RULE NO. 424(b)(5)
REGISTRATION NO. 333-68747
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.
THE MITTS SECURITIES:
o 100% principal protection at maturity.
o No payments before the maturity date.
o Senior unsecured debt securities of ML & Co.
o Linked to the value of the Nikkei 225 Index
that measures the composite price performance
of selected Japanese stocks.
o The MITTS Securities are listed on the American
Stock Exchange under the symbol "MLN".
PAYMENT AT MATURITY:
o On the maturity date, for each unit of MITTS Securities you own, we
will pay you an amount equal to the sum of the principal amount of
each unit and an additional amount based on any percentage increase
in the value of the index as described in this prospectus.
o You will receive no less than the principal amount of the MITTS
Securities.
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 June 24, 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
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 NIKKEI 225 INDEX.......................................................15
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
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before investing in the
MITTS Securities. In addition, you should reach an investment decision with
regard to the MITTS Securities only after consulting with your legal and tax
advisers and considering the suitability of the MITTS Securities in the light
of your particular circumstances.
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.
MANY FACTORS AFFECT THE TRADING VALUE OF THE MITTS SECURITIES; THESE FACTORS
INTERRELATE IN COMPLEX WAYS AND THE EFFECT OF ANY ONE FACTOR MAY OFFSET OR
MAGNIFY THE EFFECT OF ANOTHER FACTOR
The trading value of the MITTS Securities will be affected by factors
that interrelate in complex ways. It is important for you to understand that
the effect of one factor may offset the increase in the trading value of the
MITTS Securities caused by another factor and that the effect of one factor may
magnify the decrease in the trading value of the MITTS Securities caused by
another factor. For example, an increase in U.S. interest rates may offset some
or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the value of the index.
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.
THE VALUE OF THE INDEX IS EXPECTED TO AFFECT THE TRADING VALUE OF THE
MITTS SECURITIES. 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.
CHANGES IN THE LEVELS OF INTEREST RATES ARE EXPECTED TO AFFECT THE
TRADING VALUE OF THE MITTS Securities. Because we will pay, at a minimum, the
principal amount per unit of the MITTS Securities at maturity, we expect that
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.
CHANGES IN THE VOLATILITY OF THE JAPANESE YEN/U.S. DOLLAR EXCHANGE
RATE ARE EXPECTED TO AFFECT THE TRADING VALUE OF THE MITTS SECURITIES. 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.
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.
CHANGES IN THE VOLATILITY OF THE INDEX ARE EXPECTED TO AFFECT THE
TRADING VALUE OF THE MITTS SECURITIES. 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.
AS THE TIME REMAINING TO MATURITY OF THE MITTS SECURITIES DECREASES,
THE "TIME PREMIUM" ASSOCIATED WITH THE MITTS SECURITIES WILL DECREASE. 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.
CHANGES IN DIVIDEND YIELDS OF THE STOCKS INCLUDED IN THE INDEX ARE
EXPECTED TO AFFECT THE TRADING VALUE OF THE MITTS SECURITIES. 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.
CHANGES IN OUR CREDIT RATINGS MAY AFFECT THE TRADING VALUE OF THE
MITTS SECURITIES. Our credit ratings are an assessment of our ability to pay
our obligations. Consequently, real or anticipated changes in our credit
ratings may affect the trading value of the MITTS Securities. However, because
your return on your MITTS Securities is dependent upon factors in addition to
our ability to pay our obligations under the MITTS Securities, such as the
percentage increase in the value of the index at maturity, an improvement in
our credit ratings will not reduce investment risks related to the MITTS
Securities.
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.
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>
FOR THE THREE
YEAR ENDED LAST FRIDAY IN DECEMBER MONTHS ENDED
1994 1995 1996 1997 1998 MARCH 26, 1999
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a).... 1.2 1.2 1.2 1.2 1.1 1.3
</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 of subsidiaries. "Fixed charges" consist of interest
costs, the interest factor in rentals, amortization of debt issuance costs,
preferred security dividend requirements of subsidiaries, and capitalized
interest.
DESCRIPTION OF THE MITTS SECURITIES
On 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:
<TABLE>
<CAPTION>
<S> <C>
Principal amount of each MITTS 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 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.
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 TOTAL RATE OF PRETAX ANNUALIZED
VALUE PAYABLE AT RETURN ON THE RATE OF PRETAX ANNUALIZED
PERCENTAGE MATURITY MITTS SECURITIES RETURN ON THE RATE OF RETURN OF
HYPOTHETICAL CHANGE OVER THE PER UNIT OF MITTS SECURITIES(1) STOCKS UNDERLYING
ENDING VALUE STARTING VALUE MITTS SECURITIES THE INDEX(1)(2)
- ----------------------- -------------------------------------------------------------------------------------------------
<S> <C> <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 10.743 as of
June 16, 1999, 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;
o quarterly report on Form 10-Q for the period ended March 26, 1999; and
o current reports on Form 8-K dated December 28, 1998, January 19,
1999, February 17, 1999, February 18, 1999, February 22, 1999,
February 23, 1999, March 26, 1999, April 13, 1999, April 19, 1999,
May 26, 1999, May 28, 1999 and June 1, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this offering
is completed:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the MITTS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the MITTS Securities.
MLPF&S may act as principal or agent in these market-making
transactions.
The MITTS Securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the MITTS Securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the Annual
Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in the Quarterly Reports on Form 10-Q which are incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their reports included in such Quarterly Reports on Form
10-Q and incorporated by reference herein, they did not audit and they do not
express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP is not subject to the liability provisions of Section 11 of the Securities
Act for any such report on unaudited interim financial information because any
such report is not a "report" or a "part" of the Registration Statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Securities Act.
