in cash, an equivalent
amount in cash. In addition, we will pay an amount in cash equal to
accrued and unpaid interest on the STRYPES to but excluding the
redemption date. If we choose to pay in cash, we must pay cash with
respect to all of the STRYPES we redeem on any redemption date.
What you will receive on June 15, 1999:
o For each STRYPES you own, you will receive one share of common stock of
SunAmerica, which may be adjusted for the events described in this
prospectus. If we choose to pay cash instead of shares of common stock of
SunAmerica, you will receive cash equal to the current market price of
the common stock of SunAmerica.
Investing in the STRYPES involves risks, including the risk that your investment
may result in a loss. See "Risk Factors" beginning on page 3.
The STRYPES are listed on the New York Stock Exchange under the symbol
"SAI".
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 STRYPES will be the prevailing price at the time of
sale.
---------------------------
Merrill Lynch & Co.
---------------------------
The date of this prospectus is , 1999.
"STRYPES" and "Structured Yield Product Exchangeable for Stock" are registered
service marks owned by ML&Co.
<PAGE>
TABLE OF CONTENTS
RISK FACTORS..............................................................3
MERRILL LYNCH & CO., INC..................................................8
RATIO OF EARNINGS TO FIXED CHARGES........................................9
SUNAMERICA INC...........................................................10
DESCRIPTION OF THE STRYPES...............................................10
OTHER TERMS..............................................................18
CERTAIN ARRANGEMENTS WITH THE SELLING STOCKHOLDER........................21
WHERE YOU CAN FIND MORE INFORMATION......................................22
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........................22
PLAN OF DISTRIBUTION.....................................................24
EXPERTS..................................................................24
<PAGE>
RISK FACTORS
Your investment in the STRYPES will involve risks. You should carefully
consider the following discussion of risks before deciding whether an
investment in the STRYPES is suitable for you.
You may suffer a loss on your investment
You should be aware that at maturity the amount you will receive may be
less than the amount you paid for the STRYPES because the price of the common
stock of SunAmerica is subject to market fluctuations. If you receive less
than the amount you paid, your investment in the STRYPES will result in a loss
to you. When you invest in the STRYPES, you assume the risk that the market
value of the common stock of SunAmerica may decline, and that the decline
could be substantial.
The date or dates we calculate the current market price of the common stock of
SunAmerica may affect the amount you receive on the maturity date or the
redemption date
The notice date for the maturity date or the redemption date will occur
at least 30 and up to 60 days before the maturity date or the redemption date,
as the case may be. If we (1) elect to pay the STRYPES in cash at maturity or
(2) elect to redeem the STRYPES and to pay the redemption price by delivering
shares of common stock of SunAmerica, we will determine the amount of cash or
the number of shares based on the current market price as of the second
trading day before the notice date. Because the price of the common stock of
SunAmerica is subject to market fluctuations, the amount of cash we deliver on
the maturity date for each STRYPES may be more or less than the market value
on the maturity date of the common stock of SunAmerica which you would
otherwise have been entitled to receive. In addition, the market value on a
redemption date of shares of common stock of SunAmerica we may deliver may be
more or less than the redemption price.
The current market price we will use too determine the amount of cash
which we may pay at maturity or the number of shares of common stock of
SunAmerica which we may deliver upon redemption of the STRYPES will generally
be equal to the average of the daily closing prices of the common stock of
SunAmerica for the five consecutive trading days ending on and including the
date of determination. However, if the closing price on the trading day
following the five-day period is less than 95% of the five-day average closing
price, then the current market price on the date of determination will be the
closing price on the trading day following the five-day period. Because the
price of the common stock of SunAmerica is subject to market fluctuations, it
is possible that the closing price on the trading day following the five-day
period could be significantly less than the five-day average. Please review
the section "Description of the STRYPES--Certain Definitions".
There may be a limited opportunity for capital appreciation
Your opportunity for equity appreciation may be greater if you made a
direct investment in the common stock of SunAmerica because the price of the
common stock of SunAmerica is subject to market fluctuations and because we
may redeem the STRYPES at any time before the maturity date at the redemption
prices described in this prospectus. Although we are not obligated to redeem
the STRYPES before the maturity date, we expect to redeem the STRYPES if the
market price of the common stock of SunAmerica exceeds the redemption price.
Therefore, you will receive less than one share of common stock of SunAmerica
for each STRYPES or cash equal to the current market price of less than one
share of common stock of SunAmerica). Please review "Description of the
STRYPES--Optional Redemption".
If we elect to redeem the STRYPES, the capital appreciation, except for
the accrued interest that you may realize on an investment in the STRYPES,
will be limited to any excess of (1) the value of the common stock of
SunAmerica or the amount of cash you receive as the redemption price, which
declines from $86.568 and to $76.106, over (2) the price you paid for the
STRYPES.
There are many factors affecting the trading prices of the STRYPES
The trading prices of the STRYPES in the secondary market will be
directly affected by the trading prices of the common stock of SunAmerica in
the secondary market. It is impossible to predict whether the price of the
common stock of SunAmerica will rise or fall because several factors may
influence the trading prices of the common stock of SunAmerica. These factors
include:
o SunAmerica's operating results and prospects,
o complex and interrelated political, economic, financial and other
factors and market conditions that can affect (1) the capital
markets generally, (2) the market segment of which SunAmerica is a
part, or (3) the NYSE, on which the common stock of SunAmerica is
traded, including the level of, and fluctuations in, the trading
prices of stocks generally and sales of substantial amounts of the
common stock of SunAmerica in the market subsequent to the offering
of the STRYPES or the perception that these sales could occur, and
o other events that are difficult to predict and are beyond our
control.
Investing in the STRYPES may affect the market for the common stock of
SunAmerica
Any market that develops for the STRYPES is likely to influence and be
influenced by the market for the common stock of SunAmerica. For example, the
price of common stock of SunAmerica could become more volatile and could be
depressed
o by investors' anticipation of the potential distribution into the
market of substantial amounts of common stock of SunAmerica on the
maturity date or upon redemption,
o by possible sales of common stock of SunAmerica by investors who
view the STRYPES as a more attractive means of equity participation
in SunAmerica, and
o by hedging or arbitrage trading activity that may develop involving
the STRYPES and the common stock of SunAmerica.
In addition, Mr. Eli Broad, who is the selling Stockholder, is not
precluded from selling common stock of SunAmerica. Any of these activities
could adversely affect the market price of the common stock of SunAmerica and
the STRYPES.
There may be illiquidity of the STRYPES in the secondary market
It is not possible to predict how the STRYPES will trade in the secondary
market or whether the secondary market for the STRYPES will be liquid or
illiquid. The STRYPES are novel securities and there is currently no secondary
market for the STRYPES. Although the STRYPES are listed on the NYSE under the
symbol "SAI", you cannot assume
o that an active trading market for the STRYPES will develop,
o that listing on the NYSE will provide you with liquidity of
investment,
o that the STRYPES will not later be delisted or
o that trading of the STRYPES on the NYSE will not be suspended.
If the NYSE delists the STRYPES or suspends the trading of the STRYPES,
we will apply for listing of the STRYPES on another national securities
exchange or for quotation on another trading market. If the STRYPES are not
listed or traded on any securities exchange or trading market, or if trading
of the STRYPES is suspended, pricing information for the STRYPES may be more
difficult to obtain and the liquidity of the STRYPES may be adversely
affected.
As a holder of STRYPES, you have no stockholder's rights with respect to the
common stock of SunAmerica
You will not be entitled to any rights, including voting rights and
rights to receive any dividends or other distributions for the common stock of
SunAmerica, until we have delivered the shares of common stock of SunAmerica
on the maturity date or the redemption date. In addition, you will not be
entitled to any rights if the applicable record date for the exercise of any
rights occurs before the maturity date or the redemption date. For example, if
an amendment is proposed to the certificate of incorporation of SunAmerica and
the record date for determining the stockholders of record entitled to vote on
the amendment occurs before we deliver the common stock of SunAmerica, you, as
a holder of the STRYPES, will not be entitled to vote on the proposed
amendment.
The selling stockholder has no obligations with respect to the STRYPES
We are not affiliated with the selling stockholder. The selling
stockholder has no obligations with respect to the STRYPES or amounts to be
paid to you, including any obligation to take our needs or yours, as a holder
of the STRYPES, into consideration for any reason.
SunAmerica has no obligations with respect to the STRYPES
We are not affiliated with SunAmerica. SunAmerica has no obligations with
respect to the STRYPES or amounts to be paid to you, including any obligation
to take our needs or yours, as a holder of the STRYPES, into consideration for
any reason. SunAmerica will not receive any of the proceeds of this offering
of the STRYPES. SunAmerica is not responsible for, and has not participated
in, the determination of the timing of, prices for or quantities of the
STRYPES to be issued, or the determination or calculation of the amount you
may receive on the maturity date or the redemption date. In addition,
SunAmerica is not involved with the administration or trading of the STRYPES.
There may be a dilution of common stock of SunAmerica
The number of shares of common stock of SunAmerica or the equivalent
amount of cash that you are entitled to receive on the maturity date or the
redemption date is subject to adjustment for events such as:
o a merger or consolidation in which SunAmerica is not the surviving
or resulting corporation,
o a sale or transfer of all or substantially all of the assets of
SunAmerica,
o the liquidation, dissolution, winding up or bankruptcy of
SunAmerica,
o stock splits and combinations, stock dividends, and
o other actions of SunAmerica that modify its capital structure.
Please review the section entitled "Description of the STRYPES--Dilution
Adjustments".
The number of shares of common stock of SunAmerica or the equivalent
amount of cash that you may receive on the maturity date or redemption date
will not be adjusted for other events, such as offerings of common stock of
SunAmerica for cash or in connection with acquisitions. SunAmerica is not
restricted from issuing additional shares of common stock during the term of
the STRYPES and has no obligation to consider the interests of the holders of
the STRYPES for any reason. Additional issuances may materially and adversely
affect the price of the common stock of SunAmerica.
The tax treatment of STRYPES is uncertain
Because of an absence of authority as to the proper characterization of
the STRYPES, their ultimate tax treatment is uncertain. Accordingly, you
cannot assume that any particular characterization and treatment of the
STRYPES will be accepted by the Internal Revenue Service or upheld by a court.
However, it is the opinion of Brown & Wood LLP, counsel to ML&Co., that the
characterization and tax treatment of the STRYPES described in this
prospectus, while not the only reasonable characterization and tax treatment,
is based on reasonable interpretations of law currently in effect and, even if
successfully challenged by the IRS, will not result in the imposition of
penalties. Under the 1983 indenture, if you are subject to United States
Federal income tax, you are required to include currently in income, for
United States Federal income tax purposes, payments denominated as interest
that are made with respect to a STRYPES in accordance with your regular method
of tax accounting. In addition, ML&Co. and you, as a holder of the STRYPES are
required to treat each STRYPES for tax purposes as a unit consisting of
o a debt instrument with a fixed principal amount unconditionally
payable on the maturity date equal to the issue price of the STRYPES
and bearing interest at the stated interest rate on the STRYPES and
o a forward purchase contract pursuant to which you agree to use the
principal payment due on the debt instrument or, in the event of
redemption on or before the maturity date, the redemption price to
purchase on the maturity date or upon redemption on or before the
maturity date the common stock of SunAmerica which ML&Co. is
obligated under the STRYPES to deliver at that time, subject to
ML&Co.'s right to deliver cash in lieu of the common stock of
SunAmerica.
The 1983 indenture also requires that upon the acquisition of a STRYPES
and upon your sale or other disposition of a STRYPES before the maturity date
or redemption of the STRYPES, the amount paid or realized be allocated by you
between the debt instrument and the forward purchase contract based upon their
relative fair market values, as determined on the date of acquisition or
disposition. For these purposes, with respect to acquisitions of STRYPES in
connection with the original issuance of the STRYPES, ML&Co. and you agree,
pursuant to the terms of the 1983 indenture, to assign $57.277 or 101.6% of
the initial purchase price of a STRYPES to the debt instrument component and
to assign $.902 or 1.6% of the initial purchase price of a STRYPES to the
forward purchase contract component.
The appropriate character and timing of income, gain or loss to be
recognized on a STRYPES is uncertain. You should consult your own tax adviser
concerning the application of the United States Federal income tax laws to
your particular situation and any consequences of the purchase, ownership and
disposition of the STRYPES arising under the laws of any other taxing
jurisdiction.
Our holding company structure may affect your right to participate in any
distribution of assets of any subsidiary
Since we are a holding company, our right and the right of our creditors,
including you, as a holder of STRYPES, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent a bankruptcy court may recognize our claims
as a creditor of the subsidiary. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to us are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Other Considerations
We suggest that you reach an investment decision only after carefully
considering the suitability of the STRYPES in the light of your particular
circumstances.
<PAGE>
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
STRYPES described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
SUNAMERICA INC.
SunAmerica is a diversified financial services company specializing in
retirement savings products and services.
SunAmerica is subject to the informational requirements of the Exchange
Act. Accordingly, SunAmerica files reports, proxy and information statements
and other information with the SEC. Copies of such material can be inspected
and copied at the public reference facilities maintained by the SEC at the
addresses specified under "Where You Can Find More Information". Reports,
proxy and information statements and other information concerning SunAmerica
may also be inspected at the offices of the NYSE.
ML&Co. is not affiliated with SunAmerica, and SunAmerica has no
obligations with respect to the STRYPES. This prospectus relates only to the
STRYPES offered hereby and does not relate to the common stock of SunAmerica.
SunAmerica has filed a registration statement on Form S-3 with the SEC
covering the shares of common stock of SunAmerica common stock that may be
received by a holder of STRYPES on the maturity date or upon redemption. The
prospectus of SunAmerica constituting a part of the registration statement
includes information relating to SunAmerica and the common stock of
SunAmerica. The prospectus of SunAmerica does not constitute a part of this
prospectus, nor is it incorporated by reference in this prospectus.
DESCRIPTION OF THE STRYPES
ML&Co. issued the STRYPES as a series of senior debt securities under the
1983 indenture, which is more fully described in this prospectus. The
following summary of material provisions of the 1983 indenture does not
purport to be complete and is qualified in its entirety by reference to the
1983 indenture. A copy of the 1983 indenture is filed as an exhibit to the
registration statement of which this prospectus is a part.
Each STRYPES, which was issued at the issue price of $56.375, bears
interest at the rate of 71/4% of the issue price per annum or $4.0872 per
annum from June 12, 1996, or from the most recent Interest Payment Date to
which interest has been paid or provided for, until the maturity date or the
earlier date on which the STRYPES is redeemed or the issue price of the
STRYPES is repaid pursuant to the terms of the STRYPES. Interest on the
STRYPES will be payable in cash quarterly in arrears on March 15, June 15,
September 15 and December 15, beginning September 15, 1996, and on the
maturity date (each, an "Interest Payment Date"), to the persons in whose
names the STRYPES are registered at the close of business on the last day,
whether or not a Business Day, of the calendar month immediately preceding the
Interest Payment Date. Interest on the STRYPES will be computed on the basis
of a 360-day year of twelve 30-day months. If an Interest Payment Date,
maturity date or redemption date falls on a day that is not a Business Day,
the payments to be made, including any shares of common stock of SunAmerica to
be delivered, on the date will be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date,
maturity date or redemption date, and no additional interest will accrue as a
result of the delayed payment.
Payments at Maturity
The STRYPES will mature on June 15, 1999. On the maturity date, unless
redeemed on or before the date, ML&Co. will pay and discharge each STRYPES by
delivering to the holder of the STRYPES a number of shares of common stock of
SunAmerica equal to the Common Equivalent Rate (as described below) in effect
on the maturity date, subject to ML&Co.'s right to deliver, with respect to
all, but not less than all, of the STRYPES then outstanding, cash in an amount
equal to the Current Market Price, determined as of the second Trading Day
before the applicable Notice Date, of the common stock of SunAmerica which
otherwise would have been delivered. The Common Equivalent Rate will initially
be one share of Common Stock per STRYPES. The Common Equivalent Rate is
subject to adjustment as described below under "--Dilution Adjustments."
Because the price of the common stock of SunAmerica is subject to market
fluctuations, the value of the common stock of SunAmerica or, at the option of
ML&Co., the amount of cash received by a holder of STRYPES on the maturity
date may be less than the amount paid for the STRYPES upon issuance, in which
case an investment in the STRYPES will result in a loss. In addition, because
of the market fluctuations and because the Current Market Price of the common
stock of SunAmerica will be determined as of the second Trading Date before
the applicable Notice Date, which will be at least 30 and could be up to 60
days before the maturity date, it is likely that, if ML&Co. elects to pay the
STRYPES in cash on the maturity date, the amount of cash payable per STRYPES
will differ from the market value on the maturity date of the shares of common
stock of SunAmerica which a holder would otherwise have received. See "Risk
Factors".
In the 1983 indenture, ML&Co. will agree to deliver on the maturity date
the form of consideration that the ML&Co. Subsidiary receives from the selling
stockholder. ML&Co. will be required to mail a notice, at least 30 but not
more than 60 days before the maturity date, to each holder of STRYPES at its
registered address. The notice shall state whether the STRYPES will be paid
and discharged with shares of common stock of SunAmerica or in cash and, if
payable in cash, specifying the amount of cash payable for each STRYPES and
the Current Market Price used to calculate the amount. If ML&Co. elects to
deliver shares of common stock of SunAmerica, holders of the STRYPES will be
responsible for the payment of any and all brokerage costs upon the subsequent
sale of the stock.
Optional Redemption
At any time or from time to time on or before the maturity date, ML&Co.
may, at its option, redeem the outstanding STRYPES, in whole or in part, at a
redemption price per STRYPES initially equal to $86.568. The redemption price
will decline by $.00966 on each day following the Issue Date, computed on the
basis of a 360-day year of twelve 30-day months, to $76.686 on April 15, 1999,
and equal to $76.106 thereafter. The redemption price will be payable in
either (1) a number of shares of common stock of SunAmerica equal to the
redemption price on the applicable redemption date divided by the Current
Market Price of the common stock of SunAmerica determined as of the second
Trading Day preceding the applicable Notice Date or (2) at ML&Co.'s option,
which may be exercised with respect to all, but not less than all, of the
STRYPES to be redeemed on any redemption date, cash. In addition, the
redemption price will also include in either case an amount in cash equal to
accrued and unpaid interest on the STRYPES to but excluding the redemption
date; provided that installments of interest which are due and payable on or
before the redemption date shall be payable to the holders of STRYPES
registered as the at the close of business on the relevant record dates. On
and after the redemption date, interest will cease to accrue on the STRYPES
called for redemption, unless ML&Co. defaults in the payment of the redemption
price therefor. If ML&Co. elects to deliver shares of common stock of
SunAmerica, holders of the STRYPES will be responsible for the payment of any
and all brokerage costs upon the subsequent sale of the stock.
Notice of redemption shall be mailed at least 30 days but not more than
60 days before the redemption date to each holder of STRYPES to be redeemed at
its registered address. The notice shall specify whether ML&Co. will pay the
redemption price by delivery of common stock of SunAmerica or in cash. If
ML&Co. will pay the redemption price in common stock of SunAmerica, the notice
will also specify the number of shares of common stock of SunAmerica to be
delivered for each STRYPES and the Current Market Price used to calculate the
number of shares. If only a portion of the STRYPES held by any registered
holder are to be redeemed, the notice of redemption shall specify the number
of STRYPES to be redeemed from the holder and, upon redemption, a new STRYPES
certificate evidencing the unredeemed STRYPES will be issued in the name of
the holder upon surrender for cancellation of the original certificate.
In the event that less than all of the STRYPES are to be redeemed at any
time, selection of STRYPES for redemption will be made by the trustee by the
method as the trustee shall deem fair and appropriate, subject to compliance
with the requirements of the principal national securities exchange on which
the STRYPES may be listed; provided, however, that the STRYPES shall not be
redeemed except in units of one or more whole STRYPES.
The opportunity for capital appreciation afforded by an investment in the
STRYPES is limited because ML&Co. may, at its option, redeem the STRYPES at
any time on or before the maturity date at the redemption prices described
above. Although not obligated to do so, ML&Co. may be expected to redeem the
STRYPES on or before the maturity date if the market price of the common stock
of SunAmerica exceeds the applicable redemption price, in which event holders
of STRYPES will receive less than one share of common stock of SunAmerica for
each STRYPES or, at the option of ML&Co., cash in an amount equal to the
Current Market Price of less than one share of the common stock of SunAmerica.
See "Risk Factors".
If ML&Co. exercises its option to redeem the STRYPES, in whole or in
part, the Notice Date for the redemption will be at least 30 days and could be
up to 60 days before the redemption date. If, as described above, ML&Co.
elects to pay the redemption price by delivering shares of common stock of
SunAmerica, the number of shares to be so delivered will be determined on the
basis of the Current Market Price as of the second Trading Date before the
Notice Date. The price of the common stock of SunAmerica is subject to market
fluctuations and, as a result, the market value on the redemption date of the
shares of common stock of SunAmerica delivered in respect of each STRYPES may
be more or less than the applicable redemption price. See "Risk Factors".
Certain Definitions
The "Closing Price" of any security on any day shall mean (1) the closing
sales price regular way on the day or, in case no sale takes place on the day,
the average of the reported closing bid and asked prices regular way on that
day, in each case on the NYSE, or (2) if the security is not listed or
admitted to trading on the NYSE, on the principal national securities exchange
on which the security is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices of the security on the over-the-counter market on
the day in question as reported by the National Quotation Bureau Incorporated,
or a similarly generally accepted reporting service, or (3) if not so
available in the manner, as furnished by any NYSE member firm selected from
time to time by the Board of Directors of ML&Co. for that purpose.
The "Current Market Price" per share of the common stock of SunAmerica on
any date of determination means the average of the daily Closing Prices for
the five consecutive Trading Days ending on and including the date of
determination, as appropriately adjusted to take into account the occurrence
during the five-day period of any event that results in an adjustment of the
Common Equivalent Rate; provided, however, that if the Closing Price of the
common stock of SunAmerica on the Trading Day next following the five-day
period (the "Next-Day Closing Price") is less than 95% of the five-day
average, then the Current Market Price per share of common stock of SunAmerica
on the date of determination will be the Next-Day Closing Price; and provided,
further, that, for the purposes of calculating the Current Market Price in
connection with the maturity date or any redemption of STRYPES or any
determination of an amount in cash payable in lieu of a fractional share of
common stock of SunAmerica, if any adjustment of the Common Equivalent Rate
becomes effective as of any date during the period beginning on the first day
of the five-day period and ending on the maturity date or the relevant
redemption date, as the case may be, then the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to reflect
the adjustment. Because the price of common stock of SunAmerica is subject to
market fluctuations, it is possible that the Next-Day Closing Price could be
significantly less than the five-day average. See "Risk Factors".
A "Notice Date" with respect to any notice given by ML&Co. in connection
with the maturity date or any redemption of STRYPES means the commencement of
the mailing of the notice to the holders of STRYPES in accordance with
"--Payments at Maturity" or "--Optional Redemption," as the case may be,
above.
A "Trading Day" is defined as a day on which the security, the Closing
Price of which is being determined, (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the security; provided
that, if the Closing Price of the security is to be determined by a NYSE
member firm, then the term Trading Day shall mean, for purposes of determining
the Closing Price, a day on which the NYSE is open for trading.
Dilution Adjustments
The Common Equivalent Rate will initially be one share of common stock of
SunAmerica for each STRYPES. The Common Equivalent Rate is subject to
adjustment if SunAmerica shall:
(1) pay a dividend or make a distribution with respect to common stock
of SunAmerica in shares of common stock of SunAmerica;
(2) subdivide or split the outstanding shares of common stock of
SunAmerica into a greater number of shares;
(3) combine the outstanding shares of common stock of SunAmerica into a
smaller number of shares;
(4) issue by reclassification of shares of common stock of SunAmerica
any shares of common stock of SunAmerica;
(5) issue certain rights or warrants to all holders of common stock of
SunAmerica; or
(6) pay a dividend or make a distribution to all holders of common stock
of SunAmerica of evidences of its indebtedness or other assets,
including shares of capital stock of SunAmerica but excluding any
cash dividends and any stock dividends or distributions referred to
in clause (1) above.
All adjustments to the Common Equivalent Rate will be calculated to the
nearest 1/100th of a share of common stock of SunAmerica or, if there is not a
nearest 1/100th of a share, to the next lower 1/100th of a share. No
adjustment in the Common Equivalent Rate shall be required unless the
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. Each the adjustment to the Common
Equivalent Rate shall be made successively.
In the event of a "Reorganization Event", which is
(A) any consolidation or merger of SunAmerica, or any surviving entity
or subsequent surviving entity of SunAmerica (a "SunAmerica
Successor"), with or into another entity, other than a merger or
consolidation in which SunAmerica is the continuing corporation and
in which the common stock of SunAmerica outstanding immediately
before the merger or consolidation is not exchanged for cash,
securities or other property of SunAmerica or another corporation,
(B) any sale, transfer, lease or conveyance to another corporation of
the property of SunAmerica or any SunAmerica Successor as an
entirety or substantially as an entirety,
(C) any statutory exchange of securities of SunAmerica or any SunAmerica
Successor with another corporation (other than in connection with a
merger or acquisition) or
(D) any liquidation, dissolution, winding up or bankruptcy of SunAmerica
or any SunAmerica Successor,
the Common Equivalent Rate will be adjusted to provide that each holder of
STRYPES will receive on the maturity date or any redemption date for each
STRYPES cash in an amount equal to the Transaction Value.
"Transaction Value" means
(1) for any cash received in any the Reorganization Event, the amount of
cash received per share of common stock of SunAmerica,
(2) for any property other than cash or securities received in any
Reorganization Event, an amount equal to the market value on the
maturity date or any redemption date of the property received per
share of common stock of SunAmerica as determined by a nationally
recognized independent investment banking firm retained for this
purpose by ML&Co. and
(3) for any securities received in any Reorganization Event, an amount
equal to the average Closing Price per unit of the securities on the
five Trading Days immediately before the second Trading Day
preceding the maturity date or any redemption date multiplied by the
number of the securities received for each share of common stock of
SunAmerica.
Notwithstanding the foregoing, in the event that property or securities,
or a combination of cash, on the one hand, and property or securities, on the
other, are received in the Reorganization Event, ML&Co. may, at its option, in
lieu of delivering cash as described above, deliver the amount of cash,
securities and other property received per share of common stock of SunAmerica
in the Reorganization Event determined in accordance with clause (1), (2) or
(3) above, as applicable. If ML&Co. elects to deliver securities or other
property, holders of the STRYPES will be responsible for the payment of any
and all brokerage and other transaction costs upon any subsequent sale of the
securities or other property. The kind and amount of securities with which the
STRYPES shall be paid and discharged after consummation of the transaction
shall be subject to adjustment as described above following the date of
consummation of the transaction.
No adjustments will be made for certain other events, such as offerings
of common stock of SunAmerica by SunAmerica for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of common
stock of SunAmerica by the selling stockholder.
ML&Co. is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Common Equivalent Rate or, if
ML&Co. is not aware of the occurrence of an event, as soon as practicable
after becoming so aware, to provide written notice to the trustee and to the
holders of the STRYPES of the occurrence of the event and a statement in
reasonable detail setting forth the adjusted Common Equivalent Rate and the
method by which the adjustment to the Common Equivalent Rate was determined.
Certain Procedures in Connection with Maturity and Redemption
Each holder of STRYPES on the maturity date, and each holder of STRYPES
called for redemption on any redemption date, must surrender the certificates
evidencing the STRYPES at the office or agency of ML&Co. maintained for the
purpose in order to receive the consideration payable on the date. If, on the
maturity date or any redemption date, ML&Co. shall have deposited with the
trustee or other agent under the 1983 indenture the consideration payable on
the date in respect of all of the STRYPES then outstanding, in the case of the
maturity date, or the STRYPES called for redemption, in the case of any
redemption date, then, on the maturity date or redemption date, as the case
may be, all of the outstanding STRYPES or the STRYPES called for redemption,
as the case may be, shall cease to bear interest and all rights of the holders
thereof shall terminate, except for the right to receive the consideration
payable in respect of the STRYPES on the date, notwithstanding that the
certificates evidencing any of the STRYPES which are payable or subject to
redemption on the date shall not have been surrendered to ML&Co.
Fractional Shares
No fractional shares of common stock of SunAmerica will be delivered if
ML&Co. pays and discharges the STRYPES by delivering shares of common stock of
SunAmerica on the maturity date or any redemption date. In lieu of any
fractional share otherwise deliverable in respect of all STRYPES of any holder
on the maturity date or any redemption date, the holder shall be entitled to
receive an amount in cash equal to the value of the fractional share at the
Current Market Price of the common stock of SunAmerica determined as of the
second Trading Day immediately preceding the relevant Notice Date.
No Sinking Fund
The STRYPES do not contain sinking fund or other mandatory redemption
provisions. The STRYPES are not subject to payment before the maturity date at
the option of the holder.
Ranking
The STRYPES will be unsecured obligations and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co.
There are no contractual restrictions on the ability of ML&Co. or its
subsidiaries to incur additional secured or unsecured debt. However,
borrowings by certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Securities Depository
Description of the Global Securities
The STRYPES are represented by one or more fully registered global
securities. Each global security has been 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 STRYPES 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 STRYPES represented by a global security for all
purposes under the 1983 indenture. Except as provided below, the beneficial
owners of the STRYPES represented by a global security are not entitled to
have the STRYPES represented by the global security registered in their names,
will not receive or be entitled to receive physical delivery of the STRYPES in
definitive form and are not considered the owners or holders under the 1983
indenture, including for purposes of receiving any reports delivered by ML&Co.
or the trustee pursuant to the 1983 indenture. Accordingly, each person owning
a beneficial interest in a global security must rely on the procedures of DTC
and, if the person is not a participant of DTC on the procedures of the
participant through which the 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 action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants and by participants and indirect
participants to beneficial owners are 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 STRYPES. The STRYPES have been
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One or more fully registered global securities
have been issued for the STRYPES in the aggregate principal amount of such
issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 certain 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 STRYPES under DTC's system must be made by or through direct
participants, which will receive a credit for the STRYPES 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 such beneficial owner
entered into the transaction. Transfers of ownership interests in the STRYPES
are to be accomplished by entries made on the books of participants acting on
behalf of beneficial owners.
To facilitate subsequent transfers, all STRYPES deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
STRYPES 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 STRYPES; DTC's records reflect only the identity of the direct
participants to whose accounts such STRYPES are credited, which may or may not
be the beneficial owners. The participants are 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 are 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
STRYPES. 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
STRYPES are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
STRYPES 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 such
date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If:
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, and
(c) an Event of Default under the 1983 indenture has occurred and is
continuing with respect to the STRYPES,
the global securities will be exchangeable for STRYPES in definitive form of
like tenor and of an equal aggregate principal amount, in denominations of $10
and integral multiples of $10. The definitive STRYPES will be registered in
such name or names as the depositary shall instruct the trustee. It is
expected that such 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, STRIPES 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.
Governing Law
The 1983 indenture and the STRYPES are governed by, and construed in
accordance with, the laws of the State of New York.
Listing
The STRYPES have been listed on the NYSE under this symbol "SAI".
OTHER TERMS
ML&Co. issued the STRYPES 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 STRYPES
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 STRYPES 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 such 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 debt securities affected. However, without the consent of each
holder of any outstanding debt security affected, no amendment or modification
to any 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 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 any indenture which
cannot be modified under the terms of that indenture without the
consent of each holder of each series of 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 STRYPES 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.
CERTAIN ARRANGEMENTS WITH THE SELLING STOCKHOLDER
Pursuant to an agreement (the "Stock Agreement"), the selling stockholder
is obligated to deliver to Merrill Lynch Capital Services, Inc., a wholly
owned subsidiary of ML&Co. (the "ML&Co. Subsidiary), on June 14, 1999, a
specified number of shares of SunAmerica Class B Stock, subject to the selling
stockholder's right to deliver cash in an amount equal to the Current Market
Price, which will be determined as of the second Trading Day before the
applicable Notice Date, of the common stock of SunAmerica underlying the
SunAmerica Class B Stock that otherwise would have been delivered. At any time
and from time to time through June 15, 1999, the selling stockholder may, at
his option, redeem his obligations under the Stock Agreement in whole or in
part, at declining redemption prices, payable in either (1) shares of
SunAmerica Class B Stock representing common stock of SunAmerica having an
aggregate Current Market Price, determined as of the second Trading Day before
the date of the applicable notice of redemption, equal to the applicable
redemption price or (2) at the selling stockholder's option, which may be
exercised with respect to all, but not less than all, of the obligations to be
redeemed, cash, plus in either case an amount in cash equal to accrued and
unpaid interest on the Stock Agreement to but excluding the redemption date.
The consideration paid by the ML&Co. Subsidiary to the selling stockholder
under the Stock Agreement is approximately $131 million, and was paid on June
12, 1996. In the 1983 indenture, ML&Co. has agreed to pay and discharge the
STRYPES by delivering to the holders thereof on the maturity date or any
redemption date the form of consideration that the ML&Co. Subsidiary receives
from the selling stockholder and to redeem the STRYPES if and when the selling
stockholder redeems his obligations under the Stock Agreement.
Shares of SunAmerica Class B Stock delivered by the selling stockholder
will convert automatically into shares of common stock of SunAmerica upon
transfer to the ML&Co. Subsidiary. The selling stockholder has the right at
any time to modify the Stock Agreement so that he may deliver shares of common
stock of SunAmerica, or cash, instead of shares of SunAmerica Class B Stock,
or cash. Until such time, if any, as the selling stockholder shall have
delivered shares to the ML&Co. Subsidiary at maturity or upon redemption
pursuant to the terms of the Stock Agreement, the selling stockholder will
retain all ownership rights with respect to the shares held by him. The
ownership rights include, among others, voting rights and rights to receive
any dividends or other distributions in respect thereof.
The selling stockholder has no obligations with respect to the STRYPES or
amounts to be paid to holders thereof including any obligation to take the
needs of ML&Co. or holders of the STRYPES into consideration in determining
whether or when to cause the redemption of the STRYPES or whether to deliver
shares or cash at maturity or upon redemption, or for any other reason. The
Stock Agreement is a commercial transaction among the parties thereto and does
not create any rights in or for the benefit of, any third party, including any
holder of STRYPES.
In the event the selling stockholder does not perform under the Stock
Agreement, ML&Co. will be required to otherwise acquire shares of common stock
of SunAmerica for delivery to holders of the STRYPES on the maturity date or
upon redemption, unless it elects to exercise its option to deliver cash with
an equal value.
Merrill Lynch Capital Corporation, a wholly owned subsidiary of ML&Co.,
entered into a secured loan agreement with the selling stockholder pursuant to
which the selling stockholder borrowed approximately $33 million for a term of
three years.
WHERE YOU CAN FIND MORE INFORMATION
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 STRYPES and other securities. For further information on ML&Co. and the
STRYPES, 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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.
<PAGE>
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales of
the STRYPES and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the STRYPES.
MLPF&S may act as principal or agent in these market-making transactions.
The STRYPES may be offered on the NYSE or off the exchange in negotiated
transactions or otherwise.
The distribution of the STRYPES 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
6-1/4% STRUCTURED YIELD PRODUCT EXCHANGEABLE FOR STOCK(SM) due July 1, 2001
"STRYPES (SM)"
Payable with Shares of Common Stock of IMC Global Inc.
or an equivalent amount in cash
--------------------
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the STRYPES.
The issue price of each STRYPES was $38.25, which was the last sale price
of one share of common stock, par value $1.00 per share, of IMC on July 2,
1996, as reported on the New York Stock Exchange. The STRYPES will mature on
July 1, 2001.
What you will receive before July 1, 2001:
o On each January 1, April 1, July 1 and October 1, beginning October 1,
1996, we will pay you interest on the STRYPES in cash at the rate of 6
1/4% per year.
o We may not redeem the STRYPES at any time before July 1, 2001.
What you will receive on July 1, 2001:
o For each STRYPES you own, you will receive a percentage of each type of
reference property or an equivalent amount in cash. The reference
property will initially be one share of common stock of IMC, which may be
adjusted before July 1, 2001. The adjustments that may be made to the
reference property are more fully described in this prospectus.
<TABLE>
<CAPTION>
<S> <C>
If the value of the reference property is: You will receive:
(a) greater than or equal to $46.28 82.65% of each type of reference
property
(b) less than $46.28 but greater than a percentage of each type of reference
$38.25 property equal to $38.25
(c) less than or equal to $38.25 100% of each type of reference property
</TABLE>
Investing in the STRYPES involves risks, including the risk that your investment
may result in a loss. See "Risk Factors" beginning on page 3.
The STRYPES are listed on the NYSE under the symbol "IGL".
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 STRYPES will be the prevailing price at the time of
sale.
---------------------------
Merrill Lynch & Co.
----------------------------
The date of this prospectus is , 199 .
"STRYPES" and "Structured Yield Product Exchangeable for Stock" are registered
service marks owned by ML&Co.
<PAGE>
TABLE CONTENTS
PAGE
RISK FACTORS...............................................................4
MERRILL LYNCH & CO., INC...................................................8
RATIO OF EARNINGS TO FIXED CHARGES.........................................8
IMC GLOBAL INC............................................................10
DESCRIPTION OF THE STRYPES................................................10
OTHER TERMS...............................................................18
CERTAIN ARRANGEMENTS WITH GVI.............................................21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.........................22
PLAN OF DISTRIBUTION......................................................23
EXPERTS...................................................................23
<PAGE>
RISK FACTORS
Your investment in the STRYPES will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the STRYPES is suitable for you.
You may suffer a loss on your investment
You should be aware that at maturity the amount you will receive may be
less than the amount you paid for the STRYPES, which was $38.25 per STRYPES.
If the value of the reference property is less than $38.25, the amount you
will receive will be less than the amount you paid for the STRYPES and,
therefore, your investment in the STRYPES will result in a loss to you. When
you invest in the STRYPES, you assume the risk that the market value of the
reference property may decline, and that the decline could be substantial. You
should review the prospectus of IMC, which is attached to this prospectus. The
prospectus of IMC describes the shares of common stock of IMC, including the
preferred stock purchase rights associated with the shares, that you may
receive as a holder of the STRYPES on the maturity date.
Your investment in the STRYPES may differ from an investment in other debt
securities
The terms of the STRYPES differ from those of ordinary debt securities
because the value of the reference property or the equivalent amount in cash
that you will receive on the maturity date is not fixed, but is based on the
value of the reference property. Please review the section entitled
"Description of the STRYPES".
There may be a limited opportunity for equity appreciation
Your opportunity for equity appreciation may be greater if you made a
direct investment in the common stock of IMC because the value of the
reference property is subject to market fluctuations. The amount you will
receive on the maturity date will only exceed the amount you paid for the
STRYPES, which was $38.25 per STRYPES, if the value of the reference property
exceeds the threshold appreciation price of $46.28. The threshold appreciation
price of $46.28 represents an appreciation of 21% over the initial price of
$38.25. In addition, you will only be entitled to receive on the maturity date
82.65%, which is the percentage equal to the initial price of $38.25 divided
by the threshold appreciation price of $46.28, of any appreciation of the
value of the reference property in excess of the threshold appreciation price
of $46.28. Please review the section entitled "Description of the STRYPES".
There are many factors affecting the trading prices of the STRYPES
The trading prices of the STRYPES in the secondary market will be
directly affected by the trading prices of the common stock of IMC in the
secondary market. It is impossible to predict whether the price of the common
stock of IMC will rise or fall because several factors may influence the
trading prices of the common stock of IMC. These factors include:
o IMC's operating results and prospects;
o complex and interrelated political, economic, financial and other
factors and market conditions that can affect (1) the capital
markets generally, (2) the market segment of which IMC is a part, or
(3) the NYSE, on which the common stock of IMC is traded, including
the level of, and fluctuations in, the trading prices of stocks
generally and sales of substantial amounts of the common stock of
IMC in the market subsequent to the offering of the STRYPES or the
perception that these sales could occur; and
o other events that are difficult to predict and are beyond our
control.
Investing in the STRYPES may affect the market for the common stock of IMC
Any market that develops for the STRYPES is likely to influence and
be influenced by the market for common stock of IMC. For example, the price of
common stock of IMC could become more volatile and could be depressed
o by investors' anticipation of the potential distribution into the
market of substantial amounts of common stock of IMC on the maturity
date,
o by possible sales of common stock of IMC by investors who view the
STRYPES as a more attractive means of equity participation in IMC,
and
o by hedging or arbitrage trading activity that may develop involving
the STRYPES and the common stock of IMC.
There may be illiquidity of the STRYPES in the secondary market
It is not possible to predict how the STRYPES will trade in the secondary
market or whether the secondary market for the STRYPES will be liquid or
illiquid. The STRYPES are novel securities and there is currently no secondary
market for the STRYPES. Although the STRYPES are listed on the NYSE under the
symbol "IGL", you cannot assume (1) that an active trading market for the
STRYPES will develop, (2) that listing on the NYSE will provide you with
liquidity of investment, (3) that the STRYPES will not later be delisted or
(4) that trading of the STRYPES on the NYSE will not be suspended. If the NYSE
delists the STRYPES or suspends the trading of the STRYPES, we will apply for
listing of the STRYPES on another national securities exchange or for
quotation on another trading market. If the STRYPES are not listed or traded
on any securities exchange or trading market, or if trading of the STRYPES is
suspended, pricing information for the STRYPES may be more difficult to obtain
and the liquidity of the STRYPES may be adversely affected.
As a holder of STRYPES, you have no stockholder's rights with respect to the
common stock of IMC or the reference property
You will not be entitled to any rights, including voting rights and
rights to receive any dividends, interest or other distributions , with
respect to the common stock of IMC or the reference property until we have
delivered the reference property on the maturity date. In addition, you will
not be entitled to any rights if the applicable record date for the exercise
of any rights occurs before we deliver the reference property. For example, if
an amendment is proposed to the restated certificate of incorporation of IMC
and the record date for determining the stockholders of record entitled to
vote on the amendment occurs before we deliver the reference property, you, as
a holder of the STRYPES, will not be entitled to vote on the proposed
amendment.
IMC has no obligations with respect to the STRYPES
We are not affiliated with IMC. IMC has no obligations with respect to
the STRYPES or amounts to be paid to you, including any obligation to take our
needs or yours, as a holder of the STRYPES, into consideration for any reason.
IMC will not receive any of the proceeds of this offering of the STRYPES . IMC
is not responsible for, and has not participated in, the determination of the
timing of, prices for or quantities of the STRYPES to be issued, or the
determination or calculation of the amount receivable by holders of the
STRYPES on the maturity date. In addition, IMC is not involved with the
administration or trading of the STRYPES .
There may be a dilution of common stock of IMC
The reference property or the equivalent amount of cash that you are
entitled to receive on the maturity date is subject to adjustment for events
such as:
o a merger or consolidation in which IMC is not the surviving or
resulting corporation ,
o the liquidation, dissolution, winding up or bankruptcy of IMC,
o stock splits and combinations, stock dividends, and
o other actions of IMC that modify its capital structure.
Please review the section entitled "Description of the STRYPES--Reference
Property Adjustments".
The reference property or equivalent amount of cash that you may receive
on the maturity date will not be adjusted for other events, such as offerings
of common stock of IMC for cash or in connection with acquisitions. IMC is not
restricted from issuing additional shares of common stock of IMC during the
term of the STRYPES and has no obligation to consider the interests of the
holders of the STRYPES for any reason. Additional issuances may materially and
adversely affect the price of the common stock of IMC. Because of the
relationship of the amount of the reference property or cash to be received on
maturity to the price of the common stock of IMC, other events may adversely
affect the trading price of the STRYPES.
The tax treatment of STRYPES is uncertain
Because of an absence of authority as to the proper characterization of
the STRYPES, their ultimate tax treatment is uncertain. Accordingly, you
cannot assume that any particular characterization and treatment of the
STRYPES will be accepted by the Internal Revenue Service or upheld by a court.
However, it is the opinion of Brown & Wood LLP, counsel to ML&Co., that the
characterization and tax treatment of the STRYPES described in this
prospectus, while not the only reasonable characterization and tax treatment,
is based on reasonable interpretations of law currently in effect and, even if
successfully challenged by the IRS, will not result in the imposition of
penalties.
The 1983 indenture, which is more fully described in this prospectus,
will require that if you are subject to U.S. Federal income tax, that you
include currently in income, for U.S. Federal income tax purposes, payments
denominated as interest that are made with respect to a STRYPES in accordance
with your regular method of tax accounting. The 1983 indenture also requires
ML&Co. and holders to treat each STRYPES for tax purposes as a unit consisting
of:
o a debt instrument with a fixed principal amount unconditionally
payable on the maturity date equal to the issue price of the STRYPES
and bearing interest at the stated interest rate on the STRYPES, and
o a forward purchase contract under which you agree to use the
principal payment due on the debt instrument to purchase on the
maturity date the reference property which ML&Co. is obligated under
the STRYPES to deliver at that time, subject to ML&Co.'s right to
deliver cash instead of the reference property.
The 1983 indenture also requires that upon the acquisition of a STRYPES and
upon your sale or other disposition of a STRYPES before the maturity date, the
amount paid or realized by you be allocated between the debt instrument and
the forward purchase contract based upon their relative fair market values, as
determined on the date of acquisition or disposition. For these purposes, with
respect to acquisitions of STRYPES in connection with the original issuance of
the STRYPES, ML&Co. and you agree to allocate $37.045 of the entire initial
purchase price of a STRYPES to the debt instrument and to allocate the
remaining $1.205 of the entire initial purchase price of a STRYPES to the
forward purchase contract. As a result of this allocation, the debt instrument
will be treated as having been issued with original issue discount for U.S.
Federal income tax purposes.
The appropriate character and timing of income, gain or loss to be
recognized on a STRYPES is uncertain . You should consult your own tax adviser
concerning the application of the U.S. federal income tax laws to your
particular situation and any consequences of the purchase, ownership and
disposition of the STRYPES arising under the laws of any other taxing
jurisdiction.
Our holding company structure may affect your right to participate in any
distribution of assets of any subsidiary
Since we are a holding company, our right and the right of our creditors,
including you, as a holder of STRYPES, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent a bankruptcy court may recognize our claims
as a creditor of the subsidiary . In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to us are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Other Considerations
We suggest that you reach an investment decision only after carefully
considering the suitability of the STRYPES in the light of your particular
circumstances.
<PAGE>
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, references to "ML&Co.", "we", "us" and "our" refer
specifically to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the
issuer of the STRYPES described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
IMC GLOBAL INC.
IMC is one of the world's leading producers of crop nutrients for the
international agricultural community . It is also one of the largest
distributors in the United States of crop nutrients and related products
through its retail and wholesale distribution networks. IMC mines, processes
and distributes potash in the United States and Canada, and is a joint venture
partner in IMC-Agrico Company, a leading producer, marketer and distributor of
phosphate crop nutrients and a leading producer and marketer of animal feed
ingredients. IMC's retail distribution network, which extends principally to
corn and soybean farmers in the Midwestern and Southeastern United States, is
one of the largest distributors of crop nutrients and related products in the
United States. IMC also manufactures nitrogen-based and other high-value crop
nutrients which are marketed on a wholesale basis principally in the
Midwestern and Southeastern United States. In addition, IMC sells specialty
lawn and garden, turf, and nursery products on a national basis and ice-melter
products in the Midwest and Eastern snow-belt states.
IMC is subject to the informational requirements of the Exchange Act.
Accordingly, IMC files reports, proxy and information statements and other
information with the SEC. Copies of these materials can be inspected and
copied at the public reference facilities maintained by the SEC at the
addresses specified under "Where You Can Find More Information". Reports,
proxy and information statements and other information concerning IMC may also
be inspected at the offices of the NYSE.
ML&Co. is not affiliated with IMC, and IMC has no obligations with
respect to the STRYPES. This prospectus relates only to the STRYPES offered
hereby and does not relate to IMC or the common stock of IMC. IMC has filed a
registration statement on Form S-3 with the SEC covering the shares of common
stock of IMC that may be received by a holder of STRYPES on the maturity date.
The prospectus of IMC constituting a part of the registration statement
includes information relating to IMC and the common stock of IMC, including
risk factors relevant to an investment in the common stock of IMC. The
prospectus of IMC does not constitute a part of this prospectus, nor is it
incorporated by reference herein.
DESCRIPTION OF THE STRYPES
ML&Co. issued the STRYPES as a series of senior debt securities under the
1983 indenture, which is more fully described in this prospectus. The
following summary of material provisions of the 1983 indenture does not
purport to be complete and is qualified in its entirety by reference to the
1983 indenture. A copy of the 1983 indenture is filed as an exhibit to the
registration statement of which this prospectus is a part.
Each STRYPES, was issued at a price of $38.25 (the "Initial Price"),
bears interest at the rate of 61/4% of the issue price per annum, or $2.3908
per annum, from July 9, 1996, or from the most recent Interest Payment Date to
which interest has been paid or provided for, until the maturity date or the
earlier date on which the STRYPES are repaid under the terms of the STRYPES.
Interest on the STRYPES is payable in cash quarterly in arrears on January 1,
April 1, July 1 and October 1, beginning October 1, 1996, and on the maturity
date (each, an "Interest Payment Date"), to the persons in whose names the
STRYPES are registered at the close of business on the fifteenth calendar day,
whether or not a Business Day, immediately preceding the Interest Payment
Date. Interest on the STRYPES will be computed on the basis of a 360-day year
of twelve 30-day months. If an Interest Payment Date falls on a day that is
not a Business Day, the interest payment to be made on the Interest Payment
Date will be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, and no additional interest
will accrue as a result of the delayed payment.
The maturity date of the STRYPES is July 1, 2001. On the maturity date,
ML&Co. will pay and discharge each STRYPES by delivering to the holder of the
STRYPES a percentage of each type of Reference Property determined in
accordance with the formula described below. ML&Co.'s will have the right to
deliver, with respect to all, but not less than all, Reference Property
deliverable on the maturity date, cash with an equal value.
(a) If the Reference Property Value (as defined below) is greater than
or equal to $46.28 (the "Threshold Appreciation Price"), the holder
of the STRYPES will receive 82.65% of each type of Reference
Property;
(b) If the Reference Property Value is less than the Threshold
Appreciation Price but is greater than the Initial Price, the holder
of the STRYPES will receive a percentage of each type of Reference
Property, allocated as proportionately as practicable, so that the
aggregate value of the Reference Property is equal to the Initial
Price; and
(c) If the Reference Property Value is less than or equal to the Initial
Price, the holder of the STRYPES will receive 100% of each type of
Reference Property.
Accordingly, there can be no assurance that the amount receivable by holders
of the STRYPES on the maturity date will be equal to or greater than the issue
price of the STRYPES. If the Reference Property Value is less than the Initial
Price, the amount receivable on the maturity date will be less than the issue
price paid for the STRYPES, in which case an investment in STRYPES will result
in a loss.
Notwithstanding the foregoing, ML&Co. may, in lieu of delivering the
applicable percentage of each type of Reference Property, deliver cash in an
amount equal to the sum of
(d) for any portion of the Reference Property consisting of cash that is
otherwise deliverable on the maturity date, the amount of cash,
without interest thereon,
(e) for any portion of the Reference Property consisting of property
other than cash or Reference Securities that is otherwise
deliverable on the maturity date, the fair market value, as
determined by a nationally recognized independent investment banking
firm retained for this purpose by ML&Co., as of the third Trading
Day preceding the maturity date of the property, and
(f) for any portion of the Reference Property consisting of a Reference
Security (as defined below) that is otherwise deliverable on the
maturity date, except as described under "Reference Property
Adjustments" below, an amount equal to the average Closing Price (as
defined below) per unit of the Reference Security on the 20 Trading
Days immediately before, but not including, the second Trading Day
preceding the maturity date multiplied by the number of units of the
Reference Security constituting part of the Reference Property,
subject to ML&Co.'s agreement contained in the Purchase Agreement to
deliver on the maturity date the form of consideration that the
ML&Co. Subsidiary (as defined below) receives from GVI.
The right to deliver cash, if exercised by ML&Co., must be exercised with
respect to all Reference Property otherwise deliverable on the maturity date
in payment of all outstanding STRYPES. On or before the sixth Business Day
before the maturity date, ML&Co. will notify The Depository Trust Company and
the trustee and publish a notice in The Wall Street Journal or another daily
newspaper of national circulation stating whether the STRYPES will be paid and
discharged by delivery of the applicable percentage of each type of Reference
Property or cash. At the time the notice is published, the Reference Property
Value will not have been determined. If ML&Co. elects to deliver Reference
Property, holders of the STRYPES will be responsible for the payment of any
and all brokerage costs upon the subsequent sale of Reference Property.
The term "Reference Property" initially means one share of common stock
of IMC and shall be subject to adjustment from time to time before the
maturity date to reflect the addition or substitution of any cash, securities
and/or other property resulting from the application of the adjustment
provisions described herein. See "--Reference Property Adjustments" below. The
term "Reference Security" means, at any time, any security (as defined in
Section 2(1) of the Securities Act) then constituting part of the Reference
Property. The term "Reference Property Value" means, subject to the adjustment
provisions described below, the sum of
(g) for any portion of the Reference Property consisting of cash, the
amount of cash,
(h) for any portion of the Reference Property consisting of property
other than cash or Reference Securities, the fair market value,
which will be determined by a nationally recognized independent
investment banking firm retained for this purpose by ML&Co., as of
the third Trading Day preceding the maturity date of the property,
and
(i) for any portion of the Reference Property consisting of a Reference
Security, an amount equal to the average Closing Price per unit of
the Reference Security on the 20 Trading Days immediately before,
but not including, the second Trading Day preceding the maturity
date multiplied by the number of units of the Reference Security
constituting part of the Reference Property.
The "Closing Price" of any Reference Security on any date of
determination means (1) the closing sale price or, if no closing price is
reported, the last reported sale price of the Reference Security on the NYSE
on the date of determination or, (2) if the Reference Security is not listed
for trading on the NYSE on any date, as reported in the composite transactions
for the principal United States securities exchange on which the Reference
Security is so listed, or (3) if the Reference Security is not so listed on a
United States national or regional securities exchange, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System,
or (4) if the Reference Security is not so reported, the last quoted bid price
for the Reference Security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or (5) if a bid price is
not available, the market value of the Reference Security on a date as
determined by a nationally recognized independent investment banking firm
retained for this purpose by ML&Co.
A "Trading Day" is defined as a day on which the Reference Security the
Closing Price of which is being determined (A) is not suspended from trading
on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the
Reference Security.
For illustrative purposes only, the following table shows the number of
shares of common stock of IMC or the amount of cash that a holder of STRYPES
would receive for each STRYPES at various Reference Property Values. The table
assumes that there will be no Reference Property adjustments as described
below and, accordingly, that on the maturity date the Reference Property will
consist of one share of common stock of IMC. There can be no assurance that
the Reference Property Value will be within the range set forth below. Given
the Initial Price of $38.25 and the Threshold Appreciation Price of $46.28, a
STRYPES holder would receive on the maturity date the following number of
shares of common stock of IMC per STRYPES or, if ML&Co. elects to pay and
discharge the STRYPES with cash, the amount of cash per STRYPES:
Reference Number of Shares
Property of IMC Common Amount
Value Stock of Cash
-------- ------------- -------
$ 35.00 1.0000 $35.00
38.25 1.0000 38.25
42.00 0.9107 38.25
46.28 0.8265 38.25
50.00 0.8265 41.33
<PAGE>
Reference Property Adjustments
The Reference Property is subject to adjustment if an issuer of a
Reference Security shall:
(1) subdivide or split the outstanding units of the Reference
Security into a greater number of units;
(2) combine the outstanding units of the Reference Security into a
smaller number of units;
(3) issue by reclassification of units of the Reference Security
any units of another security of the issuer;
(4) issue rights or warrants to all holders of the Reference
Security entitling them, for a period expiring before the
fifteenth calendar day following the maturity date, to
subscribe for or purchase any of its securities or other
property, other than rights to purchase units of the Reference
Security pursuant to a plan for the reinvestment of dividends
or interest; or
(5) pay a dividend or make a distribution to all holders of the
Reference Security of cash, securities or other property,
excluding any cash dividend on any Reference Security
consisting of capital stock that does not constitute an
Extraordinary Cash Dividend (as defined below), excluding any
payment of interest on any Reference Security consisting of an
evidence of indebtedness and excluding any dividend or
distribution referred to in clause (1), (2), (3) or (4) above),
or issue to all holders of the Reference Security rights or
warrants to subscribe for or purchase any of its securities or
other property (other than those referred to in clause (4)
above). Any of the foregoing cash, securities or other property
or rights or warrants are referred to in this prospectus as the
"Distributed Assets".
In the case of the events referred to in clauses (1), (2) and (3) above, the
Reference Property shall be adjusted to include the number of units of the
Reference Security and/or other security of the issuer which a holder of units
of the Reference Security would have owned or been entitled to receive
immediately following any event had a holder held, immediately before the
event, the number of units of the Reference Security constituting part of the
Reference Property immediately before the event. Each adjustment shall become
effective immediately after the effective date for subdivision, split,
combination or reclassification, as the case may be. Each adjustment shall be
made successively.
In the case of the event referred to in clause (4) above, the Reference
Property shall be adjusted to include an amount in cash equal to the fair
market value, which shall be determined in the manner described below, as of
the fifth Business Day, except as provided below, following the date on which
rights or warrants are received by securityholders entitled thereto (the
"Receipt Date"), of each right or warrant multiplied by the product of (A) the
number of rights or warrants issued for each unit of the Reference Security
and (B) the number of units of the Reference Security constituting part of the
Reference Property on the date of issuance of the rights or warrants,
immediately before issuance, without interest thereon. For purposes of the
foregoing, the fair market value of each right or warrant shall be the
quotient of
(a) (1) the highest net bid, as of approximately 10:00 A.M., New York
City time, on the fifth Business Day following the Receipt Date for
settlement three Business Days later, by a recognized securities
dealer in The City of New York selected by or on behalf of ML&Co.,
from three or a fewer number of dealers as may be providing bids,
recognized dealers selected by or on behalf of ML&Co., for the
purchase by a quoting dealer of the number of rights or warrants
(the "Aggregate Number") that a holder of the Reference Security
would receive if the holder held, as of the record date for
determination of stockholders entitled to receive rights or
warrants, a number of units of the Reference Security equal to the
product of
(A) the aggregate number of Outstanding STRYPES as of a record date
and (B) the number of units of the Reference Security
constituting part of the Reference Property, divided by
(a) (2) the Aggregate Number.
Each adjustment shall become effective on the fifth Business Day
following the Receipt Date of the rights or warrants. If for any reason ML&Co.
is unable to obtain the required bid on the fifth Business Day following the
Receipt Date, it shall attempt to obtain the bid at successive intervals of
three months and on the third Trading Day before the maturity date until it is
able to obtain the required bid. From the date of issuance of the rights or
warrants until the required bid is obtained, the Reference Property shall
include the number of rights or warrants issued for each unit of the Reference
Security multiplied by the number of units of the Reference Security
constituting part of the Reference Property on the date of issuance of the
rights or warrants, immediately before the issuance, and the rights or
warrants constituting part of the Reference Property shall be deemed for all
purposes hereof to have a fair market value of zero.
In the case of the event referred to in clause (5) above, the Reference
Property shall be adjusted to include, from and after a dividend, distribution
or issuance, (a) in respect of that portion, if any, of the Distributed Assets
consisting of cash, the amount of Distributed Assets consisting of cash
received for each unit of the Reference Security multiplied by the number of
units of the Reference Security constituting part of the Reference Property on
the date of a dividend, distribution or issuance, immediately before a
dividend, distribution or issuance, without interest thereon, plus (b) in
respect of that portion, if any, of the Distributed Assets which are other
than cash, the number or amount of each type of Distributed Assets other than
cash received with respect to each unit of the Reference Security multiplied
by the number of units of the Reference Security constituting part of the
Reference Property on the date of a dividend, distribution or issuance,
immediately before the dividend, distribution or issuance.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all cash
dividends on any Reference Security consisting of capital stock occurring in a
12-month period or, if the Reference Security was not outstanding at the
commencement of the 12-month period, occurring in a shorter period during
which the Reference Security was outstanding, exceeds on a per share basis 12%
of the average of the Closing Prices per share of the Reference Security over
a 12-month period or a shorter period during which the Reference Security was
outstanding; provided that, for purposes of this definition, the amount of
cash dividends paid on a per share basis will be appropriately adjusted to
reflect the occurrence during the period of any stock dividend or distribution
of shares of capital stock of the issuer of the Reference Security or any
subdivision, split, combination or reclassification of shares of the Reference
Security.
In the event of a "Reorganization Event", which is
(A) any consolidation or merger of an issuer of a Reference Security
with or into another entity, except for a merger or consolidation in
which the issuer is the continuing corporation and in which the
Reference Security outstanding immediately before the merger or
consolidation is not exchanged for cash, securities or other
property of the issuer or another entity,
(B) any statutory exchange of securities of an issuer of a Reference
Security with another entity, except in connection with a merger or
acquisition, or
(C) any liquidation, dissolution, winding up or bankruptcy of an issuer
of a Reference Security, excluding any distribution in the event
referred to in clause (5) above,
the Reference Property shall be adjusted to include, from and after the
effective date for a Reorganization Event, in lieu of the number of units of
the Reference Security constituting part of the Reference Property immediately
before the effective date for a Reorganization Event, the amount or number of
any cash, securities and/or other property owned or received in a
Reorganization Event with respect to each unit of the Reference Security
multiplied by the number of units of the Reference Security constituting part
of the Reference Property immediately before the effective date for a
Reorganization Event.
No adjustments will be made for other events, such as offerings of common
stock of IMC by IMC for cash or in connection with acquisitions. Likewise, no
adjustments will be made for any sales of common stock of IMC by GVI.
ML&Co. is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Reference Property (or if ML&Co.
is not aware of the occurrence of an event, as soon as practicable after
becoming so aware), to provide written notice to the trustee and to the
holders of the STRYPES of the occurrence of an event and a statement in
reasonable detail setting forth the amount or number of each type of Reference
Security and other property then constituting part of the Reference Property.
Fractional Interests
No fractional units of any Reference Security will be delivered if ML&Co.
pays and discharges the STRYPES by delivering Reference Property. In lieu of
any fractional unit otherwise deliverable in respect of all STRYPES of any
holder on the maturity date, a holder shall be entitled to receive an amount
in cash equal to the value of a fractional unit based on the average Closing
Price per unit of the Reference Security on the 20 Trading Days immediately
before, but not including, the second Trading Day preceding the maturity date.
To the extent practicable, ML&Co. will deliver fractional interests of
any Reference Property other than cash or a Reference Security if ML&Co. pays
and discharges the STRYPES by delivering Reference Property. If a delivery of
fractional interests is not practicable, in lieu of delivering any fractional
interest otherwise deliverable in respect of all STRYPES to any holder on the
maturity date, ML&Co. will deliver holder shall be entitled to receive an
amount in cash equal to the value of the fractional interest based on the fair
market value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by ML&Co.) as of the third Trading Day
preceding the maturity date of the Reference Property other than cash or a
Reference Security.
Redemption, Sinking Fund and Payment Before Maturity
The STRYPES are not subject to redemption by ML&Co. before the maturity
date and do not contain sinking fund or other mandatory redemption provisions.
The STRYPES are not subject to payment before the maturity date at the option
of the holder.
Ranking
The STRYPES are unsecured obligations and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co..
There are no contractual restrictions on the ability of ML&Co. or its
subsidiaries to incur additional secured or unsecured debt. However,
borrowings by certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Exchange Act and under rules of certain
exchanges and other regulatory bodies.
Purchase Agreement
GVI is obligated, under the Purchase Agreement described in "Certain
Arrangements with GVI", to deliver to the ML&Co. Subsidiary (as defined below)
immediately before the maturity date the Reference Property required by ML&Co.
to pay and discharge all of the STRYPES, including any STRYPES issued pursuant
to the over-allotment option granted by ML&Co. to MLPF&S. In lieu of
delivering the Reference Property immediately before the maturity date, GVI
has the right to satisfy its obligation under the Purchase Agreement by
delivering cash in an amount equal to the value of the Reference Property
immediately before the maturity date. The right to deliver cash, if exercised
by GVI, must be exercised with respect to all of the Reference Property
deliverable under the Purchase Agreement.
Securities Depository
Description of the Global Securities
The STRYPES are represented by one or more fully registered global
securities. Each global security has been 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 STRYPES 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 STRYPES represented by a global security for all
purposes under the 1983 indenture. Except as provided below, the beneficial
owners of the STRYPES represented by a global security are not entitled to
have the STRYPES represented by the global security registered in their names,
will not receive or be entitled to receive physical delivery of the STRYPES in
definitive form and are not considered the owners or holders thereof 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 the person is not a participant of DTC on the procedures of the
participant through which the 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 action, and those participants would
authorize beneficial owners owning through such 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 are 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 STRYPES. The STRYPES have been
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One or more fully registered global securities
have been issued for the STRYPES in the aggregate principal amount of such
issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 certain 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 STRYPES under DTC's system must be made by or through direct
participants, which will receive a credit for the STRYPES 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 such beneficial owner
entered into the transaction. Transfers of ownership interests in the STRYPES
are to be accomplished by entries made on the books of participants acting on
behalf of beneficial owners.
To facilitate subsequent transfers, all STRYPES deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
STRYPES 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 STRYPES; DTC's records reflect only the identity of the direct
participants to whose accounts such STRYPES are credited, which may or may not
be the beneficial owners. The participants are 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 are 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
STRYPES. 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
STRYPES are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
STRYPES 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 such
date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If
(j) 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,
(k) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, and
(l) an Event of Default under the 1983 indenture has occurred and is
continuing with respect to the STRYPES,
the global securities will be exchangeable for STRYPES in definitive form of
like tenor and of an equal aggregate principal amount. The definitive STRYPES
will be registered in such name or names as the depositary shall instruct the
trustee. It is expected that such 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, STRYPES 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.
Governing Law
The 1983 indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
Listing
The STRYPES have been listed on the NYSE under the symbol "IGL".
OTHER TERMS
ML&Co. issued the STRYPES 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 STRYPES
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 STRYPES 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 such 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 debt securities affected. However, without the consent of each
holder of any outstanding debt security affected, no amendment or modification
to any 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 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 any indenture which
cannot be modified under the terms of that indenture without the
consent of each holder of each series of 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 STRYPES 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.
CERTAIN ARRANGEMENTS WITH GVI
ML&Co., Merrill Lynch Mortgage Capital Inc., our wholly-owned subsidiary
(the "ML&Co. Subsidiary"), and GVI have entered into a purchase agreement (the
"Purchase Agreement"). Under the Purchase Agreement, GVI is obligated to
deliver to the ML&Co. Subsidiary immediately before the maturity date the
Reference Property required by ML&Co. to pay and discharge all of the STRYPES.
In lieu of delivering the Reference Property immediately before the maturity
date, GVI has the right to satisfy its obligation under the Purchase Agreement
by delivering cash in an amount equal to the value of the Reference Property
immediately before the maturity date. The right to deliver cash, if exercised
by GVI, must be exercised with respect to all of the Reference Property
deliverable under the Purchase Agreement. Under the Purchase Agreement, ML&Co.
has agreed to pay and discharge the STRYPES by delivering to the holders of
the STRYPES on the maturity date the form of consideration that the ML&Co.
Subsidiary receives from GVI. The consideration to be paid by the ML&Co.
Subsidiary under the Purchase Agreement is $153,382,017 in the aggregate,
which was paid to GVI on July 9, 1996. No other consideration is payable by
the ML&Co. Subsidiary to GVI in connection with its acquisition of the
Reference Property under the Purchase Agreement or the performance of the
Purchase Agreement by GVI. ML&Co. has agreed with GVI that, without the prior
consent of GVI, it will not amend the 1983 indenture in any respect that would
adversely affect any obligation of GVI under the Purchase Agreement,
including, without limitation, increasing the consideration that GVI is
obligated to deliver under the Purchase Agreement.
Until such time, if any, as GVI shall have delivered the Reference
Property to the ML&Co. Subsidiary under the terms of the Purchase Agreement,
GVI will retain all ownership rights with respect to the Reference Property
held by it (including, without limitation, voting rights and rights to receive
any dividends, interest or other distributions in respect thereof).
GVI has no obligations with respect to the STRYPES or amounts to be paid
to holders of the STRYPES, including any obligation to take our needs or
yours, as holders of the STRYPES, into consideration in determining whether to
deliver the Reference Property or cash or for any other reason. The Purchase
Agreement among ML&Co., the ML&Co. Subsidiary and GVI is a commercial
transaction and does not create any rights in, or for the benefit of, any
holder of STRYPES.
In the event GVI does not perform under the Purchase Agreement, ML&Co.
will be required to otherwise acquire the Reference Property for delivery to
the holders of the STRYPES on the maturity date, unless it elects to exercise
its option to deliver cash with an equal value.
WHERE YOU CAN FIND MORE INFORMATION
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 STRYPES and other securities. For further information on ML&Co. and the
STRYPES, 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 STRYPES and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the STRYPES.
MLPF&S may act as principal or agent in these market-making transactions.
The STRYPES may be offered on the NYSE or off the exchange in negotiated
transactions or otherwise.
The distribution of the STRYPES 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 26, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
7 7/8% STRUCTURED YIELD PRODUCT EXCHANGEABLE FOR STOCK(SM)
Due February 1, 2001
"STRYPES (SM)"
Payable with Shares of Common Stock of CIBER, Inc.
or cash with an equal value
-----------
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the STRYPES.
The issue price of each STRYPES was $54.125, which was the last sale
price of one share of common stock, par value $.01 per share, of CIBER on
January 26, 1998, as reported on the New York Stock Exchange. The STRYPES will
mature on February 1, 2001.
What you will receive before the maturity date:
o On each February 1, May 1, August 1 and November 1, beginning May 1,
1998, we will pay you interest on the STRYPES in cash at the rate of 7
7/8% per year.
What you will receive on the maturity date:
o For each STRYPES you own, you will receive a number of shares of common
stock of CIBER or an equivalent amount of cash according to the maturity
price. The maturity price is the average closing price per share of
common stock of CIBER on a number of days before the maturity date. The
amount you will receive is also subject to adjustments, which are more
fully described in this prospectus.
<TABLE>
<CAPTION>
<S> <C>
If the maturity price is: You will receive:
(a) greater than $91.4713 .7692 shares of common stock of CIBER
(b) less than $91.4713 but greater than a fractional share of the common stock of CIBER equal to $70.3625
$70.3625 one share of common stock of CIBER
(c) less than $70.3625 but greater than a number of shares of common stock equal to $54.125, based on the
or equal to $54.125 (d) less than maturity price
$54.125 but greater than $51.4188 1.0526 shares of common stock of CIBER
(e) less than $51.4188
</TABLE>
Investing in the STRYPES involves risks, including the risk that your investment
may result in a loss. See "Risk Factors" beginning on page 3.
The STRYPES are listed on the NYSE under the trading symbol "BOB".
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 STRYPES will be the prevailing price at the time of
sale.
-----------
Merrill Lynch & Co.
-----------
The date of this prospectus is , 199 .
"STRYPES" and "Structured Yield Product Exchangeable for Stock" are registered
service marks owned by ML&Co.
TABLE OF CONTENTS
Page
RISK FACTORS................................................................4
MERRILL LYNCH & CO., INC....................................................8
RATIO OF EARNINGS TO FIXED CHARGES..........................................9
CIBER, INC.................................................................10
DESCRIPTION OF THE STRYPES.................................................10
OTHER TERMS................................................................19
CERTAIN ARRANGEMENTS WITH THE CONTRACTING STOCKHOLDER......................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC..........................25
PLAN OF DISTRIBUTION.......................................................25
EXPERTS....................................................................26
<PAGE>
RISK FACTORS
Your investment in the STRYPES will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the STRYPES is suitable for you.
You may suffer a loss on your investment
You should be aware that at maturity the amount you will receive may
be less than the amount you paid for the STRYPES, which was $54.125 per
STRYPES. Although your investment in the STRYPES may be protected from a
depreciation in the value of the common stock of CIBER, if the maturity price
does not fall below the downside protection threshold price of $51.4188, you
will have only limited protection from a depreciation below 95% of the initial
price of $54.125. If the maturity price of the common stock of CIBER is less
than the downside protection threshold price, the amount you may receive on
the maturity date will be less than the issue price you paid for the STRYPES
and, therefore, your investment in the STRYPES will result in a loss to you.
Accordingly, you assume the risk that the market value of the common stock of
CIBER may decline below 95% of the initial price of $54.125, and that the
decline could be substantial.
Your investment in the STRYPES may differ from an investment in other debt
securities
The terms of the STRYPES differ from those of ordinary debt securities
because the value of the common stock of CIBER or the equivalent amount in
cash that you will receive on the maturity date is not fixed, but is based on
the maturity price of the common stock of CIBER. Please review the section
entitled "Description of the STRYPES".
There may be a limited opportunity for equity appreciation
Your opportunity for equity appreciation may be greater if you made a
direct investment in the common stock of CIBER because the amount you may
receive on the maturity date will exceed the initial appreciation cap of
$70.3625, which represents an appreciation of 30% over the initial price of
$54.125, only if the maturity price of the common stock of CIBER exceeds the
threshold appreciation price of $91.4713, which represents an appreciation of
69% over the initial price. Moreover, you will be entitled to receive on the
maturity date only 76.92%, which is the percentage equal to the initial
appreciation cap of $70.3625 divided by the threshold appreciation price of
$91.4713, of any appreciation of the value of common stock of CIBER above the
threshold appreciation price.
Because the price of the common stock of CIBER is subject to market
fluctuations, the value of the common stock of CIBER or the amount of cash you
may receive on the maturity date may be more or less than the issue price of
the STRYPES. If the maturity price is less than the downside protection
threshold price, you will have only limited protection from a depreciation
below 95% of the initial price of $54.125. Please review the section entitled
"Description of the STRYPES".
There are many factors affecting the trading prices of the STRYPES
The trading prices of the STRYPES in the secondary market will be
directly affected by the trading prices of the common stock of CIBER in the
secondary market. It is impossible to predict whether the price of the common
stock of CIBER will rise or fall because several factors may influence the
trading prices of the common stock of CIBER. These factors include:
o CIBER 's operating results and prospects ,
o complex and interrelated political, economic, financial and other
factors and market conditions that can affect (1) the capital
markets generally, (2) the market segment of which CIBER is a part,
or (3) the NYSE, on which the common stock of CIBER is traded,
including the level of, and fluctuations in, the trading prices of
stocks generally and sales of substantial amounts of the common
stock of CIBER in the market subsequent to the offering of the
STRYPES or the perception that these sales could occur, and
o other events that are difficult to predict and are beyond our
control.
There may be illiquidity of the STRYPES in the secondary market
It is not possible to predict how the STRYPES will trade in the secondary
market or whether the secondary market for the STRYPES will be liquid or
illiquid. The STRYPES are novel securities and there is currently no secondary
market for the STRYPES. Although the STRYPES are listed on the NYSE under the
symbol "BOB", you cannot assume
o that an active trading market for the STRYPES will develop,
o that listing on the NYSE will provide you with liquidity of
investment,
o that the STRYPES will not later be delisted or
o that trading of the STRYPES on the NYSE will not be suspended.
If the NYSE delists the STRYPES or suspends the trading of the STRYPES,
we will apply for listing of the STRYPES on another national securities
exchange or for quotation on another trading market. If the STRYPES are not
listed or traded on any securities exchange or trading market, or if trading
of the STRYPES is suspended, it may be more difficult to obtain pricing
information for the STRYPES and the liquidity of the STRYPES may be adversely
affected.
Investing in the STRYPES may affect the market for the common stock of CIBER
Any market that develops for the STRYPES is likely to influence and be
influenced by the market for common stock of CIBER. For example, the price of
common stock of CIBER could become more volatile and could be depressed
o by investors' anticipation of the potential distribution into the
market of substantial amounts of common stock of CIBER on the
maturity date,
o by possible sales of common stock of CIBER by investors who view the
STRYPES as a more attractive means of equity participation in CIBER,
and
o by hedging or arbitrage trading activity that may develop involving
the STRYPES and the common stock of CIBER.
As a holder of STRYPES, you have no stockholder's rights with respect to the
common stock of CIBER
You will not be entitled to any rights, including voting rights and
rights to receive any dividends, interest or other distributions , with
respect to the common stock of CIBER until we have delivered the shares of
common stock of CIBER on the maturity date. In addition, you will not be
entitled to any rights if the applicable record date for the exercise of any
rights occurs before we deliver the shares. For example, if an amendment is
proposed to the amended and restated certificate of incorporation of CIBER and
the record date for determining the stockholders of record entitled to vote on
the amendment occurs before we deliver the shares of common stock of CIBER,
you, as a holder of the STRYPES, will not be entitled to vote on the proposed
amendment.
CIBER has no obligations with respect to the STRYPES
We are not affiliated with CIBER. CIBER has no obligations with respect
to the STRYPES or amounts to be paid to you, including any obligation to take
our needs or yours, as a holder of the STRYPES, into consideration for any
reason. CIBER will not receive any of the proceeds of this offering of the
STRYPES . CIBER is not responsible for, and has not participated in, the
determination of the timing of, prices for or quantities of the STRYPES to be
issued, or the determination or calculation of the amount you will receive, as
a holder of the STRYPES, on the maturity date. In addition, CIBER is not
involved with the administration or trading of the STRYPES .
There may be a dilution of common stock of CIBER
The number of shares of common stock of CIBER or the equivalent amount of
cash that you are entitled to receive on the maturity date is subject to
adjustment for events such as:
o a merger or consolidation in which CIBER is not the surviving or
resulting corporation,
o a sale or transfer of substantially all of the assets of CIBER,
o the liquidation, dissolution, winding up or bankruptcy of CIBER,
o stock splits and combinations, stock dividends, and
o other actions of CIBER that modify its capital structure.
Please review the section entitled "Description of the STRYPES--Dilution
Adjustments".
The number of shares of common stock of CIBER or the cash amount that you
may receive as a holder of the STRYPES on the maturity date will not be
adjusted for other events not specifically provided, such as offerings of
common stock of CIBER by CIBER for cash or in connection with acquisitions.
In addition, no adjustments will be made for any sales of common stock of
CIBER by any principal stockholder of CIBER, including the contracting
stockholder. The contracting stockholder is Bobby G. Stevenson, who
individually and as settlor, beneficiary and trustee of the 1998 Bobby G.
Stevenson Revocable Trust, is the contracting stockholder. At December 31,
1997, the contracting stockholder owned beneficially approximately 27% of the
outstanding common stock of CIBER. CIBER is not restricted from issuing
additional shares of common stock of CIBER during the term of the STRYPES .
Because the contracting stockholder can exercise significant influence on the
business and affairs of CIBER, any decision to issue additional shares of
common stock of CIBER will be influenced by the contracting stockholder. The
principal stockholders of CIBER, including the contracting stockholder, are
also not precluded from selling shares of common stock of CIBER under Rule 144
under the Securities Act or by causing CIBER to register shares.
Neither CIBER nor any stockholder of CIBER, including the contracting
stockholder, has any duty or obligation to consider the interests of the
holders of the STRYPES for any reason. Additional issuances or sales may
materially and adversely affect the price of the common stock of CIBER.
Because of the relationship of the number of shares of common stock of CIBER
or the cash amount you will receive on the maturity date to the price of the
common stock of CIBER, other events may adversely affect the trading price of
the STRYPES. You cannot assume that CIBER will not take any of the foregoing
actions or that CIBER or any of its principal stockholders, including the
contracting stockholder, it will not make offerings of, or that will not sell
any, common stock of CIBER in the future, or as to the amount of any such
offerings or sales.
The tax treatment of STRYPES is uncertain
Because of an absence of authority as to the proper characterization of
the STRYPES, their ultimate tax treatment is uncertain. Accordingly, you
cannot assume that any particular characterization and tax treatment of the
STRYPES will be accepted by the Internal Revenue Service or upheld by a court.
However, it is the opinion of Brown & Wood LLP, counsel to ML&Co., that the
characterization and tax treatment of the STRYPES described in this
prospectus, while not the only reasonable characterization and tax treatment,
is based on reasonable interpretations of law currently in effect and, even if
successfully challenged by the IRS, will not result in the imposition of
penalties. Under the 1983 indenture, which is more fully described in this
prospectus, if you are subject to United States Federal income tax, you must
include currently in income, for United States Federal income tax purposes,
payments denominated as interest that are made with respect to a STRYPES in
accordance with your regular method of tax accounting. In addition, ML&Co. and
you, as a holder of the STRYPES, are required to treat each STRYPES for tax
purposes as a unit consisting of:
o a debt instrument with a fixed principal amount unconditionally
payable on the maturity date equal to the issue price of the STRYPES
and bearing interest at the stated interest rate on the STRYPES and
o a forward purchase contract under which you agree to use the
principal payment due on the debt instrument to purchase on the
maturity date the common stock of CIBER which ML&Co. is obligated to
deliver at that time, subject to ML&Co.'s right to deliver cash
instead of common stock of CIBER.
Upon the acquisition of a STRYPES and upon your sale or other disposition
of a STRYPES before the maturity date, the amount paid or realized be
allocated between the debt instrument and the forward contract based upon
their relative fair market values, as determined on the date of acquisition or
disposition. For these purposes, with respect to acquisitions of STRYPES in
connection with the original issuance thereof, ML&Co. and you agree, under the
terms of the 1983 indenture, to assign $56.78 or 104.91% of the initial
purchase price of a STRYPES to the debt instrument and to assign $2.655 or
4.91% of the initial purchase price of a STRYPES to the forward contract.
Because the appropriate character and timing of income, gain or loss to
be recognized on a STRYPES is uncertain , you should consult your own tax
advisors concerning the application of the United States Federal income tax
laws to your particular situation and any consequences of the purchase,
ownership and disposition of the STRYPES arising under the laws of any other
taxing jurisdiction.
Our holding company structure may affect your right to participate in any
distribution of assets of any subsidiary
Since we are a holding company, our right and the right of our creditors,
including you, as a holder of STRYPES, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent a bankruptcy court may recognize our claims
as a creditor of the subsidiary . In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to us are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Other Considerations
We suggest that you reach an investment decision only after carefully
considering the suitability of the STRYPES in the light of your particular
circumstances.
<PAGE>
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
STRYPES described in this prospectus.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a) 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
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. "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.
<PAGE>
CIBER, INC.
CIBER is a nationwide provider of information technology consulting,
including application software staff supplementation, management consulting
solutions for "business/IT" problems, package software implementation
services, system life-cycle project responsibility, millennium date change
conversion services and networking procurement and engineering services.
CIBER's revenues are generated from two areas, the CIBER Information Services
("CIS") Division and CIBER's Solutions Consulting Group ("CIBER Solutions").
The CIS Division provides application software development and maintenance
services and, through its CIBR2000 Division, millennium date change solutions.
CIBER Solutions provides services through CIBER's wholly-owned subsidiaries
Spectrum Technology Group, Inc. ("Spectrum"), Business Information Technology,
Inc. ("BIT") and CIBER Network Services, Inc. ("CNSI"). Spectrum provides
information technology consulting solutions to business problems, specifically
in the areas of data warehousing, data modeling and enterprise architecture,
as well as project management and system integration services. BIT specializes
in the implementation and integration of human resource and financial software
application products, plus workflow automation and manufacturing/distribution
software systems, primarily for client/server networks. A substantial portion
of BIT's revenues is derived from assisting clients implementing PeopleSoft,
Inc. software. CNSI provides a wide range of local-area and wide-area network
solutions, from design and procurement to installation and maintenance, with
services including Internet and intranet connectivity.
CIBER is subject to the informational requirements of the Exchange Act.
Accordingly, CIBER files reports, proxy and information statements and other
information with the SEC. Copies of such material can be inspected and copied
at the public reference facilities maintained by the SEC. Reports, proxy and
information statements and other information concerning CIBER may also be
inspected at the offices of the NYSE. The SEC maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including CIBER, that file
electronically with the SEC.
ML&CO. is not affiliated with CIBER, and CIBER has no obligations with
respect to the STRYPES. This prospectus relates only to the STRYPES offered
hereby and does not relate to the common stock of CIBER. CIBER has filed a
registration statement on Form S-3 with the SEC with respect to the shares of
common stock of CIBER that may be received by a holder of STRYPES on the
maturity date. The prospectus of CIBER constituting a part of such
registration statement includes information relating to CIBER and the common
stock of CIBER, as well as a discussion of certain risk factors relevant to an
investment in common stock of CIBER. The prospectus of CIBER does not
constitute a part of this prospectus nor is it incorporated by reference in
this prospectus.
DESCRIPTION OF THE STRYPES
ML&Co. issued the STRYPES as a series of Senior Debt Securities issued
under the 1983 indenture, which is more fully described in this prospectus.
The following summary of material provisions of the 1983 indenture does not
purport to be complete and is qualified in its entirety by reference to the
1983 indenture. A copy of the 1983 indenture is filed as an exhibit to the
registration statement of which this prospectus is a part.
Each STRYPES, which was issued at an issue price of $54.125 (the "Initial
Price"), bears interest at the rate of 7-7/8% of the issue price per annum, or
$4.2623 per annum, from January 30, 1998, or from the most recent Interest
Payment Date to which interest has been paid or provided for, until the
maturity date or the earlier date on which the issue price of the STRYPES is
repaid pursuant to the terms of the STRYPES. Interest on the STRYPES is
payable in cash quarterly in arrears on February 1, May 1, August 1 and
November 1, beginning May 1, 1998, and on the maturity date (each, an
"Interest Payment Date"), to the persons in whose names the STRYPES are
registered at the close of business on the fifteenth calendar day, whether or
not a Business Day, immediately preceding the Interest Payment Date. Interest
on the STRYPES will be computed on the basis of a 360-day year of twelve
30-day months. If an Interest Payment Date falls on a day that is not a
Business Day, the interest payment to be made on the Interest Payment Date
will be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, and no additional interest
will accrue as a result of the delayed payment.
The maturity date of the STRYPES is February 1, 2001. On the maturity
date, ML&Co. will pay and discharge each STRYPES by delivering to the holder
of the STRYPES a number of shares of common stock of CIBER, subject to
ML&Co.'s right to deliver, with respect to all, but not less than all, shares
of common stock of CIBER deliverable on the maturity date, cash with an equal
value. The number of shares that ML&Co. will deliver is referred to in this
prospectus as the "Payment Rate". ML&Co. will determine the Payment Rate
according to the following Payment Rate Formula, which is subject to
adjustment as a result of dilution events described in this prospectus.
(a) If the Maturity Price (as defined below) is greater than or equal to
$91.4713 (the "Threshold Appreciation Price"), the holder of STRYPES
will receive 0.7692 shares of common stock of CIBER per STRYPES;
(b) If the Maturity Price is less than the Threshold Appreciation Price
but is greater than $70.3625 (the "Initial Appreciation Cap"), the
holder of STRYPES will receive a fractional share of common stock of
CIBER per STRYPES so that the value of the fractional share, which
will be determined based on the Maturity Price, equals the Initial
Appreciation Cap;
(c) If the Maturity Price is less than or equal to the Initial
Appreciation Cap but is greater than or equal to the Initial Price,
the holder of STRYPES will receive one share of common stock of
CIBER per STRYPES;
(d) If the Maturity Price is less than the Initial Price but is greater
than or equal to $51.4188 (the "Downside Protection Threshold
Price"), the holder of STRYPES will receive a number of shares of
common stock of CIBER per STRYPES so that the value of the shares,
which will be determined based on the Maturity Price, equals the
Initial Price; and
(e) If the Maturity Price is less than the Downside Protection Threshold
Price, the holder of STRYPES will receive 1.0526 shares of common
stock of CIBER per STRYPES.
The Maturity Price will represent a determination of the value of a share of
common stock of CIBER immediately before the maturity date. You, as a holder
of the STRYPES, cannot assume that the amount you will receive on the maturity
date will be equal to or greater than the issue price of the STRYPES. If the
Maturity Price of the common stock of CIBER is less than the Downside
Protection Threshold Price, the amount you will receive on the maturity date
will be less than the issue price paid for the STRYPES, in which case your
investment in STRYPES will result in a loss. The numbers of shares of common
stock of CIBER per STRYPES specified in clauses (a), (c) and (e) of the
Payment Rate Formula are referred to in this prospectus as the "Share
Components".
Notwithstanding the foregoing, ML&Co. may, in lieu of delivering shares
of common stock of CIBER, deliver cash in an amount equal to the value of the
number of shares of common stock of CIBER at the Maturity Price, subject to
ML&Co.'s agreement contained in the forward purchase contract to deliver on
the maturity date the form of consideration that the ML&Co. Subsidiary
receives from the contracting stockholder. The right to deliver cash, if
exercised by ML&Co., must be exercised with respect to all shares of common
stock of CIBER otherwise deliverable on the maturity date in payment of all
Outstanding STRYPES. On or before the sixth Business Day before the maturity
date, ML&Co. will notify the Securities Depository and the trustee and publish
a notice in The Wall Street Journal or another daily newspaper of national
circulation stating whether the STRYPES will be paid and discharged with
shares of common stock of CIBER or cash. At the time the notice is published,
the Maturity Price will not have been determined. If ML&Co. delivers shares of
common stock of CIBER, holders of the STRYPES will be responsible for the
payment of any and all brokerage costs upon the subsequent sale of the common
stock.
The "Maturity Price" means the average Closing Price per share of common
stock of CIBER on the 20 Trading Days immediately before, but not including,
the second Trading Day preceding the maturity date.
The "Closing Price" of any security on any date of determination means
(1) the closing sale price or, if no closing price is reported, the last
reported sale price, of such security on the NYSE on such date, or (2) if such
security is not listed for trading on the NYSE on any date of determination,
as reported in the composite transactions for the principal United States
securities exchange on which the security is so listed, or (3) if the security
is not so listed on a United States national or regional securities exchange,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System, (4) or if the security is not so reported, the last quoted
bid price for the security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or (5) if the bid price is
not available, the market value of the security on the date of determination
as determined by a nationally recognized independent investment banking firm
retained for this purpose by ML&Co. In the event that the Payment Rate Formula
is adjusted as described under "-Dilution Adjustments" below, each of the
Closing Prices used in determining the Maturity Price will be similarly
adjusted to derive, for purposes of determining which clause of the Payment
Rate Formula will apply on the maturity date, a Maturity Price stated on a
basis comparable to the Downside Protection Threshold Price, the Initial
Price, the Initial Appreciation Cap and the Threshold Appreciation Price.
A "Trading Day" means a day on which the security the Closing Price
of which is being determined (A) is not suspended from trading on any national
or regional securities exchange or association or over-the-counter market at
the close of business and (B) has traded at least once on the national or
regional securities exchange or association or over-the-counter market that is
the primary market for the trading of the security.
The term "Business Day" means any day that is not a Saturday, a
Sunday or a day on which the NYSE or banking institutions or trust companies
in The City of New York are authorized or obligated by law or executive order
to close.
<PAGE>
Hypothetical Payments at Maturity
For illustrative purposes only, the following table shows the number of
shares of common stock of CIBER or the amount of cash that a holder of STRYPES
would receive for each STRYPES at various hypothetical Maturity Prices. The
table assumes that there will be no dilution adjustments to the Payment Rate
Formula as described below. Given the Downside Protection Threshold Price of
$51.42, the Initial Price of $54.13, the Initial Appreciation Cap of $70.36
and the Threshold Appreciation Price of $91.47, a STRYPES holder would receive
on the maturity date the following number of shares of common stock of CIBER
or, if ML&Co. elects to pay and discharge the STRYPES with cash, the amount of
cash per STRYPES:
Maturity Price
of Number of
Common Stock of Shares of
CIBER Common Stock of CIBER Amount of Cash*
-------------- --------------------- ---------------
$45.13 1.0526 $47.50
49.13 1.0526 51.71
51.42 1.0526 54.13
52.13 1.0384 54.13
54.13 1.0000 54.13
59.13 1.0000 59.13
64.13 1.0000 64.13
70.36 1.0000 70.36
74.13 0.9492 70.36
79.13 0.8893 70.36
84.13 0.8364 70.36
91.47 0.7692 70.36
94.13 0.7692 72.40
99.13 0.7692 76.25
- -----------
* The preceding table does not take into account interest payable on the
STRYPES. Dollar amounts in the table have been rounded to two decimal
places and share amounts have been rounded to four decimal places.
Dilution Adjustments
The Payment Rate Formula is subject to adjustment if CIBER shall:
(1) pay a stock dividend or make a distribution with respect to common
stock of CIBER in shares of the stock;
(2) subdivide or split the outstanding shares of common stock of CIBER
into a greater number of shares;
(3) combine the outstanding shares of common stock of CIBER into a
smaller number of shares;
(4) issue by reclassification of shares of common stock of CIBER any
shares of common stock of CIBER;
(5) issue rights or warrants to all holders of common stock of CIBER
entitling them to subscribe for or purchase shares of common stock
of CIBER at a price per share less than the then current market
price of the common stock of CIBER, other than rights to purchase
common stock of CIBER pursuant to a plan for the reinvestment of
dividends or interest; or
(6) pay a dividend or make a distribution to all holders of common stock
of CIBER of evidences of its indebtedness or other assets, excluding
any stock dividends or distributions referred to in clause (1) above
or any cash dividends other than any Extraordinary Cash Dividend (as
defined below), or issue to all holders of common stock of CIBER
rights or warrants to subscribe for or purchase any of its
securities, other than those referred to in clause (5) above.
In the case of the events referred to in clauses (1), (2), (3) and (4)
above, the Payment Rate Formula shall be adjusted so that each holder of any
STRYPES shall thereafter be entitled to receive, upon payment and discharge of
the STRYPES, the number of shares of common stock of CIBER or, in the case of
a reclassification referred to in clause (4) above, the number of shares of
other common stock of CIBER issued pursuant to the reclassification, which the
holder would have owned or been entitled to receive immediately following any
event had the STRYPES been paid and discharged immediately before the event in
clauses (1), (2), (3) and (4) or any record date with respect to the event.
In the case of the event referred to in clause (5) above, the Payment
Rate Formula shall be adjusted by multiplying each of the Share Components in
the Payment Rate Formula in effect immediately before the date of issuance of
the rights or warrants referred to in clause (5) above by a fraction, (A) the
numerator of which shall be the number of shares of common stock of CIBER
outstanding on the date of issuance of the rights or warrants, immediately
before the issuance, plus the number of additional shares of common stock of
CIBER offered for subscription or purchase pursuant to the rights or warrants,
and (B) the denominator of which shall be the number of shares of common stock
of CIBER outstanding on the date of issuance of the rights or warrants,
immediately before the issuance, plus the number of additional shares of
common stock of CIBER which the aggregate offering price of the total number
of shares of common stock of CIBER so offered for subscription or purchase
pursuant to the rights or warrants would purchase at the current market price,
which shall be determined by multiplying the total number of shares by the
exercise price of the rights or warrants and dividing the product so obtained
by the current market price. The current market price shall be the average
Closing Price per share of common stock of CIBER on the 20 Trading Days
immediately before the date the rights or warrants are issued, subject to
certain adjustments. To the extent that shares of common stock of CIBER are
not delivered after the expiration of the rights or warrants, the Payment Rate
Formula shall be readjusted to the Payment Rate Formula which would then be in
effect had the adjustments for the issuance of the rights or warrants been
made upon the basis of delivery of only the number of shares of common stock
of CIBER actually delivered.
In the case of the event referred to in clause (6) above, the Payment
Rate Formula shall be adjusted by multiplying each of the Share Components in
the Payment Rate Formula in effect on the record date referred to below by a
fraction, (A) the numerator of which shall be the market price per share of
the common stock of CIBER on the record date for the determination of
stockholders entitled to receive the dividend or distribution or the rights or
warrants referred to in clause (6) above, and(B) the denominator of which
shall be the market price per share of common stock of CIBER less the fair
market value as of the record date of the portion of the assets or evidences
of indebtedness to be distributed or of the subscription rights or warrants
applicable to one share of common stock of CIBER. The market price in the
above fraction shall be the average Closing Price per share of common stock of
CIBER on the 20 Trading Days immediately before the record date, subject to
certain adjustments. The Board of Directors of ML&Co. shall determine the fair
market value in the above fraction; their determination of the fair market
value shall be conclusive and described in a resolution adopted with respect
thereto.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all cash
dividends on the common stock of CIBER occurring in the 12-month period,
excluding any the dividends occurring in the period for which a prior
adjustment to the Payment Rate Formula was previously made, exceeds on a per
share basis 10% of the average of the Closing Prices per share of the common
stock of CIBER over the 12-month period. All adjustments to the Payment Rate
Formula will be calculated to the nearest 1/10,000th of a share of common
stock of CIBER or, if there is not a nearest 1/10,000th of a share, to the
next lower 1/10,000th of a share. No adjustment in the Payment Rate Formula
shall be required unless the adjustment would require an increase or decrease
of at least one percent therein; provided, however, that any adjustments which
by reason of the foregoing are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. If an adjustment
is made to the Payment Rate Formula as described above, an adjustment will
also be made to the Maturity Price solely to determine which clause of the
Payment Rate Formula will apply on the maturity date. The required adjustment
to the Maturity Price will be made by multiplying each of the Closing Prices
used in determining the Maturity Price by a fraction, the numerator of which
shall be the Share Component in clause (c) of the Payment Rate Formula
immediately after the adjustment described above, and the denominator of which
shall be the Share Component in clause (c) of the Payment Rate Formula
immediately before the adjustment described above. Each adjustment to the
Payment Rate Formula shall be made successively.
In the event of a "Reorganization Event", which is
(A) any consolidation or merger of CIBER, or any surviving entity or
subsequent surviving entity of CIBER (a "CIBER Successor"), with or
into another entity, other than a consolidation or merger in which
CIBER is the continuing corporation and in which the common stock of
CIBER outstanding immediately before the consolidation or merger is
not exchanged for cash, securities or other property of CIBER or
another corporation,
(B) any sale, transfer, lease or conveyance to another entity of the
property of CIBER or any CIBER Successor as an entirety or
substantially as an entirety,
(C) any statutory exchange of securities of CIBER or any CIBER Successor
with another entity, other than in connection with a merger or
acquisition, or
(D) any liquidation, dissolution, winding up or bankruptcy of CIBER or
any CIBER Successor,
the Payment Rate Formula used to determine the amount payable on the maturity
date for each STRYPES will be adjusted to provide that each holder of STRYPES
will receive cash on the maturity date for each STRYPES. The holder will
receive cash in an amount equal to
(a) if the Transaction Value (as defined below) is greater than or equal
to the Threshold Appreciation Price, 0.7692, subject to adjustment
in the same manner and to the same extent as the Share Components in
the Payment Rate Formula are adjusted as described above, multiplied
by the Transaction Value,
(b) if the Transaction Value is less than the Threshold Appreciation
Price but greater than the Initial Appreciation Cap, the Initial
Appreciation Cap,
(c) if the Transaction Value is less than or equal to the Initial
Appreciation Cap but is greater than or equal to the Initial Price,
the Transaction Value,
(d) if the Transaction Value is less than the Initial Price but is
greater than or equal to the Downside Protection Threshold Price,
the Initial Price and
(e) if the Maturity Price is less than the Downside Protection Threshold
Price, 1.0526, subject to adjustment in the same manner and to the
same extent as the Share Components in the Payment Rate Formula are
adjusted as described above, multiplied by the Transaction Value.
"Transaction Value" means (1) for any cash received in any the
Reorganization Event, the amount of cash received per share of common stock of
CIBER, (2) for any property other than cash or securities received in any
Reorganization Event, an amount equal to the market value on the third
Business Day preceding the maturity date of the property received per share of
common stock of CIBER as determined by a nationally recognized independent
investment banking firm retained for this purpose by ML&Co. and (3) for any
securities received in any Reorganization Event, an amount equal to the
average Closing Price per unit of the securities on the 20 Trading Days
immediately before, but not including, the second Trading Day preceding the
maturity date multiplied by the number of the securities, subject to
adjustment on a basis consistent with the adjustment provisions described
above, received for each share of common stock of CIBER; provided, however, if
one or more adjustments to the Payment Rate Formula shall have become
effective before the effective date for the Reorganization Event, then the
Transaction Value determined in accordance with the foregoing shall be
adjusted by multiplying the Transaction Value by the Share Component in clause
(c) of the Payment Rate Formula immediately before the effective date for the
Reorganization Event. Notwithstanding the foregoing, if any Marketable
Securities (as defined below) are received by holders of common stock of CIBER
in the Reorganization Event, then in lieu of delivering cash as provided
above, ML&Co. may at its option deliver a proportional amount of the
Marketable Securities. If ML&Co. elects to deliver Marketable Securities,
holders of the STRYPES will be responsible for the payment of any and all
brokerage and other transactional costs upon the sale of the securities.
"Marketable Securities" means any securities listed on a U.S. national
securities exchange or reported by NASDAQ.
No adjustments will be made for other events, such as offerings of common
stock of CIBER by CIBER for cash or in connection with acquisitions. Likewise,
no adjustments will be made for any sales of common stock of CIBER by any
principal stockholder of CIBER, including the contracting stockholder.
ML&Co. is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Payment Rate Formula or, if ML&Co.
is not aware of the occurrence of an event, as soon as practicable after
becoming so aware, to provide written notice to the trustee and to the holders
of the STRYPES of the occurrence of the event and a statement in reasonable
detail setting forth the adjusted Payment Rate Formula and the method by which
the adjustment to the Payment Rate Formula was determined; provided that, in
respect of any adjustment to the Maturity Price, the notice will only disclose
the factor by which each of the Closing Prices used in determining the
Maturity Price is to be multiplied in order to determine the Payment Rate on
the maturity date. Until the maturity date, the Payment Rate itself cannot be
determined.
Securities Depository
Description of the Global Securities
The STRYPES are represented by one or more fully registered global
securities. Each global security has been 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 STRYPES 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 the 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 STRYPES represented by a global security for all
purposes under the 1983 indenture. Except as provided below, the beneficial
owners of the STRYPES represented by a global security are not entitled to
have the STRYPES represented by the global security registered in their names,
will not receive or be entitled to receive physical delivery of the STRYPES in
definitive form and are not considered the owners or holders under the 1983
indenture, including for purposes of receiving any reports delivered by ML&Co.
or the trustee pursuant to the 1983 indenture. Accordingly, each person owning
a beneficial interest in a global security must rely on the procedures of DTC
and, if the person is not a participant of DTC on the procedures of the
participant through which the 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 action, and the participants would
authorize beneficial owners owning through the participants to give or take
the 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 are 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 STRYPES. The STRYPES have been
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One or more fully registered global securities
have been issued for the STRYPES in the aggregate principal amount of such
issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 certain 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 STRYPES under DTC's system must be made by or through direct
participants, which will receive a credit for the STRYPES 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 such beneficial owner
entered into the transaction. Transfers of ownership interests in the STRYPES
are to be accomplished by entries made on the books of participants acting on
behalf of beneficial owners.
To facilitate subsequent transfers, all STRYPES deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
STRYPES 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 STRYPES; DTC's records reflect only the identity of the direct
participants to whose accounts such STRYPES are credited, which may or may not
be the beneficial owners. The participants are 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 are 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
STRYPES. 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
STRYPES are credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the
STRYPES 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 such
date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable , and
(c) an Event of Default under the 1983 indenture has occurred and is
continuing with respect to the STRYPES,
the global securities will be exchangeable for STRYPES in definitive form of
like tenor and of an equal aggregate principal amount. The definitive STRYPES
will be registered in such name or names as the depositary shall instruct the
trustee. It is expected that such 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, STRYPES 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.
Fractional Shares
No fractional shares of common stock of CIBER will be delivered if ML&Co.
pays and discharges the STRYPES by delivering shares of common stock of CIBER.
In lieu of any fractional share otherwise deliverable in respect of all
STRYPES of any holder on the maturity date, the holder shall be entitled to
receive an amount in cash equal to the value of the fractional share at the
Maturity Price.
No Redemption, Sinking Fund or Payment Before Maturity
The STRYPES are not subject to redemption before the maturity date at the
option of ML&Co. and do not contain sinking fund or other mandatory redemption
provisions. The STRYPES are not subject to payment before the maturity date at
the option of the holder.
Ranking
The STRYPES are unsecured obligations and rank equally with all other
unsecured and unsubordinated indebtedness of ML&Co.
There are no contractual restrictions on the ability of ML&Co. or its
subsidiaries to incur additional secured or unsecured debt. However,
borrowings by certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Exchange Act and under rules of exchanges and
other regulatory bodies.
Listing
The STRYPES are listed on the NYSE under the trading symbol "BOB".
OTHER TERMS
ML&Co. issued the STRYPES 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 STRYPES
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 STRYPES 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 such 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.
<PAGE>
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 debt securities affected. However, without the consent of each
holder of any outstanding debt security affected, no amendment or modification
to any 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".
<PAGE>
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 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 any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of 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 STRYPES 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 .
<PAGE>
CERTAIN ARRANGEMENTS WITH THE CONTRACTING STOCKHOLDER
Pursuant to the forward purchase contract, the contracting stockholder is
obligated to deliver to the ML&Co. Subsidiary on the Business Day immediately
preceding the maturity date a number of shares of common stock of CIBER equal
to the number required by ML&Co. to pay and discharge all of the STRYPES,
including any STRYPES issued pursuant to the over-allotment option granted by
ML&Co. to the Underwriter. In lieu of delivering shares of common stock of
CIBER on the Business Day immediately preceding the maturity date, the
contracting stockholder has the right to satisfy his obligation under the
forward purchase contract by delivering cash in an amount equal to the value
of the number of shares of common stock of CIBER at the Maturity Price. The
right to deliver cash, if exercised by the contracting stockholder, must be
exercised with respect to all shares of common stock of CIBER then deliverable
pursuant to the forward purchase contract. Under the forward purchase
contract, ML&Co. has agreed to pay and discharge the STRYPES by delivering to
the holders thereof on the maturity date the form of consideration that the
ML&Co. Subsidiary receives from the contracting stockholder.
The consideration to be paid by the ML&Co. Subsidiary under the forward
purchase contract is $71,315,820 in the aggregate which was paid to the
contracting stockholder on January 30, 1998. No other consideration is payable
by the ML&Co. Subsidiary to the contracting stockholder in connection with its
acquisition of the common stock of CIBER or the performance of the forward
purchase contract by the contracting stockholder. ML&Co. has agreed with the
contracting stockholder that, without the prior consent of the contracting
stockholder, it will not amend, modify or supplement the 1983 indenture or the
STRYPES in any respect that would adversely affect any obligation of the
contracting stockholder under the forward purchase contract, including,
without limitation, increasing the consideration that the contracting
stockholder is obligated to deliver pursuant to the forward purchase contract.
Until such time, if any, as the contracting stockholder shall have
delivered shares of common stock of CIBER to the ML&Co. Subsidiary pursuant to
the terms of the forward purchase contract, the contracting stockholder will
retain all ownership rights with respect to the common stock of CIBER held by
him. The ownership rights include, among others, voting rights and rights to
receive any dividends or other distributions .
The contracting stockholder has no duties or obligations with respect to
the STRYPES or amounts to be paid to holders thereof, including any duty or
obligation to take the needs of ML&Co. or holders of the STRYPES into
consideration in determining whether to deliver shares of common stock of
CIBER or cash or for any other reason. The forward purchase contract among
ML&Co., the ML&Co. Subsidiary, The Bank of New York, as agent for and on
behalf of the ML&Co. Subsidiary, and the contracting stockholder is a
commercial transaction and does not create any rights in, or for the benefit
of, any third party, including any holder of STRYPES.
To the extent that the contracting stockholder does not perform under the
forward purchase contract, ML&Co. will be required to otherwise acquire shares
of common stock of CIBER for delivery to holders of the STRYPES on the
maturity date, unless, in the case of shares deliverable on the maturity date,
it elects to exercise its option to deliver cash with an equal value.
Merrill Lynch Capital Corporation, a wholly owned subsidiary of ML&Co.,
has entered into a secured loan agreement with Bobby G. Stevenson, as trustee
of the 1998 Bobby G. Stevenson Revocable Trust. Under the loan agreement, Mr.
Stevenson, as trustee of the 1998 Bobby G. Stevenson Revocable Trust, will
borrow approximately $20,567,930 for a term of three years.
WHERE YOU CAN FIND MORE INFORMATION
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 STRYPES and other securities. For further information on ML&Co. and the
STRYPES, 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.
<PAGE>
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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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 STRYPES and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the STRYPES.
MLPF&S may act as principal or agent in these market-making transactions.
The STRYPES may be offered on the NYSE or off the exchange in negotiated
transactions or otherwise.
The distribution of the STRYPES 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
Nikkei 225 Market Index Target-Term Securities(R)
due September 21, 2005
"MITTS(R) Securities"
$10 principal amount per unit
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the following securities.
<TABLE>
<CAPTION>
The MITTS Securities: Payment at Maturity:
<S> <C>
o 100% principal protection at maturity o On the maturity date, for each unit of MITTS
o No payments before the maturity date Securities you own, we will pay you an amount
o Senior unsecured debt securities of ML & Co. equal to the sum of the principal amount of
o Linked to the value of the Nikkei 225 Index percentage increase in the value of the index
that measures the composite price performance as described in this prospectus.
of selected Japanese stocks. o You will receive no less than the principal
o The MITTS Securities are listed on the American amount of your MITTS Securities.
Stock Exchange under the symbol "MLN"
</TABLE>
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 5.
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.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus is____________, 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Page
RISK FACTORS.................................................................2
MERRILL LYNCH & CO., INC.....................................................6
RATIO OF EARNINGS TO FIXED CHARGES...........................................6
DESCRIPTION OF THE MITTS SECURITIES..........................................7
THE NIKKEI 225 INDEX........................................................14
OTHER TERMS.................................................................16
PROJECTED PAYMENT SCHEDULE..................................................19
WHERE YOU CAN FIND MORE INFORMATION.........................................20
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................20
PLAN OF DISTRIBUTION........................................................21
EXPERTS.....................................................................22
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
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 date is less than 14,152.95,
the value of the index on the date the MITTS Securities were priced. This will
be true even if, at some time during the life of the MITTS Securities, the
value of the index was higher than 14,152.95 but later falls below 14,152.95.
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.
Your return will not reflect the return of owning the stocks included in the
Index
Your return will not reflect the return you would realize if you actually
owned the stocks underlying the index and received the dividends paid on those
stocks. This is because the value of the index is calculated by reference to
the prices of the common stocks included in the index without taking into
consideration the value of dividends paid on those stocks.
Your return may be affected by currency exchange rates
Although the stocks included in the index are traded in Japanese yen and
the MITTS Securities are denominated in U.S. dollars, we will not adjust the
amount payable at maturity for the currency exchange rate in effect at the
maturity of the MITTS Securities. Any amount in addition to the principal
amount of each unit payable to you at maturity is based solely upon the
percentage increase in the index. Changes in the currency exchange rate,
however, may reflect changes in the Japanese economy that may affect the value
of the index and the MITTS Securities.
Your return may be affected by factors affecting the value of Japanese stocks
Because the underlying stocks included in the index have been issued by
Japanese companies, the return on your MITTS Securities will be affected by
risks relating to an investment in Japanese equity securities. The Japanese
securities markets may be more volatile than U.S. or other securities markets
and may be affected by market developments in different ways than U.S. or other
securities markets. Direct or indirect government intervention to stabilize the
Japanese securities markets and cross-shareholdings in Japanese companies on
those markets may affect prices and volume of trading on those markets. Also,
there is generally less publicly available information about Japanese companies
than about those U.S. companies that are subject to the reporting requirements
of the U.S. Securities and Exchange Commission, and Japanese companies are
subject to accounting, auditing and financial reporting standards and
requirements that differ from those applicable to U.S. reporting companies.
Securities prices in Japan are subject to political, economic, financial
and social factors that apply in Japan. In addition, recent or future changes
in the Japanese government's economic and fiscal policies, the possible
imposition of, or changes in, currency exchange laws or other Japanese laws or
restrictions applicable to Japanese companies or investments in Japanese equity
securities and fluctuations in the rate of exchange between currencies may
negatively affect the Japanese securities markets. Moreover, the Japanese
economy may differ favorably or unfavorably from the U.S. economy in economic
factors such as growth in gross national product, rates of inflation, capital
reinvestment, resources and self-sufficiency.
There may be an uncertain trading market for the MITTS Securities in the
future
Although the MITTS Securities are listed on the AMEX under the symbol
"MLN," 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, you cannot assume that 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
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited and you do not
wish to hold your investment until maturity, there may be a limited number of
buyers for your MITTS Securities. This may affect the price you receive if you
sell before maturity.
There are many factors affecting the trading value of the MITTS Securities
We believe that the trading value of the MITTS Securities will be affected
by the value of the index and by a number of other factors. Some of these
factors are interrelated in complex ways; as a result, the effect of any one
factor may be offset or magnified by the effect of another factor. The
following paragraphs describe the expected impact on the market value of the
MITTS Securities given a change in a specific factor, assuming all other
conditions remain constant.
o The value of the index. The trading value of the MITTS Securities will
depend substantially on the amount by which the value of the index exceeds
or does not exceed 14,152.95, the value of the index on the pricing date.
If you choose to sell your MITTS Securities at a time when the value of
the index exceeds 14,152.95, you may receive substantially less than the
amount that would be payable at maturity based on that value because of
the expectation that the index will continue to fluctuate until shortly
before the maturity date when the average value of the index over five
trading days is determined. If you choose to sell your MITTS Securities
when the value of the index is below, or not sufficiently above,
14.152.95, you may receive less than $10 per unit of your MITTS
Securities. In general, rising Japanese dividend rates, or dividends per
share, may increase the value of the index while falling Japanese dividend
rates may decrease the value of the index. Additionally, political,
economic and other developments that affect the stocks underlying the
index may also affect the value of the index and the value of the MITTS
Securities.
o Interest rates. Because we will pay, at a minimum, the principal amount
per unit of the MITTS Securities at maturity, we expect that the trading
value of the MITTS Securities will be affected by changes in interest
rates. In general, if U.S. interest rates increase, we expect that the
trading value of the MITTS Securities will decrease and, conversely, if
U.S. interest rates decrease, we expect the trading value of the MITTS
Securities will increase. In general, if interest rates in Japan increase,
we expect that the trading value of the MITTS Securities will increase
and, conversely, if interest rates in Japan decrease, we expect the
trading value of the MITTS Securities will decrease. However, interest
rates in Japan may also affect the Japanese economy and, in turn, the
value of the index. Rising interest rates in Japan may lower the value of
the index and, as a result, may decrease the value of the MITTS
Securities. Falling interest rates in Japan may increase the value of the
index and, as a result, may increase the value of the MITTS Securities.
o Volatility of the Japanese yen/U.S. dollar exchange rate. The Japanese
yen/U.S. dollar rate is a foreign exchange spot rate that measures the
relative values of two currencies, the Japanese yen and the U.S. dollar
and is expressed as a rate that reflects the amount of Japanese yen that
can be purchased for one U.S. dollar. The Japanese yen/U.S. dollar rate
increases when the U.S. dollar appreciates relative to the Japanese yen.
Volatility is the term used to describe the size and frequency of market
fluctuations. In general, if the volatility of the Japanese yen/U.S.
dollar rate increases, we expect that the trading value of the MITTS
Securities will increase and, conversely, if the volatility of the
Japanese yen/U.S. dollar rate decreases, we expect that the trading value
of the MITTS Securities will decrease.
o Correlation between the Japanese yen/U.S. dollar exchange rate and the
index. Correlation is the term used to describe the relationship between
the percentage changes in the Japanese yen/U.S. dollar exchange rate and
the percentage changes in the index. In general, if the correlation
between the Japanese yen/U.S. dollar exchange rate and the index
increases, we expect that the trading value of the MITTS Securities will
increase and, conversely, if the correlation between the Japanese yen/U.S.
dollar exchange rate and the index decreases, we expect that the trading
value of the MITTS Securities will decrease.
o Volatility of the index. Generally, if the volatility of the index
increases, we expect that the trading value of the MITTS Securities will
increase and, conversely, if the volatility of the index decreases, we
expect that the trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that prior to their maturity,
the MITTS Securities may trade at a value above that which would be
expected based on the level of interest rates and the index. This
difference would reflect a "time premium" due to expectations concerning
the value of the index during the period before September 21, 2005, the
stated maturity of the MITTS Securities. However, as the time remaining to
the stated maturity of the MITTS Securities decreases, we expect that this
time premium will decrease, lowering the trading value of the MITTS
Securities.
o Dividend Yields. Generally, if dividend yields on the stocks included in
the index increase, we expect that the value of the MITTS Securities will
decrease and, conversely, if dividend yields on the stocks included in the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in our credit ratings. 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 value
of the index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in U.S. interest rates or a
reduction in our credit ratings, 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 value of the index.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most 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, except that we expect that the effect on the trading value of the
MITTS Securities of a given increase or decrease in the value of the index 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.
Amounts payable on the MITTS Securities may be limited by state law
The indenture under which the MITTS Securities are issued is governed by
New York State law. 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.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the stocks
underlying the index for their own accounts, for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
Potential conflicts of interest
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index and
the amount payable to you at maturity. Under certain 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. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 have entered into an arrangement with one of our a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Other Considerations
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the MITTS
Securities and should consult with your tax adviser.
<PAGE>
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.
<PAGE>
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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)..... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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 December 28, 1998, ML&Co. issued an aggregate principal amount of
$70,000,000 or 7,000,000 units of the MITTS Securities. The MITTS Securities
were issued as a series of senior debt securities under the 1983 Indenture
which is more fully described in this prospectus.
The MITTS Securities will mature on September 21, 2005.
While at maturity a beneficial owner of a MITTS Security will receive the
principal amount of the MITTS Security plus the Supplemental Redemption Amount
described below, if any, there will be no other payment of interest, periodic
or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms Events of
Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
(Ending Value - Starting Value)
principal amount of each MITTS Security -------------------------------
($10 per unit) X (Starting Value)
provided, however, that in no event will the Supplemental Redemption
Amount be less than zero.
The "Starting Value" equals 14,152.95.
The "Ending Value" will be determined by the calculation agent and will
equal the average or arithmetic mean of the closing values of the Nikkei 225
Index (the "Index") determined on each of the first five Calculation Days
during the Calculation Period. If there are fewer than five Calculation Days,
then the Ending Value will equal the average or arithmetic mean of the closing
values of the Index on these Calculation Days, and if there is only one
Calculation Day, then the Ending Value will equal the closing value of the
Index on that Calculation Day. If no Calculation Days occur during the
Calculation Period, then the Ending Value will equal the closing value of the
Index determined on the last scheduled Index Business Day in the Calculation
Period, regardless of the occurrence of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day prior to the maturity date to and including the
second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are open
for trading and the Index or any Successor Index, as defined on page 11 below,
is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values:
o the percentage change from the Starting Value to the Ending Value;
o the total amount payable per Unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks underlying the Index
,which includes an assumed aggregate dividend yield of 1.04% per annum, as
more fully described below.
<TABLE>
<CAPTION>
Ending Total Amount
Value Payable at Pretax Annualized Pretax Annualized
Percentage Maturity Total Rate of Rate of Rate of Return of
Hypothetical Change Over the Per Unit of Return on the Return on the Stocks Underlying
Ending Value Starting Value MITTS Securities MITTS Securities MITTS Securities(1) the Index(1)(2)
------------ -------------- ---------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
7,076.48 -50.00% $ 10.00 0.00% 0.00% -9.00%
8,491.77 -40.00% $ 10.00 0.00% 0.00% -6.41%
9,907.07 -30.00% $ 10.00 0.00% 0.00% -4.20%
11,322.36 -20.00% $ 10.00 0.00% 0.00% -2.25%
12,737.66 -10.00% $ 10.00 0.00% 0.00% -0.52%
14,152.95(3) 0.00% $ 10.00 0.00% 0.00% 1.04%
15,568.25 10.00% $ 11.00 10.00% 1.42% 2.47%
16,983.54 20.00% $ 12.00 20.00% 2.72% 3.79%
18,398.84 30.00% $ 13.00 30.00% 3.93% 5.00%
19,814.13 40.00% $ 14.00 40.00% 5.06% 6.14%
21,229.43 50.00% $ 15.00 50.00% 6.11% 7.20%
22,644.72 60.00% $ 16.00 60.00% 7.10% 8.20%
24,060.02 70.00% $ 17.00 70.00% 8.03% 9.15%
25,475.31 80.00% $ 18.00 80.00% 8.92% 10.04%
26,890.61 90.00% $ 19.00 90.00% 9.76% 10.89%
28,305.90 100.00% $ 20.00 100.00% 10.56% 11.70%
29,721.20 110.00% $ 21.00 110.00% 11.32% 12.48%
31,136.49 120.00% $ 22.00 120.00% 12.05% 13.22%
32,551.79 130.00% $ 23.00 130.00% 12.75% 13.93%
33,967.08 140.00% $ 24.00 140.00% 13.43% 14.61%
35,382.38 150.00% $ 25.00 150.00% 14.07% 15.27%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) a constant dividend yield of 1.04% per annum, paid quarterly
from the date of initial delivery of MITTS Securities, applied to
the value of the Index at the end of each quarter assuming the value
increases or decreases linearly from the Starting Value to the
hypothetical Ending Value;
(b) no transaction fees or expenses;
(c) the term of the MITTS Securities is from December 28, 1998 to
September 21, 2005; and
(d) a final Index value equal to the hypothetical Ending Value.
(3) The Starting Value of the Index.
The above figures are for purposes of illustration only. The actual
investment term, Supplemental Redemption Amount received by investors, and the
respective total and pretax annualized rate of return will depend entirely on
the Starting Value and the actual Ending Value determined by the calculation
agent as provided herein.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value, is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Value is to be calculated, make such adjustments as, in
the good faith judgment of the calculation agent, may be necessary in order to
arrive at a calculation of a value of a stock index comparable to the Index as
if the changes or modifications had not been made, and calculate the closing
value with reference to the Index, as adjusted. Accordingly, if the method of
calculating the Index is modified so that the value of the Index is a fraction
or a multiple of what it would have been if it had not been modified (e.g., due
to a split in the Index), then the calculation agent shall adjust the Index in
order to arrive at a value of the Index as if it had not been modified, e.g.,
as if the split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
o a suspension, material limitation or absence of trading on the Tokyo Stock
Exchange (the "TSE") of 20% or more of the underlying stocks which then
comprise the Index or a Successor Index during the one-half hour period
preceding the close of trading on the applicable exchange; or
o the suspension or material limitation on the Singapore International
Monetary Exchange, Ltd. (the "SIMEX"), the Osaka Securities Exchange (the
"OSE") or any other major futures or securities market from trading in
futures or options contracts related to the Index or a Successor Index
during the one-half hour period preceding the close of trading on the
applicable exchange.
For the purposes of determining whether a Market Disruption Event has
occurred:
o a limitation on the hours 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,
o a decision to permanently discontinue trading in the relevant futures or
options contract will not constitute a Market Disruption Event,
o a suspension in trading in a futures or options contract on the Index by a
major securities market by reason of
o a price change violating limits set by the securities market,
o an imbalance of orders relating to futures or options contracts or
o a disparity in bid and ask quotes relating to futures or options
contracts will constitute a suspension or material limitation of
trading in futures or options contracts related to the Index, and
o an absence of trading on the TSE will not include any time when the TSE is
closed for trading under ordinary circumstances.
Under certain circumstances, the duties of MLPF&S as calculation agent in
determining the existence of Market Disruption Events could conflict with the
interests of MLPF&S as a subsidiary of ML&Co..
Based on the information currently available to ML&Co., the opening of
trading on the OSE was delayed on January 17, 1995 because of the earthquake in
Kobe. If this delay had occurred during the one-half hour period preceding the
close of trading on the OSE, it would have constituted a Market Disruption
Event. In addition, because of movements in the price for futures contracts for
the Index, the OSE imposed price limits on futures contracts on January 23,
1995 that were in effect during the one-half hour period preceding the close of
trading on the OSE and that would have constituted a Market Disruption Event.
On January 31 and February 1 of 1994, prices for futures contracts for the
Index reached price limits imposed by the OSE, which would have been a Market
Disruption Event. Other than the foregoing events, to ML&Co.'s knowledge no
circumstances have arisen since the inception of the Index that could have
constituted a Market Disruption Event. The existence or nonexistence of these
circumstances, however, is not necessarily indicative of the likelihood of
these circumstances arising or not arising in the future.
Discontinuance of the Index
If the publisher of the Nikkei 225 Index, Nihon Keizai Shimbum, Inc.
("NKS"), discontinues publication of the Index and NKS or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of that determination to the Trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by NKS or such other entity for the Index and calculate the Ending
Value as described above under "-Payment at Maturity". Upon any selection by
the calculation agent of a Successor Index, ML&Co. shall cause notice to be
given to holders of the MITTS Securities.
If NKS discontinues publication of the Index and a Successor Index is not
selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any Calculation
Day used to calculate the Supplemental Redemption Amount at maturity will be a
value computed by the calculation agent for each Calculation Day in accordance
with the procedures last used to calculate the Index before any discontinuance.
If a Successor Index is selected or the calculation agent calculates a value as
a substitute for the Index as described below, that Successor Index or value
shall be substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists. If the calculation agent
calculates a value as a substitute for the Index, "Calculation Day" shall mean
any day on which the Calculation Agent is able to calculate a substitute value.
If NKS discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that time,
then on each Business Day until the earlier to occur of:
o the determination of the Ending Value and
o a determination by the Calculation Agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in computing
the Supplemental Redemption Amount as described in the preceding paragraph as
if that day were a Calculation Day. 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
the values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the MITTS Securities.
Events of Default and Acceleration
If 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 per unit, will be equal to the principal amount per unit
and the Supplemental Redemption Amount, if any, calculated as though the date
of early repayment were the stated maturity date of the MITTS Securities. See
"- Payment 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 per unit 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 of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners, at the rate of 6.01% per annum (to the extent that payment of such
interest shall be legally enforceable) on the unpaid amount due and payable on
such date in accordance with the terms of the MITTS Securities to the date
payment of that 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
such 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 such
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 are to 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 Payment
All payments of principal and the Supplemental Redemption Amount, if any,
will be made by ML&Co. in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE NIKKEI 225 INDEX
Unless otherwise stated, all information relating to the Nikkei 225
Index in this prospectus has been derived from the Stock Market Indices Data
Book published by NKS and other publicly-available sources. This information
reflects the policies of NKS as stated in these sources; these policies are
subject to change at the discretion of NKS.
The Nikkei 225 Index is a stock index calculated, published and
disseminated by NKS that measures the composite price performance of selected
Japanese stocks. The Nikkei 225 Index is currently based on 225 underlying
stocks (the "Underlying Stocks") trading on the TSE and represents a broad
cross-section of Japanese industry. All 225 Underlying Stocks are stocks listed
in the First Section of the TSE. Stocks listed in the First Section are among
the most actively traded stocks on the TSE. Futures and options contracts on
the Nikkei 225 Index are traded on the SIMEX, the OSE and the Chicago
Mercantile Exchange.
The Nikkei 225 Index is a modified, price-weighted index (i.e., an
Underlying Stock's weight in the index is based on its price per share rather
than the total market capitalization of the issuer) which is calculated by
o multiplying the per share price of each Underlying Stock by the
corresponding weighting factor for that Underlying Stock (a "Weight
Factor"),
o calculating the sum of all these products, and
o dividing the sum by a divisor.
The divisor, initially set in 1949 at 225, was 10.052 as of December 21,
1998, and is subject to periodic adjustments as set forth below. Each Weight
Factor is computed by dividing (Y)50 by the par value of the relevant
Underlying Stock, so that the share price of each Underlying Stock when
multiplied by its Weight Factor corresponds to a share price based on a uniform
par value of (Y)50. Each Weight Factor represents the number of shares of the
related Underlying Stock which are included in one trading unit of the Nikkei
225 Index. The stock prices used in the calculation of the Nikkei 225 Index are
those reported by a primary market for the Underlying Stocks, currently the
TSE. The level of the Nikkei 225 Index is calculated once per minute during TSE
trading hours.
In order to maintain continuity in the level of the Nikkei 225 Index in
the event of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stocks,
stock dividends, stock splits or distributions of assets to stockholders, the
divisor used in calculating the Nikkei 225 Index is adjusted in a manner
designed to prevent any instantaneous change or discontinuity in the level of
the Nikkei 225 Index. Thereafter, the divisor remains at the new value until a
further adjustment is necessary as the result of another change. As a result of
each change affecting any Underlying Stock, the divisor is adjusted so that the
sum of all share prices immediately after the change multiplied by the
applicable Weight Factor and divided by the new divisor, which will be the
level of the Nikkei 225 Index immediately after the change, will equal the
level of the Nikkei 225 Index immediately prior to the change.
Underlying Stocks may be deleted or added by NKS. However, to maintain
continuity in the Nikkei 225 Index, the policy of NKS is generally not to alter
the composition of the Underlying Stocks except when an Underlying Stock is
deleted in accordance with the following criteria. Any stock becoming
ineligible for listing in the First Section of the TSE due to any of the
following reasons will be deleted from the Underlying Stocks: bankruptcy of the
issuer; merger of the issuer into, or acquisition of the issuer by, another
company; delisting of the stock or transfer of the stock to the "Seiri-Post"
because of excess debt of the issuer or because of any other reason; or
transfer of the stock to the Second Section of the TSE. Upon deletion of a
stock from the Underlying Stocks, NKS will select, in accordance with criteria
established by it, a replacement for deleted Underlying Stock. In an
exceptional case, a newly listed stock in the First Section of the TSE that is
recognized by NKS to be representative of a market may be added to the
Underlying Stocks. In such case, an existing Underlying Stock with low trading
volume and not representative of a market will be deleted.
NKS is under no obligation to continue the calculation and dissemination
of the Nikkei 225 Index. The MITTS Securities are not sponsored, endorsed, sold
or promoted by NKS. No inference should be drawn from the information contained
in this prospectus that NKS makes any representation or warranty, implied or
express, to ML&Co., the holder of the MITTS Securities or any member of the
public regarding the advisability of investing in securities generally or in
the MITTS Securities in particular or the ability of the Nikkei 225 Index to
track general stock market performance. NKS has no obligation to take the needs
of ML&Co. or the holder of the MITTS Securities into consideration in
determining, composing or calculating the Nikkei 225 Index. NKS is not
responsible for, and has not participated in the determination of the timing
of, prices for, or quantities of, the MITTS Securities that have been issued or
in the determination or calculation of the equation by which the MITTS
Securities are to be settled in cash. NKS has no obligation or liability in
connection with the administration or marketing of the MITTS Securities.
The use of and reference to the Nikkei 225 Index in connection with the
MITTS Securities have been consented to by NKS, the publisher of the Nikkei 225
Index.
None of ML&Co., the calculation agent and MLPF&S accepts any
responsibility for the calculation, maintenance or publication of the Nikkei
225 Index or any Successor Index. NKS disclaims all responsibility for any
errors or omissions in the calculation and dissemination of the Nikkei 225
Index or the manner in which the Index is applied in determining any Starting
Values or Ending Values or any Supplemental Redemption Amount upon maturity of
the MITTS Securities.
The Tokyo Stock Exchange
The TSE is one of the world's largest securities exchanges in terms of
market capitalization. Trading hours are currently from 9:00 A.M. to 11:00 A.M.
and from 12:30 P.M. to 3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day the TSE will
close prior to the opening of business in New York City on the same calendar
day. Therefore, the closing level of the Nikkei 225 Index on such trading day
will generally be available in the United States by the opening of business on
the same calendar day.
The TSE has adopted measures, including daily price floors and ceilings on
individual stocks, intended to prevent any extreme short-term price
fluctuations resulting from order imbalances. In general, any stock listed on
the TSE cannot be traded at a price lower than the applicable price floor or
higher than the applicable price ceiling. Price floors and ceilings are
expressed in absolute Japanese yen, rather than percentage, limits based on the
closing price of the stock on the previous trading day. In addition, when there
is a major order imbalance in a listed stock, the TSE posts a "special bid
quote" or a "special asked quote" for that stock at a specified higher or lower
price level than the stock's last sale price in order to solicit counter-orders
and balance supply and demand for the stock. Prospective investors should also
be aware that the TSE may suspend the trading of individual stocks in limited
and extraordinary circumstances, including, for example, unusual trading
activity in that stock. As a result, changes in the Nikkei 225 Index may be
limited by price limitations or special quotes, or by suspension of trading, on
individual stocks which comprise the Nikkei 225 Index, which limitations may,
in turn, adversely affect the value of the MITTS Securities.
OTHER TERMS
The MITTS Securities were issued 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.
Series of senior debt securities may from time to time be issued 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 is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of ML&Co. itself as a creditor of the subsidiary may
be recognized. 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 such 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 of 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 debt securities affected. However, without the consent of each holder
of any outstanding debt security affected, no amendment or modification to any
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 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 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 debt securities of any series of senior debt securities may
waive an Event of Default under 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 any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of 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 $4.8938 per Unit (the
"Projected Supplemental Redemption Amount"). This represents an estimated yield
on the MITTS Securities equal to 6.01% 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 the term of the MITTS Securities based upon the projected
payment schedule for the MITTS Securities (including both the Projected
Supplemental Redemption Amount and the estimated yield equal to 6.01% per annum
(compounded semiannually)) as determined by ML&Co. for purposes of applying the
Final Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
Interest Deemed to Total Interest
Accrue During Deemed to Have Accrued
Accrual Period on the MITTS Securities
(per Unit) as of End of Accrual Period
Accrual Period (per Unit)
----------------- ----------------------- --------------------------------
<S> <C> <C>
December 28, 1998 through March 21, 1999............ $ 0.1356 $ 0.1356
March 22, 1999 through September 21, 1999........... $ 0.3045 $ 0.4401
September 22, 1999 through March 21, 2000........... $ 0.3138 $ 0.7539
March 22, 2000 through September 21, 2000........... $ 0.3231 $ 1.0770
September 22, 2000 through March 21, 2001........... $ 0.3329 $ 1.4099
March 22, 2001 through September 21, 2001........... $ 0.3428 $ 1.7527
September 22, 2001 through March 21, 2002........... $ 0.3532 $ 2.1059
March 22, 2002 through September 21, 2002........... $ 0.3638 $ 2.4697
September 22, 2002 through March 21, 2003........... $ 0.3747 $ 2.8444
March 22, 2003 through September 21, 2003........... $ 0.3860 $ 3.2304
September 22, 2003 through March 21, 2004........... $ 0.3976 $ 3.6280
March 22, 2004 through September 21, 2004........... $ 0.4095 $ 4.0375
September 22, 2004 through March 21, 2005........... $ 0.4218 $ 4.4593
March 22, 2005 through September 21, 2005........... $ 0.4345 $ 4.8938
</TABLE>
Projected Supplemental Redemption Amount = $ 4.8938 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
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.
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; 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 and March 26, 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 or after the date of this initial registration statement and prior to
effectiveness of the registration statement:
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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
Merrill Lynch & Co., Inc.
5 3/4% STock Return Income DEbt Securities(SM) due June 1, 2000
"STRIDES(SM) Securities"
Payable with common stock of Lucent Technologies Inc.
or cash with an equal value
($10 principal amount per unit)
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
our wholly-owned subsidiary, will use this prospectus when making offers and
sales related to market-making transactions in the STRIDES Securities.
<TABLE>
<CAPTION>
The STRIDES Securities: Payment at Maturity:
<S> <C>
o On June 1 and December 1 of each year, beginning o On the maturity date, for each unit of STRIDES
June 1, 1999, we will pay you interest at a rate of Securities you own, we will pay you the redemption
5 3/4% per year for each unit of STRIDES Securities amount which is equal to the lesser of:
you own. o the capped value of $13.00 and
o We will not redeem the STRIDES Securities before the o the product of
maturity date. o $10 and
o Senior unsecured debt securities of ML&Co. o the quotient of (a) the average of the
o Linked to the value of the common stock of Lucent. closing prices of the common stock of
o The STRIDES Securities are listed on the American Lucent during a number of days before
Stock Exchange under the symbol "LTS". The common the maturity date and (b) the starting
stock of Lucent is listed on the New York Stock value of $90.3125.
Exchange under the symbol "LU". o We will pay you the redemption amount either in
shares of common stock of Lucent or an equivalent
amount in cash.
o The redemption amount will not exceed $13.00.
o You may receive less at maturity than the initial
issue price of each unit of STRIDES Securities if
the redemption amount is less than $10.
</TABLE>
Investing in the STRIDES Securities involves risks, including the risk
that your investment may result in a loss.
See "Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The sale price of the STRIDES Securites will be the prevailing price
at the time of sale.
--------------
Merrill Lynch & Co.
---------------
The date of this prospectus is ________________, 1999.
"STock Return Income DEbt Securities" and "STRIDES" are service marks owned by
ML&Co.
TABLE OF CONTENTS
Page
----
RISK FACTORS...........................................................3
MERRILL LYNCH & CO., INC...............................................7
RATIO OF EARNINGS TO FIXED CHARGES.....................................8
DESCRIPTION OF THE STRIDES SECURITIES..................................9
COMMON STOCK OF LUCENT................................................18
OTHER TERMS...........................................................18
WHERE YOU CAN FIND MORE INFORMATION...................................22
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.....................22
PLAN OF DISTRIBUTION..................................................23
EXPERTS...............................................................23
RISK FACTORS
Your investment in the STRIDES Securities will involve certain risks. You
should consider carefully the following discussion of risks before you decide
that an investment in the STRIDES Securities is suitable for you.
You may suffer a loss on your investment
You should be aware that at maturity the amount you will receive may be
less than the amount you paid for the STRIDES Securities. If the ending value
is less than the starting value, the redemption amount you will receive will be
less than the amount you paid for the STRIDES Securities and, therefore, your
investment in the STRIDES Securities will result in a loss to you. When you
invest in the STIDES Securities, you assume the risk that the market value of
the common stock of Lucent may decline, and that the decline could be
substantial.
Your investment in the STRIDES Securities may differ from an investment in
other equity securities
As a holder of the STRIDES Securities, unlike a holder of common stock of
Lucent , you will not be entitled to receive any dividends that may be payable
on common stock of Lucent. When we calculate the starting value and the ending
value, we do not take into consideration the value of cash dividends paid on
the common stock of Lucent, other than an extraordinary dividend. Therefore,
any return on the STRIDES Securities will not be the same as the return that
you could earn by directly owning the common stock of Lucent and receiving the
dividends paid on that stock.
Your investment in the STRIDES Securities may differ from an investment in
other debt securities
The terms of the STRIDES Securities differ from the terms of ordinary debt
securities because the redemption amount ML&Co. will pay on the maturity date
is not a fixed amount. The redemption amount is based on the price of the
common stock of Lucent on five or, under the circumstances described in this
prospectus, fewer than five trading days shortly before the maturity date and
is subject to the capped value of $13.00. Because the price of the common stock
of Lucent is subject to market fluctuations, the amount of cash or the value of
the common stock of Lucent paid to you on the maturity date may be more or less
than the principal amount of the STRIDES Securities.
Other events could affect the market price of the common stock of Lucent and,
therefore, the redemption amount you will receive on the maturity date
Although the redemption amount that you are entitled to receive on the
maturity date is subject to adjustment for corporate events relating to Lucent
and the common stock of Lucent, the adjustments described in this prospectus do
not cover all events that could affect the market price of the common stock of
Lucent. These events include a partial tender or exchange offer for the common
stock of Lucent by Lucent or any third party. These events may adversely affect
the market value of the STRIDES Securities or any common stock of Lucent
allocated during the calculation period, but not received by you until the
maturity date.
There may be a limited opportunity for equity appreciation
You should understand that the opportunity to participate in possible
increases in the price of common stock of Lucent through an investment in the
STRIDES Securities is limited because any amount that you receive on the
maturity date will never exceed the capped value of $13.00. The capped value
represents an appreciation of 30% over the initial price of the STRIDES
Securities. However, if the price of the common stock of Lucent declines over
the term of the STRIDES Securities, you will realize the entire decline in
value of the STRIDES Securities, and may lose all or part of your investment in
the STRIDES Securities. You cannot assume that the amount that you receive on
the maturity date will be equal to or greater than the initial issue price of
the STRIDES Securities.
There may be an uncertain trading market for the STRIDES Securities in the
future
Although the STRIDES Securities are listed on the AMEX under the trading
symbol "LTS", you cannot assume that a trading market will continue to exist
for the STRIDES Securites. If a trading market in the STRIDES Securities
continues to exist, you cannot assume that there will be liquidity in the
trading market. The continued existence of a trading market for the STRIDES
Securities will depend on the financial performance of the Company and other
factors such as the appreciation, if any, in the price of the common stock of
Lucent. In addition, it is unlikely that the secondary market price of the
STRIDES Securities will correlate exactly with the value of common stock of
Lucent.
If the trading market for the STRIDES Securities is limited and you do not
wish to hold you investment until maturity, there may be a limited number of
buyers when you decide to sell your STRIDES Securities . This may affect the
price you receive if you sell before maturity.
There are many factors affecting the trading value of the STRIDES Securities
We believe that the market value of the STRIDES Securities will be
affected by the value of the common stock of Lucent and by a number of other
factors. Some of these factors are interrelated in complex ways; as a result,
the effect of any one factor may be magnified or mitigated by the effect of
another factor. The following paragraphs describe the expected effect on the
market value of the STRIDES Securities given a change in a specific factor,
assuming all other conditions remain constant.
o Value of the common stock of Lucent . The market value of the STRIDES
Securities will depend substantially on the value of the common stock of
Lucent . In general, the value of the STRIDES Securities will decrease as
the value of the common stock of Lucent decreases and the value of the
STRIDES Securities will increase as the value of the common stock of
Lucent increases. However, as the value of the Common Stock increases or
decreases, we do not expect the value of the STRIDES Securities to
increase or decrease at the same rate as the change in value of the common
stock of Lucent. Because the value of the STRIDES Securities on the
maturity date cannot be greater than the capped value of $13.00, the
STRIDES Securities will generally not trade in the secondary market
significantly above the capped value. In addition, political, economic and
other developments that affect the capital markets generally and the
market segment of which Lucent is a part may also affect the value of the
common stock of Lucent and the value of the STRIDES Securities.
o Interest rates. In general, we anticipate that if U.S. interest rates
increase, the trading value of the STRIDES Securities will decrease.
Conversely, if U.S. interest rates decrease, the trading value of the
STRIDES Securities will increase. Generally, fluctuations in interest
rates will affect the U.S. economy and, in turn, the value of the common
stock of Lucent . Rising interest rates may lower the value of the common
stock of Lucent and, as a result, the value of the STRIDES Securities.
Falling interest rates may increase the value of the common stock of
Lucent and, as a result, may increase the value of the STRIDES Securities.
o Volatility of the common stock of Lucent . Volatility is the term used to
describe the size and frequency of market fluctuations. Generally, if the
volatility of the common stock of Lucent increases, we expect that the
trading value of the STRIDES Securities will decrease . Conversely, if the
volatility of the common stock of Lucent decreases, we expect that the
trading value of the STRIDES Securities will increase.
o Time remaining to maturity. We believe that before the maturity date the
STRIDES Securities will trade at a value above or below that which would
be expected based on the value of the common stock of Lucent . Generally,
as the time remaining to maturity decreases, the value of the STRIDES
Securities will approach the redemption amount that would be payable at
maturity based on the then current value of the common stock of Lucent. As
a result, as the time remaining to maturity decreases, any discount or
premium attributed to the trading value of the STRIDES Securities will
diminish, increasing or decreasing the trading value of the STRIDES
Securities, as applicable.
o Dividend yields. Generally, if the dividend yield on the common stock of
Lucent increases, we expect that the value of the STRIDES Securities will
decrease. Conversely, if the dividend yield on the common stock of Lucent
decreases, we expect that the value of the STRIDES Securities will
increase.
o Changes in our credit ratings. 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 STRIDES
Securities. However, because your return on your STRIDES Securities is
dependent upon factors in addition to our ability to pay our obligations
under the STRIDES Securities, such as the percentage increase in the value
of the index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the STRIDES Securities.
It is important for you to understand that a decrease in the trading value
of the STRIDES Securities resulting from the effect of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any increase in the trading value of the STRIDES Securities attributable to
another factor, such as an increase in the value of the common stock of Lucent.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the STRIDES Securities of a given
change in most of the factors listed above will be less if it occurs later in
the term of the STRIDES Securities than if it occurs earlier in the term of the
STRIDES Securities. However, so long as the value of the common stock of Lucent
is less than 30% above the starting value, we expect that the effect on the
trading value of the STRIDES Securities of a given increase or decrease in the
value of the common stock of Lucent will be greater if it occurs later in the
term of the STRIDES Securities than if it occurs earlier in the term of the
STRIDES Securities.
Lucent has no obligations with respect to the STRIDES Securities
We are not affiliated with Lucent, and Lucent has no obligations with
respect to the STRIDES Securities or amounts to be paid to you, including any
obligation to take our needs or yours, as holders of the STRIDES Securities,
into consideration for any reason. Lucent will not receive any of the proceeds
of the offering of the STRIDES Securities . Lucent is not responsible for, and
has not participated in, the determination or calculation of the amount you may
receive on the maturity date. In addition, Lucent is not involved with the
administration or trading of the STRIDES Securities .
As a holder of STRIDES Securities, you have no stockholder's rights with
respect to the common stock of Lucent
You will not be entitled to any rights with respect to the common stock of
Lucent , including the right to receive dividends or other distributions,
voting rights and the right to tender or exchange common stock of Lucent in any
tender or exchange offer by Lucent or any third party.
Purchase and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the common stock
of Lucent for our own accounts for business reasons or in connection with
hedging our obligations under the STRIDES Securities. These transactions could
affect the price of the common stock of Lucent in a manner that would be
adverse to your investment in the STRIDES Securities.
Amounts payable on the MITTS Securities may be limited by state law
The indenture under which the STRIDES Securities are issued is governed by
New York State. 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
STRIDES 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 your benefit, to the extent permitted by law,
not to voluntarily claim the benefits of any laws concerning usurious rates of
interest.
Potential conflicts of interest
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the common
stock of Lucent and the amount you will receive at maturity. The role of MLPF&S
as our subsidiary and its responsibilities as calculation agent for the STRIDES
Securities could give rise to conflicts of interests . These conflicts could
occur, for instance, in connection with its determination as to whether a
market disruption event has occurred or in connection with judgments that it
would be required to make with respect to certain antidilution and
reorganization adjustments to the closing price. See "Description of the
STRIDES Securities--Dilution and Reorganization Adjustments" in this
prospectus. 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 the calculation agent, potential conflicts of interest could
arise.
We have entered into an arrangement with one of our subsidiaries to hedge
the market risks associated with our obligation to pay the redemption amount
due at maturity. This subsidiary expects to make a profit in connection with
this arrangement. We did not seek competitive bids for this arrangement from
unaffiliated parties.
Other considerations
You should also consider the tax consequences of investing in the STRIDES
Securities, which are uncertain. We suggest that you consult your tax advisor.
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
STRIDES 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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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 STRIDES SECURITIES
ML&Co. issued the STRIDES Securities as a series of senior debt securities
under the 1983 indenture, which is more fully described in this prospectus.
Upon the occurrence of an Event of Default with respect to the STRIDES
Securities, beneficial owners of the STRIDES Securities may accelerate the
maturity of the STRIDES Securities, as described under "--Events of Default and
Acceleration" and "Other Events of Default" in this prospectus.
The STRIDES Securities were issued in denominations of whole units.
The STRIDES Securities do not have the benefit of any sinking fund.
Interest
The STRIDES Securities will bear interest at a rate of 5 3/4% per annum of
the principal amount of each unit from December 1, 1998, or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or provided for, until the maturity date. Interest on the STRIDES Securities
will be payable in cash semi-annually in arrears on June 1 and December 1 of
each year (each, an "Interest Payment Date"), commencing June 1, 1999, to the
persons in whose names the STRIDES Securities are registered at the close of
business on the May 15 and November 15, whether or not a Business Day,
immediately preceding such Interest Payment Date. Interest on the STRIDES
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. If an Interest Payment Date falls on a day that is not a Business Day,
the interest payment to be made on the Interest Payment Date will be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, and no additional interest will accrue as a result
of the delayed payment.
Payment at Maturity
The maturity date of the STRIDES Securities is June 1, 2000. On the
maturity date, the beneficial owner of each STRIDES Security will receive an
amount equal to the value of the Redemption Amount of the STRIDES Security.
The "Redemption Amount" will be determined by the Calculation Agent and,
for each unit, will equal the lesser of:
o $13.00 (the "Capped Value"); and
o $10 per unit X ( Ending Value )
(---------------)
( Starting Value)
On the maturity date, holders of the STRIDES Securities will receive, for
each unit of the STRIDES Securities then held, a number of shares of common
stock of Lucent equal to the Redemption Amount divided by the Ending Value and
accrued interest from the last Interest Payment Date for which interest was
paid.
If the Company elects to pay the Redemption Amount in cash instead of in
shares of common stock of Lucent to which a holder of the STRIDES Securities
would otherwise be entitled to receive, the Company will pay the holder an
amount of cash equal to the Redemption Amount.
The "Starting Value" means $90.3125 which was the Closing Price (as
defined in this prospectus) of one share of common stock of Lucent on November
24, 1998.
The "Ending Value" will be determined by the Calculation Agent and will
equal the average or arithmetic mean of the Closing Prices of the common stock
of Lucent determined on each of the first five Calculation Days during the
Calculation Period, subject to adjustment for certain events described under
"--Dilution and Reorganization Adjustments". If there are fewer than five
Calculation Days in the Calculation Period, then the Closing Prices used to
determine the Ending Value will equal the average or arithmetic mean of the
Closing Prices of the common stock of Lucent on the Calculation Days. If there
is only one Calculation Day, then the Ending Value will equal the Closing Price
of the common stock of Lucent on the Calculation Day. If no Calculation Days
occur during the Calculation Period, then the Ending Value will equal the
Closing Price of the common stock of Lucent determined on the last scheduled
Calculation Day in the Calculation Period, regardless of the occurrence of a
Market Disruption Event on that day.
The "Calculation Period" means the period from and including the seventh
scheduled Calculation Day before the maturity date to and including the second
scheduled Calculation Day before the maturity date.
"Calculation Day" means any Trading Day on which a Market Disruption Event
has not occurred.
"Trading Day" is a day on which the common stock of Lucent (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
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 common stock of Lucent .
"Market Disruption Event" means the occurrence or existence on any Trading
Day during the one-half hour period that ends when the Closing Price is
determined of any suspension of, or limitation imposed on, trading in the
common stock of Lucent on the NYSE or other market or exchange, if applicable.
"Closing Price" means the product of (i) the Share Ratio and (ii) the last
sales price of one share of common stock of Lucent as reported by the NYSE or,
if the security is not trading on the NYSE on any date, as reported in the
composite transactions for the principal United States securities exchange on
which the security is so listed, or if the security is not so listed on a
United States national or regional securities exchange, the last quoted bid
price for the security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if a bid price is not
available, the market value of the security on the date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Calculation Agent.
"Share Ratio" means, initially 1.0, but will be subject to adjustment for
certain events described under "--Dilution and Reorganization Adjustments".
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law to close and that is a Trading Day on the NYSE.
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, absent a determination by the
Calculation Agent of a manifest error, shall be conclusive for all purposes and
binding on the Company and beneficial owners of the STRIDES Securities.
Fractional Shares
ML&Co. will not distribute fractional shares of common stock of Lucent on
the maturity date. In the event the Company elects to pay the Redemption Amount
in shares of common stock of Lucent , all amounts due to any holder of the
STRIDES Securities in respect of the total number of units held by the holder
will be aggregated, and in lieu of delivering any fractional share to the
holder, the holder will receive the cash value of the fractional share based on
the Ending Value.
Examples of Redemption Amount Calculations
The following examples illustrate Redemption Amount calculations:
Example One--Ending Value is 50% less than Starting Value
Starting Value: $90.31
Hypothetical Ending Value: $45.16
Redemption Amount (per unit) = $10.00 X 45.16
-----
90.31 = $5.00.
Total payment on the maturity date (per unit) = $5.00.
Example Two--Ending Value is 20% greater than Starting Value
Starting Value: $90.31
Hypothetical Ending Value: $108.38
Redemption Amount (per unit) = $10.00 X 108.38
------
90.31 = $12.00.
Total payment on the maturity date (per unit) = $12.00.
Example Three--Ending Value is 50% greater than Starting Value
Starting Value: $90.31
Hypothetical Ending Value: $135.47
Redemption Amount (per unit) = $10.00 X 135.47
-----
90.31 = $13.00 (Redemption
Amount
cannot
be
greater
than
Capped
Value).
Total payment on the maturity date (per unit) = $13.00
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values:
o the percentage change over the Starting Value;
o the total amount payable on the maturity date for each $10 principal
amount of STRIDES Securities;
o the total rate of return to beneficial owners of the STRIDES
Securities;
o the pretax annualized rate of return to beneficial owners of STRIDES
Securities; and
o the pretax annualized rate of return of the common stock of Lucent .
<TABLE>
<CAPTION>
Total Amount Pretax Pretax Annualized Rate
Percentage Change Payable on the Annualized of Return of the
Hypothetical Over the Starting maturity date Total Rate of Rate of Lucent Common
Ending Value Value per unit Return(1) Return(2)(3) Stock(3)(4)
------------ ----------------- -------------- ------------ ------------ ---------------------
<S> <C> <C> <C> <C> <C>
45.16 -50.00% $ 5.00 -41.375% -33.94% -41.11%
54.19 -40.00% $ 6.00 -31.375% -24.46% -31.16%
63.22 -30.00% $ 7.00 -21.375% -15.93% -22.26%
72.25 -20.00% $ 8.00 -11.375% -8.14% -14.17%
81.28 -10.00% $ 9.00 -1.375% -0.95% -6.73%
90.31(5) 0.00% $ 10.00 8.625% 5.75% 0.18%
99.34 10.00% $ 11.00 18.625% 12.03% 6.64%
108.38 20.00% $ 12.00 28.625% 17.95% 12.72%
117.41 30.00% $ 13.00 38.625% 23.57% 18.48%
126.44 40.00% $ 13.00 38.625% 23.57% 23.94%
135.47 50.00% $ 13.00 38.625% 23.57% 29.15%
144.50 60.00% $ 13.00 38.625% 23.57% 34.14%
153.53 70.00% $ 13.00 38.625% 23.57% 38.92%
162.56 80.00% $ 13.00 38.625% 23.57% 43.51%
171.59 90.00% $ 13.00 38.625% 23.57% 47.94%
180.63 100.00% $ 13.00 38.625% 23.57% 52.22%
</TABLE>
- ----------
(1) The rates of return specified in this column assume a coupon yield of 5
3/4% per annum.
(2) The annualized rates of return specified in this column assume a constant
coupon yield of 5 3/4% per annum paid semi-annually from December 1, 1998
and applied to the principal amount of each STRIDES Security.
(3) The annualized rates of return specified in these columns are calculated
on a semi-annual bond equivalent basis.
4) The rates of return specified in this column assume
(a) a constant dividend yield of 0.18% per annum, paid quarterly from the
date of initial delivery of STRIDES Securities, applied to the value
of the common stock of Lucent at the end of each the quarter assuming
the value increases or decreases linearly from the Starting Value to
the applicable hypothetical Ending Value;
(b) no transaction fees or expenses;
(c) a term for the STRIDES Securities from December 1, 1998 to June 1,
2000; and
(d) a final value of the common stock of Lucent equal to the Ending
Value.
The dividend yield of the common stock of Lucent as of November 24, 1998
was approximately 0.18%.
(5) The actual Starting Value, as determined on November 24, 1998, was
$90.3125.
The above figures are for purposes of illustration only. The actual
Redemption Amount and the resulting total and pretax annualized rate of return
that investors will receive will depend entirely on the actual Ending Value
determined by the Calculation Agent as provided in this prospectus.
Dilution and Reorganization Adjustments
The Closing Price of the common stock of Lucent used to determine the
Ending Value is subject to adjustment by the Calculation Agent as follows:
1. If common stock of Lucent is subject to a stock split or reverse
stock split, then once the split has become effective, the Share Ratio
will be adjusted to equal the product of the prior Share Ratio and the
number of shares which a holder of one share of common stock of Lucent
before the effective date of the stock split or reverse stock split would
have owned or been entitled to receive immediately following the effective
date.
2. If common stock of Lucent is subject to a stock dividend or
issuance of additional shares of common stock of Lucent that is given
ratably to all holders of shares of common stock of Lucent , then once the
shares are trading ex-dividend, the Share Ratio will be adjusted so that
the new Share Ratio shall equal the prior Share Ratio plus the product of
(a) the number of shares of common stock of Lucent issued with respect to
one share of common stock of Lucent and (b) the prior Share Ratio.
3. There will be no adjustments to the Share Ratio to reflect cash
dividends or distributions paid with respect to common stock of Lucent
other than distributions described in clause (e) of paragraph 5 below and
Extraordinary Dividends as described below. An "Extraordinary Dividend"
means, with respect to any consecutive 12-month period, all cash dividends
or other distributions with respect to common stock of Lucent to the
extent the dividends exceed on a per share basis 10% of the average
Closing Price during the period, less any the dividends for which a prior
adjustment was previously made. If an Extraordinary Dividend occurs with
respect to common stock of Lucent , the Share Ratio will be adjusted on
the Trading Day preceding the payment of any dividend, the payment of
which caused all cash dividends or other distributions made with respect
to the common stock of Lucent over the past 12-month period to exceed on a
per share basis 10% of the average Closing Price during the period, less
any the dividends for which a prior adjustment was previously made (the
"ex-dividend date"), so that the new Share Ratio will equal the product of
(A) the then current Share Ratio, and (B) a fraction, (1) the numerator of
which is the Closing Price on the Trading Day preceding the ex-dividend
date, and (2) the denominator of which is the amount by which the Closing
Price on the Trading Day preceding the ex-dividend date exceeds the
Extraordinary Dividend Amount.
The "Extraordinary Dividend Amount" with respect to an Extraordinary
Dividend for common stock of Lucent will equal (a) in the case of cash
dividends or other distributions that constitute quarterly dividends, the
amount per share of the Extraordinary Dividend minus the amount per share
of the immediately preceding non-Extraordinary Dividend or (b) in the case
of cash dividends or other distributions that do not constitute quarterly
dividends, the amount per share of the Extraordinary Dividend. To the
extent an Extraordinary Dividend is not paid in cash, the value of the
non-cash component will be determined by the Calculation Agent, whose
determination shall be conclusive. A distribution on the common stock of
Lucent described in clause (e) of paragraph 5 below that also constitutes
an Extraordinary Dividend shall cause an adjustment to the Share Ratio
pursuant only to clause (e) of paragraph 5.
4. If Lucent issues transferable rights or warrants to all holders of
common stock of Lucent to subscribe for or purchase common stock of
Lucent, including new or existing rights to purchase common stock of
Lucent pursuant to a shareholders rights plan or arrangement, once a
triggering event shall have occurred thereunder, at an exercise price per
share less than the Closing Price of common stock of Lucent on (a) the
date the exercise price of the rights or warrants is determined and (b)
the expiration date of the rights or warrants, and, in each case, if the
expiration date of the rights or warrants precedes the maturity date, then
the Share Ratio will be adjusted to equal the product of the prior Share
Ratio and a fraction, (1) the numerator of which shall be the number of
shares of common stock of Lucent outstanding immediately before the
issuance plus the number of additional shares of common stock of Lucent
offered for subscription or purchase pursuant to the rights or warrants
and (2) the denominator of which shall be the number of shares of common
stock of Lucent outstanding immediately before the issuance plus the
number of additional shares of common stock of Lucent which the aggregate
offering price of the total number of shares of common stock of Lucent so
offered for subscription or purchase pursuant to the rights of warrants
would purchase at the Closing Price on the expiration date of the rights
or warrants, which shall be determined by multiplying the total number of
shares offered by the exercise price of the rights or warrants and
dividing the product so obtained by the Closing Price.
5. If a "Reorganization Event" occurs, which means
(a) any reclassification or change of common stock of Lucent has
occurred,
(b) Lucent, or any surviving entity or subsequent surviving
entity of Lucent (a "Successor Entity") has been subject to a merger,
combination or consolidation and is not the surviving entity,
(c) any statutory exchange of securities of Lucent or any
Successor Entity with another corporation has occurred, other than
pursuant to clause (b) above),
(d) Lucent is liquidated,
(e) Lucent issues to all of its shareholders equity securities
of an issuer other than Lucent, other than in a transaction described
in clauses (b), (c) or (d above) (a "Spin-off Event") or
(f) a tender or exchange offer is consummated for all the
outstanding shares of Lucent, the Ending Value shall equal the
Reorganization Event Value (as defined below).
The "Reorganization Event Value" shall be determined by the Calculation
Agent and shall equal (a) the Transaction Value related to the relevant
Reorganization Event, plus (b) interest on the Transaction Value accruing
from the date of the payment or delivery of the consideration, if any,
received in connection with the Reorganization Event until the stated
maturity date at a fixed interest rate determined on the date of the
payment or delivery equal to the interest rate that would be paid on a
standard senior non-callable debt security of the Company with a term
equal to the remaining term of the STRIDES Securities.
"Transaction Value" means (a) for any cash received in any the
Reorganization Event, an amount equal to the amount of cash received per
share of common stock of Lucent multiplied by the Share Ratio in effect on
the date all of the holders of shares of common stock of Lucent have
agreed or have become irrevocably obligated to exchange the shares, (b)
for any property other than cash or securities received in any
Reorganization Event, the market value, as determined by the Calculation
Agent, of the Exchange Property received for each share of common stock of
Lucent at the date of the receipt of the Exchange Property multiplied by
the then current Share Ratio and (c) for any security received in any
Reorganization Event, an amount equal to the closing price per share of
the security on the fifth Trading Day before the maturity date multiplied
by the quantity of the security received for each share of common stock of
Lucent multiplied by the then current Share Ratio. "Exchange Property"
means the securities, cash or any other assets distributed in any
Reorganization Event, including, in the case of a Spin-off Event, the
share of common stock of Lucent with respect to which the spun-off
security was issued.
For purposes of paragraph 5 above, in the case of a consummated tender or
exchange offer for all Exchange Property of a particular type, Exchange
Property shall be deemed to include the amount of cash or other property paid
by the offeror in the tender or exchange offer with respect to the Exchange
Property in an amount determined on the basis of the rate of exchange in the
tender or exchange offer. In the event of a tender or exchange offer with
respect to Exchange Property in which an offeree may elect to receive cash or
other property, Exchange Property shall be deemed to include the kind and
amount of cash and other property received by offerees who elect to receive
cash.
No adjustments to the Share Ratio will be required unless the Share Ratio
adjustment would require a change of at least 0.1% in the Share Ratio then in
effect. The Share Ratio resulting from any of the adjustments specified above
will be rounded to the nearest one thousandth, with five ten-thousandths being
rounded upward.
No adjustments to the Share Ratio or to the Ending Value will be required
other than those specified above. However, the Company may, at its sole
discretion, cause the Calculation Agent to make additional adjustments to the
Share Ratio or to the Ending Value to reflect changes occurring in relation to
the common stock of Lucent or any other Exchange Property in other
circumstances where the Company determines that it is appropriate to reflect
the changes.
MLPF&S, as Calculation Agent, will be solely responsible for the
determination and calculation of any adjustments to the Share Ratio or the
Ending Value and of any related determinations and calculations with respect to
any distributions of stock, other securities or other property or assets,
including cash, in connection with any corporate event described in paragraph 5
above, and its determinations and calculations with respect thereto shall be
conclusive.
No adjustments will be made for certain other events, such as offerings of
common stock of Lucent by Lucent for cash or in connection with acquisitions or
the occurrence of a partial tender or exchange offer for the common stock of
Lucent by Lucent or any third party.
ML&Co. will, within ten Business Days following the occurrence of an event
that requires an adjustment to the Share Radio or the Ending Value or, if the
Company is not aware of the occurrence of an event, as soon as practicable
after becoming so aware, provide written notice to the trustee. The trustee in
turn shall provide notice to the holders of the STRIDES Securities of the
occurrence of the event and, if applicable, a statement in reasonable detail
setting forth the adjusted Share Ratio or other formula to be used in
determining the Ending Value.
Events of Default and Acceleration
In case an Event of Default with respect to any STRIDES Securities shall
have occurred and be continuing, the amount payable to a beneficial owner of a
STRIDES Security upon any acceleration permitted by the STRIDES Securities,
with respect to each $10 unit thereof, will be equal to the principal amount
and any accrued interest due thereon. If a bankruptcy proceeding is commenced
in respect of the Company, the claim of the beneficial owner of a STRIDES
Security may be limited, under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount of the STRIDES 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 STRIDES Securities.
In case of default in payment of the STRIDES Securities, whether at any
Interest Payment Date, the maturity date or upon acceleration, from and after
any the date the STRIDES Securities shall bear interest, payable upon demand of
the beneficial owners thereof, at the rate of 5 3/4% per annum, to the extent
that payment of the interest shall be legally enforceable, on the unpaid amount
due and payable on the date in accordance with the terms of the STRIDES
Securities to the date payment of the amount has been made or duly provided
for.
Securities Depository
Description of the Global Securities
The STRIDES Securities are represented by one or more fully registered
global securities. Each global security has been 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 STRIDES 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 STRIDES Securities represented by a global security for
all purposes under the 1983 indenture. Except as provided below, the beneficial
owners of the STRIDES Securities represented by a global security are not
entitled to have the STRIDES Securities represented by the global security
registered in their names, will not receive or be entitled to receive physical
delivery of the STRIDES Securities in definitive form and are not considered
the owners or holders under the 1983 indenture, including for purposes of
receiving any reports delivered by ML&Co. or the trustee pursuant to the 1983
indenture. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of DTC and, if the person is not a
participant of DTC on the procedures of the participant through which the
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 action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instructions of beneficial owners. Conveyance of notices and other
communications by DTC to participants, by participants to indirect participants
and by participants and indirect participants to beneficial owners are 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 STRIDES Securities. The STRIDES
Securities have been issued as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One or more fully registered
global securities have been issued for the STRIDES Securities in the aggregate
principal amount of such issue, and has been deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
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 certain 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 STRIDES Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the STRIDES
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
such beneficial owner entered into the transaction. Transfers of ownership
interests in the STRIDES Securities are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all STRIDES Securities deposited with
DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of STRIDES 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 STRIDES Securities; DTC's records reflect
only the identity of the direct participants to whose accounts such STRIDES
Securities are credited, which may or may not be the beneficial owners. The
participants are 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 are 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
STRIDES 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
to whose accounts the STRIDES 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
STRIDES 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
such date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participant and not of DTC, the
trustee or 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 such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
Exchange for Certificated Securities
If
(a) 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,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, and
(c) an Event of Default under the 1983 indenture has occurred and is
continuing with respect to the STRIDES Securities,
the global securities will be exchangeable for STRIDES 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 STRIDES Securities will be
registered in such name or names as the depositary shall instruct the trustee.
It is expected that such 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, STRIDES Security 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 Payment
All payments of interest and the Redemption Amount, to the extent that
payment of the Redemption Amount is made in cash, will be made by the Company
in immediately available funds so long as the STRIDES Securities are maintained
in book-entry form.
COMMON STOCK OF LUCENT
Lucent Technologies Inc.
Lucent is a designer, developer and manufacturer of communications
systems, software and products. Lucent is engaged in the sale of public
communications systems, and is a supplier of systems or software to most of the
world's largest network operators. Lucent is also engaged in the sale of
business communications systems and in the sale of microelectronic components
for communications applications to manufacturers of communications systems and
computers. Lucent's research and development activities are conducted through
Bell Laboratories.
Because the common stock of Lucent is registered under the Exchange Act,
Lucent is required to file periodically certain financial and other information
specified by the SEC. For more information about Lucent and the common stock of
Lucent that you may receive on the maturity date, information provided to or
filed with the SEC by Lucent with respect to its registered securities can be
located by reference to SEC file number 1-11639 and 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. In addition, information regarding
Lucent may be obtained from other sources including, but not limited to, press
releases, newspaper articles and other publicly disseminated information. We
make no representation or warranty as to the accuracy or completeness of any
such information.
ML&Co. is not affiliated with Lucent, and Lucent has no obligations with
respect to the STRIDES Securities. This prospectus relates only to the STRIDES
Securities offered hereby and does not relate to the common stock of Lucent or
other securities of Lucent. The information contained in this prospectus
regarding Lucent has been derived from the publicly available documents
described in the preceding paragraph. ML&Co. has not participated in the
preparation of these documents or made any due diligence inquiries with respect
to Lucent in connection with the offering of the STRIDES Securities. ML&Co.
makes no representation that the publicly available documents or any other
publicly available information regarding Lucent are accurate or complete.
Furthermore, there can be no assurance that all events, including events that
would affect the accuracy or completeness of the publicly available documents
described in the preceding paragraph, occurring before the date of this
prospectus that would affect the trading price of the common stock of Lucent
and, therefore, the trading price of the STRIDES Securities, have been publicly
disclosed. Subsequent disclosure of any events or the disclosure of or failure
to disclose material future events concerning Lucent could affect the
Redemption Amount to be received at the maturity date and, therefore, the
trading value of the STRIDES Securities.
From time to time, in the ordinary course of business, affiliates of
ML&Co. have engaged in certain investment banking activities on behalf of
Lucent as well as served as counterparty in certain other transactions.
OTHER TERMS
ML&Co. issued the STRIDES 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
STRIDES 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 STRIDES 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 such 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 debt securities affected. However, without the consent of each holder
of any outstanding debt security affected, no amendment or modification to any
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 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 any indenture which
cannot be modified under the terms of that indenture without the
consent of each holder of each series of 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 STRIDES 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.
WHERE YOU CAN FIND MORE INFORMATION
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 STRIDES Securities and other securities. For further information on ML&Co.
and the STRIDES 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.
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;
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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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 STRIDES Securities and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the STRIDES Securities.
MLPF&S may act as principal or agent in these market-making transactions.
The STRIDES Securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the STRIDES 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.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
Merrill Lynch & Co., Inc.
5 1/4% Stock Return Income Debt Securities(SM) due August 23, 2000
"STRIDES(SM) Securities"
Linked to the value of the Nasdaq-100 Index(R)
$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 STRIDES
Securities.
<TABLE>
<CAPTION>
The STRIDES Securities: Payment at Maturity:
<S> <C>
o Interest on the STRIDES Securities at a rate of 5 o On the maturity date, for each unit of the STRIDES
1/4% per year is payable on February 23 and August Securities you own, you will receive accrued and
23 of each year. unpaid interest. In addition, we will pay you the
o Senior unsecured debt securities of Merrill Lynch & lesser of $12.50 and an amount based on the
Co., Inc. percentage change in the value of the index, as
o Linked to the value of the Nasdaq-100 Index described in this prospectus.
o The STRIDES Securities are listed on the American
Stock Exchange under the symbol "NML".
</TABLE>
Investing in the STRIDES Securities involves risks, including the risk that
you may receive less than the price you paid for your STRIDES.
See "Risk Factors" beginning on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The sale price of the STRIDES Securities will be the prevailing market
price at the time of sale.
-------------------------
Merrill Lynch & Co.
-------------------------
The date of this prospectus is March __ , 1999.
"Stock Return Income Debt Securities" and "STRIDES" are service marks owned by
Merrill Lynch & Co., Inc. "Nasdaq", "Nasdaq-100" and "Nasdaq-100 Index" are
trademarks, trade names or service marks owned by The Nasdaq Stock Market, Inc.
TABLE OF CONTENTS
Page
RISK FACTORS.........................................................5
MERRILL LYNCH & CO., INC.............................................8
RATIO OF EARNINGS TO FIXED CHARGES...................................9
DESCRIPTION OF THE STRIDES SECURITIES...............................10
THE INDEX...........................................................18
OTHER TERMS.........................................................22
WHERE YOU CAN FIND MORE INFORMATION.................................25
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...................26
PLAN OF DISTRIBUTION................................................26
EXPERTS.............................................................27
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from this prospectus to help you understand the STock Return Income
DEbt Securities SM or STRIDES SM Securities due August 23, 2000. You should
carefully read this prospectus to fully understand the terms of the STRIDES
Securities, the Nasdaq-100 Index as well as the tax and other considerations
that are important to you in making a decision about whether to invest in the
STRIDES Securities. You should, in particular, carefully review the "Risk
Factors" section, which highlights certain risks, to determine whether an
investment in the STRIDES Securities is appropriate for you.
What are the STRIDES Securities?
The STRIDES Securities are a series of senior debt securities issued by
ML&Co. and are not secured by collateral. The STRIDES Securities rank equally
with all of our other unsecured and unsubordinated debt. The maturity date of
the STRIDES Securities is August 23, 2000. We cannot redeem the STRIDES
Securities at any earlier date.
Each unit of the STRIDES Securities represents $10 principal amount of the
STRIDES Securities. You may transfer the STRIDES Securities only in whole
units. You will not have the right to receive physical certificates evidencing
your ownership except under limited circumstances. Instead, we issued the
STRIDES Securities in the form of a global certificate, held by The Depository
Trust Company, known as DTC, or its nominee. Direct and indirect participants
in DTC record beneficial ownership of the STRIDES Securities by individual
investors. You should refer to the section "Description of the STRIDES
Securities--Depositary" in this prospectus.
When will you receive interest?
You will receive interest payments on the STRIDES Securities at a rate of
5 1/4% per year of the principal amount of each unit, on February 23 and August
23 of each year, beginning August 23, 1999.
What will you receive on the maturity date?
On the maturity date, for each unit of the STRIDES Securities that you
own, in addition to accrued and unpaid interest, we will pay you an amount
equal to the "Redemption Amount" which will equal the lesser of:
o $12.50 (the "Capped Value"); and
o $10 X (Ending Value )
(---------------)
(Starting Value )
"Starting Value" equals 1,891.37.
"Ending Value" means the average of the values of the index at the close
of the market on five business days shortly before the maturity date. We may
calculate the Ending Value by reference to fewer than five or even by reference
to a single day's closing value if, during the period prior to the maturity
date, there is a disruption in the trading of the stocks included in the index
or futures or options relating to the index.
You should understand that the opportunity to participate in the possible
increases in the value of the index through an investment in the STRIDES
Securities is limited because the amount that you receive on the maturity date
will never exceed the Capped Value, which represents an appreciation of 25%
over the initial price of the STRIDES Securities. However, in the event that
the value of the Index declines over the term of the STRIDES Securities, you
will realize the entire decline in value of the STRIDES Securities and may
therefore lose a part of your initial investment in the STRIDES Securities. For
more information about risks associated with the STRIDES Securities, please see
the section entitled "Risk Factors" in this prospectus.
For more specific information about the determination of the Ending Value
and the Redemption Amount, please see the sections entitled "Description of the
STRIDES Securities--Payment at Maturity" and "--Examples of Redemption Amount
Calculations" in this prospectus.
Who publishes the index and what does the index measure?
The Nasdaq-100 Index is a modified capitalization-weighted index of 100 of
the largest and most actively traded of non-financial companies listed on the
Nasdaq National Market tier of the Nasdaq Stock Market. The index is currently
calculated and published by The Nasdaq Stock Market, Inc.
Please note that an investment in the STRIDES Securities does not entitle
you to any ownership interest in any of the stocks included in the index.
How has the index performed historically?
Tables showing the closing value of the index on the last business day of
each month from January 1989 through February 1999 are provided in the section
entitled "The Index--Historical Data" in this prospectus. We have provided this
historical information to help you evaluate the behavior of the index in
various economic environments; however, past performance of the index is not
necessarily indicative of how the index will perform in the future.
What about taxes?
The U.S. Federal income tax consequences of an investment in the STRIDES
Securities are complex and uncertain. Pursuant to the terms of the STRIDES
Securities, ML&Co. and you agree, in the absence of an administrative or
judicial ruling to the contrary, to characterize a STRIDES Security for all tax
purposes as an investment unit consisting of a debt instrument of ML&Co. and a
forward contract to acquire cash equivalent to the Redemption Amount. Under
this characterization of the STRIDES Securities, for U.S. Federal income tax
purposes, you will include payments of interest on the STRIDES Securities in
income in accordance with your regular method of tax accounting. You should be
required to recognize gain or loss to the extent that you receive cash on the
maturity date. You should review the discussion under the section entitled
"United States Federal Income Taxation" in this prospectus.
Will the STRIDES Securities be listed on a stock exchange?
The STRIDES Securities are listed on the American Stock Exchange under the
trading symbol "NML".
What is the role of MLPF&S?
MLPF&S, our subsidiary, was the underwriter for the offering and sale of
the STRIDES Securities.
MLPF&S also will be our agent for purposes of calculating, among other
things, the Ending Value and the Redemption Amount. In 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.
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., please see the
section "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 entitled "Where You Can Find More Information" in this
prospectus.
Are there any risks associated with an investment in the STRIDES
Securities?
Yes, an investment in the STRIDES Securities is subject to certain risks.
Please refer to the section entitled "Risk Factors" in this prospectus.
RISK FACTORS
Your investment in the STRIDES Securities will involve risks. You should
consider carefully the following discussion of risks before you decide that an
investment in the STRIDES Securities is suitable for you.
The STRIDES Securities are unlike typical debt or equity securities
The STRIDES Securities combine features of equity and debt instruments.
For example, like an equity instrument, your return will be based on the
appreciation of the stocks included in the index as reflected in the closing
value of the index. However, as a holder of the STRIDES Securities, you will
not be entitled to receive dividends that would be payable on these underlying
stocks if you had made a direct investment in the underlying stocks. In
addition, like a debt instrument, you will receive a fixed interest payment on
your STRIDES Securities on each interest payment date. However, the terms of
the STRIDES Securities differ from the terms of ordinary debt securities in
that the amount payable on the maturity date is not a fixed amount, but is
based on the closing value of the index, limited to the maximum amount of
$12.50.
Your investment may result in a loss
The STRIDES Securities are not principal-protected. Because the closing
value of the index is subject to market fluctuations, the amount of cash paid
to you on the maturity date, determined as described below, may be more or less
than the principal amount of your STRIDES Securities. If the average of the
values of the index at the close of the market on five business day shortly
before the maturity date is less than 1,891.37, the amount we will pay you at
maturity will be less than the initial issue price of each STRIDES Security, in
which case your investment in the STRIDES Securities may result in a loss to
you.
Your yield may be lower than the yield on a standard debt security of
comparable maturity
The interest payments and the amount we pay you at maturity may together
be less than the return you could earn on other investments. Your yield may be
less than the yield you would earn if you bought a standard senior non-callable
debt security of Merrill Lynch & Co. with the same maturity date. Your
investment may not reflect the full opportunity cost to you when you take into
account factors that affect the time value of money.
Your return is capped and will not reflect the return of owning the stocks
underlying the index
You should understand that the opportunity to participate in the possible
increases in the value of the index through an investment in the STRIDES
Securities is limited because the amount that you receive on the maturity date
will never exceed $12.50, which represents an appreciation of 25% over the
initial issue price of the STRIDES Securities. However, in the event that the
value of the index declines over the term of the STRIDES Securities, you will
realize the entire decline in value of the STRIDES Securities, and may lose a
part of your investment in the STRIDES Securities. There is no assurance that
the amount that you receive on the maturity date will be equal to or greater
than the initial issue price of the STRIDES Securities. Accordingly, the value
of the STRIDES Securities may decline and that decline could be substantial.
In addition, your return will not reflect the return you would realize if
you actually owned the stocks underlying the index and received the dividends
paid on those stocks because the index is calculated by reference to the prices
of the underlying stocks without taking into consideration the value of
dividends paid on these stocks.
There may be an uncertain trading market for the STRIDES Securities in the
future
Although the STRIDES Securities are listed on the AMEX under the symbol
"NML", you cannot assume that a trading market will continue to exist for the
STRIDES Securities. If a trading market in the STRIDES Securities continues to
exist, you cannot assume that there will be liquidity in the trading market.
The continued existence of a trading market for the STRIDES Securities will
depend on our financial performance and other factors including the
appreciation, if any, of the value of the index.
Factors affecting the trading value of the STRIDES Securities
The value of the index and a number of other factors will affect the
market value of the STRIDES Securities. Some of these factors are interrelate
in complex ways; as a result, the effect of any one factor may magnify or
mitigate the effect of another factor. The following paragraphs describe the
expected effect on the market value of the STRIDES Securities given a change in
a specific factor, assuming all other conditions remain constant.
o Value of the index. The market value of the STRIDES Securities will
depend substantially on the amount by which the value of the index
exceeds or does not exceed 1,891.37. In general, the value of the
STRIDES Securities will decrease as the value of the index decreases
and the value of the STRIDES Securities will increase as the value of
the index increases, subject to maximum payment at maturity of
$12.50. However, as the value of the index increases or decreases,
the value of the STRIDES Securities is not expected to increase or
decrease at the same rate as the change in value of the index. The
value of the STRIDES Securities on the maturity date cannot be
greater than $12.50, and therefore, the STRIDES Securities will
generally not trade in the secondary market above that amount.
Additionally, political, economic and other developments that can
affect the capital markets generally, and over which we have no
control, that affect the value of the index will also affect the
value of the STRIDES Securities.
o Interest rates. In general, we anticipate that if U.S. interest rates
increase, the trading value of the STRIDES Securities will decrease,
and conversely, if U.S. interest rates decrease, the trading value of
the STRIDES Securities will increase. Generally, fluctuations in
interest rates will affect the U.S. economy and, in turn, the value
of the index. Rising interest rates may lower the value of the index
and, as a result, the value of the STRIDES Securities. Falling
interest rates may increase the value of the index and, as a result,
may increase the value of the STRIDES Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. Generally, if the
volatility of the index increases, we expect that the trading value
of the STRIDES Securities will decrease and if the volatility of the
index decreases, we expect that the trading value of the STRIDES
Securities will increase.
o Time remaining to maturity. We believe that before the maturity date
the STRIDES Securities will trade at a value above or below that
which would be expected based on the value of the index. Generally,
as the time remaining to maturity decreases, the value of the STRIDES
Securities will approach the amount that would be payable at maturity
based on the then current value of the index. As a result, as the
time remaining to maturity decreases, any discount or premium
attributed to the trading value of the STRIDES Securities will
diminish, increasing or decreasing the trading value of the STRIDES
Securities, as applicable.
o Dividend yields. Generally, if the dividend yield on the underlying
stocks increases, we expect that the value of the STRIDES Securities
will decrease, and conversely, if the dividend yield on the
underlying stocks decreases, we expect that the value of the STRIDES
Securities will increase.
o Changes in our credit ratings. 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 STRIDES Securities. However, because your return on your
STRIDES Securities is dependent upon factors in addition to our
ability to pay our obligations under the STRIDES Securities,
including the percentage increase in the value of the index at
maturity, an improvement in our credit ratings will not reduce
investment risks related to the STRIDES Securities.
It is important for you to understand that a decrease in the trading value
of the STRIDES Securities resulting from the effect of one of the factors
specified above, including an increase in interest rates, may offset some or
all of any increase in the trading value of the STRIDES Securities attributable
to another factor, for example, an increase in the value of the index.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the STRIDES Securities of a given
change in most of the factors listed above will be less if it occurs later in
the term of the STRIDES Securities than if it occurs earlier in the term of the
STRIDES Securities. However, so long as the value of the Index is less than 25%
above 1,891.37, we expect that the effect on the trading value of the STRIDES
Securities of a given increase or decrease in the value of the index will be
greater if it occurs later in the term of the STRIDES Securities than if it
occurs earlier in the term of the STRIDES Securities.
Potential conflicts
The calculation agent for the STRIDES Securities is one of our
subsidiaries. In some circumstances, MLPF&S's role as our subsidiary and its
responsibilities as calculation agent for the STRIDES Securities could give
rise to conflicts of interests between the calculation agent and the holders of
the STRIDES Securities. These conflicts could occur, for instance, in
connection with its determination as to whether a market disruption event has
occurred. 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 have entered into arrangements with one of our subsidiaries to hedge
the market risks associated with our obligation in connection with the STRIDES
Securities. This subsidiary expects to make a profit in connection with these
arrangements. We did not seek competitive bids for the arrangements from
unaffiliated parties.
Uncertain tax consequences
You should also consider the tax consequences of investing in the STRIDES
Securities, aspects of which are uncertain. See the section entitled "United
States Federal Income Taxation" in this prospectus.
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
STRIDES 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
1994 1995 1996 1997 1998
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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 STRIDES SECURITIES
On February 23, 1999, ML&Co. issued $18,000,000 aggregate principal amount
of STRIDES Securities due August 23, 2000. The STRIDES Securities were issued
as a series of senior debt securities under the 1983 Indenture, which is more
fully described in this prospectus.
Upon the occurrence of an Event of Default with respect to the STRIDES
Securities, beneficial owners of the STRIDES Securities may accelerate the
maturity of the STRIDES Securities, as described under "Description of the
STRIDES Securities--Events of Default and Acceleration" in this prospectus.
The STRIDES Securities were issued in denominations of whole units.
The STRIDES Securities do not have the benefit of any sinking fund.
Interest
The STRIDES Securities bear interest at a rate of 5 1/4% per annum of the
principal amount of each unit from February 23, 1999, or from the most recent
interest payment date for which interest has been paid or provided for, until
the maturity date. Interest on the STRIDES Securities is payable in cash
semi-annually in arrears on February 23 and August 23 of each year, commencing
August 23, 1999, to the persons in whose names the STRIDES Securities are
registered at the close of business on the immediately preceding February 8 and
August 8, respectively, whether or not a Business Day. Interest on the STRIDES
Securities is computed on the basis of a 360-day year of twelve 30-day months.
If an interest payment date falls on a day that is not a Business Day, the
interest payment to be made on the interest payment date will be made on the
next succeeding Business Day with the same force and effect as if made on the
interest payment date, and no additional interest will accrue as a result of a
delayed payment.
Payment at Maturity
The maturity date of the STRIDES Securities will be on August 23, 2000. On
the maturity date, the beneficial owner of each STRIDES Security will receive,
in addition to accrued and unpaid interest, for each unit of the STRIDES
Securities then held, the Redemption Amount in cash.
The "Redemption Amount" will be determined by the calculation agent and
for each unit will equal the lesser of:
o $12.50 (the "Capped Value"); and
o $10 X (Ending Value )
(--------------)
(Starting Value)
The "Starting Value" equals 1,891.37.
The Ending Value will be determined by the calculation agent and will
equal the average or arithmetic mean of the Closing Values, as defined below,
of the index determined on each of the first five Calculation Days during the
Calculation Period. If there are fewer than five Calculation Days in the
Calculation Period, then the Closing Values used to determine the Ending Value
will equal the average or arithmetic mean of the Closing Values of the index on
those Calculation Days, and if there is only one Calculation Day, then the
Ending Value will be equal to the Closing Value of the index on that
Calculation Day. If no Calculation Days occur during the Calculation Period,
then the Ending Value will be equal to the Closing Value of the index
determined on the last scheduled Calculation Day in the Calculation Period,
regardless of the occurrence of a Market Disruption Event on that day.
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 the maturity date.
"Calculation Day" means any Index Business Day on which a Market
Disruption Event has not occurred.
"Index Business Day" means any day on which the Nasdaq Stock Market, the
New York Stock Exchange and the AMEX are open for trading and the Index or any
Successor Index, as defined below, is calculated and published.
"Market Disruption Event" has the meaning defined in the section entitled
"--Adjustments to the Index; Market Disruption Events".
"Closing Value" means the value of the Index or any Successor Index at the
close of trading on any Index Business Day.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law to close and that is an Index Business Day.
All determinations made by the calculation agent shall be at its sole
discretion and, absent a determination by the calculation agent of a manifest
error, shall be conclusive for all purposes and binding on ML&Co. and the
beneficial owners of the STRIDES Securities.
Examples of Redemption Amount Calculations
Set forth below are three examples of Redemption Amount calculations:
Example One--Ending Value is 30% less than Starting Value
Starting Value: 1,891.37
Hypothetical Ending Value: 1,323.96
Redemption Amount (per unit) (1,323.96)
= 10.00 X (--------) = $7.00
(1,891.37)
Redemption Amount (per unit) = $7.00
Example Two--Ending Value is 10% greater than Starting Value
Starting Value: 1,891.37
Hypothetical Ending Value: 2,080.51
Redemption Amount (per unit) (2,080.51)
= 10.00 X (--------) = $11.00
(1,891.37)
Redemption Amount (per unit) = $11.00
Example Three--Ending Value is 30% greater than Starting Value
Starting Value: 1,891.37
Hypothetical Ending Value: 2,458.78
Redemption Amount = $10.00 X (2,458.78)
(per unit) (--------) = $12.50 (Redemption
(1,891.37) Amount cannot be
greater than the
Capped Value)
Redemption Amount (per unit) = $12.50
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values,
o the percentage change over the Starting Value;
o the Redemption Amount payable per unit;
o the total rate of return to beneficial owners of the STRIDES
Securities;
o the pretax annualized rate of return to beneficial owners of STRIDES
Securities; and
o the pretax annualized rate of return of the Underlying Stocks, which
includes an assumed aggregate dividend yield of 0.12% per annum, as
more fully described below.
<TABLE>
<CAPTION>
Pretax
Redemption Total Rate of Pretax Annualized
Percentage Change Amount Return of Annualized Rate of Return
Hypothetical Over the Payable STRIDES Rate of of the Underlying
Ending Value Starting Value per unit Securities(1) Return(2)(3) Stocks(3)(4)
------------ -------------- -------- ------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
945.69 -50.00% $ 5.00 -42.13% -34.57% -41.16%
1,040.25 -45.00% $ 5.50 -37.13% -29.68% -36.03%
1,134.82 -40.00% $ 6.00 -32.13% -25.05% -31.21%
1,229.39 -35.00% $ 6.50 -27.13% -20.67% -26.65%
1,323.96 -30.00% $ 7.00 -22.13% -16.49% -22.31%
1,418.53 -25.00% $ 7.50 -17.13% -12.50% -18.18%
1,513.10 -20.00% $ 8.00 -12.13% -8.68% -14.22%
1,607.66 -15.00% $ 8.50 -7.13% -5.00% -10.43%
1,702.23 -10.00% $ 9.00 -2.13% -1.47% -6.79%
1,796.80 -5.00% $ 9.50 2.88% 1.95% -3.27%
1,891.37(5) 0.00% $ 10.00 7.88% 5.25% 0.12%
1,985.94 5.00% $ 10.50 12.88% 8.45% 3.40%
2,080.51 10.00% $ 11.00 17.88% 11.55% 6.58%
2,175.08 15.00% $ 11.50 22.88% 14.56% 9.66%
2,269.64 20.00% $ 12.00 27.88% 17.48% 12.66%
2,364.21 25.00% $ 12.50 32.88% 20.33% 15.57%
2,458.78 30.00% $ 12.50 32.88% 20.33% 18.41%
2,553.35 35.00% $ 12.50 32.88% 20.33% 21.18%
2,647.92 40.00% $ 12.50 32.88% 20.33% 23.87%
2,742.49 45.00% $ 12.50 32.88% 20.33% 26.51%
2,837.06 50.00% $ 12.50 32.88% 20.33% 29.08%
</TABLE>
(1) The rates of return specified in this column assume a coupon yield of 5
1/4% per annum.
(2) The annualized rates of return specified in this column assume a constant
coupon yield of 5 1/4% per annum paid semi-annually and applied to the
principal amount of each STRIDES Security.
(3) The annualized rates of return specified in these columns are calculated
on a semi-annual bond equivalent basis.
(4) The rates of return specified in this column assume:
(a) a constant dividend yield of 0.12% per annum, paid quarterly from the
date of initial delivery of STRIDES Securities, applied to the value
of the Index at the end of each quarter assuming that value increases
or decreases linearly from the Starting Value to the applicable
hypothetical Ending Value;
(b) no transaction fees or expenses;
(c) an investment term equal to the term of the STRIDES Securities; and
(d) a final Index value equal to the hypothetical Ending Value.
(5) This value is the Starting Value.
The above figures are for purposes of illustration only. The actual
Redemption Amount received by investors and the resulting total and pretax
annualized rate of return will depend entirely on the actual Ending Value
determined by the calculation agent as provided in this prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value, is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the close
of business in New York, New York, on each date that the Closing Value is to be
calculated, make any adjustments as, in the good faith judgment of the
calculation agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the Index as if any changes or
modifications had not been made, and calculate the Closing Value with reference
to the Index, as adjusted. Accordingly, if the method of calculating the Index
is modified so that the value of the Index is a fraction or a multiple of what
it would have been if it had not been modified, for example, due to a split in
the Index, then the calculation agent shall adjust the Index in order to arrive
at a value of the Index as if it had not been modified, for example, as if the
split had not occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation 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 on trading, in each case, for
more than two hours of trading, whether by reason of movements in
price otherwise exceeding levels permitted by the relevant exchange
or otherwise, in
(1) futures contracts related to the Index, or options on futures
contracts, which are traded on any major U.S. exchange or
(2) option contracts related to the Index which are traded on any
major U.S. exchange.
For the purposes of clause (a) above, any limitations on trading during
significant market fluctuations under New York Stock Exchange Rule 80A, or an y
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".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular business
hours of the relevant exchange.
Discontinuance of the Index
If Nasdaq discontinues publication of the Index and Nasdaq or another
entity publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any index so
selected being referred to as a "Successor Index"), then, upon the calculation
agent's notification of the determination to the Trustee and ML&Co., the
calculation agent will substitute the Successor Index as calculated by Nasdaq
or any other entity for the Index. Upon any selection by the calculation agent
of a Successor Index, ML&Co. will cause notice to be given to holders of the
STRIDES Securities.
If Nasdaq discontinues publication of the Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any Calculation
Day used to calculate the Redemption Amount at maturity will be a value
computed by the calculation agent for each Calculation Day in accordance with
the procedures last used to calculate the Index prior to any discontinuance. If
a Successor Index is selected or the calculation agent calculates a value as a
substitute for the Index as described below, the Successor Index or value shall
be substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists. If the calculation agent
calculates a value as a substitute for the Index, "Calculation Day" shall mean
any day on which the calculation agent is able to calculate the value.
If Nasdaq discontinues publication of the Index prior to the period during
which the Redemption Amount is to be determined and the calculation agent
determines that no Successor Index is available at that time, then on each
Index Business Day until the earlier to occur of (a) the determination of the
Ending Value and (b) a determination by the calculation agent that a Successor
Index is available, the calculation agent will determine the value that would
be used in computing the Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. 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. Discontinuance of the publication of the Index may adversely affect
trading in the STRIDES Securities.
Events of Default and Acceleration
In case an Event of Default with respect to any STRIDES Securities has
occurred and is continuing, the amount payable to a beneficial owner of a
STRIDES Security upon any acceleration permitted by the STRIDES Securities,
with respect to each $10 unit of the STRIDES Securities, will be equal to the
principal amount and any accrued interest due thereon. If a bankruptcy
proceeding is commenced in respect of the ML&Co., the claim of the beneficial
owner of a STRIDES Security may be limited, under Section 502(b)(2) of Title 11
of the United States Code, to the principal amount of the STRIDES 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 STRIDES
Securities.
In case of default in payment of the STRIDES Securities, whether at any
interest payment date, the maturity date or upon acceleration), from and after
that date the STRIDES Securities shall bear interest, payable upon demand of
the beneficial owners of the STRIDES Securities, at the rate of 5 1/4% 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 STRIDES Securities to the date payment of that amount has been made or
duly provided for.
Global Securities
Description of the Global Securities
Beneficial owners of the STRIDES Securities may not receive physical
delivery of the STRIDES Securities nor may they be entitled to have the STRIDES
Securities registered in their names. The STRIDES 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, 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 STRIDES 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 STRIDES Securities represented by a global security for
all purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the STRIDES Securities represented by a global security will not be
entitled to have the STRIDES Securities represented by the global security
registered in their names, will not receive or be entitled to receive physical
delivery of the STRIDES 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 the
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 STRIDES Securities. The STRIDES
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 STRIDES Securities in the aggregate principal
amount of the STRIDES 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 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 STRIDES Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the STRIDES
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 STRIDES Securities are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all STRIDES Securities deposited with
DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of STRIDES 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 STRIDES Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the STRIDES
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
STRIDES 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
STRIDES 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
STRIDES 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 STRIDES Securities,
the global securities will be exchangeable for STRIDES 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 STRIDES 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, STRIDES 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 Payment
ML&CO., if any, will make all payments of principal and the Supplemental
Redemption Amount, in immediately available funds so long as the STRIDES
Securities are maintained in book-entry form.
THE INDEX
The Nasdaq-100 Index(R) is a modified capitalization-weighted index of 100
of the largest and most actively traded stocks of non-financial companies
listed on the Nasdaq National Market tier of the Nasdaq Stock Market. The Index
was first published in January 1985 and includes companies across a variety of
major industry groups. As of December 31, 1998, the major industry groups
covered in the Index, listed according to their respective capitalization in
the Index, were as follows: computer and office equipment (32.6%), computer
software/services (30.2%), telecommunications (17.8%), retail/wholesale trade
(8.0%), biotechnology (5.0%), services (2.4%), health care (2.1%),
manufacturing (1.5%) and transportation (0.4%). The identity and capitalization
weightings of the five largest companies represented in the Index as of
December 31, 1998 were as follows: Microsoft Corporation (14.5%), Intel
Corporation (8.4%), Cisco Systems, Inc. (6.4%), MCI WORLDCOM, Inc. (5.8%), and
Dell Computer Corporation (4.2%). Current information regarding the market
value of the Index is available from Nasdaq as well as numerous market
information services. The Index is determined, comprised and calculated by
Nasdaq without regard to the STRIDES Securities.
The Index share weights of the component securities, or Underlying Stocks,
of the Index at any time are based upon the total shares outstanding in each of
the 100 securities in the Index and are additionally subject, in some cases, to
rebalancing to ensure that the relative weighting of the Underlying Stocks
continues to meet minimum pre-established requirements for a diversified
portfolio. Accordingly, each Underlying Stock's influence on the value of the
Index is directly proportional to the value of its Index share weight. At any
moment in time, the value of the Index equals the aggregate value of the then
current Index share weights of each of the component 100 Underlying Stocks
multiplied by each security's respective last sale price on the Nasdaq Stock
Market, and divided by a scaling factor (the "divisor") which becomes the basis
for the reported Index value. The divisor serves the purpose of scaling the
aggregate value, otherwise in the trillions, to a lower order of magnitude
which is more desirable for Index reporting purposes.
After the close of trading on December 18, 1998, the Index share weights
of the component securities in the Index were rebalanced in accordance with the
modified capitalization weighted methodology implemented on that date. Hence,
the performance of the Index after December 18, 1998 will reflect the
performance of the securities in the Index as calculated in accordance with the
revised Index methodology.
Computation of the Index
Underlying Stock Eligibility Criteria and Annual Ranking Review
To be eligible for inclusion in the Index, a security must be traded on
the Nasdaq National Market tier of the Nasdaq Stock Market and meet the
following criteria:
(1) the security must be of a non-financial company;
(2) only one class of security per issuer is allowed;
(3) the security may not be issued by an issuer currently in bankruptcy
proceedings;
(4) the security must have average daily trading volume of at least
100,000 shares per day;
(5) the security must have "seasoned" on the Nasdaq Stock Market or
another recognized market, generally, a company is considered to be
seasoned by Nasdaq if it has been listed on a market for at least two
years; in the case of spin-offs, the operating history of the
spin-off will be considered;
(6) if a security would otherwise qualify to be in the top 25% of the
issuers included in the Index by market capitalization, then a one
year "seasoning" criteria would apply;
(7) if the security is of a foreign issuer, the company must have a
worldwide market value of at least $10 billion, a U.S. market value
of at least $4 billion, and average trading volume on the Nasdaq
Stock Market of at least 200,000 shares per day; in addition, foreign
securities must be eligible for listed options trading; and
(8) the issuer of the security may not have entered into a definitive
agreement or other arrangement which would result in the security no
longer being listed on the Nasdaq Stock Market within the next six
months.
These Index eligibility criteria may be revised from time to time by the
NASD without regard to the STRIDES Securities.
The Underlying Stocks are evaluated annually as follows (the evaluation is
referred to as the "Annual Ranking Review"). Securities listed on the Nasdaq
Stock Market which meet the above eligibility criteria are ranked by market
value. Index-eligible securities which are already in the Index and which are
in the top 150 eligible securities, based on market value, are retained in the
Index provided that the security was ranked in the top 100 eligible securities
as of the previous year's annual review. Securities not meeting this criteria
are replaced. The replacement securities chosen are those Index-eligible
securities not currently in the Index which have the largest market
capitalization. The list of annual additions and deletions is publicly
announced via a press release in the early part of December. Replacements are
made effective after the close of trading on the third Friday in December.
Moreover, if at any time during the year an Underlying Stock is no longer
traded on the Nasdaq Stock Market, or is otherwise determined by Nasdaq to
become ineligible for continued inclusion in the Index, the security will be
replaced with the largest market capitalization security not currently in the
Index and meeting the Index eligibility criteria listed above.
In addition to the Annual Ranking Review, the securities in the Index are
monitored every day by Nasdaq with respect to changes in total shares
outstanding arising from secondary offerings, stock repurchases, conversions,
or other corporate actions. Nasdaq has adopted the following quarterly
scheduled weight adjustment procedures with respect to these changes. If the
change in total shares outstanding arising from corporate action is greater
than or equal to 5.0%, the change is ordinarily made to the Index on the
evening prior to the effective date of the corporate action. Otherwise, if the
change in total shares outstanding is less than 5%, then all of these changes
are accumulated and made effective at one time on a quarterly basis after the
close of trading on the third Friday in each of March, June, September, and
December. In either case, the Index share weights for the Underlying Stocks are
adjusted by the same percentage amount by which the total shares outstanding
have changed in the Underlying Stocks. Ordinarily, whenever there is a change
in Index share weights or a change in a component security included in the
Index, Nasdaq adjusts the divisor to assure that there is no discontinuity in
the value of the Index which might otherwise be caused by any the change.
Rebalancing of the Index
Effective after the close of trading on December 18, 1998 Nasdaq has
calculated the Index under a "modified capitalization-weighted" methodology,
which is a hybrid between equal weighting and conventional capitalization
weighting. This methodology is expected to:
o retain in general the economic attributes of capitalization
weighting;
o promote portfolio weight diversification, thereby limiting domination
of the Index by a few large stocks;
o reduce Index performance distortion by preserving the capitalization
ranking of companies; and
o reduce market impact on the smallest Underlying Stocks from necessary
weight rebalancings.
Under the methodology employed, on a quarterly basis coinciding with
Nasdaq's quarterly scheduled weight adjustment procedures, the Underlying
Stocks are categorized as either "Large Stocks" or "Small Stocks" depending on
whether their current percentage weights, after taking into account the
scheduled weight adjustments due to stock repurchases, secondary offerings, or
other corporate actions, are greater than, or less than or equal to, the
average percentage weight in the Index, for example, as a 100-stock index, the
average percentage weight in the Index is 1.0%.
The quarterly examination will result in an Index rebalancing if either
one or both of the following two weight distribution requirements are not met:
(1) the current weight of the single largest market capitalization Underlying
Stock must be less than or equal to 24.0% and (2) the "collective weight" of
those Underlying Stocks whose individual current weights are in excess of 4.5%,
when added together, must be less than or equal to 48.0%.
If either one or both of these weight distribution requirements are not
met upon quarterly review, a weight rebalancing will be performed in accordance
with the following plan. First, relating to weight distribution requirement (1)
above, if the current weight of the single largest Underlying Stock exceeds
24.0%, then the weights of all Large Stocks will be scaled down proportionately
towards 1.0% by enough for the adjusted weight of the single largest Underlying
Stock to be set to 20.0%. Second, relating to weight distribution requirement
(2) above, for those Underlying Stocks whose individual current weights or
adjusted weights in accordance with the preceding step are in excess of 4.5%,
if their "collective weight" exceeds 48.0%, then the weights of all Large
Stocks will be scaled down proportionately towards 1.0% by just enough for the
"collective weight," so adjusted, to be set to 40.0%.
The aggregate weight reduction among the Large Stocks resulting from
either or both of the above rescalings will then be redistributed to the Small
Stocks in the following iterative manner. In the first iteration, the weight of
the largest Small Stock will be scaled upwards by a factor which sets it equal
to the average Index weight of 1.0%. The weights of each of the smaller
remaining Small Stocks will be scaled up by the same factor reduced in relation
to each stock's relative ranking among the Small Stocks so that the smaller the
Underlying Stock in the ranking, the less the scale-up of its weight. This is
intended to reduce the market impact of the weight rebalancing on the smallest
component securities in the Index.
In the second iteration, the weight of the second largest Small Stock,
already adjusted in the first iteration, will be scaled upwards by a factor
which sets it equal to the average index weight of 1.0%. The weights of each of
the smaller remaining Small Stocks will be scaled up by this same factor
reduced in relation to each stock's relative ranking among the Small Stocks so
that, once again, the smaller the stock in the ranking, the less the scale-up
of its weight.
Additional iterations will be performed until the accumulated increase in
weight among the Small Stocks exactly equals the aggregate weight reduction
among the Large Stocks from rebalancing in accordance with weight distribution
requirement (1) and/or weight distribution requirement (2).
Then, to complete the rebalancing procedure, once the final percent
weights of each Index Security are set, the Index share weights will be
determined anew based upon the last sale prices and aggregate capitalization of
the Index at the close of trading on the Thursday in the week immediately
preceding the week of the third Friday in March, June, September, and December.
Changes to the Index share weights will be made effective after the close of
trading on the third Friday in March, June, September, and December and an
adjustment to the Index divisor will be made to ensure continuity of the Index.
Effective after the close of trading on December 18, 1998, the Index was
rebalanced in accordance with the above methodology. As a result of the
rebalancing, the Index share weights of the five (5) stocks whose unadjusted
weights were in excess of 4.5% were adjusted downwards on that date. As of the
close of trading on December 31, 1998, the weights of these five stocks in the
Index as rebalanced, in relation to what they would have been if the Index were
not rebalanced, were as follows: Microsoft Corporation (14.5% vs. 22.5%), Intel
Corporation (8.4% vs. 12.8%), Cisco Systems, Inc. (6.4% vs. 9.5%), MCI
WORLDCOM, Inc. (5.8% vs. 8.5%), and Dell Computer Corporation (4.2% vs. 6.1%).
The following table sets forth the level of the Index at the end of each
month, in the period from January 1989 through February 1999. These historical
data on the Index are not necessarily indicative of the future performance of
the Index or what the value of the STRIDES Securities may be. Any historical
upward or downward trend in the level of the Index during any period set forth
below is not an indication that the Index is more or less likely to increase or
decrease at any time during the term of the STRIDES Securities.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January......... 186.47 201.94 232.43 338.32 370.56 413.99 405.33 591.82 921.55 1,071.13 2,127.19
February........ 183.79 207.92 250.12 345.88 351.14 412.17 432.50 622.83 850.46 1,194.13
March........... 185.87 213.15 264.91 323.05 359.42 382.96 447.15 609.69 797.06 1,220.66 --
April........... 200.47 205.82 263.66 307.86 339.95 373.25 469.56 666.73 874.74 1,248.12 --
May............. 214.55 236.15 279.00 315.30 368.11 378.85 488.10 692.39 958.85 1,192.07 --
June............ 204.59 238.46 254.20 301.23 366.13 360.30 538.03 677.30 957.30 1,337.34 --
July............ 214.28 223.39 272.16 310.90 352.87 370.16 568.88 636.01 1,107.03 1,377.26 --
August.......... 222.01 193.62 287.41 299.26 372.65 397.90 576.77 663.57 1,074.17 1,140.34 --
September....... 226.42 177.06 287.54 313.19 382.72 393.85 585.08 737.58 1,097.17 1,345.48 --
October......... 222.62 172.56 292.51 329.16 390.99 413.05 598.78 751.99 1,019.62 1,400.52 --
November........ 224.45 192.66 284.79 350.96 386.76 404.82 593.72 834.01 1,050.51 1,557.96 --
December........ 223.84 200.53 330.86 360.19 398.28 404.27 576.23 821.36 990.80 1,836.01 --
</TABLE>
License Agreement
The Nasdaq Stock Market, Inc. and Merrill Lynch & Co., Inc. have entered
into a non-exclusive license agreement providing for the license to ML&Co., in
exchange for a fee, of the right to use the Index in connection with certain
securities, including the STRIDES Securities.
The license agreement between Nasdaq and ML&Co. provides that the
following language must be stated in this prospectus:
"The STRIDES Securities are not sponsored, endorsed, sold or promoted by,
The Nasdaq Stock Market, Inc. (including its affiliates) (Nasdaq, with its
affiliates, are referred to as the "Corporations"). The Corporations have
not passed on the legality or suitability of, or the accuracy or adequacy
of descriptions and disclosures relating to, the STRIDES Securities. The
Corporations make no representation or warranty, express or implied to the
owners of the STRIDES Securities or any member of the public regarding the
advisability of investing in securities generally or in the STRIDES
Securities particularly, or the ability of the Nasdaq-100 Index(R) to
track general stock market performance. The Corporations' only
relationship to ML&Co. is in the licensing of the Nasdaq-100(R),
Nasdaq-100 Index(R), and Nasdaq(R) trademarks or service marks, and trade
names of the Corporations and the use of the Nasdaq-100 Index(R) which is
determined, composed and calculated by Nasdaq without regard to ML&Co. or
the STRIDES Securities. Nasdaq has no obligation to take the needs of
ML&Co. or the owners of the STRIDES Securities into consideration in
determining, composing or calculating the Nasdaq-100 Index(R). The
Corporations are not responsible for and have not participated in the
determination of the timing of, prices at, or quantities of the STRIDES
Securities to be issued or in the determination or calculation of the
equation by which the STRIDES Securities is to be converted into cash. The
Corporations have no liability in connection with the administration,
marketing or trading of the STRIDES Securities.
The Corporations do not guarantee the accuracy and/or uninterrupted
calculation of the Nasdaq-100 Index(R) or any data included therein. The
Corporations make no warranty, express or implied, as to results to be
obtained by ML&Co., owners of the STRIDES Securities, or any other person
or entity from the use of the Nasdaq-100 Index(R) or any data included
therein. The Corporations make no express or implied warranties, and
expressly disclaim all warranties of merchantability or fitness for a
particular purpose or use with respect to the Nasdaq-100 Index(R) or any
data included therein. Without limiting any of the foregoing, in no event
shall the Corporations have any liability for any lost profits or special,
incidental, punitive, indirect, or consequential damages, even if notified
of the possibility of such damages."
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components, are
derived from publicly available information prepared by Nasdaq. ML&Co. and
MLPF&S do not assume any responsibility for the accuracy or completeness of
this information.
OTHER TERMS
ML&Co. issued the STRIDES 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
STRIDES 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 STRIDES 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 STRIDES 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.
WHERE YOU CAN FIND MORE INFORMATION
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 STRIDES Securities and other securities. For further information on ML&Co.
and the STRIDES 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.
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; 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 and March 26, 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 or after the date of this initial registration statement and before
the effectiveness of the registration statement:
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 STRIDES Securities and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the STRIDES Securities.
MLPF&S may act as principal or agent in these market-making transactions.
ML&Co. may offer the STRIDES Securities on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the STRIDES 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.
<PAGE>
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
LOGO
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.
<TABLE>
<CAPTION>
The MITTS Securities: Payment at Maturity:
<S> <C>
o 100% principal protection at maturity o On the maturity date, for each unit of the MITTS
o No payments prior to the maturity date Securities you own, you will receive a number of
o Senior unsecured debt securities of Merrill Lynch & shares of the Energy Select Sector SPDR Fund, or
Co, Inc. cash with an equal value, equal to the sum of the
o Linked to the value of the Energy Select Sector SPDR principal amount of each unit and an additional
Fund. amount based on any percentage increase in the value
o The MITTS Securities are listed on the American of the fund as described in this prospectus.
Stock Exchange under the symbol "ESM" o You will receive no less than the principal amount
of your MITTS Securities.
</TABLE>
Investing in the MITTS Securities involves risk.
See "Risk Factors" beginning on page 10 of this prospectus supplement.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus of Merrill Lynch &
Co., Inc. 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.
---------------------
Merrill Lynch & Co.
---------------------
The date of this prospectus is ________________, 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service
marks owned by Merrill Lynch & Co., Inc.
<TABLE>
<CAPTION>
<PAGE>
TABLE OF CONTENTS
Prospectus
Page
<S> <C>
SUMMARY INFORMATION--Q&A...........................................................................................4
What are the MITTS Securities?...........................................................................4
What will I receive at the stated maturity date of the MITTS Securities?.................................4
How is the Net Asset Value determined?...................................................................4
When will I receive cash instead of shares of the Energy SPDR Fund?......................................4
Will I be charged any transaction fees or expenses with respect to the shares of the Energy SPDR Fund?...7
What is the Energy SPDR Fund?............................................................................7
Will the MITTS Securities be listed on a stock exchange?.................................................8
What is the role of MLPF&S?..............................................................................8
Who is ML&Co.?...........................................................................................8
Are there any risks associated with my investment?.......................................................8
RISK FACTORS......................................................................................................9
The MITTS Securities are unlike typical equity or debt securities........................................9
You may not earn a return on your investment.............................................................9
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......................................9
Changes in the Net Asset Value per share of the Energy SPDR Fund will not exactly mirror changes in the
Energy Select Sector Index...............................................................................9
There may be an uncertain trading market for the MITTS Securities.......................................10
There are many factors affecting the trading value of the MITTS Securities..............................10
Absence of prior active market for shares of the Energy SPDR Fund.......................................11
Concentration in energy-related securities..............................................................12
No affiliation between ML&Co. and the Energy SPDR Fund..................................................12
You will not have shareholder's rights until you receive share of the Energy SPDR Fund..................12
Amounts payable on the MITTS Securities may be limited by state law.....................................12
Potential conflicts.....................................................................................13
Other Considerations....................................................................................13
MERRILL LYNCH & CO., INC.........................................................................................14
RATIO OF EARNINGS TO FIXED CHARGES...............................................................................15
DESCRIPTION OF THE MITTS SECURITIES..............................................................................16
Delivery at Maturity....................................................................................16
Fractional Shares.......................................................................................17
Hypothetical Returns....................................................................................18
Adjustments to the Net Asset Value; Market Disruption Events............................................19
Termination of the Energy SPDR Fund.....................................................................19
Events of Default and Acceleration......................................................................21
Global Securities.......................................................................................21
Same-Day Settlement and Delivery........................................................................23
THE ENERGY SPDR FUND.............................................................................................24
License Agreement.......................................................................................25
OTHER TERMS......................................................................................................26
Limitations Upon Liens..................................................................................26
Limitation on Disposition of Voting Stock of, and Merger and Sale of Assets by, MLPF&S..................27
Merger and Consolidation................................................................................27
Modification and Waiver.................................................................................27
Events of Default.......................................................................................28
PROJECTED PAYMENT SCHEDULE.......................................................................................29
WHERE YOU CAN FIND MORE INFORMATION..............................................................................30
The Energy SPDR Fund....................................................................................30
INCORPORATION OF INFORMATION WE FILE WITH THE SEC................................................................30
PLAN OF DISTRIBUTION.............................................................................................33
EXPERTS..........................................................................................................33
</TABLE>
<PAGE>
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:
$10 X (Adjusted Ending Value-Starting Value)
(------------------------------------)
( 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.
<PAGE>
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>
<S> <C> <C>
(Supplemental
(22.25 - 22.49) Redemption Amount
Supplemental Redemption Amount (per unit) = $10 X (-------------) =$0.00 cannot be less
( 22.49 ) 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
Supplemental Redemption Amount (per unit) = $10 X (33.90 - 22.49 )
(--------------) = $5.07
( 22.49 )
Total value of shares delivered at maturity (per unit) = $10 + $5.07 = $15.07
<PAGE>
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 supplement.
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.
Will the MITTS Securities be listed on a stock exchange?
The MITTS Securities have been approved for listing on the AMEX under the
symbol "ESM".
What is the role of MLPF&S?
Our subsidiary, MLPF&S, is the underwriter for the offering and sale of
the MITTS Securities.
MLPF&S will be 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'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.
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
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
ML&Co. has listed the MITTS Securities 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.
There are many factors affecting the trading value of the MITTS Securities
We believe that the Net Asset Value per share of the Energy SPDR Fund and
a number of other factors will affect the market value of the MITTS Securities.
Some of these factors interrelate in complex ways; as a result, the effect of
any one factor may offset or magnify the effect of another factor. 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.
o Net Asset Value. 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.
o Interest Rates. 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.
o Volatility of the Fund. 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.
o Time Remaining to Maturity. 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.
o Dividend Yields. 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.
o Changes in Our Credit Ratings. 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.
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
increase in the trading value of the MITTS Securities attributable to another
factor, such as an increase in the Net Asset Value per share of the Energy SPDR
Fund.
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
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.
Other Considerations
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities, some aspects of which are uncertain. You should consult with
your tax adviser. See "United States Federal Income Taxation" below.
<PAGE>
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.
<PAGE>
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
1994 1995 1996 1997 1998
----------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(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. "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.
<PAGE>
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:
Principal Amount of each MITTS Security
($10 per unit) X ( Adjusted Ending Value - Starting Value )
( ---------------------------------------)
( Starting Value )
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 Pretax Pretax Annualized
Ending Value Change of and Supplemental Annualized Rate Rate of Return of
During the Hypothetical Adjusted Ending Redemption Total Rate of of Return on Shares of the
Calculation Adjusted Ending Value Over the Amount Paid at Return on the the MITTS Energy SPDR
Period Value Starting Value Maturity per Unit MITTS Securities Securities(1) 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%
</TABLE>
- ----------------------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes,
(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.
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 any of the following events, as determined
by the calculation agent:
"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.
<PAGE>
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. As of February 11, 1999, the Energy
Select Sector Index included 31 component stocks.
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
supplement, 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 supplement:
"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 supplement 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:
<TABLE>
<CAPTION>
Total Interest Deemed
Interest Deemed to Accrue to Have Accrued on
During Accrual Period MITTS Securities
(per Unit) as of End of Accrual
Accrual Period I Period (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; 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 and March 26, 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 or after the date of this initial registration statement and
before the effectiveness of the registration statement:
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.
<PAGE>
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.
<PAGE>
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS [LOGO]
Merrill Lynch & Co., Inc.
S&P 500(R) Market Index Target-Term Securities(R)
due March 27, 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.
<TABLE>
<CAPTION>
<S> <C>
The MITTS Securities: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities you
o No payments before the maturity own, we will pay you an amount of
date each unit and an additional
o Senior unsecured debt securities amount based on the percentage
of Merrill Lynch & Co., Inc. increase, if any, in the value of
o Linked to the value of the S&P the S&P 500 Index adjusted by an
500 Index adjustment factor as described in
o The MITTS Securities are listed this prospectus
on the American Stock Exchange o You will receive no less than the
under the trading symbol "FML" principal amount of your MITTS
Securities
</TABLE>
Investing in the MITTS Securities involves
risk. See "Risk Factors" beginning on
page S-8.
---------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved these securities or passed upon the
adequacy of this prospectus. 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.
---------------
Merrill Lynch & Co.
---------------
The date of this prospectus is ________, 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
"Standard & Poor's(R)", "Standard & Poor's 500", "S&P 500(R)", "S&P(R)" and
"500", are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Merrill Lynch Capital Services, Inc., and Merrill Lynch &
Co., Inc. is an authorized sublicensee.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY INFORMATION--Q&A.....................................................3
RISK FACTORS.................................................................6
MERRILL LYNCH & CO., INC.....................................................8
RATIO OF EARNINGS TO FIXED CHARGES...........................................9
DESCRIPTION OF THE MITTS SECURITIES..........................................7
THE S&P 500 INDEX...........................................................17
OTHER TERMS.................................................................20
PROJECTED PAYMENT SCHEDULE..................................................23
WHERE YOU CAN FIND MORE INFORMATION.........................................24
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................24
PLAN OF DISTRIBUTION........................................................25
EXPERTS.....................................................................26
<PAGE>
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from this prospectus to help you understand the S&P 500 Market
Index Target-Term Securities due March 27, 2006. You should carefully read
this prospectus to fully understand the terms of the MITTS Securities, the S&P
500 Index, and the tax and other considerations that are 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 certain risks
associated with an investment in the MITTS Securities, to determine whether an
investment in the MITTS Securities is appropriate for you.
References in this prospectus 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.
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 will rank
equally with all of our other unsecured and unsubordinated debt. The MITTS
Securities will mature on March 27, 2006. We cannot redeem the MITTS
Securities at any earlier date. We will not make any 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, we will issue the MITTS
Securities in the form of a global certificate, which will be held by The
Depository Trust Company, also known as DTC, or its nominee. Direct and
indirect participants in DTC will record your ownership of the MITTS
Securities. 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 possible increases
in the S&P 500 Index as reduced by the Adjustment Factor. At the stated
maturity date, you will receive a payment on the MITTS Securities equal to the
sum of two amounts: the "principal amount" and the "Supplemental Redemption
Amount".
Principal Amount
The principal amount per unit is $10.
Supplemental Redemption Amount
The Supplemental Redemption Amount per unit will equal: $10 x (
Adjusted Ending Value - Starting Value )
------------------------------------------
Starting Value
but will not be less than zero.
"Starting Value", equals 1,262.14, the closing value of the S&P 500
Index on March 23, 1999, the date the MITTS Securities were priced for initial
sale to the public.
"Adjusted Ending Value" means the average of the values of the S&P
500 Index as reduced by the application of the Adjustment Factor at the close
of the market on five business days before the maturity of the MITTS
Securities. We may calculate the Adjusted Ending Value by reference to fewer
than five or even a single day's closing value if, during the period shortly
before the stated maturity date of the MITTS Securities, there is a disruption
in the trading of the component stocks included in the S&P 500 Index or
certain futures or options relating to the S&P 500 Index.
The "Adjustment Factor" equals 2.6% per year and will be prorated
based on a 365-day year and applied each calendar day to reduce the value of
the S&P 500 Index. As a result of the Adjustment Factor, the adjusted value of
the S&P 500 Index used to calculate your Supplemental Redemption Amount at the
stated maturity of the MITTS Securities will be approximately 16.66% less than
the actual value of the S&P 500 Index on any day during the calculation
period. For a detailed discussion of how the Adjustment Factor will affect the
value of the S&P 500 Index used to calculate your Supplemental Redemption
Amount, see "Description of the MITTS Securities--Payment at Maturity" in this
prospectus.
For more specific information about the Supplemental Redemption
Amount, please see the section "Description of the MITTS Securities" in this
prospectus.
We will pay you a Supplemental Redemption Amount only if the Adjusted
Ending Value is greater than the Starting Value. If the Adjusted Ending Value
is less than, or equal to, the Starting Value, the Supplemental Redemption
Amount will be zero. We will pay you the principal amount of your MITTS
Securities regardless of whether any Supplemental Redemption Amount is
payable.
<PAGE>
Examples
Here are two examples of Supplemental Redemption Amount calculations
assuming an Adjustment Factor of 2.6%:
Example 1--The S&P 500 Index, as adjusted, is below the Starting value at
maturity:
Starting Value: 1,262.14
Hypothetical closing value of the S&P 500 Index at maturity: 1,388.35
Hypothetical Adjusted Ending Value: 1,157.08
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental
( 1,157.08-1,262.14 ) Reduction
Supplemental Redemption Amount (per unit) = $10 x -------------------- = $0.00 Amount cannot
1,262.14 be less than
zero)
</TABLE>
Total payment at maturity (per unit) = $10 + $0 = $10
Example 2--The S&P 500 Index, as adjusted, is above the Starting value at
maturity:
Starting Value: 1,262.14
Hypothetical closing value of the S&P 500 Index at maturity: 2,145.64
Hypothetical Adjusted Ending Value: 1,788.21
<TABLE>
<CAPTION>
<S> <C> <C>
( 1,788.21-1,262.14 )
Supplemental Redemption Amount (per unit) = $10 x -------------------- = $4.17
1,262.14
Total payment at maturity (per unit) = $10 + $4.17 = $14.17
</TABLE>
<PAGE>
Who publishes the S&P 500 Index and what does the S&P 500 Index measure?
The S&P 500 Index is published by Standard & Poor's, a division of
The McGraw-Hill Companies, Inc., and is intended to provide an indication of
the pattern of common stock price movement. The value of the S&P 500 Index is
based on the relative value of the aggregate market value of the common stocks
of 500 companies as of a particular time compared to the aggregate average
market value of the common stocks of 500 similar companies during the base
period of the years 1941 through 1943. The market value for the common stock
of a company is the product of the market price per share of the common stock
and the number of outstanding shares of common stock. As of March 22, 1999,
the 500 companies included in the S&P 500 Index represented approximately 78%
of the aggregate market value of common stocks traded on the New York Stock
Exchange; however, these 500 companies are not the 500 largest companies
listed on the NYSE and not all of these 500 companies are listed on the NYSE.
As of March 22, 1999, the aggregate market value of the 500 companies included
in the Index represented approximately 79% of the aggregate market value of
United States domestic, public companies. Standard &Poor's chooses companies
for inclusion in the S&P 500 Index with the aim of achieving a distribution by
broad industry groupings that approximates the distribution of these groupings
in the common stock population of the NYSE, which Standard & Poor's uses as an
assumed model for the composition of the total market.
Please note that an investment in the MITTS Securities does not
entitle you to any ownership interest in the stocks of the companies included
in the S&P 500 Index.
How has the S&P 500 Index performed historically?
We have included tables showing the year-end closing value of the S&P
500 Index for each year from 1947 through 1998 and the month-end closing value
of the S&P 500 Index from January 1990 through February 1999 in the section
"The S&P 500 Index--Historical Data on the S&P 500 Index", in this prospectus.
We have provided this historical information to help you evaluate the behavior
of the S&P 500 Index in various economic environments; however, past
performance of the S&P 500 Index is not necessarily indicative of how the S&P
500 Index will perform in the future.
Will the MITTS Securities be listed on a stock exchange?
The MITTS Securities are listed on the AMEX under the trading symbol
"FML". You should be aware that the listing of the MITTS Securities on the
AMEX will not necessarily ensure that a liquid trading market will be
available for the MITTS Securities. You should review "Risk Factors--There may
be an uncertain trading market for the MITTS Securities in the future".
What is the role of MLPF&S?
Our subsidiary, MLPF&S, is the underwriter for the offering and sale
of the MITTS Securities. MLPF&S is also our agent for purposes of calculating,
among other things, the Adjusted Ending Value and the Supplemental Redemption
Amount. Under certain circumstances, these duties could result in a conflict
of interest between MLPF&S's status as a subsidiary of ML&Co. and its
responsibilities as calculation agent.
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 "Merrill Lynch & Co., Inc." in the accompanying 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 risk. Please
refer to the section "Risk Factors" in this prospectus.
<PAGE>
RISK FACTORS
Your investment in the MITTS Securities will involve certain risks.
You should carefully consider the following discussion of risks before
deciding whether an investment in the MITTS Securities is suitable for you.
You may not earn a return on your investment
You should be aware that if the Adjusted Ending Value does not exceed
the Starting Value at the stated maturity, the Supplemental Redemption Amount
will be zero. This will be true even if, at some time during the life of the
MITTS Securities the value of the S&P 500 Index, as reduced by the Adjustment
Factor, was higher than Starting Value but later falls below the Starting
Value. If the Supplemental Redemption Amount is zero, we will pay you only the
principal amount of your MITTS Securities.
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,
like inflation, that affect the time value of money.
Your return will not reflect the return of owning the stocks included
in the S&P 500 Index
Your return will not reflect the return you would realize if you
actually owned the stocks included in the S&P 500 Index and received the
dividends paid on those stocks because of the reduction caused by the
Adjustment Factor and because the S&P 500 Index is calculated by reference to
the prices of the common stocks included in the S&P 500 Index without taking
into consideration the value of dividends paid on those stocks.
There may be an uncertain trading market for the MITTS Securities in the future
Although the MITTS Securities are listed on the AMEX under the
trading symbol "FML", 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, you cannot assume 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, of the value of the S&P 500 Index.
If the trading market for the MITTS Securities is limited and you do
not wish to hold your investment until maturity, there may be a limited number
of buyers for your MITTS Securities. This may affect the price you receive if
you sell before maturity.
There are many factors affecting the trading value of the MITTS Securities
We believe that the value of the index and a number of other factors
will affect the trading value of the MITTS Securities. Some of these factors
interrelate in complex ways; as a result, the effect of any one factor may
offset or magnify the effect of another factor. 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.
o S&P 500 Index Value. We expect that the market value of the
MITTS Securities will depend substantially on the amount by
which the index, as reduced by the adjustment factor, exceeds
the Starting Value. If you choose to sell your MITTS Securities
when the value of the index, 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
this value because of the expectation that the index will
continue to fluctuate until shortly before the maturity date
when the average value of the index is determined. If you choose
to sell your MITTS Securities when the value of the index is
below the Starting Value, you may receive less than the $10
principal amount per unit of MITTS Securities. In general,
rising U.S. dividend rates, or dividends per share, may increase
the value of the index while falling U.S. dividend rates may
decrease the value of the index. Political, economic and other
developments that affect the stocks included in the index may
also affect the value of the index and the value of the MITTS
Securities.
o Interest Rates. Because we will pay, at a minimum, the
principal amount per unit of MITTS Securities at maturity, we
expect that changes in interest rates will affect 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 the trading value of the MITTS Securities
will increase. Interest rates may also affect the U.S. economy
and, in turn, the value of the index. Rising interest rates may
lower the value of the index and, thus, the MITTS Securities.
Falling interest rates may increase the value of the index and,
thus, may increase the value of the MITTS Securities.
o Volatility of the Index. Volatility is the term used to
describe the size and frequency of market fluctuations.
Generally, if the volatility of the index increases, we expect
that the trading value of the MITTS Securities will increase. If
the volatility of the index decreases, we expect that the
trading value of the MITTS Securities will decrease.
o Time Remaining to Maturity. We anticipate that before the
maturity of the MITTS Securities the MITTS Securities may trade
at a value above that which would be expected based on the level
of interest rates and the index value. This difference will
reflect a "time premium" due to expectations concerning the
value of the index during the period before the stated maturity
of the MITTS Securities. However, as the time remaining to the
stated maturity of the MITTS Securities decreases, we expect
that this time premium will decrease, lowering the trading value
of the MITTS Securities.
o Dividend Yields. If dividend yields on the stocks included in
the index increase, we expect that the value of the MITTS
Securities will decrease. Conversely, if dividend yields on the
stock included in the index decrease, we expect that the value
of the MITTS Securities will increase.
o Changes in Our Credit Ratings. 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 value of the
index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most 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 a given increase in the value of the index 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.
Amounts payable on the MITTS Securities may be limited by state law
New York State law governs the indenture under which the MITTS
Securities will be 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.
Purchases and sales by us and our affiliates may affect your return
We and our other affiliates may from time to time buy or sell the
stocks included in the S&P 500 Index for our own accounts, for business
reasons or in connection with hedging our obligations under the MITTS
Securities. These transactions could affect the price of these stocks and the
value of the S&P 500 Index in a manner that would be adverse to your
investment in the MITTS Securities.
Potential conflicts
The calculation agent is our subsidiary. Under certain 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. These
conflicts could occur, for instance, in connection with the calculation
agent's determination as to whether a Market Disruption Event has occurred, or
in connection with judgments that it would be required to make in the event of
a discontinuance of the S&P 500 Index. See "Description of the MITTS
Securities--Adjustments to the S&P 500 Index; Market Disruption Events" and
"--Discontinuance of the S&P 500 Index" in this prospectus. 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 have entered into an arrangement with our subsidiary to hedge the
market risks associated with our obligation to pay the Supplemental Redemption
Amount. Our subsidiary expects to make a profit in connection with this
arrangement. We did not seek competitive bids for such an arrangement from
unaffiliated parties.
Other considerations
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult with your tax adviser.
<PAGE>
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.
<PAGE>
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:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)....... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios
reported for the fiscal years 1994 through 1997.
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. "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 March 26, 1999, ML&Co. issued an aggregate principal amount of
$70,000,000 or 7,000,000 units of the MITTS Securities. The MITTS Securities
were issued as a series of senior debt securities under the 1983 Indenture
which is more fully described in this prospectus.
The MITTS Securities will mature on March 27, 2006.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at
the option of any beneficial owner before 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 "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the stated maturity date, a beneficial owner of a MITTS Security
will be entitled to receive the principal amount plus the Supplemental
Redemption Amount, if any, all as provided below. 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 principal amount.
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>
Principal amount of the MITTS Security ($10 per unit) X (Adjusted Ending Value - Starting Value )
(---------------------------------------)
( Starting Value )
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Value" equals 1,262.14, the closing value of the S&P
500 Index on March 23, 1999, the date the MITTS Securities were priced for
initial sale to the public.
The "Adjusted Ending Value" will be determined by the calculation
agent and will equal the average or arithmetic mean of the closing values of
the S&P 500 Index, as reduced by the application of the Adjustment Factor on
each Calculation Day, determined on each of the first five Calculation Days
during the Calculation Period. If there are fewer than five Calculation Days,
then the Adjusted Ending Value will equal the average or arithmetic mean of
the closing values of the S&P 500 Index on those Calculation Days as reduced
by the application of the Adjustment Factor on each Calculation Day. If there
is only one Calculation Day, then the Adjusted Ending Value will equal the
closing value of the S&P 500 Index on that Calculation Day as reduced by the
application of the Adjustment Factor on that Calculation Day. If no
Calculation Days occur during the Calculation Period, then the Adjusted Ending
Value will equal the closing value of the S&P 500 Index determined on the last
scheduled Index Business Day in the Calculation Period as reduced by the
application of the Adjustment Factor on that Calculation Day, regardless of
the occurrence of a Market Disruption Event on that day.
The "Adjustment Factor" equals 2.6% and will be prorated based on a
365-day year and applied each calendar day during the term of the MITTS
Securities to reduce the value of the S&P 500 Index. As a result of the
Adjustment Factor, the adjusted value of the S&P 500 Index used to calculate
your Supplemental Redemption Amount at the stated maturity of the MITTS
Securities will be approximately 16.66% less than the actual value of the S&P
500 Index on any day during the Calculation Period.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day before the maturity date to and including
the second scheduled Index Business Day before the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are
open for trading and the S&P 500 Index or any Successor Index, as defined on
page S-14, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical closing
values of the S&P 500 Index during the Calculation Period:
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 total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities; o the pretax
annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks included in the
S&P 500 Index, which includes an assumed aggregate dividend yield of
1.27% per annum, as more fully described below.
This table assumes an Adjustment Factor of 2.6% per year.
<TABLE>
<CAPTION>
Adjusted Pretax
Hypothetical Ending Value Total Amount Annualized Rate
Closing Value of Percentage Payable at Total Rate of Pretax Annualized of Return of
S&P 500 Index Change Over Maturity per Unit Return on the Rate of Return on Stocks Included
During the Adjusted the Starting of MITTS the MITTS in The S&P 500
Calculation Period Ending Value Value MITTS Securities Securities Securities(1) Index(1)(2)
<S> <C> <C> <C> <C> <C> <C>
631.07 525.94 -58.33% $10.00 0.00% 0.00% -8.39%
757.28 631.13 -49.99% $10.00 0.00% 0.00% -5.91%
883.50 736.32 -41.66% $10.00 0.00% 0.00% -3.77%
1,009.71 841.51 -33.33% $10.00 0.00% 0.00% -1.90%
1,135.93 946.70 -24.99% $10.00 0.00% 0.00% -0.24%
1,262.14(4) 1,051.89 -16.66% $10.00 0.00% 0.00% 1.27%
1,388.35 1,157.08 -8.32% $10.00 0.00% 0.00% 2.64%
1,514.57 1,262.27 0.01% $10.00 0.01% 0.00% 3.91%
1,640.78 1,367.46 8.34% $10.83 8.34% 1.15% 5.08%
1,767.00 1,472.65 16.68% $11.67 16.68% 2.21% 6.17%
1,893.21 1,577.83 25.01% $12.50 25.01% 3.21% 7.20%
2,019.42 1,683.02 33.35% $13.33 33.35% 4.15% 8.16%
2,145.64 1,788.21 41.68% $14.17 41.68% 5.03% 9.07%
2,271.85 1,893.40 50.02% $15.00 50.02% 5.87% 9.93%
2,398.07 1,998.59 58.35% $15.83 58.35% 6.67% 10.75%
2,524.28 2,103.78 66.68% $16.67 66.68% 7.42% 11.53%
2,650.49 2,208.97 75.02% $17.50 75.02% 8.15% 12.27%
2,776.71 2,314.16 83.35% $18.34 83.35% 8.84% 12.99%
2,902.92 2,419.35 91.69% $19.17 91.69% 9.50% 13.67%
3,029.14 2,524.54 100.02% $20.00 100.02% 10.14% 14.33%
3,155.35 2,629.72 108.35% $20.84 108.35% 10.75% 14.97%
</TABLE>
- ---------------
(1) The Adjusted Ending Values in this column are approximately 16.66% less
than the hypothetical closing values of the S&P 500 Index during the
Calculation Period as a result of the application of the Adjustment
Factor of 2.6% over the term of the MITTS Securities.
(2) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(3) This rate of return assumes:
(a) a dividend yield of 1.27% per annum, paid quarterly from the date of
initial delivery of MITTS Securities, applied to the value of the
S&P 500 Index at the end of each quarter assuming this value
increases or decreases linearly from the Starting Value to the
hypothetical closing value of the S&P 500 Index during the
Calculation Period;
(b) no transaction fees or expenses;
(c) an investment term equal to the term of the MITTS Securities, and
(d) a final closing value of the S&P 500 Index equal to the hypothetical
closing value of the S&P 500 Index during the Calculation Period.
(4) The Starting Value of the S&P 500 Index.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual
Adjusted Ending Value determined by the calculation agent as provided in this
prospectus. Historical data regarding the S&P 500 Index is included in this
prospectus under "The S&P 500 Index--Historical Data on the S&P 500 Index".
Adjustments to the S&P 500 Index; Market Disruption Events
If at any time the method of calculating the S&P 500 Index, or its
value, is changed in any material respect, or if the S&P 500 Index is in any
other way modified so that the S&P 500 Index does not, in the opinion of the
calculation agent, fairly represent the value of the S&P 500 Index had these
changes or modifications not been made, then, from and after that time, the
calculation agent shall, at the close of business in New York, New York, on
each date that the closing value with respect to the Adjusted Ending Value is
to be calculated, make any adjustments as, in the good faith judgment of the
calculation agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the S&P 500 Index as if the changes or
modifications had not been made, and calculate a closing value with reference
to the S&P 500 Index, as adjusted. Accordingly, if the method of calculating
the S&P 500 Index is modified so that the value of the S&P 500 Index is a
fraction or a multiple of what it would have been if it had not been modified,
for example, due to a split in the S&P 500 Index, then the calculation agent
shall adjust the S&P 500 Index in order to arrive at a value of the S&P 500
Index as if it had not been modified, for example, as if the split had not
occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation 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
20% or more of the stocks which then comprise the S&P 500
Index; or
(b) the suspension or material limitation, in each case, for more
than two hours of trading, whether by reason of movements in
price otherwise exceeding levels permitted by the relevant
exchange or otherwise, in
(1) futures contracts related to the S&P 500 Index, or
options on those futures contracts, which are traded on
any major U.S. exchange or
(2) option contracts related to the S&P 500 Index which are
traded on any major U.S. exchange.
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 NYSE 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".
Discontinuance of the S&P 500 Index
If Standard & Poor's discontinues publication of the S&P 500 Index
and S&P or another entity publishes a successor or substitute index that the
calculation agent determines, in its sole discretion, to be comparable to the
S&P 500 Index (a "Successor Index"), then, upon the calculation agent's
notification of that determination to the trustee and ML&Co., the calculation
agent will substitute the Successor Index as calculated by Standard &Poor's or
any other entity for the S&P 500 Index. Upon any selection by the calculation
agent of a Successor Index, ML&Co.
shall cause notice to be given to holders of the MITTS Securities.
If Standard & Poor's discontinues publication of the S&P 500 Index
and a Successor Index is not selected by the calculation agent or is no longer
published on any of the Calculation Days, the value to be substituted for the
S&P 500 Index for any Calculation Day used to calculate the Supplemental
Redemption Amount at maturity will be a value computed by the calculation
agent for each Calculation Day in accordance with the procedures last used to
calculate the S&P 500 Index before the discontinuance. If a Successor Index is
selected or the calculation agent calculates a value as a substitute for the
S&P 500 Index as described below, that Successor Index or value shall be
substituted for the S&P 500 Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists. If the calculation agent
calculates a value as a substitute for the S&P 500 Index, "Index Calculation
Day" shall mean any day on which the calculation agent is able to calculate
that value.
If Standard & Poor's discontinues publication of the Index before the
period during which the Supplemental Redemption Amount is to be determined and
the calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of the
determination of the Adjusted Ending Value and a determination by the
calculation agent that a Successor Index is available, the calculation agent
shall determine the value that would be used in computing the Supplemental
Redemption Amount as described in the preceding paragraph as if that day were
a Calculation Day. 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 for this information to be made
available by telephone. Despite these alternative arrangements, discontinuance
of the publication of 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
occurs 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 of the MITTS Securities, will be equal to the
principal amount and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "Description of the MITTS Securities--Payment 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 of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners, at the rate of 6.13% 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 the amount has been made or duly provided for.
Depositary
Upon issuance, all MITTS Securities will be represented by one or
more fully registered global securities. Each global security will be
deposited with, or on behalf of, 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 depositary or
by a nominee of the depositary to 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 the 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 a 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 of the MITTS Securities 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 that action, and those participants would authorize beneficial owners
owning through those participants to give or take that 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.
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.
The following is based on information furnished by DTC:
DTC will act as securities depositary for the MITTS Securities. The
MITTS Securities will be issued as fully registered securities registered in
the name of Cede & Co., DTC's partnership nominee. One or more fully
registered global securities will be issued for the MITTS Securities in the
aggregate principal amount of that issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct participants of DTC include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its direct participants and by the
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 or indirect participants through which that
beneficial owner entered into the transaction. Transfers of ownership
interests in the MITTS Securities are to 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
participants and indirect participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
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.
Principal, premium, if any, and/or interest, if any, payments made in
cash 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 these payments to direct participants
shall be the responsibility of DTC, and disbursement of these payments to the
beneficial owners shall be the responsibility of direct participants and
indirect participants.
DTC may discontinue providing its services as securities depositary
with respect to the MITTS Securities at any time by giving reasonable notice
to ML&Co. or the trustee. Under these circumstances, in the event that a
successor securities depositary is not obtained, MITTS Security certificates
are required to be printed and delivered.
ML&Co. may decide to discontinue use of the system of book-entry
transfers through DTC or a successor securities depositary. In that event,
MITTS Security certificates 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 Payment
Settlement for the MITTS Securities will be made by the underwriter
in immediately available funds. ML&Co. will make all payments of principal and
the Supplemental Redemption Amount, if any, in immediately available funds so
long as the MITTS Securities are maintained in book-entry form.
THE S&P 500 INDEX
Standard & Poor's publishes the S&P 500 Index. The index is intended
to provide an indication of the pattern of common stock price movement. The
calculation of the value of the S&P 500 Index, discussed below in further
detail, is based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to the
aggregate average market value of the common stocks of 500 similar companies
during the base period of the years 1941 through 1943. As of March 22, 1999,
the 500 companies included in the S&P 500 Index represented approximately 78%
of the aggregate market value of common stocks traded on the NYSE; however,
these 500 companies are not the 500 largest companies listed on the NYSE and
not all of these 500 companies are listed on the NYSE. As of March 22, 1999,
the aggregate market value of the 500 companies included in the S&P 500 Index
represented approximately 79% of the aggregate market value of United States
domestic, public companies. Standard & Poor's chooses companies for inclusion
in the S&P 500 Index with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in
the common stock population of the NYSE, which Standard & Poor's uses as an
assumed model for the composition of the total market. Relevant criteria
employed by Standard & Poor's include the viability of the particular company,
the extent to which that company represents the industry group to which it is
assigned, the extent to which the market price of that company's common stock
is generally responsive to changes in the affairs of the respective industry
and the market value and trading activity of the common stock of that company.
Four main groups of companies comprise the S&P 500 Index with the number of
companies currently included in each group indicated in parentheses:
Industrials (380), Utilities (39), Transportation (10) and Financial (71).
Standard & Poor's may from time to time, in its sole discretion, add companies
to, or delete companies from, the S&P 500 Index to achieve the objectives
stated above.
The S&P 500 Index does not reflect the payment of dividends on the
stocks included in the S&P 500 Index. Because of this, and due to the
application of the Adjustment Factor, the return on the MITTS Securities will
not be the same that you would receive if you were to purchase these stocks
and hold them for a period equal to the term of the MITTS Securities.
Computation of the S&P 500 Index
Standard & Poor's currently computes the S&P 500 Index as of a
particular time as follows:
(a) the product of the market price per share and the number of then
outstanding shares of each component stock is determined as of that
time (referred to as the "market value" of that stock);
(b) the market values of all component stocks as of that time are
aggregated;
(c) the mean average of the market values as of each week in the base
period of the years 1941 through 1943 of the common stock of each
company in a group of 500 substantially similar companies is
determined;
(d) the mean average market values of all these common stocks over the
base period are aggregated (the aggregate amount being referred to
as the "base value");
(e) the current aggregate market value of all component stocks is
divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is multiplied by ten.
While Standard & Poor's currently employs the above methodology to
calculate the S&P 500 Index, no assurance can be given that Standard & Poor's
will not modify or change this methodology in a manner that may affect the
Supplemental Redemption Amount, if any, payable to beneficial owners of MITTS
Securities upon maturity or otherwise.
Standard & Poor's adjusts the foregoing formula to offset the effects
of changes in the market value of a component stock that are determined by
Standard &Poor's to be arbitrary or not due to true market fluctuations.
These changes may result from causes such as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities
of ML&Co.,
o the substitution by Standard & Poor's of particular component stocks
in the S&P 500 Index, and
o other reasons.
In these cases, Standard & Poor's first recalculates the aggregate
market value of all component stocks, after taking account of the new market
price per share of the particular component stock or the new number of
outstanding shares of that stock or both, as the case may be, and then
determines the new base value in accordance with the following formula:
old base value x new base value = new market value
old market value
The result is that the base value is adjusted in proportion to any
change in the aggregate market value of all component stocks resulting from
the causes referred to above to the extent necessary to negate the effects of
these causes upon the S&P 500 Index.
Historical Data on the S&P 500 Index
The following table sets forth the closing values of the S&P 500
Index on the last business day of each year from 1947 through 1998, as
published by Standard & Poor's. The historical experience of the S&P 500 Index
should not be taken as an indication of future performance, and no assurance
can be given that the value of the S&P 500 Index will not decline and thereby
reduce or eliminate the Supplemental Redemption Amount which may be payable to
holders of the MITTS Securities at the maturity date.
Year-End Value of the S&P 500
Closing Closing
Year Value Year Value
1947..................... 15.30 1973................... 97.55
1948..................... 15.20 1974................... 68.56
1949..................... 16.76 1975................... 90.19
1950..................... 20.41 1976................... 107.46
1951..................... 23.77 1977................... 95.10
1952..................... 26.57 1978................... 96.11
1953..................... 24.81 1979................... 107.94
1954..................... 35.98 1980................... 35.76
1955..................... 45.48 1981................... 122.55
1956..................... 46.67 1982................... 140.64
1957..................... 39.99 1983................... 164.93
1958..................... 55.21 1984................... 167.24
1959..................... 59.89 1985................... 211.28
1960..................... 58.11 1986................... 242.17
1961..................... 71.55 1987................... 247.08
1962..................... 63.10 1988................... 277.72
1963..................... 75.02 1989................... 353.40
1964..................... 84.75 1990................... 330.22
1965..................... 92.43 1991................... 417.09
1966..................... 80.33 1992................... 435.71
1967..................... 96.47 1993................... 466.45
1968..................... 103.86 1994................... 459.27
1969..................... 92.06 1995................... 615.93
1970..................... 92.15 1996................... 740.74
1971..................... 102.09 1997................... 970.43
1972..................... 118.05 1998................... 1,229.23
The following table sets forth the value of the S&P 500 Index at the
end of each month, in the period from January 1990 through February 1999.
These historical data on the S&P 500 Index are not necessarily indicative of
the future performance of the S&P 500 Index or what the value of the MITTS
Securities may be. Any historical upward or downward trend in the value of the
S&P 500 Index during any period set forth below is not any indication that the
S&P 500 Index is more or less likely to increase or decrease at any time
during the term of the MITTS Securities.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
January......... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February........ 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March........... 339.94 375.22 403.69 451.67 445/77 500.71 645.50 757.12 1,101.75 --
April........... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75 --
May............. 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82 --
June............ 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84 --
July............ 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67 --
August.......... 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28 --
September....... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01 --
October......... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67 --
November........ 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63 --
December........ 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23 --
</TABLE>
License Agreement
Standard & Poor's does not guarantee the accuracy and/or the
completeness of the S&P 500 Index or any data included in that index. Standard
& Poor's makes no warranty, express or implied, as to results to be obtained
by ML&Co., MLPF&S, holders of the MITTS Securities, or any other person or
entity from the use of the S&P 500 Index or any data included therein in
connection with the rights licensed under the license agreement described in
this prospectus supplemement or for any other use. Standard & Poor's makes no
express or implied warranties, and hereby expressly disclaims all warranties
of merchantability or fitness for a particular purpose with respect to the S&P
500 Index or any data included therein. Without limiting any of the above, in
no event shall Standard & Poor's have any liability for any special, punitive,
indirect or consequential damage, including lost profits, even if notified of
the possibility of these damages.
Standard & Poor's and Merrill Lynch Capital Services, Inc. have
entered into a non-exclusive license agreement providing for the license to
Merrill Lynch Capital Services, Inc., in exchange for a fee, of the right to
use indices owned and published by Standard & Poor's in connection with
certain securities, including the MITTS Securities, and ML&Co. is an
authorized sublicensee under that agreement.
The license agreement between Standard & Poor's and Merrill Lynch
Capital Services, Inc. provides that the following language must be stated in
this prospectus:
"The MITTS Securities are not sponsored, endorsed, sold or promoted
by Standard & Poor's. Standard & Poor's 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 the ability of the S&P 500 Index to
track general stock market performance. Standard & Poor's only relationship to
Merrill Lynch Capital Services, Inc. and ML&Co. (other than transactions
entered into in the ordinary course of business) is the licensing of certain
servicemarks and trade names of Standard & Poor's and of the S&P 500 Index
which is determined, composed and calculated by Standard & Poor's without
regard to ML&Co. or the MITTS Securities. Standard & Poor's has no obligation
to take the needs of ML&Co. or the holders of the MITTS Securities into
consideration in determining, composing or calculating the S&P 500 Index.
Standard & Poor's is not responsible for and has not participated in the
determination of the timing of the sale of the MITTS Securities, prices at
which the MITTS Securities are to initially be sold, or quantities of the
MITTS Securities to be issued or in the determination or calculation of the
equation by which the MITTS Securities are to be converted into cash. Standard
& Poor's has no obligation or liability in connection with the administration,
marketing or trading of the MITTS Securities."
All disclosures contained in this prospectus regarding the above S&P
500 Index, including its make-up, method of calculation and changes in its
components, are derived from publicly available information prepared by
Standard & Poor's. 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 such 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 proper 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 thereof and a projected Supplemental Redemption Amount equal
to $5.2665 per unit (the "Projected Supplemental Redemption Amount"). This
represents an estimated yield on the MITTS Securities equal to 6.13% 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 would 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 6.13% per annum, compounded semiannually, as
determined by ML&Co. for purposes of illustrating the application of the Final
Regulations to the MITTS Securities:
<TABLE>
<CAPTION>
Total Interest Deemed to
Interest Deemed Have Accrued on the MITTS
to Accrue During Securities as of
Accrual Period End of Accrual Period
Accrual Period (per unit) (per unit
<S> <C> <C>
March 26, 1999 through September 27, 1999 $0.3108 $0.3108
September 28, 1999 through March 27, 2000 $0.3160 $0.6268
March 28, 2000 through September 27, 2000 $0.3257 $0.9525
September 28, 2000, through March 27, 2001 $0.3357 $1.2882
March 28, 2001 through September 27, 2001 $0.3460 $1.6342
September 28, 2001, through March 27, 2002 $0.3566 $1.9908
March 28, 2002 through September 27, 2002 $0.3675 $2.3583
September 28, 2002, through March 27, 2003 $0.3788 $2.7371
March 28, 2003 through September 27, 2003 $0.3904 $3.1275
September 28, 2003, through March 27, 2004 $0.4023 $3.5298
March 28, 2004 through September 27, 2004 $0.4147 $3.9445
September 28, 2004, through March 27, 2005 $0.4274 $4.3719
March 28, 2005 through September 27, 2005 $0.4405 $4.8124
September 28, 2005, through March 27, 2006 $0.4541 $5.2665
</TABLE>
Projected Supplemental Redemption Amount = $5.2665 per unit.
All prospective investors in the MITTS 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 for such information to Merrill Lynch & Co.,
Inc., Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church
Street, 12th Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
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.
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; 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 and March 26, 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 or after the date of this initial registration statement
and before the effectiveness of the registration statement:
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 NYSE 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.
<PAGE>
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.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses in connection with the
issuance and distribution of the securities being registered. All the amounts
shown are estimates, except the registration fee and the NASD fee.
Registration fee....................................... $4,170,000
Fees and expenses of accountants....................... 400,000
Fees and expenses of counsel........................... 1,500,000
NASD fee............................................... 30,500
Fees and expenses of Trustees and Warrant Agents....... 800,000
Printing expenses...................................... 800,000
Printing and engraving of securities................... 100,000
Rating agency fees..................................... 500,000
Stock exchange listing fees............................ 300,000
Miscellaneous.......................................... 4,500
---------
Total.......................................... $8,605,000
==========
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, has no reasonable cause to believe such person's
conduct was unlawful.
Article XIII, Section 2 of the Restated Certificate of Incorporation of
the Company provides in effect that, subject to certain limited exceptions, the
Company shall indemnify its directors and officers to the extent authorized or
permitted by the General Corporation Law of the State of Delaware.
Each of the underwriting and distribution agreements and forms thereof
filed as Exhibit 1 provides for the indemnification of the Company, its
controlling persons, its directors and certain of its officers by the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act").
The directors and officers of the Company are insured under policies of
insurance maintained by the Company, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such directors or officers. In addition, the Company has
entered into contracts with all of its directors providing for indemnification
of such persons by the Company to the full extent authorized or permitted by
law, subject to certain limited exceptions.
The Declaration of Trust of the Trust provides, to the fullest extent
permitted by applicable law, for indemnity of the Regular Trustees, any
Affiliate of any Regular Trustee, any officer, director, shareholder, member,
partner, employees, representative or agent of any Regular Trustee, or any
officer, director, shareholder member, partner, employee representative or agent
of the Trust or its Affiliates (each a "Company Indemnified Person"), from and
against losses and expenses incurred by such Company Indemnified Person in
connection with any action, suit or proceeding, except that if such action, suit
or proceedings is by or in the right of the Trust, the indemnity shall be
limited to expenses of such Company Indemnified Person.
The Limited Partnership Agreement of the Partnership provides that to
the fullest extent permitted by applicable law, the Partnership shall indemnify
and hold harmless each of the General Partner, and any Special Representative,
any Affiliate of the General Partner or any Special Representative, any officer,
director, shareholder, member, partner, employee representative or agent of the
General Partner or any Special Representative, or any of their respective
Affiliates, or any employee of agent of the Partnership or its Affiliates (each,
a "Partnership Indemnified Person"), from and against any loss, damage or claim
incurred by such Partnership Indemnified Person by reason of any act or omission
performed or omitted by such Partnership Indemnified Person in good faith on
behalf of the Partnership and in a manner such Partnership Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Partnership Indemnified Person by the Limited Partnership Agreement, except that
no Partnership Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Partnership Indemnified Person by
reason of gross negligence or willful misconduct with respect to such acts or
omissions. The Limited Partnership Agreement also provides that, to the fullest
extent permitted by applicable law, expenses (including legal fees) incurred by
a Partnership Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of any undertaking by or on behalf of the Partnership
Indemnified Person to repay such amount if it shall be determined that the
Partnership Indemnified Person is not entitled to be indemnified as authorized
in the Limited Partnership Agreement.
The Regular Trustees of the Trust are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Act, which might be incurred by them in such capacity and
against which they cannot be indemnified by the Company or the Trust. Any
agents, dealers or underwriters who execute the agreements filed as Exhibit 1 of
this Registration Statement with respect to Trust Originated Preferred
SecuritiesSM will agree to indemnify the Company's directors and their officers
and the Trustees who signed the Registration Statement with respect to such
securities against certain liabilities that may arise under the Act with respect
to information furnished to the Company or the Trust by or on behalf of any such
indemnifying party.
Item 16. List of Exhibits.
<TABLE>
<S> <C> <C>
Exhibit Incorporation by Reference
Number Description to Filings Indicated
- -------- ------------- ------------------------
1(a) Form of Underwriting Agreement for Debt Securities and Debt, Exhibit 1(a) to Company's Registration
Currency and Index Warrants, including forms of Terms Agreement. Statement on Form S-3 (No. 333-59997).
1(b) Form of Distribution Agreement, including form of Terms Agreement, Exhibit 1(b) to Company's Registration
relating to Medium-Term Notes, Series B (a series of Senior Debt Statement on Form S-3 (No. 33-51489).
Securities).
1(c) Form of Underwriting Agreement for Preferred Stock Exhibit 1(c) to Company's Registration
and Common Stock Warrants, Preferred Stock, Depositary Statement on Form S-3 (No. 333-59997).
Shares and Common Stock.
1(d) Form of Purchase Agreement relating to the Trust Preferred Exhibit 1.1 to Company's Registration
Securities. Statement on Form S-3 (No. 333-42859).
4(a)(i) Senior Indenture, dated as of April 1, 1983, as Exhibit 99(c) to Company's Registration
amended and restated (the "1983 Senior Indenture"), Statement on Form 8-A dated July 20, 1992.
between the Company and The Chase Manhattan Bank,
formerly known as Chemical Bank (successor by
merger to Manufacturers Hanover Trust Company)
4(a)(ii) Senior Indenture, dated as of October 1, 1993 (the Exhibit 4 to Company's Current Report on
"1993 Senior Indenture"), between the Company and the Chase Form 8-K dated October 7, 1993.
Manhattan Bank (successor by merger to The Chase Manhattan
Bank, N.A.).
4(a)(iii) Form of initial Subsequent Indenture with respect to Senior
Debt Securities.*
4(a)(iv) Form of Subsequent Indenture with respect to Senior Debt
Securities.*
4(b)(i) Supplemental Indenture to the 1983 Senior Exhibit 99(c) to Company's Registration
Indenture, dated March 15, 1990, between the Company Statement on Form 8-A dated July 20, 1992.
and The Chase Manhattan Bank, formerly
known as Chemical Bank (successor by merger to Manufacturers
Hanover Trust Company).
4(b)(ii) Eighth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated March 1, 1996, between the Company and No. 1 to Company's Registration Statement
The Chase Manhattan Bank, formerly known as on Form S-3 (No. 33-65135).
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(iii) Ninth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated June 1, 1996, between the Company and No. 4 to Company's Registration Statement
The Chase Manhattan Bank, formerly known as on Form S-3 (No. 33-65135).
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
_____________
* Previously filed.
4(b)(iv) Tenth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated July 1, 1996, between the Company and No. 5 to Company's Registration Statement
The Chase Manhattan Bank, formerly known as on Form S-3 (No. 33-65135).
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company)
4(b)(v) Supplemental Indenture to the 1983 Senior Exhibit 4(b)(ii) to Company' Registrations
Indenture, dated October 25, 1993, between the Company on Form S-3 (No. 33-61559).
and The Chase Manhattan Bank Statement
(successor by merger to The Chase Manhattan Bank, N.A.).
4(b)(vi) Twelfth Supplemental Indenture to the 1983 Senior Exhibit 4(a) to Company's Current report on
Indenture dated as of September 1, 1998 between the Form 8-K dated October 21, 1998.
Company and The Chase Manhattan
Bank, formerly known as Chemical Bank (successor
by merger to Manufacturers Hanover Trust Company).
4(b)(vii) First Supplemental Indenture to the 1993 Senior Exhibit 4(a) to Company's Current Report on
Indenture, dated as of June 1, 1998, between the
Company and The Chase Manhattan Bank Form 8-K
dated July 2, 1998.
(successor by merger to The Chase Manhattan Bank N.A.).
4(c)(i) Form of Subordinated Indenture between the Company and The Exhibit 4.7 to Company's Registration
Chase Manhattan Bank. Statement on Form S-3 (No. 333-16603).
4(c)(ii) Form of Subsequent Indentures with respect to Subordinated
Debt Securities.*
4(d) Form of 6% Note due February 17, 2009. Exhibit 4 to Company's Current Report on
Form 8-K dated February 17, 1999.
4(e) Form of 6 3/8% Note due March 30, 1999. Exhibit 4 to Company's Current Report on
Form 8-K dated March 30, 1994.
4(f) Form of Equity Participation Security with Minimum Return Exhibit 4(ooo) to Amendment No. 1 to
Protection due June 30, 1999. Company's Registration Statement on Form S-3
(No. 33-54218).
4(g) Form of European Portfolio Market Index Target-Term Security Exhibit 4 to Company's Current Report on
due June 30, 1999. Form 8-K dated December 30, 1993.
4(h) Form of 81/4% Note due November 15, 1999. Exhibit 4(cc) to Company's Registration
Statement on Form S-3 (No. 33-45327).
4(i) Form of Stock Market Annual Reset Term Note due December 31, Exhibit 4 to Company's Current Report on
1999 (Series A). Form 8-K dated April 29, 1993.
4(j) Form of Japan Index Equity Participation Security Exhibit 4 to Company's Current Report on
with Minimum Return Protection due January 31, 2000. Form 8-K dated January 27, 1994.
4(k) Form of 8 3/8% Note due February 9, 2000. Exhibit 4 to Company's Current Report on
Form 8-K dated February 9, 1995.
4(l) Form of 6.70% Note due August 1, 2000. Exhibit 4 to Company's Report on Form 8-K
dated August 1, 1995.
4(m) Form of AMEX Oil Index Stock Market Annual Reset Term Note Exhibit 4 to Company's Current Report on
due December 29, 2000. Form 8-K dated March 31, 1994.
4(n) Form of 8% Note due February 1, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated February 4, 1992.
_____________
* Previously filed.
4(o) Form of Step-Up Note due April 30, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated April 30, 1992.
4(p) Form of Step-Up Note due May 6, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated May 6, 1992.
4(q) Form of 7 3/8% Note due August 17, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated August 17, 1992.
4(r) Form of Major 8 European Index Market Index Exhibit 4 to Company's Current Report on
Target-Term Security due August 30, 2002. Form 8-K dated August 1, 1997.
4(s) Form of 6.64% Note due September 19, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated September 19, 1995.
4(t) Form of 8.30% Note due November 1, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated May 4, 1992.
4(u) Form of Major 11 European Market Index Target-Term Security Exhibit 4 to Company's Current Report on
due December 6, 2002. Form 8-K dated November 26, 1997.
4(v) Form of 6 7/8% Note due March 1, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated March 1, 1993.
4(w) Form of 7.05% Note due April 15, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated April 15, 1993.
4(x) Form of 6.55% Note due August 1, 2004. Exhibit 4 to Company's Current Report on
Form 8-K dated August 1, 1997.
4(y) Form of Russell 2000 Index Market Index Target-Term Security Exhibit 4 to Company's Current Report on
due September 30, 2004. Form 8-K dated September 29, 1997.
4(z) Form of 61/4% Note due January 15, 2006 Exhibit 4 to Company's Current Report on
Form 8-K dated January 20, 1994.
4(aa) Form of 6 3/8% Note due September 8, 2006. Exhibit 4 to Company's Current Report on
Form 8-K dated September 8, 1993.
4(bb) Form of 8% Note due June 1, 2007. Exhibit 4 to Company's Current Report on
Form 8-K dated June 1, 1992.
4(cc) Form of S&P 500 Inflation Adjusted Market Index Exhibit 4 to Company's Current Report on
Target-Term Security due September 24, 2007. Form 8-K dated September 24, 1997.
4(dd) Form of 7% Note due April 27, 2008. Exhibit 4 to Company's Current Report on
Form 8-K dated April 27, 1993.
4(ee) Form of 61/4% Note due October 15, 2008. Exhibit 4 to Company's Current Report on
Form 8-K dated October 15, 1993.
4(ff) Form of 8.40% Note due November 1, 2019. Exhibit 4(z) to Company's Registration
Statement on Form S-3 (No. 33-35456).
4(gg) Form of Fixed Rate Medium-Term Note(without redemption Exhibit 4(kk) to Company's Registration
provisions). Statement on Form S-3 (No. 33-54218).
4(hh) Form of Fixed Rate Medium-Term Note (with redemption Exhibit 4(ll) to Company's Registration
provisions). Statement on Form S-3 (No. 33-54218).
4(ii) Form of Fixed Rate Medium-Term Note (without Exhibit 4(d) to Company's Registration
redemption provisions, minimum denomination $1,000). Statement on Form S-3 (No. 33-38879).
4(jj) Form of Fixed Rate Medium-Term Note (with Exhibit 4(c) to Company's Registration
redemption provisions, minimum denominations $1,000). Statement on Form S-3 (No. 33-38879).
4(kk) Form of Fixed Rate Medium-Term Note, Series B.
4(ll) Form of Federal Funds Rate Medium-Term Note. Exhibit 4(oo) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(mm) Form of Floating Rate Medium-Term Note, Series B.
4(nn) Form of Commercial Paper Rate Medium-Term Note. Exhibit 4(qq) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(oo) Form of Commercial Paper Index Rate Medium-Term Note. Exhibit 4(i) to Company's Registration
Statement on Form S-3 (File No. 33-38879).
4(pp) Form of Constant Maturity Treasury Rate Indexed Medium-Term Exhibit 4(ccc) to Company's Registration
Note, Series B. Statement on Form S-3 (No. 33-52647).
4(qq) Form of Constant Maturity Treasury Rate Indexed Medium-Term Exhibit 4(xv) to Company's Annual Report on
Note II, Series B. Form 10-K for the year ended December 30,
1994.
4(rr) Form of JPY Yield Curve Flattening Medium-Term Note, Series B. Exhibit 4(ddd) to Company's Registration
Statement on Form S-3 (No. 33-52647).
4(ss) Form of LIBOR Medium-Term Note. Exhibit 4(pp) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(tt) Form of Multi-Currency Medium-Term Note, Series B. Exhibit 4(fff) to Company's Registration
Statement on Form S-3 (No. 33-52647).
4(uu) Form of Nine Month Renewable Floating Rate Medium-Term Note, Exhibit 4(ix) to Company's Quarterly Report
Series B. on Form 10-Q for the quarter ended
September 24, 1993.
4(vv) Form of Treasury Rate Medium-Term Note. Exhibit 4(aaa) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(ww) Form of Collared LIBOR Medium-Term Note due February 14, 2000. Exhibit 4(ww) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(xx) Form of Japanese Yen Swap Rate Linked Medium-Term Note, Exhibit 4(mmm) to Company's Registration
Series B. Statement on Form S-3 (No. 33-52647).
4(yy) Form of Step-Up Medium-Term Note due May 20, 2008. Exhibit 4(ggg) to Amendment No. 1 to
Company's Registration Statement on Form S-3
(No. 33-54218).
4(zz) Form of Warrant Agreement, including form of Warrant Certificate. Exhibit 4(aa) to Company's Registration
Statement on Form S-3 (No. 33-35456).
4(aaa) Form of Currency [Put/Call] Warrant Agreement, including form of Exhibit 4 to Company's Registration
Global Currency Warrant Certificate. Statement on Form S-3 (No. 33-17965).
4(bbb) Form of Index Warrant Agreement, including form of Global Index Exhibit 4(kkk) to Amendment No. 1 to
Warrant Certificate. Company's Registration Statement on Form S-3
(No. 33-54218).
4(ccc) Form of Index Warrant Trust Indenture, including form of Global Exhibit 4(lll) to Amendment No. 1 to
Index Warrant Certificate. Company's Registration Statement on Form S-3
(No. 33-54218).
4(ddd) Form of 6 1/2% Note due April 1, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated April 1, 1996.
4(eee) Form of 6% Note due January 15, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated January 17, 1996.
4(fff) Form of 6% Note due March 1, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated February 29, 1996.
4(ggg) Form of 7% Note due March 15, 2006. Exhibit 4 to Company's Current Report on
Form 8-K dated March 18, 1996.
4(hhh) Form of 7 3/8% Note due May 15, 2006. Exhibit 4 to Company's Current Report on
Form 8-K dated May 15, 1996.
4(iii) Form of 6% STRYPES due June 1, 1999. Exhibit 4(c) to Company's Form 8-K/A dated
June 7, 1996.
4(jjj) Form of 7 1/4% STRYPES due June 15, 1999. Exhibit 4(c) to Post-Effective Amendment
No. 4 to Company's Registration Statement on
Form S-3 (33-65135).
4(kkk) Form of 6 1/4% STRYPES due July 1, 2001. Exhibit 4(c) to Company's Current Report on
Form 8-K dated July 9, 1996.
4(lll) Form of S&P 500 Market Index Target-Term Security due May 10, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated May 13, 1996.
4(mmm) Form of S&P 500 Market Index Target-Term Security due March 27, Exhibit 4 to Company's Current Report on
2006. Form 8-K dated March 26, 1999.
4(nnn) Form of Technology Market Index Target-Term Security due August 15, Exhibit 4(a) to Company's Current Report on
2001. Form 8-K dated August 12, 1996.
4(ooo) Form of Top Ten Yield Market Index Target-Term Security due Exhibit 4(b) to Company's Current Report on
August 15, 2006. Form 8-K dated August 12, 1996.
4(ppp) Form of Healthcare/Biotechnology Portfolio Market Exhibit 4 to Company's Current Report on
Index Target-Term Security due October 31, 2001. Form 8-K dated October 30, 1996.
4(qqq) Form of 7% Note due January 15, 2007. Exhibit 4 to Company's Current Report on
Form 8-K dated January 13, 1997.
4(rrr) Form of S&P 500 Market Index Target-Term Security due September 16, Exhibit 4 to Company's Current Report on
2002. Form 8-K dated March 14, 1997.
4(sss) Form of Nikkei 225 Market Index Target-Term Security due June 14, Exhibit 4 to Company's Current Report on
2002. Form 8-K dated June 3, 1997.
4(ttt) Form of 6.56% Note due December 16, 2007. Exhibit 4 to Company's Current Report on
Form 8-K dated December 16, 1997.
4(uuu) Form of 7 7/8% STRYPES due February 1, 2001 (Payable with Shares of Exhibit 4(c) to Company's Current Report on
Common Stock of CIBER, Inc.). Form 8-K dated January 30, 1998.
4(vvv) Form of Floating Rate Note due February 4, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated February 4, 1998.
4(www) Form of 6% Note due February 12, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated February 12, 1998.
4(xxx) Form of Oracle Corporation Indexed Callable Protected Growth Exhibit 4 to Company's Current Report on
Security due March 31, 2003. Form 8-K dated March 19, 1998.
4(yyy) Form of Telebras Indexed Callable Protected Growth Security due Exhibit 4 to Company's Current Report on
May 19, 2005. Form 8-K dated May 19, 1998.
4(zzz) Form of 6 3/4% Note due June 1, 2028. Exhibit 4 to Company's Current Report on
Form 8-K dated June 3, 1998.
4(aaaa) Form of Floating Rate Note due June 24, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated June 24, 1998.
4(bbbb) Form of S&P 500 Market Index Target-Term Security due July 1, 2005. Exhibit 4 to Company's Current Report on
Form 8-K dated June 26, 1998.
4(cccc) Form of Medium-Term Notes, Series B, 3% Stock Exhibit 4 to Company's Current Report on
Linked Note due June 10, 2000 (Linked to the performance Form 8-K dated June 10, 1998.
of Honda Motor Co., Ltd. Common Stock)
4(dddd) Form of Medium-Term Notes, Series B, 5% Stock Exhibit 4(c) to Company's Current Report on
Linked Note due July 3, 2000 (Linked to the performance Form 8-K dated July 2, 1998.
of the Common Stock of Travelers Group, Inc.).
4(eeee) Form of Medium-Term Notes, Series B, 7% Stock
Portfolio Linked Note due August 18, 2000 (Linked
to the performance of the Common Stock of Intuit
Inc., CKS Group, Inc. and CNET, Inc.).*
4(ffff) Form of Medium-Term Notes, Series B, Single Stock
Linked Note due August 13, 1999 (Linked to the
performance of the Common Stock of Case
Corporation).*
4(gggg) Form of 5 3/4% STock Return Income DEbt Securities Exhibit 4 to Company's Current Report on
due June 1, 2000. Form 8-K dated December 1, 1998.
4(hhhh) Form of 6% Note due July 15, 2003. Exhibit (4)(a) to Company's Current Report
on Form 8-K dated July 15, 1998.
4(iiii) Form of 6 1/2% Note due July 15, 2018. Exhibit (4)(b) to Company's Current Report
on Form 8-K dated July 15, 1998.
4(jjjj) Form of Preferred Stock and Common Stock Warrant Exhibit 4(cccc) to Company's Registration
Agreement, including forms of Preferred Stock Statement on Form S-3 (File No. 333-44173).
and Common Stock Warrant Certificates.
4(kkkk) Form of Deposit Agreement, including form of Depositary Receipt Exhibit 4(ffff) to Company's Registration
Certificate representing the Depositary Shares. Statement on Form S-3 (File No. 333-44173).
4(llll) Certificate of Trust of Merrill Lynch Preferred Capital Trust VI.*
_____________
* Previously filed.
4(mmmm) Form of Amended and Restated Declaration of Trust of Merrill Lynch
Preferred Capital Trust VI, including form of Trust Preferred
Security.*
4(nnnn) Certificate of Limited Partnership of Merrill Lynch Preferred
Funding VI, L.P.*
4(oooo) Form of Amended and Restated Limited Partnership Agreement of
Merrill Lynch Preferred Funding VI, L.P.*
4(pppp) Form of Trust Preferred Securities Guarantee Agreement, between the
Company and The Chase Manhattan Bank, as guarantee trustee,
including form of Partnership Preferred Security.*
4(qqqq) Form of Partnership Preferred Securities Guarantee Agreement between
the Company and The Chase Manhattan Bank, as guarantee trustee.*
4(rrrr) Form of Subordinated Debenture Indenture between Exhibit 4 to Registration Statement on
the Company and The Chase Manhattan Bank, as guarantee Form S-3 (File No. 333-16603).
trustee.
4(ssss) Form of Affiliate Debenture Guarantee Agreement between the Company
and The Chase Manhattan Bank, as guarantee trustee.*
4(tttt) Form of Subordinated Debenture.*
4(uuuu) Restated Certificate of Incorporation of the Company, dated Exhibit 3(i) to Company's Quarterly Report
April 28, 1998. on Form 10-Q for the quarter ended March 27,
1998.
4(vvvv) By-Laws of the Company, effective as of April 15, 1997. Exhibit 3(ii) to Company's Quarterly Report
on Form 10-Q for the quarter ended March 27,
1997.
4(wwww) Form of Certificate of Designations of the Company Exhibit 4(ssss) to Company's Registration
establishing the rights, preferences, privileges, Statement on Form S-3 (File No. 333-44173).
qualifications, restrictions, and
limitations relating to a series of the Preferred Stock.
4(xxxx) Form of certificate representing Preferred Stock. Exhibit 4(d) to Company's Registration
Statement on Form S-3 (File No. 33-55363).
4(yyyy) Form of certificate representing Common Stock. Exhibit 4(uuuu) to Company's Registration
Statement on Form S-3 (File No. 333-44173).
4(zzzz) Form of Liquid Yield Option Note Indenture. Exhibit 4(vvvv) to Company's Registration
Statement on Form S-3 (File No. 333-44173).
4(aaaaa) Form of Subsequent Liquid Yield Option Note Indenture. Exhibit 4(wwww) to Company's Registration
Statement on Form S-3 (File No. 333-44173).
4(bbbbb) Form of Market Index Target-Term Security based Exhibit 4 to Company's Current Report on
upon the Dow Jones Industrial Average due January 14, 2003. Form 8-K dated December 23, 1997.
4(ccccc) Supplemental Indenture to the 1983 Senior Exhibit 4(yyyy) to Company's Registration
Indenture, the 1993 Senior Indenture and the Statement on Form S-3 (File No. 333-44173).
Subordinated Indenture between the Company and
The Chase Manhattan Bank, as trustee.
_____________
* Previously filed.
4(ddddd) Amended and Restated Rights Agreement, dated as of Exhibit 4 to Company's Current Report on
December 2, 1997 between the Company and ChaseMellon Form 8-K dated December 2, 1997.
Shareholder Services,L.L.C., as Rights Agent.
4(eeeee) Certificate of Designations of the Company Exhibit 3(f) to Company's Registration
establishing the rights, preferences, privileges, Statement on Form S-3 (File No. 33-19975).
qualifications, restrictions and limitations relating
to the Company's Series A Junior Preferred Stock.
4(fffff) Amendment No. 1 to the Form of Distribution Agreement. Exhibit 4(bbbbb) to Company's Registration
Statement on Form S-3 (File No. 333-19975).
4(ggggg) Form of EuroFund Market Index Target-Term Security Exhibit 4 to Company's Current Report
due February 28, 2006. on Form 8-K dated September 3, 1998.
4(hhhhh) Form of S&P 500 Market Index Target-Term Security Exhibit 4 to Company's Current Report on
due September 28, 2005. Form 8-K dated September 29, 1998.
4(iiiii) Form of 6 3/8% Note due October 15, 2008. Exhibit 4 to Company's Current Report on
Form 8-K dated October 28, 1998.
4(jjjjj) Form of 6% Note due November 15, 2004. Exhibit (4)(b) to Company's Current Report
on Form 8-K dated November 24, 1998.
4(kkkkk) Form of 6 7/8% Note due November 15, 2018. Exhibit (4)(c) to Company's Current Report
on Form 8-K dated November 24, 1998.
4(lllll) Form of Medium-Term Notes, Series B, 1.5% Exhibit 99(b) to Company's Registration
Principal Protected Note due December 15, 2005 on Form 8-A dated December 3, 1998.
(Linked to the performance of the Dow Jones
Statement Euro STOXX 50 Index).
4(mmmmm) Form of Nikkei 225 Market Index Target-Term Exhibit 4 to Company's Current Report on
Security due September 21, 2005. Form 8-K dated December 28, 1998.
4(nnnnn) Form of Energy Select Sector SPDR(R) Fund Market Exhibit 4 to Company's Current Report on
Index Target-Term Securities due February 21, 2006. Form 8-K dated February 18, 1999.
4(ooooo) Form of 5 1/4% STock Return Income DEbt Securities
due August 23, 2000. Exhibit 4 to Company's Current Report on
Form 8-K dated February 23, 1999.
5(a) Opinion of Brown & Wood LLP.*
5(b) Opinion of Brown & Wood LLP.*
5(c) Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
5(d) Opinion of Brown & Wood LLP.*
12(a) Computation of Ratio of Earnings to Fixed Charges of the Exhibit 12 to Company's Annual Report on
Company. Form 10-K for the year ended December 25,
1998.
12(b) Computation of Ratio of Earnings to Combined Fixed Charges Exhibit 12 to Company's Annual Report on
and Preferred Stock Dividends of the Company. Form 10-K for the year ended December 25,
1998.
23(a) Consents of Brown & Wood LLP. (included as part of Exhibit 5).*
23(b) Consent of Deloitte & Touche LLP.
24 Power of Attorney of the Company.*
25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of The Chase Manhattan Bank.*
25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of The Chase Manhattan Bank under the Amended and Restated
Declaration of Trust (contained in Exhibit 4(mmmm)); Trust
Preferred Securities Guarantee Agreement (contained in Exhibit
4(pppp)); Subordinated Indenture (contained in Exhibit 4(rrrr));
and Affiliate Debenture Guarantee Agreement (contained in Exhibit
4(ssss)).*
99(a) Opinion of Deloitte & Touche LLP with respect to Exhibit (99)(i) to Company's Annual Report
certain financial data appearing in the on Form 10-k for year ended December 25,
Registration Statement. 1998.
99(b) Opinion of Deloitte & Touche LLP with respect to certain summary Exhibit (99)(ii) to Company's Annual Report
financial information and selected financial data incorporated by on Form 10-k for year ended December 25,
reference in the Registration Statement. 1998.
</TABLE>
- -----------
* Previously filed.
<PAGE>
Item 17. Undertakings
Each of the undersigned registrants hereby undertakes:
(a)(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the securities act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3 and the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Securities being registered which remain unsold at
the termination of the offering.
(b) That, for purpose of determining any liability under the
Securities Act of 1933, each filing of such registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of such registrant pursuant to the provisions
referred to in Item 15 of this registration statement, or otherwise,
such registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy
as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by such registrant of expenses incurred or paid by a
director, officer or controlling person of such registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, such registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
(d) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310
of the Trust Indenture Act (the "Act") in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the
Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York and State of New York on the
29th day of March, 1999.
MERRILL LYNCH & CO., INC.
By: /s/ E. Stanley O'Neal
-------------------------------------
E. Stanley O'Neal
(Executive Vice President and
Chief Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed by the following persons
in the capacities indicated on the 29th day of March, 1999.
<TABLE>
<S> <C>
Signature Title
* Chairman of the Board, Chief Executive Officer and Director
- --------------------------------------------------
(David H. Komansky)
* President, Chief Operating Officer and Director
- --------------------------------------------------
(Herbert M. Allison, Jr.)
/s/ E. Stanley O'Neal Executive Vice President and Chief Financial Officer (Principal Financial
- --------------------------------------------------
(E. Stanley O'Neal) Officer)
/s/ Ahmass L. Fakahany Senior Vice President and Controller (Principal Accounting Officer)
- --------------------------------------------------
(Ahmass L. Fakahany)
* Director
- --------------------------------------------------
(W. H. Clark)
* Director
- --------------------------------------------------
(Jill K. Conway)
* Director
- --------------------------------------------------
(Stephen L. Hammerman)
* Director
- --------------------------------------------------
(Earle H. Harbison, Jr.)
* Director
- --------------------------------------------------
(George B. Harvey)
* Director
- --------------------------------------------------
(William R. Hoover)
* Director
- --------------------------------------------------
(Robert P. Luciano)
* Director
- --------------------------------------------------
(Aulana L. Peters)
* Director
- --------------------------------------------------
(John J. Phelan, Jr.)
* Director
- --------------------------------------------------
(John L. Steffens)
* Director
- --------------------------------------------------
(William L. Weiss)
*By: /s/ E. Stanley O'Neal
- --------------------------------------------------
E. Stanley O'Neal
(Attorney-in-Fact)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 29th of March, 1999.
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
BY: MERRILL LYNCH & CO., INC.,
as General Partner
By: /s/ E. Stanley O'Neal
--------------------------------------------------
Name: E. Stanley O'Neal
Title: Executive Vice President and Chief
Financial Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 29th of March, 1999.
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
By: /s/ Raymond Disco
---------------------------------------------
Name: Raymond Disco
Title: Regular Trustee
By: /s/ Stanley Schaefer
--------------------------
Name: Stanley Schaefer
Title: Regular Trustee
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit Incorporation by Reference
Number Description to Filings Indicated
------ ----------- ---------------------
1(a) Form of Underwriting Agreement for Debt Securities Exhibit 1(a) to Company's Registration
and Debt, Currency and Index Warrants, including forms of Statement on Form S-3 (No. 333-59997).
Terms Agreement.
1(b) Form of Distribution Agreement, including form of Exhibit 1(b) to Company's Registration
Terms Agreement, relating to Medium-Term Notes, Series B Statement on Form S-3 (No. 33-51489).
(a series of Senior Debt Securities).
1(c) Form of Underwriting Agreement for Preferred Stock Exhibit 1(c) to Company's
and Common Stock Registration Warrants, Preferred Stock, Statement on Form S-3 (No. 333-59997).
Depositary Shares and Common Stock.
1(d) Form of Purchase Agreement relating to the Trust Preferred Exhibit 1.1 to Company's Registration
Securities. Statement on Form S-3 (No. 333-42859).
4(a)(i) Senior Indenture, dated as of April 1, 1983, as Exhibit 99(c) to Company's Registration
amended and restated (the "1983 Senior Indenture"), on Form 8-A dated July 20, 1992.
between the Company and The Chase Statement
Manhattan Bank, formerly known as Chemical Bank
(successor by merger to Manufacturers Hanover Trust
Company).
4(a)(ii) Senior Indenture, dated as of October 1, 1993 (the Exhibit 4 to Company's Current Report on
"1993 Senior Indenture"), between the Company and the Chase Form 8-K dated October 7, 1993.
Manhattan Bank (successor by merger to The Chase Manhattan
Bank, N.A.).
4(a)(iii) Form of initial Subsequent Indenture with respect to Senior Debt
Securities.*
4(a)(iv) Form of Subsequent Indenture with respect to Senior Debt Securities.*
4(b)(i) Supplemental Indenture to the 1983 Senior Indenture, Exhibit 99(c) to Company's Registration
dated March 15, 1990, between the Company and The Chase on Form 8-A dated July 20, 1992.
Manhattan Bank, formerly Statement known as Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company).
4(b)(ii) Eighth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated March 1, 1996, between the Company and The No. 1 to Company's Registration Statement on
Chase Manhattan Bank, formerly known as Chemical Form S-3 (No. 33-65135).
Bank (successor by merger to Manufacturers
Hanover Trust Company).
4(b)(iii) Ninth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated June 1, 1996, between the Company and The No. 4 to Company's Registration Statement
Chase Manhattan Bank, formerly known as Chemical on Form S-3 (No. 33-65135).
Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(iv) Tenth Supplemental Indenture to the 1983 Senior Exhibit 4(b) to Post-Effective Amendment
Indenture, dated July 1, 1996, between the Company and The No.5 to Company's Registration Statement on
Chase Manhattan Bank, formerly known as Chemical Form S-3 (No. 33-65135).
Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(b)(v) Supplemental Indenture to the 1983 Senior Indenture, Exhibit 4(b)(ii) to Company's Registration
dated October 25, 1993, between the Company and The Chase on Form S-3 (No. 33-61559).
Manhattan Bank Statement (successor by merger to
The Chase Manhattan Bank, N.A.).
_____________
* Previously filed.
4(b)(vi) Twelfth Supplemental Indenture to the 1983 Senior Exhibit 4(a) to Company's Current report on
Indenture dated as of September 1, 1998 between the Company Form 8-K dated October 21, 1998.
and The Chase Manhattan Bank, formerly known
as Chemical Bank (successor by
merger to Manufacturers Hanover Trust Company).
4(b)(vii) First Supplemental Indenture to the 1993 Senior Exhibit 4(a) to Company's Current Report
Indenture, dated as of June 1, 1998, between the on Form 8-K dated July 2, 1998.
Company and The Chase Manhattan Bank
(successor by merger to The Chase Manhattan Bank N.A.).
4(c)(i) Form of Subordinated Indenture between the Company and The Chase Exhibit 4.7 to Company's Registration
Manhattan Bank. Statement on Form S-3 (No. 333-16603).
4(c)(ii) Form of Subsequent Indentures with respect to Subordinated Debt
Securities.*
4(d) Form of 6% Note due February 17, 2009. Exhibit 4 to Company's Current Report on
Form 8-K dated February 17, 1999.
4(e) Form of 6 3/8% Note due March 30, 1999. Exhibit 4 to Company's Current Report on
Form 8-K dated March 30, 1994.
4(f) Form of Equity Participation Security with Minimum Return Protection Exhibit 4(ooo) to Amendment No. 1 to
due June 30, 1999. Company's Registration Statement on Form S-3
(No. 33-54218).
4(g) Form of European Portfolio Market Index Target-Term Security due Exhibit 4 to Company's Current Report on
June 30, 1999. Form 8-K dated December 30, 1993.
4(h) Form of 8 1/4% Note due November 15, 1999. Exhibit 4(cc) to Company's Registration
Statement on Form S-3 (No. 33-45327).
4(i) Form of Stock Market Annual Reset Term Note due December 31, 1999 Exhibit 4 to Company's Current Report on
(Series A). Form 8-K dated April 29, 1993.
4(j) Form of Japan Index Equity Participation Security Exhibit 4 to Company's Current Report on
with Minimum Return Protection due January 31, 2000. Form 8-K dated January 27, 1994.
4(k) Form of 8 3/8% Note due February 9, 2000. Exhibit 4 to Company's Current Report on
Form 8-K dated February 9, 1995.
4(l) Form of 6.70% Note due August 1, 2000. Exhibit 4 to Company's Report on Form 8-K
dated August 1, 1995.
4(m) Form of AMEX Oil Index Stock Market Annual Reset Term Note due Exhibit 4 to Company's Current Report on
December 29, 2000. Form 8-K dated March 31, 1994.
4(n) Form of 8% Note due February 1, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated February 4, 1992.
4(o) Form of Step-Up Note due April 30, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated April 30, 1992.
4(p) Form of Step-Up Note due May 6, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated May 6, 1992.
4(q) Form of 7 3/8% Note due August 17, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated August 17, 1992.
_____________
* Previously filed.
4(r) Form of Major 8 European Index Market Index Exhibit 4 to Company's Current Report on
Target-Term Security due August 30, 2002. Form 8-K dated August 1, 1997.
4(s) Form of 6.64% Note due September 19, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated September 19, 1995.
4(t) Form of 8.30% Note due November 1, 2002. Exhibit 4 to Company's Current Report on
Form 8-K dated May 4, 1992.
4(u) Form of Major 11 European Market Index Target-Term Security due Exhibit 4 to Company's Current Report on
December 6, 2002. Form 8-K dated November 26, 1997.
4(v) Form of 6 7/8% Note due March 1, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated March 1, 1993.
4(w) Form of 7.05% Note due April 15, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated April 15, 1993.
4(x) Form of 6.55% Note due August 1, 2004. Exhibit 4 to Company's Current Report on
Form 8-K dated August 1, 1997.
4(y) Form of Russell 2000 Index Market Index Target-Term Security due Exhibit 4 to Company's Current Report on
September 30, 2004. Form 8-K dated September 29, 1997.
4(z) Form of 6 1/4% Note due January 15, 2006. Exhibit 4 to Company's Current Report on
Form 8-K dated January 20, 1994.
4(aa) Form of 6 3/8% Note due September 8, 2006. Exhibit 4 to Company's Current Report
on Form 8-K dated September 8, 1993.
4(bb) Form of 8% Note due June 1, 2007. Exhibit 4 to Company's Current Report on
Form 8-K dated June 1, 1992.
4(cc) Form of S&P 500 Inflation Adjusted Market Index Exhibit 4 to Company's Current Report on
Target-Term Security due September 24, 2007. Form 8-K dated September 24, 1997.
4(dd) Form of 7% Note due April 27, 2008. Exhibit 4 to Company's Current Report on
Form 8-K dated April 27, 1993.
4(ee) Form of 6 1/4% Note due October 15, 2008. Exhibit 4 to Company's Current Report on
Form 8-K dated October 15, 1993.
4(ff) Form of 8.40% Note due November 1, 2019. Exhibit 4(z) to Company's Registration
Statement on Form S-3 (No. 33-35456).
4(gg) Form of Fixed Rate Medium-Term Note (without redemption provisions). Exhibit 4(kk) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(hh) Form of Fixed Rate Medium-Term Note (with redemption provisions). Exhibit 4(ll) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(ii) Form of Fixed Rate Medium-Term Note (without Exhibit 4(d) to Company's Registration
redemption provisions, minimum denomination $1,000). Statement on Form S-3 (No. 33-38879).
4(jj) Form of Fixed Rate Medium-Term Note (with redemption Exhibit 4(c) to Company's Registration
provisions, minimum denominations $1,000). Statement on Form S-3 (No. 33-38879).
4(kk) Form of Fixed Rate Medium-Term Note, Series B.
4(ll) Form of Federal Funds Rate Medium-Term Note. Exhibit 4(oo) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(mm) Form of Floating Rate Medium-Term Note, Series B.
4(nn) Form of Commercial Paper Rate Medium-Term Note. Exhibit 4(qq) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(oo) Form of Commercial Paper Index Rate Medium-Term Note. Exhibit 4(i) to Company's Registration
Statement on Form S-3 (File No. 33-38879).
4(pp) Form of Constant Maturity Treasury Rate Indexed Medium-Term Note, Exhibit 4(ccc) to Company's Registration
Series B. Statement on Form S-3 (No. 33-52647).
4(qq) Form of Constant Maturity Treasury Rate Indexed Medium-Term Note II, Exhibit 4(xv) to Company's Annual Report on
Series B. Form 10-K for the year ended December 30,
1994.
4(rr) Form of JPY Yield Curve Flattening Medium-Term Note, Series B. Exhibit 4(ddd) to Company's Registration
Statement on Form S-3 (No. 33-52647).
4(ss) Form of LIBOR Medium-Term Note. Exhibit 4(pp) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(tt) Form of Multi-Currency Medium-Term Note, Series B. Exhibit 4(fff) to Company's Registration
Statement on Form S-3 (No. 33-52647).
4(uu) Form of Nine Month Renewable Floating Rate Medium-Term Note, Series Exhibit 4(ix) to Company's Quarterly Report
B. on Form 10-Q for the quarter ended
September 24, 1993.
4(vv) Form of Treasury Rate Medium-Term Note. Exhibit 4(aaa) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(ww) Form of Collared LIBOR Medium-Term Note due February 14, 2000. Exhibit 4(ww) to Company's Registration
Statement on Form S-3 (No. 33-54218).
4(xx) Form of Japanese Yen Swap Rate Linked Medium-Term Note, Series B. Exhibit 4(mmm) to Company's Registration
Statement on Form S-3 (No. 33-52647).
4(yy) Form of Step-Up Medium-Term Note due May 20, 2008. Exhibit 4(ggg) to Amendment No. 1 to
Company's Registration Statement on Form S-3
(No. 33-54218).
4(zz) Form of Warrant Agreement, including form of Warrant Certificate. Exhibit 4(aa) to Company's Registration
Statement on Form S-3 (No. 33-35456).
4(aaa) Form of Currency [Put/Call] Warrant Agreement, including form of Exhibit 4 to Company's Registration Statement
Global Currency Warrant Certificate. on Form S-3 (No. 33-17965).
4(bbb) Form of Index Warrant Agreement, including form of Global Index Exhibit 4(kkk) to Amendment No. 1 to
Warrant Certificate. Company's Registration Statement on Form S-3
(No. 33-54218).
4(ccc) Form of Index Warrant Trust Indenture, including form of Global Exhibit 4(lll) to Amendment No. 1 to
Index Warrant Certificate. Company's Registration Statement on Form S-3
(No. 33-54218).
4(ddd) Form of 6 1/2% Note due April 1, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated April 1, 1996.
4(eee) Form of 6% Note due January 15, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated January 17, 1996.
4(fff) Form of 6% Note due March 1, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated February 29, 1996.
4(ggg) Form of 7% Note due March 15, 2006. Exhibit 4 to Company's Current Report on
Form 8-K dated March 18, 1996.
4(hhh) Form of 7 3/8% Note due May 15, 2006. Exhibit 4 to Company's Current Report on
Form 8-K dated May 15, 1996.
4(iii) Form of 6% STRYPES due June 1, 1999. Exhibit 4(c) to Company's Form 8-K/A dated
June 7, 1996.
4(jjj) Form of 7 1/4% STRYPES due June 15, 1999. Exhibit 4(c) to Post-Effective Amendment
No. 4 to Company's Registration Statement on
Form S-3 (33-65135).
4(kkk) Form of 6 1/4% STRYPES due July 1, 2001. Exhibit 4(c) to Company's Current Report on
Form 8-K dated July 9, 1996.
4(lll) Form of S&P 500 Market Index Target-Term Security due May 10, 2001. Exhibit 4 to Company's Current Report on
Form 8-K dated May 13, 1996.
4(mmm) Form of S&P 500 Market Index Target-Term Security due March 27, Exhibit 4 to Company's Current Report on
2006. Form 8-K dated March 26, 1999.
4(nnn) Form of Technology Market Index Target-Term Security due August 15, Exhibit 4(a) to Company's Current Report on
2001. Form 8-K dated August 12, 1996.
4(ooo) Form of Top Ten Yield Market Index Target-Term Security due Exhibit 4(b) to Company's Current Report on
August 15, 2006. Form 8-K dated August 12, 1996.
4(ppp) Form of Healthcare/Biotechnology Portfolio Market Exhibit 4 to Company's Current Report on
Index Target-Term Security due October 31, 2001. Form 8-K dated October 30, 1996.
4(qqq) Form of 7% Note due January 15, 2007. Exhibit 4 to Company's Current Report on
Form 8-K dated January 13, 1997.
4(rrr) Form of S&P 500 Market Index Target-Term Security due September 16, Exhibit 4 to Company's Current Report on
2002. Form 8-K dated March 14, 1997.
4(sss) Form of Nikkei 225 Market Index Target-Term Security due June 14, Exhibit 4 to Company's Current Report on
2002. Form 8-K dated June 3, 1997.
4(ttt) Form of 6.56% Note due December 16, 2007. Exhibit 4 to Company's Current Report on
Form 8-K dated December 16, 1997.
4(uuu) Form of 7 7/8% STRYPES due February 1, 2001 (Payable with Shares of Exhibit 4(c) to Company's Current Report on
Common Stock of CIBER, Inc.) Form 8-K dated January 30, 1998.
4(vvv) Form of Floating Rate Note due February 4, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated February 4, 1998.
4(www) Form of 6% Note due February 12, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated February 12, 1998.
4(xxx) Form of Oracle Corporation Indexed Callable Protected Growth Exhibit 4 to Company's Current Report on
Security due March 31, 2003. Form 8-K dated March 19, 1998.
4(yyy) Form of Telebras Indexed Callable Protected Growth Security due Exhibit 4 to Company's Current Report on
May 19, 2005. Form 8-K dated May 19, 1998.
4(zzz) Form of 6 3/4% Note due June 1, 2028. Exhibit 4 to Company's Current Report on
Form 8-K dated June 3, 1998.
4(aaaa) Form of Floating Rate Note due June 24, 2003. Exhibit 4 to Company's Current Report on
Form 8-K dated June 24, 1998.
4(bbbb) Form of S&P 500 Market Index Target-Term Security due July 1, 2005. Exhibit 4 to Company's Current Report on
Form 8-K dated June 26, 1998.
4(cccc) Form of Medium-Term Notes, Series B, 3% Stock Linked Exhibit 4 to Company's Current Report on
Note due June 10, 2000 (Linked to the performance of Honda Form 8-K dated June 10, 1998.
Motor Co., Ltd. Common Stock).
4(dddd) Form of Medium-Term Notes, Series B, 5% Stock Linked Exhibit 4(c) to Company's Current Report on
Note due July 3, 2000 (Linked to the performance of the Form 8-K dated July 2, 1998.
Common Stock of Travelers Group, Inc.).
4(eeee) Form of Medium-Term Notes, Series B, 7% Stock
Portfolio Linked Note due August 18, 2000 (Linked to
the performance of the Common Stock of Intuit Inc.,
CKS Group, Inc. and CNET, Inc.).*
4(ffff) Form of Medium-Term Notes, Series B, Single Stock
Linked Note due August 13, 1999 (Linked to the
performance of the Common Stock of Case
Corporation).*
4(gggg) Form of 5 3/4% STock Return Income DEbtSecurities
due June 1, 2000. Exhibit 4 to Company's Current Report on
Form 8-K dated December 1, 1998.
4(hhhh) Form of 6% Note due July 15, 2003. Exhibit (4)(a) to Company's Current Report on
Form 8-K dated July 15, 1998.
4(iiii) Form of 6 1/2% Note due July 15, 2018. Exhibit (4)(b) to Company's Current Report on
Form 8-K dated July 15, 1998.
4(jjjj) Form of Preferred Stock and Common Stock Warrant Exhibit 4(cccc) to Company's Registration
Agreement, including forms of Preferred Stock and Common Stock Statement on Form S-3 (File No. 333-44173).
Warrant Certificates.
4(kkkk) Form of Deposit Agreement, including form of Depositary Receipt Exhibit 4(ffff) to Company's Registration
Certificate representing the Depositary Shares. Statement on Form S-3 (File No. 333-44173).
4(llll) Certificate of Trust of Merrill Lynch Preferred Capital Trust VI.*
4(mmmm) Form of Amended and Restated Declaration of Trust of Merrill Lynch
Preferred Capital Trust VI, including form of Trust Preferred
Security.*
4(nnnn) Certificate of Limited Partnership of Merrill Lynch Preferred
Funding VI, L.P.*
4(oooo) Form of Amended and Restated Limited Partnership Agreement of
Merrill Lynch Preferred Funding VI, L.P.*
_____________
* Previously filed.
4(pppp) Form of Trust Preferred Securities Guarantee Agreement, between the
Company and The Chase Manhattan Bank, as guarantee trustee,
including form of Partnership Preferred Security.*
4(qqqq) Form of Partnership Preferred Securities Guarantee Agreement between
the Company and The Chase Manhattan Bank, as guarantee trustee.*
4(rrrr) Form of Subordinated Debenture Indenture between the Exhibit 4 to Registration Statement on
Company and The Chase Manhattan Bank, as guarantee trustee. Form S-3 (File No. 333-16603).
4(ssss) Form of Affiliate Debenture Guarantee Agreement between the Company
and The Chase Manhattan Bank, as guarantee trustee.*
4(tttt) Form of Subordinated Debenture.*
4(uuuu) Restated Certificate of Incorporation of the Company, dated Exhibit 3(i) to Company's Quarterly Report on
April 28, 1998. Form 10-Q for the quarter ended March 27,
1998.
4(vvvv) By-Laws of the Company, effective as of April 15, 1997. Exhibit 3(ii) to Company's Quarterly Report
on Form 10-Q for the quarter ended March 27,
1997.
4(wwww) Form of Certificate of Designations of the Company Exhibit 4(ssss) to Company's Registration
establishing the rights, preferences, privileges, Statement on Form S-3 (File No. 333-44173).
qualifications, restrictions, and
limitations relating to a series of the Preferred Stock.
4(xxxx) Form of certificate representing Preferred Stock. Exhibit 4(d) to Company's Registration
Statement on Form S-3 (File No. 33-55363).
4(yyyy) Form of certificate representing Common Stock.
Exhibit 4(uuuu)to Company's Registration
Statement on Form S-3 (File No.333-44173).
4(zzzz) Form of Liquid Yield Option Note Indenture. Exhibit 4(vvvv) to Company's Registration
Statement on Form S-3 (File No. 333-44173).
4(aaaaa) Form of Subsequent Liquid Yield Option Note Indenture. Exhibit 4(wwww) to Company's Registration
Statement on Form S-3 (File No. 333-44173).
4(bbbbb) Form of Market Index Target-Term Security based upon Exhibit 4 to Company's Current Report on
the Dow Jones Industrial Average due January 14, 2003. Form 8-K dated December 23, 1997.
4(ccccc) Supplemental Indenture to the 1983 Senior Indenture, Exhibit 4(yyyy) to Company's Registration
the 1993 Senior Indenture and the Subordinated Indenture Statement on Form S-3 (File No. 333-44173).
between the Company and The Chase Manhattan Bank, as trustee.
4(ddddd) Amended and Restated Rights Agreement, dated as of Exhibit 4 to Company's Current Report
December 2, 1997 on between the Company and ChaseMellon Form 8-K dated December 2, 1997.
Shareholder Services, L.L.C., as Rights Agent.
4(eeeee) Certificate of Designations of the Company establishing Exhibit 3(f) to Company's Registration
the rights, preferences, privileges, qualifications, Statement on Form S-3 (File No. 33-19975).
restrictions and limitations relating to the Company's
Series A Junior Preferred Stock.
4(fffff) Amendment No.1 to the Form of Distribution Agreement. Exhibit 4(bbbbb) to Company's Registration
Statement on Form S-3 (File No. 333-19975).
_____________
* Previously filed.
4(ggggg) Form of EuroFund Market Index Target-Term Security Exhibit 4 to Company's Current Report
due February 28, 2006. on Form 8-K dated September 3, 1998.
4(hhhhh) Form of S&P 500 Market Index Target-Term Security Exhibit 4 to Company's Current Report
due September 28, 2005. on Form 8-K dated September 29, 1998.
4(iiiii) Form of 6 3/8% Note due October 15, 2008. Exhibit 4 to Company's Current Report on
Form 8-K dated October 28, 1998.
4(jjjjj) Form of 6% Note due November 15, 2004. Exhibit (4)(b) to Company's Current Report
on Form 8-K dated November 24, 1998.
4(kkkkk) Form of 6 7/8% Note due November 15, 2018. Exhibit (4)(c) to Company's Current Report on
Form 8-K dated November 24, 1998.
4(lllll) Form of Medium-Term Notes, Series B, 1.5% Principal Exhibit 99(b) to Company's Registration
Protected Note due December 15, 2005 (Linked to the Statement on Form 8-A dated December 3, 1998.
performance of the Dow Jones Euro STOXX 50 Index).
4(mmmmm) Form of Nikkei 225 Market Index Target-Term Security due Exhibit 4 to Company's Current Report on Form
September 21, 2005. 8-K dated December 28, 1998.
4(nnnnn) Form of Energy Select Sector SPDR(R) Fund Market Index Exhibit 4 to Company's Current Report on
Target-Term Securities due February 21, 2006. Form 8-K dated February 18, 1999
4(ooooo) Form of 5 1/4% STock Return Income DEbt Securities Exhibit 4 to Company's Current Report on
due August 23, 2000. Form 8-K dated February 23, 1999
5(a) Opinion of Brown & Wood LLP.*
5(b) Opinion of Brown & Wood LLP.*
5(c) Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
5(d) Opinion of Brown & Wood LLP.*
12(a) Computation of Ratio of Earnings to Fixed Charges of the Exhibit 12 to Company's Annual Report on
Company. Form 10-K for the year ended December 25,
1998.
12(b) Computation of Ratio of Earnings to Combined Fixed Charges Exhibit 12 to Company's Annual Report on
and Preferred Stock Dividends of the Company. Form 10-K for the year ended December 25,
1998.
23(a) Consents of Brown & Wood LLP. (included as part of
Exhibit 5).*
23(b) Consent of Deloitte & Touche LLP.*
24 Power of Attorney of the Company.*
25(a) Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Chase Manhattan Bank.*
_____________
* Previously filed.
25(b) Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Chase Manhattan Bank under the Amended
and Restated Declaration of Trust (contained in Exhibit
4(mmmm)); Trust Preferred Securities Guarantee Agreement
(contained in Exhibit 4(pppp)); Subordinated Indenture
(contained in Exhibit 4(vvvv)); and Affiliate Debenture
Guarantee Agreement (contained in Exhibit 4(ssss)).*
99(a) Opinion of Deloitte & Touche LLP with respect to Exhibit (99)(i) to Company's Annual Report
certain financial data appearing in the Registration on Form 10-k for year ended December 25,
Statement. 1998.
99(b) Opinion of Deloitte & Touche LLP with respect to certain Exhibit (99)(ii) to Company's Annual Report
summary financial information and selected financial data on Form 10-k for year ended December 25,
incorporated by reference in the Registration Statement. 1998.
</TABLE>
- -----------
* Previously filed.
<PAGE>
Exhibit 4(kk)
FIXED RATE GLOBAL MEDIUM-TERM NOTE
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE
THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR
BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
REGISTERED PRINCIPAL AMOUNT
No. FX ________________ CUSIP No. ________________ $_______________
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTE,
SERIES B
(Fixed Rate)
ORIGINAL ISSUE DATE: INTEREST RATE: STATED MATURITY:
INTEREST PAYMENT DATES RECORD DATE:
(May 15 and November 15, (Fifteen days prior to the
unless otherwise specified) applicable Interest Payment
Date, unless otherwise
specified)
INITIAL REDEMPTION INITIAL REDEMPTION ANNUAL REDEMPTION
DATE: PERCENTAGE: PERCENTAGE
REDUCTION:
OPTIONAL REPAYMENT DATE(S):
DENOMINATIONS: ADDENDUM ATTACHED:
(Integral multiples of $1,000,
unless otherwise : Yes
specified) : No
OTHER PROVISIONS:
<PAGE>
MERRILL LYNCH & CO., INC., a Delaware corporation ("Issuer" or the
"Company," which terms include any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, the principal sum of
DOLLARS
on the Stated Maturity specified above (except to the extent redeemed or
repaid prior to the Stated Maturity), and to pay interest thereon at the
Interest Rate per annum specified above, until the principal hereof is paid or
duly made available for payment. Reference herein to "this Note", "hereof",
"herein" and comparable terms shall include an Addendum hereto if an Addendum
is specified above.
The Company will pay interest on each Interest Payment Date specified
above, commencing on the first Interest Payment Date next succeeding the
Original Issue Date specified above, and on the Stated Maturity or any
Redemption Date or Optional Repayment Date (as defined below) (the date of
each such Stated Maturity, Redemption Date and Optional Repayment Date and the
date on which principal or an installment of principal is due and payable by
declaration of acceleration pursuant to the Indenture being referred to
hereinafter as a "Maturity" with respect to principal payable on such date);
provided, however, that if the Original Issue Date is between a Regular Record
Date (as defined below) and the next succeeding Interest Payment Date,
interest payments will commence on the second Interest Payment Date succeeding
the Original Issue Date. Unless otherwise specified above, the "Regular Record
Date" shall be the date 15 calendar days (whether or not a Business Day) prior
to the applicable Interest Payment Date. Interest on this Note will accrue
from and including the most recent Interest Payment Date to which interest has
been paid or duly provided for or, if no interest has been paid, from the
Original Issue Date specified above, to, but excluding such Interest Payment
Date. If the Maturity or an Interest Payment Date falls on a day which is not
a Business Day, the payment due on such Maturity or Interest Payment Date will
be paid on the next succeeding Business Day with the same force and effect as
if made on such Maturity or Interest Payment Date, as the case may be, and no
interest shall accrue with respect to such payment for the period from and
after such Maturity or Interest Payment Date. The interest so payable and
punctually paid or duly provided for on any Interest Payment Date will as
provided in the Indenture be paid to the Person in whose name this Note (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such Interest Payment Date. Any such interest
which is payable, but not punctually paid or duly provided for on any Interest
Payment Date (herein called "Defaulted Interest"), shall forthwith cease to be
payable to the registered Holder on such Regular Record Date, and may be paid
to the Person in whose name this Note (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to the Holder of this Note not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner,
all as more fully provided in the Indenture.
Payment of the principal of and interest on this Note will be made at
the Office or Agency of the Company maintained by the Company for such purpose
in the Borough of Manhattan, The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
Unless the certificate of authentication hereon has been executed by
or on behalf of The Chase Manhattan Bank, the Trustee for this Note under the
Indenture, or its successor thereunder, by the manual signature of one of its
authorized officers, this Note shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
This Note is one of a duly authorized issue of Securities
(hereinafter called the "Securities") of the Company designated as its
Medium-Term Notes, Series B (the "Notes"). The Securities are issued and to be
issued under an indenture (the "Indenture") dated as of October 1, 1993,
between the Company and The Chase Manhattan Bank (successor by merger to The
Chase Manhattan Bank (National Association)) (herein called the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the respective rights thereunder of the Company, the Trustee
and the Holders of the Notes and the terms upon which the Notes are to be
authenticated and delivered. The terms of individual Notes may vary with
respect to interest rates or interest rate formulas, issue dates, maturity,
redemption, repayment, currency of payment and otherwise as provided in the
Indenture.
The Notes are issuable only in registered form without coupons in
denominations, unless otherwise specified above, of $1,000 and integral
multiples thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes as requested by the Holder surrendering the same. If
(x) the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company within
60 days, (y) the Company executes and delivers to the Trustee a Company Order
to the effect that this Note shall be exchangeable or (z) an Event of Default
has occurred and is continuing with respect to the Notes, this Note shall be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in authorized denominations. Such definitive Notes
shall be registered in such name or names as the Depository shall instruct the
Trustee. If definitive Notes are so delivered, the Company may make such
changes to the form of this Note as are necessary or appropriate to allow for
the issuance of such definitive Notes.
This Note is not subject to any sinking fund.
This Note may be subject to repayment at the option of the Holder
prior to its Stated Maturity on any Holder's Optional Repayment Date(s), if
any, indicated above. If no Optional Repayment Dates are set forth above, this
Note may not be so repaid at the option of the Holder hereof prior to the
Stated Maturity. On any Optional Repayment Date this Note shall be repayable
in whole or in part in an amount equal to $1,000 or any integral multiple
thereof (provided that any remaining principal amount shall be an authorized
denomination) at the option of the Holder hereof at a repayment price equal to
100% of the principal amount to be repaid, together with interest thereon
payable to the date of repayment. For this Note to be repaid in whole or in
part at the option of the Holder hereof, this Note must be received, with the
form entitled "Option to Elect Repayment" below duly completed, by the Trustee
at its office at 55 Water Street, Room 234, Corporate Trust Securities Window,
New York, New York 10041 or such address which the Company shall from time to
time notify the Holder hereof ("Corporate Trust Office"), not more than 60 nor
less than 30 days prior to an Optional Repayment Date. This Note must be
received by the Trustee by 5:00 P.M., New York City time, on the last day for
giving such notice. Exercise of such repayment option by the Holder hereof
shall be irrevocable. In the event of payment of this Note in part only, a new
Note for the unpaid portion hereof shall be issued in the name of the Holder
hereof upon the surrender hereof.
This Note may be redeemed at the option of the Company prior to its
Stated Maturity on any date on and after the Initial Redemption Date, if any,
specified above (the "Redemption Date"). If no Initial Redemption Date is set
forth above, this Note may not be redeemed at the option of the Company prior
to the Stated Maturity. On and after the Initial Redemption Date, if any, this
Note may be redeemed at any time in whole or from time to time in part in
increments of $1,000 (provided that any remaining principal amount shall be an
authorized denomination) at the option of the Company at the applicable
Redemption Price (as defined below) together with interest thereon payable to
the Redemption Date, on notice given not more than 60 nor less than 30 days
prior to the Redemption Date. In the event of redemption of this Note in part
only, a new Note for the unredeemed portion hereof shall be issued in the name
of the Holder hereof upon the surrender hereof.
If this Note is redeemable at the option of the Company prior to its
Stated Maturity, the "Redemption Price" shall initially be the Initial
Redemption Percentage, specified above, of the principal amount of this Note
to be redeemed and shall decline at each anniversary of the Initial Redemption
Date by the Annual Redemption Percentage Reduction, if any, specified above,
of the principal amount to be redeemed until the Redemption Price is 100% of
such principal amount.
Interest payments on this Note shall include interest accrued from,
and including, the Original Issue Date indicated above, or the most recent
date to which interest has been paid or duly provided for, to, but excluding,
the related Interest Payment Date or Maturity, as the case may be, at the rate
per annum stated on the face hereof until the principal amount hereof is paid
or made available for payment. Unless otherwise specified above, interest will
be computed on the basis of a 360-day year of twelve 30-day months for the
period specified hereunder.
Any provision contained herein with respect to the calculation of the
rate of interest applicable to this Note, its payment dates or any other
matter relating hereto may be modified as specified in an Addendum relating
hereto if so specified above or as set forth under Other Provisions if so set
forth above.
If an Event of Default (as defined in the Indenture) with respect to
the Notes shall occur and be continuing, the principal of all the Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Securities of each series to
be affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of 66 2/3% in aggregate principal amount of
the Securities at the time Outstanding, as defined in the Indenture, of each
series affected thereby. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all the Securities of each series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of
such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the time, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations set
forth therein and on the face hereof, the transfer of this Note may be
registered on the Security Register of the Company, upon surrender of this
Note for registration of transfer at the office or agency of the Company in
the Borough of Manhattan, The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed by, the Holder hereof or by his attorney duly authorized
in writing, and thereupon one or more new Notes of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, manually or in facsimile, and an imprint or facsimile of its
corporate seal to be imprinted hereon.
Dated: ____________
MERRILL LYNCH & CO., INC.
By: ________________________________
E. Stanley O'Neal
Executive Vice President and
Chief Financial Officer
[FACSIMILE OF SEAL]
Attest:
By:_________________________________
Andrea L. Dulberg
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the
series designated therein referred to in
the within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By: _______________________________________
Authorized Officer
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) and instruct(s) the Company
to repay this Note (or portion hereof specified below) pursuant to its terms
at a price equal to the principal amount hereof together with interest to the
repayment date, to the undersigned, at
- ----------------------------------------------------------------------------
(Please print or typewrite name and address of the undersigned)
For this Note to be repaid, the Trustee must receive at its Corporate
Trust Office, or at such other place or places of which the Company shall from
time to time notify the Holder of this Note, not more than 60 nor less than 30
days prior to an Optional Repayment Date, if any, shown on the face of this
Note, this Note with this "Option to Elect Repayment" form duly completed.
This Note notice must be received by the Trustee by 5:00 P.M., New York City
time, on the last day for giving such notice.
If less than the entire principal amount of this Note is to be
repaid, specify the portion hereof (which shall be in an amount equal to
$1,000 or an integral multiple thereof, provided that any remaining principal
amount is equal to an authorized denomination) which the Holder elects to have
repaid and specify the denomination or denominations (which shall be in an
amount equal to an authorized denomination) of the Notes to be issued to the
Holder for the portion of this Note not being repaid (in the absence of any
such specification, one such Note will be issued for the portion not being
repaid).
$ _______________________ __________________________________________________
NOTICE: The signature on this Option to Elect
Date_____________________ Repayment must correspond with the name as written
upon the face of this Note in every particular,
without alterationor enlargement or any change
whatever
<PAGE>
ASSIGNMENT/TRANSFER FORM
FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto
(insert Taxpayer Identification No.) _________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
______________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ________________________________________ attorney to transfer said
Note on the books of the Company with full power of substitution in the
premises.
Date ____________________ _________________________________________________
NOTICE: The signature of the registered registered
Holder to this assignment must correspond with
the name as written upon the face of the within
instrument in every particular, without alteration
or enlargement or any change whatsoever.
<PAGE>
<PAGE>
Exhibit 4(mm)
FLOATING RATE GLOBAL MEDIUM-TERM NOTE
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE
THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR
BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
REGISTERED PRINCIPAL AMOUNT
No. BFLR ______________ CUSIP No. ______________ $___________________
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTE,
SERIES B
(Floating Rate)
INTEREST RATE BASIS: ORIGINAL ISSUE DATE: STATED MATURITY:
INDEX MATURITY: INITIAL INTEREST RATE: SPREAD:
INITIAL INTEREST REGULAR RECORD DATE: INTEREST PAYMENT DATES:
RESET DATE: (Fifteen days prior to the
applicable Interest Payment
Date, unless otherwise
specified)
SPREAD MULTIPLIER: INTEREST RESET DATES:
MAXIMUM INTEREST RATE: MINIMUM INTEREST RATE: INITIAL REDEMPTION DATE:
INITIAL REDEMPTION PERCENTAGE: ANNUAL REDEMPTION OPTIONAL REPAYMENT
PERCENTAGE REDUCTION: DATE(S):
CALCULATION AGENT: IF INTEREST RATE BASIS
(Merrill Lynch, Pierce, IS LIBOR:
Fenner & Smith Incorporated, INDEX CURRENCY:
unless otherwise specified)
DESIGNATED LIBOR PAGE:
: Reuters Page: _____
: Telerate Page: _____
INTEREST CALCULATION: DAY COUNT CONVENTION
:Regular Floating Rate Note : Actual/360 for the
:Floating Rate/Fixed Rate period from
Fixed Rate Commencement Date: to .
Fixed Interest Rate: Actual/Actual to the
:Inverse Floating Rate Note period from to .
Fixed Interest Rate:
ADDENDUM ATTACHED: DENOMINATIONS:
: Yes (Integral multiples of
$1,000, unless otherwise
: No
IF INTEREST RATE BASIS OTHER PROVISIONS:
IS PRIME RATE:
: Prime Rate--Major Ban
: Prime Rate--H.15
IF INTEREST RATE BASIS IS CMT
RATE:
: Designated CMT Telerate Page is 7051
: Designated CMT Telerate Page is 7052
: Weekly Average
: Monthly Average
: Designated CMT Maturity Index:
<PAGE>
MERRILL LYNCH & CO., INC., a Delaware corporation ("Issuer" or the
"Company," which terms include any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, the principal sum of
DOLLARS on the Stated Maturity specified above (except to the extent redeemed
or repaid prior to the Stated Maturity Date), and to pay interest thereon, at
a rate per annum equal to the Initial Interest Rate specified above until the
Initial Interest Reset Date specified above and thereafter at a rate per annum
determined in accordance with the provisions hereof and any Addendum relating
hereto depending upon the Interest Rate Basis or Bases, and such other terms
specified above, until the principal hereof is paid or duly made available for
payment. Reference herein to "this Note", "hereof", "herein" and comparable
terms shall include an Addendum hereto if an Addendum is specified above.
The Company will pay interest on each Interest Payment Date specified
above, commencing on the first Interest Payment Date specified above next
succeeding the Original Issue Date specified above, and on the Stated Maturity
or any Redemption Date or Optional Repayment Date (as defined below) (the date
of each such Stated Maturity, Redemption Date and Optional Repayment Date and
the date on which principal or an installment of principal is due and payable
by declaration of acceleration pursuant to the Indenture being referred to
hereinafter as a "Maturity" with respect to principal payable on such date);
provided, however, that if the Original Issue Date is between a Regular Record
Date (as defined below) and the next succeeding Interest Payment Date,
interest payments will commence on the second Interest Payment Date succeeding
the Original Issue Date; and provided, further, that if an Interest Payment
Date (other than an Interest Payment Date at Maturity) would fall on a day
that is not a Business Day (as defined below), such Interest Payment Date
shall be postponed to the following day that is a Business Day, except that in
the case the Interest Rate Basis is LIBOR, as indicated above, if such next
Business Day falls in the next calendar month, such Interest Payment Date
shall be the next preceding day that is a Business Day. Except as provided
above, interest payments will be made on the Interest Payment Dates shown
above. Unless otherwise specified above, the "Regular Record Date" shall be
the date 15 calendar days (whether or not a Business Day) prior to the
applicable Interest Payment Date. Interest on this Note will accrue from and
including the Original Issue Date specified above, at the rates determined
from time to time as specified herein, until the principal hereof has been
paid or made available for payment. If the Maturity falls on a day which is
not a Business Day as defined below, the payment due on such Maturity will be
paid on the next succeeding Business Day with the same force and effect as if
made on such Maturity and no interest shall accrue with respect to such
payment for the period from and after such Maturity. The interest so payable
and punctually paid or duly provided for on any Interest Payment Date will as
provided in the Indenture be paid to the Person in whose name this Note (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such Interest Payment Date. Any such interest
which is payable, but not punctually paid or duly provided for on any Interest
Payment Date (herein called "Defaulted Interest"), shall forthwith cease to be
payable to the registered Holder on such Regular Record Date, and may be paid
to the Person in whose name this Note (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to the Holder of this Note not less than 10 days prior to such
Special Record Date, or may be paid at any time in any other lawful manner,
all as more fully provided in the Indenture.
Payment of the principal of and interest on this Note will be made at
the Office or Agency of the Company maintained by the Company for such purpose
in the Borough of Manhattan, The City of New York, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
Unless the certificate of authentication hereon has been executed by
or on behalf of The Chase Manhattan Bank, the Trustee with respect to the
Notes under the Indenture, or its successor thereunder, by the manual
signature of one of its authorized officers, this Note shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
This Note is one of a duly authorized issue of Securities
(hereinafter called the "Securities") of the Company designated as its
Medium-Term Notes, Series B (the "Notes"). The Securities are issued and to be
issued under an indenture (the "Indenture") dated as of October 1, 1993,
between the Company and The Chase Manhattan Bank (successor by merger to The
Chase Manhattan Bank (National Association)) (herein called the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the respective rights thereunder of the Company, the Trustee
and the Holders of the Notes and the terms upon which the Notes are to be
authenticated and delivered. The terms of individual Notes may vary with
respect to interest rates or interest rate formulas, issue dates, maturity,
redemption, repayment, currency of payment and otherwise as provided in the
Indenture.
The Notes are issuable only in registered form without coupons in
denominations of, unless otherwise specified above, $1,000 and integral
multiples thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes as requested by the Holder surrendering the same. If
(x) the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company within
60 days, (y) the Company executes and delivers to the Trustee a Company Order
to the effect that this Note shall be exchangeable or (z) an Event of Default
has occurred and is continuing with respect to the Notes, this Note shall be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in authorized denominations. Such definitive Notes
shall be registered in such name or names as the Depository shall instruct the
Trustee. If definitive Notes are so delivered, the Company may make such
changes to the form of this Note as are necessary or appropriate to allow for
the issuance of such definitive Notes.
This Note is not subject to any sinking fund.
This Note may be subject to repayment at the option of the Holder
prior to its Stated Maturity on the Holder's Optional Repayment Date(s), if
any, indicated on the face hereof. If no Holder's Optional Repayment Dates are
set forth on the face hereof, this Note may not be so repaid at the option of
the Holder hereof prior to the Stated Maturity. On any Holder's Optional
Repayment Date, this Note shall be repayable in whole or in part in an amount
equal to $1,000 or integral multiples thereof (provided that any remaining
principal amount shall be an authorized denomination) at the option of the
Holder hereof at a repayment price equal to 100% of the principal amount to be
repaid, together with interest thereon payable to the date of repayment. For
this Note to be repaid in whole or in part at the option of the Holder hereof,
this Note must be received, with the form entitled "Option to Elect Repayment"
below duly completed, by the Trustee at its office at 55 Water Street, Room
234, Corporate Trust Securities Window, New York, New York 10041 or such
address which the Company shall from time to time notify the Holders of the
Medium-Term Notes (the "Corporate Trust Office"), not more than 60 nor less
than 30 days prior to a Holder's Optional Repayment Date. This Note must be
received by the Trustee by 5:00 P.M., New York City time, on the last day for
giving such notice. Exercise of such repayment option by the Holder hereof
shall be irrevocable. In the event of payment of this Note in part only, a new
Note for the unpaid portion hereof shall be issued in the name of the Holder
hereof upon the surrender hereof.
This Note may be redeemed at the option of the Company prior to its
Stated Maturity on any date on and after the Initial Redemption Date, if any,
specified on the face hereof (the "Redemption Date"). If no Initial Redemption
Date is set forth on the face hereof, this Note may not be redeemed at the
option of the Company prior to the Stated Maturity. On and after the Initial
Redemption Date, if any, this Note may be redeemed at any time in whole or
from time to time in part in increments of $1,000 or integral multiples
thereof (provided that any remaining principal amount shall be an authorized
denomination) at the option of the Company at the applicable Redemption Price
(as defined below) together with interest thereon payable to the Redemption
Date, on notice given not more than 60 nor less than 30 days prior to the
Redemption Date. In the event of redemption of this Note in part only, a new
Note for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the surrender hereof.
If this Note is redeemable at the option of the Company prior to its
Stated Maturity, the "Redemption Price" shall initially be the Initial
Redemption Percentage, specified on the face hereof, of the principal amount
of this Note to be redeemed and shall decline at each anniversary of the
Initial Redemption Date by the Annual Redemption Percentage Reduction, if any,
specified on the face hereof, of the principal amount to be redeemed until the
Redemption Price is 100% of such principal amount.
The interest rate borne by this Note shall be determined as follows:
1. If this Note is designated as a Regular Floating Rate
Note above, then, except as described below, this Note shall bear
interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases shown above (1) plus or minus the
applicable Spread, if any, and/or (2) multiplied by the applicable
Spread Multiplier, if any, specified and applied in the manner
described above. Commencing on the first Interest Reset Date, the
rate at which interest on this Note is payable will be reset as of
each Interest Reset Date specified above; provided, however, that the
interest rate in effect for the period from the Original Issue Date
to the first Interest Reset Date will be the Initial Interest Rate.
2. If this Note is designated as a Floating Rate/Fixed Rate
Note above, then, except as described below, this Note shall bear
interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases shown above (1) plus or minus the
applicable Spread, if any, and/or (2) multiplied by the applicable
Spread Multiplier, if any, specified and applied in the manner
described above. Commencing on the first Interest Reset Date, the
rate at which interest on this Note is payable will be reset as of
each Interest Reset Date specified above; provided, however, that (i)
the interest rate in effect for the period from the date of issue to
the first Interest Reset Date will be the Initial Interest Rate, and
(ii) the interest rate in effect commencing on, and including, the
date on which interest begins to accrue on a fixed rate basis to
Maturity will be the Fixed Interest Rate, if the rate is specified
above, or if no Fixed Interest Rate is specified, the interest rate
in effect on the Floating Rate/Fixed Rate Note on the day immediately
preceding the date on which interest begins to accrue on a fixed rate
basis.
3. If this Note is designated as an Inverse Floating Rate
Note above, then, except as described below, this Note will bear
interest equal to the Fixed Interest Rate indicated above minus the
rate determined by reference to the applicable Interest Rate Basis or
Bases shown above (1) plus or minus the applicable Spread, if any,
and/or (2) multiplied by the applicable Spread Multiplier, if any,
specified and applied in the manner described above; provided,
however, that unless otherwise specified on the face hereof, the
interest rate hereon will not be less than zero percent. Commencing
on the first Interest Reset Date, the rate at which interest on this
Note is payable shall be reset as of each Interest Reset Date
specified above; provided, however, that the interest rate in effect
for the period from the Original Issue Date to the Initial Interest
Reset Date shall be the Initial Interest Rate.
4. Notwithstanding the foregoing, if this Note is designated
above as having an Addendum attached or as having Other Provisions
apply, the Note shall bear interest in accordance with the terms
described in such Addendum or specified under Other Provisions.
Except as provided above, the interest rate in effect on each day
shall be (a) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as defined below)
immediately preceding such Interest Reset Date or (b) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the immediately preceding Interest
Reset Date. Each Interest Rate Basis shall be the rate determined in
accordance with the applicable provision below. If any Interest Reset Date
(which term includes the term first Interest Reset Date unless the context
otherwise requires) would otherwise be a day that is not a Business Day, that
Interest Reset Date shall be postponed to the next succeeding day that is a
Business Day, except that if an Interest Rate Basis specified on the face
hereof is LIBOR and the next Business Day falls in the next succeeding
calendar month, that Interest Reset Date shall be the immediately preceding
Business Day. In addition, if an Interest Rate Basis specified on the face
hereof is the Treasury Rate and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then that Interest Reset Date shall
be postponed to the next succeeding Business Day.
Unless otherwise specified above, interest payable on this Note on
any Interest Payment Date shall be the amount of interest accrued from and
including the immediately preceding Interest Payment Date in respect of which
interest has been paid (or from and including the Original Issue Date
specified above, if no interest has been paid), to but excluding the related
Interest Payment Date; provided, however, that the interest payments on
Maturity will include interest accrued to but excluding such Maturity. Unless
otherwise specified above, accrued interest hereon shall be an amount
calculated by multiplying the face amount hereof by an accrued interest
factor. The accrued interest factor shall be computed by adding the interest
factor calculated for each day from the date of issue or from the last date to
which interest shall have been paid or duly provided for, to the date for
which accrued interest is being calculated. Unless otherwise specified above,
the interest factor for each such day shall be computed by dividing the
interest rate applicable to such day by 360, if the Day Count Convention
specified above is "Actual/360" for the period specified thereunder or by the
actual number of days in the year if the Day Count Convention specified above
is "Actual/Actual" for the period specified thereunder. In the case of notes
for which the Interest Rate Basis is the CD Rate, the Commercial Paper Rate,
the Eleventh District Cost of Funds Rate, the Federal Funds Rate, LIBOR or the
Prime Rate, the interest factor for each day will be computed by dividing the
interest rate applicable to each day by 360. In the case of notes for which
the Interest Rate Basis is the CMT Rate or the Treasury Rate, the interest
factor for each day will be computed by dividing the interest rate applicable
to each day by the actual number of days in the year. The interest factor for
notes for which the interest rate is calculated with reference to two or more
Interest Rate Bases will be calculated in each period in the same manner as if
only one of the applicable Interest Rate Bases applied.
Unless otherwise specified above, the "Interest Determination Date"
with respect to the CD Rate, the CMT Rate and the Commercial Paper Rate shall
be the second Business Day preceding each Interest Reset Date; the "Interest
Determination Date" with respect to the Federal Funds Rate and the Prime Rate
shall be the Business Day immediately preceding each Interest Reset Date; the
"Interest Determination Date" with respect to LIBOR shall be the second London
Business Day (as defined below) preceding each Interest Reset Date; the
"Interest Determination Date" with respect to the Eleventh District Cost of
Funds Rate shall be the last working day of the month immediately preceding
each Interest Reset Date on which the Federal Home Loan Bank of San Francisco
(the "FHLB of San Francisco") publishes the Index (as defined below); and the
"Interest Determination Date" with respect to the Treasury Rate shall be the
day in the week in which the related Interest Reset Date falls on which day
Treasury bills (as defined below) are normally auctioned. Treasury bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that the auction may be held on the preceding Friday; provided,
however, that if an auction is held on the Friday of the week preceding the
related Interest Reset Date, the related Interest Determination Date shall be
such preceding Friday; and provided, further, that if an auction shall fall on
any Interest Reset Date, then the related Interest Reset Date shall instead be
the first Business Day following such auction. If the interest rate of this
Note is determined with reference to two or more Interest Rate Bases, the
Interest Determination Date pertaining to this Note will be the latest
Business Day which is at least two Business Days prior to such Interest Reset
Date on which each Interest Rate Basis shall be determinable. Each Interest
Rate Basis shall be determined and compared on such date, and the applicable
interest rate shall take effect on the related Interest Reset Date.
Unless otherwise specified above, the "Calculation Date", if
applicable, pertaining to any Interest Determination Date will be the earlier
of (i) the tenth calendar day after such Interest Determination Date or, if
such day is not a Business Day, the next succeeding Business Day, or (ii) the
Business Day preceding the applicable Interest Payment Date or date of
Maturity, as the case may be. All calculations on this Note shall be made by
the calculation agent specified above or such successor thereto as is duly
appointed by the Company.
All percentages resulting from any calculation on this Note will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards. For example, 9.876545%
or .09876545 would be rounded to 9.87655% or .0987655. All dollar amounts used
in or resulting from such calculation will be rounded to the nearest cent with
one-half cent being rounded upward.
As used herein, "Business Day" means any day, other than a Saturday
or Sunday, that is neither a legal holiday nor a day on which commercial banks
are authorized or required by law, regulation or executive order to close in
The City of New York; provided, however, that, with respect to non-United
State dollar denominated Notes, such day is also not a day on which commercial
banks are authorized or required by law, regulation or executive order to
close in the Principal Financial Center (as hereinafter defined) of the
country issuing the Specified Currency or, if the Specified Currency is EURO,
the day is also a day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET) System is open; provided, further, that,
with respect to Notes as to which LIBOR is an applicable Interest Rate Basis,
such day is also a London Business Day (as hereinafter defined).
As used herein, "London Business Day" means a day on which commercial
banks are open for business, including dealings in the Index Currency in
London.
<PAGE>
Determination of CD Rate. If an Interest Rate Basis for this Note is
the CD Rate, as indicated above, the CD Rate shall be determined on the
applicable Interest Determination Date (a "CD Rate Interest Determination
Date"), as:
(1) the rate on the applicable Interest Determination Date for
negotiable United States dollar certificates of deposit having
the Index Maturity specified above published in H.15(519) under
the heading "CDs (secondary market)", or
(2) if the rate referred to in clause (1) above is not so published
by 3:00 P.M., New York City time, on the related calculation
date, the rate on the applicable Interest Determination Date
for negotiable United States dollar certificates of deposit of
the Index Maturity specified above as published in H.15 Daily
Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption
"CDs (secondary market)", or
(3) if the rate referred to in clause (2) is not so published by
3:00 P.M., New York City time, on the related calculation date,
the rate on the applicable Interest Determination Date
calculated by the calculation agent as the arithmetic mean of
the secondary market offered rates as of 10:00 A.M., New York
City time, on the applicable Interest Determination Date, of
three leading non-bank dealers in negotiable United States
dollar certificates of deposit in The City of New York selected
by the calculation agent for negotiable United States dollar
certificates of deposit of major United States money center
banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified above in an
amount that is representative for a single transaction in that
market at that time, or
(4) if the dealers selected by the calculation agent are not
quoting as mentioned in clause (3) above, the CD rate in effect
on the applicable Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as
H.15(519), or any successor publication, published by the Board of Governors
of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available
through the world-wide-web site of the Board of Governors of the Federal
Reserve System at http://www.bog.frb.fed.us/releases/h15/update, or any
successor site or publication.
Determination of CMT Rate. If an Interest Rate Basis for this Note is
the CMT Rate, as indicated above, the CMT Rate shall be determined as of the
applicable Interest Determination Date (a "CMT Rate Interest Determination
Date") as:
(1) the rate displayed on the Designated CMT Telerate Page under
the caption "...Treasury Constant Maturities... Federal Reserve
Board Release H.15... Mondays Approximately 3:45 P.M.", under
the column for the Designated CMT Maturity Index for:
(a) if the Designated CMT Telerate Page is 7051, the rate
on the applicable Interest Determination Date, and
(b) if the Designated CMT Telerate Page is 7052, the
weekly or the monthly average, as specified above,
for the week or the month, as applicable, ended
immediately preceding the week or the month, as
applicable, in which the related Interest
Determination Date falls, or
(2) if the rate referred to in clause (1) is no longer displayed on
the relevant page or is not so displayed by 3:00 P.M., New York
City time, on the related calculation date, the treasury
constant maturity rate for the Designated CMT Maturity Index
published in H.15(519), or
(3) if the rate referred to in clause (2) is no longer published or
is not published by 3:00 P.M., New York City time, on the
related calculation date, the treasury constant maturity rate
for the Designated CMT Maturity Index, or other United States
Treasury rate for the Designated CMT Maturity Index, for the
applicable Interest Determination Date with respect to the
applicable Interest Reset Date as may then be published by
either the Board of Governors of the Federal Reserve System or
the United States Department of the Treasury that the
calculation agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and
published in H.15(519), or
(4) if the rate referred to in clause (4) applicable information is
not so published by 3:00 P.M., New York City time, on the
applicable calculation date, the rate on the applicable
Interest Determination Date calculated by the calculation agent
as a yield to maturity, based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M.,
New York City time, on the applicable Interest Determination
Date reported, according to their written records, by three
leading primary United States government securities dealers in
The City of New York, which may include the agent or its
affiliates (each, a "Reference Dealer"), selected by the
calculation agent after eliminating the highest quotation, or,
in the event of equality, one of the highest, and the lowest
quotation or, in the event of equality, one of the lowest, for
the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an
original maturity of approximately the Designated CMT Maturity
Index and a remaining term to maturity of not less than such
Designated CMT Maturity Index minus one year, or
(5) if the calculation agent is unable to obtain three applicable
Treasury Note quotations as referred to in clause (4), the rate
on the applicable Interest Determination Date calculated by the
calculation agent as a yield to maturity based on the
arithmetic mean of the secondary market offered rates as of
approximately 3:30 P.M., New York City time, on the applicable
Interest Determination Date of three Reference Dealers in The
City of New York selected by the calculation agent from five
Reference Dealers selected by the calculation agent after
eliminating the highest quotation or, in the event of equality,
one of the highest and the lowest quotation or, in the event of
equality, one of the lowest, for Treasury Notes with an
original maturity of the number of years that is the next
highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index
and in an amount of at least $100 million, or
(6) if three or four and not five of Reference Dealers are quoting
as referred to in clause (5) above, the rate will be calculated
by the calculation agent as the arithmetic mean of the offered
rates obtained and neither the highest nor the lowest of quotes
will be eliminated, or
(7) if fewer than three Reference Dealers selected by the
calculation agent are quoting as mentioned in clause (6), the
rate in effect on the applicable Interest Determination Date.
If two Treasury Notes with an original maturity as described
in clause (6) have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the calculation agent will obtain from
five Reference Dealers quotations for the Treasury Notes with the
shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate,
Inc. or any successor service on the page specified above or any other page as
may replace the specified page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519), or, if no page is
specified above, page 7052.
"Designated CMT Maturity Index" means the original period to maturity
of the U.S. Treasury securities, either 1, 2, 3, 5, 7, 10, 20 or 30 years,
specified above with respect to which the CMT Rate will be calculated or, if
no maturity is specified above, 2 years.
Determination of Commercial Paper Rate. If an Interest Rate Basis for
this Note is the Commercial Paper Rate, as indicated above, the Commercial
Paper Rate shall be determined on the applicable Interest Determination Date
(a "Commercial Paper Rate Interest Determination Date"), as:
(1) the Money Market Yield on the applicable Interest Determination
Date of the rate for commercial paper having the Index Maturity
specified above published in H.15(519) under the caption
"Commercial Paper-Nonfinancial", or
(2) if the rate described in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the
rate on the applicable Interest Determination Date for
commercial paper having the Index Maturity specified above
published in H.15 Daily Update, or other recognized electronic
source used for the purpose of displaying the applicable rate,
under the caption "Commercial Paper-Nonfinancial", or
(3) if the rate is referred to in clause (2) is not so published by
3:00 P.M., New York City time, on the related calculation date,
the rate on the applicable Interest Determination Date
calculated by the calculation agent as the Money Market Yield
of the arithmetic mean of the offered rates at approximately
11:00 A.M., New York City time, on the applicable Interest
Determination Date of three leading dealers of United States
dollar commercial paper in The City of New York, which may
include the agent and its affiliates, selected by the
calculation agent for commercial paper having the Index
Maturity specified above placed for industrial issuers whose
bond rating is "Aa", or the equivalent, from a nationally
recognized statistical rating organization, or
(4) if the dealers selected by the calculation agent are not
quoting as mentioned in clause (3), the rate in effect on
the applicable Interest Determination Date.
"Money Market Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
Money Market Yield = D x 360 x 100
----------------------
360 - ( D x M )
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Eleventh District Cost of Funds Rate. If an Interest Rate Basis for
this Note is the Eleventh District Cost of Funds Rate, as indicated above, the
Eleventh District Cost of Funds Rate shall be determined on the applicable
Interest Determination Date (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), and shall be:
(1) the rate equal to the monthly weighted average cost of funds
for the calendar month immediately preceding the month in which
the applicable Interest Determination Date falls as set forth
under the caption "11th District" on the display on Bridge
Telerate, Inc. or any successor service on page 7058 or any
other page as may replace the specified page on that service
("Telerate Page 7058") as of 11:00 A.M., San Francisco time, on
the applicable Interest Determination Date, or
(2) if the rate referred to in clause (1) does not appear on
Telerate Page 7058 on the related Interest Determination Date,
the monthly weighted average cost of funds paid by member
institutions of the Eleventh Federal Home Loan Bank District
that was most recently announced (the "Index") by the Federal
Home Loan Bank of San Francisco as the cost of funds for the
calendar month immediately preceding the applicable Interest
Determination Date, or
(3) if the Federal Home Loan Bank of San Francisco fails to
announce the Index on or before the applicable Interest
Determination Date for the calendar month immediately preceding
the applicable Interest Determination Date, the rate in effect
on the applicable Interest Determination Date.
Determination of Federal Funds Rate. If an Interest Rate Basis for
this Note is the Federal Funds Rate, as indicated above, the Federal Funds
Rate shall be determined on the applicable Interest Determination Date (a
"Federal Funds Rate Interest Determination Date"), and shall be:
(1) the rate on the applicable Interest Determination Date for
United States dollar federal funds as published in H.15(519)
under the heading "Federal Funds (Effective)", as displayed on
Bridge Telerate, Inc. or any successor service on page 120 or
any other page as may replace the applicable page on that
service ("Telerate Page 120"), or
(2) if the rate referred to in clause (1) does not appear on
Telerate Page 120 or is not so published by 3:00 P.M., New York
City time, on the related calculation date, the rate on the
applicable Interest Determination Date for United States dollar
federal funds published in H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying
the applicable rate, under the caption "Federal Funds/Effective
Rate", or
(3) if the rate referred to in clause (2) is not so published by
3:00 P.M., New York City time, on the related calculation date,
the rate on the applicable Interest Determination Date
calculated by the calculation agent as the arithmetic mean of
the rates for the last transaction in overnight United States
dollar federal funds arranged by three leading brokers of
United States dollar federal funds transactions in The City of
New York, which may include the agent or its affiliates,
selected by the calculation agent before 9:00 A.M., New York
City time, on the applicable Interest Determination Date, or
(4) if the brokers selected by the calculation agent are not
quoting as mentioned in clause (3), the rate in effect on the
applicable Interest Determination Date.
Determination of LIBOR. "LIBOR" means the rate determined by the
Calculation Agent in accordance with the following provisions:
(1) if "LIBOR Telerate" is specified above or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified above as the method
for calculating LIBOR, LIBOR will be the rate for deposits in
the LIBOR Currency, as defined below, having the Index Maturity
specified above, commencing on the second London Business Day
immediately following that Interest Determination Date that
appears on the Designated LIBOR Page as of 11:00 A.M., London
time, on the applicable Interest Determination Date, or
(2) if "LIBOR Reuters" is specified above, LIBOR will be the
arithmetic mean of the offered rates for deposits in the LIBOR
Currency having the Index Maturity specified above, commencing
on the second London Business Day immediately following that
Interest Determination Date, that appear, on the Designated
LIBOR Page specified above as of 11:00 A.M., London time, on
the applicable Interest Determination Date. If the Designated
LIBOR Page by its terms provides only for a single rate, then
the single rate will be used, or
(3) with respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the
case may be, on the designated LIBOR Page as specified in
clauses (1) and (2), the rate calculated by the calculation
agent as the arithmetic mean of at least two quotations
obtained by the calculation agent after requesting the
principal London offices of each of four major reference banks,
which may include affiliates of the agent, in the London
interbank market to provide the calculation agent with its
offered quotation for deposits in the LIBOR Currency for the
period of the Index Maturity specified above, commencing on the
second London Business Day immediately following the applicable
Interest Determination Date, to prime banks in the London
interbank market at approximately 11:00 A.M., London time, on
the applicable Interest Determination Date and in a principal
amount that is representative for a single transaction in the
applicable LIBOR Currency in that market at that time, or
(4) if fewer than two quotations referred to in clause (2) are so
provided, the rate on the applicable Interest Determination
Date calculated by the calculation agent as the arithmetic mean
of the rates quoted at approximately 11:00 A.M., in the
applicable Principal Financial Center(s), on the applicable
Interest Determination Date by three major banks, which may
include affiliates of the agent, in the applicable Principal
Financial Center selected by the calculation agent for loans in
the LIBOR Currency to leading European banks, having the Index
Maturity specified designated above and in a principal amount
that is representative for a single transaction in the
applicable LIBOR Currency in that market at that time, or
(5) if the banks so selected by the calculation agent are not
quoting as mentioned in clause (4), the rate in effect on the
applicable Interest Determination Date.
"LIBOR Currency" means the currency specified above as to
which LIBOR will be calculated or, if no currency is specified
above, United States dollars.
"Designated LIBOR Page" means either:
o if "LIBOR Telerate" is designated above or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified above as the method for calculating LIBOR,
the display on Bridge Telerate, Inc. or any successor service on the page
specified in such pricing supplement or any page as may replace the
specified page on that service for the purpose of displaying the London
interbank rates of major banks for the applicable LIBOR Currency, or
o if "LIBOR Reuters" is specified above, the display on the Reuter Monitor
Money Rates Service or any successor service on the page specified above
or any other page as may replace the specified page on that service for
the purpose of displaying the London interbank rates of major banks for
the applicable LIBOR Currency.
Determination of Prime Rate. "Prime Rate" means, with respect to any
Interest Determination Date relating to a Prime Rate Note or any Floating Rate
Note for which the interest rate is determined with reference to the Prime
Rate (a "Prime Rate Interest Determination Date"), the"Prime Rate" means:
(1) the rate on the applicable Interest Determination Date as
published in H.15(519) under the heading "Bank Prime Loan", or
(2) if the rate referred to in clause (1) is not so published by
3:00 P.M., New York City time, on the related calculation date,
the rate on the applicable Interest Determination Date
published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying the
applicable rate under the caption "Bank Prime Loan", or
(3) if the rate referred to in clause (2) is not so published by
3:00 P.M., New York City time, on the related calculation date,
the rate calculated by the calculation agent as the arithmetic
mean of the rates of interest publicly announced by at least
four banks that appear on the Reuters Screen US PRIME 1 Page as
the particular bank's prime rate or base lending rate as of
11:00 A.M., New York City time, on the applicable Interest
Determination Date, or
(4) if fewer than four rates described in clause (2) by 3:00 P.M.,
New York City time, on the related calculation date, the rate
on the applicable Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the prime rates or
base lending rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of
business on the applicable Interest Determination Date by three
major banks, which may include affiliates of the agent, in The
City of New York selected by the calculation agent, or
(5) if the banks selected by the calculation agent are not quoting
as mentioned in clause (4), the rate in effect on the
applicable Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter
Monitor Money Rates Service or any successor service on the "US PRIME 1" Page
or other page as may replace the US PRIME 1 Page on such service for the
purpose of displaying prime rates or base lending rates of major United States
banks.
Determination of Treasury Rate. If an Interest Rate Basis for this Note is the
Treasury Rate, as specified above, the Treasury Rate shall be determined on
the applicable Interest Determination Date (a "Treasury Rate Interest
Determination Date") "Treasury Rate" means:
(1) the rate from the auction held on the applicable Interest
Determination Date (the "Auction") of direct obligations of the
United States ("Treasury Bills") having the Index Maturity
specified above under the caption "INVESTMENT RATE" on the
display on Bridge Telerate, Inc. or any successor service on
page 56 or any other page as may replace page 56 on that
service ("Telerate Page 56") or page 57 or any other page as
may replace page 57 on that service ("Telerate Page 57"), or
(2) if the rate described in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the
Bond Equivalent Yield of the rate for the applicable Treasury
Bills as published in H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying the
applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High", or
(3) if the rate described in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the
Bond Equivalent Yield of the auction rate of the applicable
Treasury Bills announced by the United States Department of the
Treasury, or
(4) in the event that the rate referred to in clause (3) is not
announced by the United States Department of the Treasury, or
if the Auction is not held, the Bond Equivalent Yield of the
rate on the applicable Interest Determination Date of Treasury
Bills having the Index Maturity specified above published in
H.15(519) under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market", or
(5) if the rate referred to in clause (4) is not so published by
3:00 P.M., New York City time, on the related calculation date,
the rate on the applicable Interest Determination Date of the
applicable Treasury Bills as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market", or
(6) if the rate referred to in clause (5) is not so published by
3:00 P.M., New York City time, on the related Calculation Date,
the rate on the applicable Interest Determination Date
calculated by the calculation agent as the Bond Equivalent
Yield of the arithmetic mean of the secondary market bid rates,
as of approximately 3:30 P.M., New York City time, on the
applicable Interest Determination Date, of three primary United
States government securities dealers, which may include the
agent or its affiliates, selected by the calculation agent, for
the issue of Treasury Bills with a remaining maturity closest
to the Index Maturity specified above, or
(7) if the dealers selected by the calculation agent are not
quoting as mentioned in clause (6), the rate in effect on the
applicable Interest Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with
the following formula and expressed as a percentage:
D x N
Bond Equivalent Yield = --------------------------------------- x 100
360 - ( D x M )
where "D" refers to the applicable per annum rate for Treasury Bills quoted on
a bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest
is being calculated.
Any provisions contained herein with respect to the determination of
one or more Interest Rate Bases, the specification of one or more Interest
Rate Bases, calculation of the Interest Rate applicable to this Note, its
payment dates the stated maturity date, any redemption or repayment
provisions, or any other matter relating hereto may be modified by the terms
as specified above under "Other Provisions" or in an Addendum relating hereto
if so specified above.
Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified above. The Calculation Agent shall calculate
the interest rate hereon in accordance with the foregoing on or before each
Calculation Date. The Company hereby covenants for the benefit of the Holder
hereof, to the extent permitted by applicable law, not to claim voluntarily
the benefits of any laws concerning usurious rates of interest against such
Holder.
Unless otherwise above, Merrill Lynch, Pierce, Fenner & Smith
Incorporated will be the "Calculation Agent". At the request of the Holder
hereof, the Calculation Agent shall provide to the Holder hereof the interest
rate hereon then in effect and, if determined, the interest rate which shall
become effective as of the next Interest Reset Date with respect to this Note.
If an Event of Default (as defined in the Indenture) with respect to
the Notes shall occur and be continuing, the principal of all the Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Securities of each series to
be affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of 66 2/3% in aggregate principal amount of
the Securities at any time Outstanding, as defined in the Indenture, of each
series affected thereby. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all the Securities of each series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of
such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the time, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations set
forth therein and on the face hereof, the transfer of this Note may be
registered on the Security Register of the Company, upon surrender of this
Note for registration of transfer at the office or agency of the Company in
the Borough of Manhattan, The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed by, the Holder hereof or by his attorney duly authorized
in writing, and thereupon one or more new Notes of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, manually or in facsimile, and an imprint or facsimile of its
corporate seal to be imprinted hereon.
Dated: ____________
MERRILL LYNCH & CO., INC.
By:___________________________________
E. Stanley O'Neal
Executive Vice President and
Chief Financial Officer
[FACSIMILE OF SEAL]
Attest:
By: __________________________________
Andrea L. Dulberg
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the
series designated therein referred to
in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By: ________________________________
Authorized Officer
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) and instruct(s) the
Company to repay this Note (or portion hereof specified below) pursuant to its
terms at a price equal to the principal amount hereof together with interest
to the repayment date, to the undersigned, at_________________________________
______________________________________________________________________________
(Please print or typewrite name and address of the undersigned)
For this Note to be repaid, the Trustee must receive at its Corporate
Trust Office, or at such other place or places of which the Company shall from
time to time notify the Holder of this Note, not more than 60 nor less than 30
days prior to an Optional Repayment Date, if any, shown on the face of this
Note, this Note with this "Option to Elect Repayment" form duly completed.
This Note must be received by the Trustee by 5:00 P.M., New York City time, on
the last day for giving such notice.
If less than the entire principal amount of this Note is to be
repaid, specify the portion hereof (which shall be in an amount equal to
$1,000 or an integral multiple thereof, provided that any remaining principal
amount shall be an authorized denomination) which the Holder elects to have
repaid and specify the denomination or denominations (which shall be in an
amount equal to an authorized denomination) of the Notes to be issued to the
Holder for the portion of this Note not being repaid (in the absence of any
such specification, one such Note will be issued for the portion not being
repaid).
$ ____________________ _____________________________________________
NOTICE: The signature on this Option to Elect
Date Repayment must correspond with the name as
written upon the face of this Note in every
particular, without alteration or enlargement
or any change whatever.
<PAGE>
ASSIGNMENT/TRANSFER FORM
FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto (insert Taxpayer Identification No.)___________
______________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
______________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_______________________________________ attorney to transfer said Note on the
books of the Company with full power of substitution in the premises.
Date:________________ _____________________________________
NOTICE: The signature of the
registered Holder to this assignment
must correspond with the name as
written upon the face of the within
instrument in every particular,
without alteration or enlargement or
any change whatsoever.
<PAGE>
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-68747 of Merrill Lynch & Co., Inc. and
subsidiaries ("Merrill Lynch") on Form S-3 of our reports dated February 22,
1999 (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), appearing or incorporated by reference in the Annual Report on Form
10-K of Merrill Lynch for the year ended December 25, 1998, and to the
reference to us under the heading "Experts" in the Prospectuses, which are a
part of this Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
March 26, 1999
