<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 333-59997
PROSPECTUS SUPPLEMENT
(To prospectus dated July 30, 1998)
[LOGO] MERRILL LYNCH
PROTECTED GROWTH(SM) INVESTING
Pursuit of Growth, Protection of Principal
7,200,000 Units
Merrill Lynch & Co., Inc.
Consumer Staples Select Sector SPDR(R) Fund
Market Index Target-Term Securities(R) due April 19, 2006
"MITTS(R) Securities"
$10 principal amount per unit
--------------
The MITTS Securities: Payment at Maturity:
. 100% principal protection at . On the maturity date, for each unit
maturity. of the MITTS Securities you own, we
will pay you an amount equal to the
. No payments before the maturity date. sum of the principal amount of each
unit and an additional amount based
. Senior unsecured debt securities of on the increase, if any, in the net
Merrill Lynch & Co., Inc. asset value per share of the
Consumer Staples Select Sector SPDR
. Linked to the net asset value per Fund, as adjusted by an adjustment
share of the Consumer Staples Select factor as described in this
Sector SPDR Fund, a registered index prospectus supplement.
fund.
. At maturity, we will pay you all
. The MITTS Securities have been amounts due under the MITTS
approved for listing on the American Securities by delivering to you
Stock Exchange under the trading shares of the Consumer Staples
symbol "CSM". Select Sector SPDR Fund or paying
you cash with an equal value.
. Closing: April 19, 1999
Investing in the MITTS Securities involves risk.
See "Risk Factors" beginning on page S-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.
<TABLE>
<CAPTION>
Per unit Total
-------- -----------
<S> <C> <C>
Public offering price............................... $10.00 $72,000,000
Underwriting discount............................... $.30 $2,160,000
Proceeds, before expenses, to Merrill Lynch & Co.,
Inc. .............................................. $9.70 $69,840,000
</TABLE>
The public offering price and the underwriting discount for any single
transaction to purchase 100,000 units or more will be $9.95 per unit and $.25
per unit, respectively.
--------------
Merrill Lynch & Co.
--------------
The date of this prospectus supplement is April 13, 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
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Page
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<S> <C>
SUMMARY INFORMATION--Q&A.................................................. S-4
What are the MITTS Securities?.......................................... S-4
What will I receive at the stated maturity date of the MITTS
Securities?............................................................ S-4
How is the Net Asset Value determined?.................................. S-6
When will I receive cash instead of shares of the Consumer Staples SPDR
Fund?.................................................................. S-6
Will I be charged any transaction fees or expenses with respect to the
shares of the Consumer Staples SPDR Fund?.............................. S-7
What is the Consumer Staples SPDR Fund?................................. S-7
What about taxes?....................................................... S-8
Will the MITTS Securities be listed on a stock exchange?................ S-8
What is the role of MLPF&S?............................................. S-8
Who is ML&Co.?.......................................................... S-9
Are there any risks associated with my investment?...................... S-9
RISK FACTORS.............................................................. S-10
The MITTS Securities are unlike typical equity or debt securities....... S-10
You may not earn a return on your investment............................ S-10
Your return will not reflect the return of owning shares of the Consumer
Staples SPDR Fund or the securities and other assets comprising the
Consumer Staples SPDR Fund's investment portfolio...................... S-10
Changes in the Net Asset Value per share of the Consumer Staples SPDR
Fund will not exactly mirror changes in the Consumer Staples Select
Sector Index........................................................... S-10
Your yield may be lower than the yield on a standard debt security of
comparable maturity.................................................... S-11
There may be an uncertain trading market for the MITTS Securities....... S-11
There are many factors affecting the trading value of the MITTS
Securities............................................................. S-11
Absence of prior active market for shares of the Consumer Staples SPDR
Fund................................................................... S-12
Concentration in consumer-related securities............................ S-12
No affiliation between ML&Co. and the Consumer Staples SPDR Fund........ S-13
No shareholder's rights................................................. S-13
Amounts payable on the MITTS Securities may be limited by state law..... S-13
Potential conflicts of interests........................................ S-13
Uncertain tax consequences.............................................. S-14
RATIO OF EARNINGS TO FIXED CHARGES OF ML&CO. ............................. S-14
DESCRIPTION OF THE MITTS SECURITIES....................................... S-15
Delivery at Maturity.................................................... S-15
Fractional Shares....................................................... S-16
Hypothetical Returns.................................................... S-17
Adjustments to the Net Asset Value; Market Disruption Events............ S-18
Termination of the Consumer Staples SPDR Fund........................... S-18
Events of Default and Acceleration...................................... S-19
Depositary.............................................................. S-20
Same-Day Settlement and Delivery........................................ S-22
THE CONSUMER STAPLES SPDR FUND............................................ S-22
License Agreement....................................................... S-25
</TABLE>
S-2
<PAGE>
<TABLE>
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Page
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UNITED STATES FEDERAL INCOME TAXATION............................... S-26
General........................................................... S-27
U.S. Holders...................................................... S-27
Non-U.S. Holders.................................................. S-29
Backup Withholding................................................ S-30
New Withholding Regulations....................................... S-30
USE OF PROCEEDS AND HEDGING......................................... S-30
WHERE YOU CAN FIND MORE INFORMATION................................. S-31
ML&Co............................................................. S-31
The Consumer Staples SPDR Fund.................................... S-31
UNDERWRITING........................................................ S-32
VALIDITY OF THE MITTS SECURITIES.................................... S-32
INDEX OF DEFINED TERMS.............................................. S-33
Prospectus
AVAILABLE INFORMATION............................................... 2
INCORPORATION OF CERTAIN DOCUMENT BY REFERENCE...................... 2
MERRILL LYNCH & CO., INC............................................ 3
USE OF PROCEEDS..................................................... 3
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS........................ 4
DESCRIPTION OF DEBT SECURITIES...................................... 4
DESCRIPTION OF DEBT WARRANTS........................................ 9
DESCRIPTION OF CURRENCY WARRANTS.................................... 11
DESCRIPTION OF INDEX WARRANTS....................................... 12
DESCRIPTION OF PREFERRED STOCK...................................... 17
DESCRIPTION OF DEPOSITARY SHARES.................................... 21
DESCRIPTION OF PREFERRED STOCK WARRANTS............................. 25
DESCRIPTION OF COMMON STOCK......................................... 27
DESCRIPTION OF COMMON STOCK WARRANTS................................ 30
PLAN OF DISTRIBUTION................................................ 32
EXPERTS............................................................. 33
</TABLE>
S-3
<PAGE>
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the prospectus and prospectus supplement to help you
understand the Consumer Staples Select Sector SPDR(R) Fund Market Index Target-
Term Securities(R) due April 19, 2006. You should carefully read our prospectus
and this prospectus supplement 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
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 supplement to "ML&Co.", "we", "us" and
"our" are to Merrill Lynch & Co., Inc.
References in this prospectus supplement to "MLPF&S" are to Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
References in this prospectus supplement to the "Consumer Staples SPDR
Fund" are to the Consumer Staples Select Sector SPDR Fund.
We have attached the prospectus for the Consumer Staples SPDR Fund. You
should carefully read the Fund Prospectus to fully understand the operation and
management of the Consumer Staples SPDR Fund, particularly the fees and
expenses associated with shares of the Consumer Staples SPDR Fund which affect
the Net Asset Value per share of the Consumer Staples 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 Consumer Staples SPDR Fund and the index compilation agent
for the Consumer Staples Select Sector Index. However, we are not affiliated
with the Consumer Staples SPDR Fund or the Consumer Staples Select Sector
Index. The Consumer Staples 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 supplement and the
accompanying prospectus of ML&Co. for the convenience of reference only. The
Fund Prospectus does not constitute a part of this prospectus supplement or the
accompanying prospectus of ML&Co., nor is it incorporated by reference in this
prospectus supplement or in the accompanying prospectus of ML&Co.
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 April 19, 2006 and cannot be redeemed at an earlier
date. You will not receive any shares of the Consumer Staples 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, 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
supplement.
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 Consumer Staples SPDR Fund. At maturity,
you will receive a number of shares of the Consumer Staples SPDR Fund equal
S-4
<PAGE>
in value to the sum of the principal amount and the Supplemental Redemption
Amount, if any, and an amount of cash equal to the value of any fractional
shares. We will determine the number of shares to be delivered to you based on
the Ending Value. At our option, instead of delivering to you the shares to
which you would otherwise be entitled, we may pay you cash.
"Principal Amount"
The Principal Amount per unit is $10.
"Supplemental Redemption Amount"
The Supplemental Redemption Amount per unit will equal:
( Adjusted Ending Value - Starting Value )
$10 X ( -------------------------------------- )
( Starting Value )
but will not be less than zero.
"Starting Value" equals 27.4089, the Net Asset Value of one share of the
Consumer Staples SPDR Fund on April 13, 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 to the Net Asset Value used to calculate
the Ending Value on each calculation day during the calculation period.
"Ending Value" means the average of the Net Asset Values per share of the
Consumer Staples 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 Consumer Staples Select Sector Index
or options relating to the shares of the Consumer Staples SPDR Fund, the
Consumer Staples SPDR Fund is unable or otherwise fails to issue a Net Asset
Value for the shares of the Consumer Staples SPDR Fund or the Consumer Staples
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 supplement.
The "Adjustment Factor" equals 1.95% per year and will be applied over
the term of the MITTS Securities to reduce the Net Asset Value per share of the
Consumer Staples SPDR Fund used to calculate the Supplemental Redemption Amount
on each calculation day during the calculation period. As a result of the
cumulative effect of this reduction, the values used to calculate your
Supplemental Redemption Amount at the maturity of the MITTS Securities will be
approximately 12.77% less than the actual Net Asset Values per share of the
Consumer Staples SPDR Fund on each day during the calculation period. For a
detailed discussion of how the Adjustment Factor will affect the Net Asset
Value per share of the Consumer Staples SPDR Fund used to calculate your
Supplemental Redemption Amount, see "Description of the MITTS Securities--
Delivery at Maturity" and "--Hypothetical Returns" in this prospectus
supplement.
For more specific information about the Supplemental Redemption Amount,
please see the section "Description of the MITTS Securities" in this prospectus
supplement.
S-5
<PAGE>
"Examples"
Here are two examples of Supplemental Redemption Amount calculations
assuming an Adjustment Factor of 1.95% per year.
Example 1--Adjusted Ending Value is less than the Starting Value at the
maturity date:
Starting Value: 27.41
Hypothetical Ending Value: 28.78
Hypothetical Adjusted Ending Value: 25.10
<TABLE>
<S> <C>
( 25.10 - 27.41 ) (Supplemental
Supplemental Redemption Amount (per unit) = $10 X ( ------------- ) = $0.00 Redemption
( 27.41 ) Amount cannot
be less than zero)
</TABLE>
Total value of shares delivered at maturity (per unit) = $10 + $0 = $10
Example 2--Adjusted Ending Value is greater than the Starting Value at the
maturity date:
Starting Value: 27.41
Hypothetical Ending Value: 43.85
Hypothetical Adjusted Ending Value: 38.25
( 38.25 - 27.41 )
Supplemental Redemption Amount (per unit) = $10 X ( ------------- ) = $3.96
( 27.41 )
Total value of shares delivered at maturity (per unit) = $10 + $3.96 = $13.96
How is the Net Asset Value determined?
The "Net Asset Value" means the net asset value per share of the Consumer
Staples SPDR Fund as determined by the Consumer Staples SPDR Fund. The Consumer
Staples 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 Consumer
Staples SPDR Fund are accrued daily and taken into account for purposes of
determining Net Asset Value. The Net Asset Value per share of the Consumer
Staples SPDR Fund is determined by the Consumer Staples SPDR Fund each Business
Day after the close of trading on the New York Stock Exchange, ordinarily 4:00
p.m., New York City time. Shares of the Consumer Staples SPDR Fund are listed
on the AMEX under the trading symbol "XLP".
When will I receive cash instead of shares of the Consumer Staples SPDR Fund?
If we choose to pay you the amount due to you at maturity in cash instead
of in shares of the Consumer Staples 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
Consumer Staples 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
Consumer Staples 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
S-6
<PAGE>
on the stated maturity date, and in lieu of delivering to you any fractional
shares of the Consumer Staples SPDR Fund to which you would otherwise be
entitled, we will pay you the cash value of these fractional shares based on
the Ending Value.
Will I be charged any transaction fees or expenses with respect to the shares
of the Consumer Staples SPDR Fund?
Unless and until we deliver shares of the Consumer Staples 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 Consumer
Staples SPDR Fund. However, because the Consumer Staples 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 Consumer Staples SPDR
Fund, you will then become directly subject to ongoing account maintenance fees
and certain other transaction expenses with respect to your shares so long as
you hold those shares.
The accompanying Fund Prospectus describes the fees and expenses charged
by the Consumer Staples SPDR Fund in greater detail.
What is the Consumer Staples SPDR Fund?
The Consumer Staples 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 Consumer Staples Select Sector Index. The Consumer
Staples 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 consumer staples, including cosmetic and
personal care products, pharmaceuticals, soft drinks, tobacco and food
products. As of April 13, 1999, the Consumer Staples Select Sector Index
included 71 component stocks. A list of these securities and their index
weightings as of April 13, 1999 is set forth under the section entitled "The
Consumer Staples SPDR Fund" in this prospectus supplement. Our affiliate,
MLPF&S, is both a soliciting dealer in the shares of the Consumer Staples SPDR
Fund and the index compilation agent for the Consumer Staples Select Sector
Index. We are not affiliated with the Consumer Staples SPDR Fund or the
Consumer Staples Select Sector Index. The Consumer Staples SPDR Fund will 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 Consumer Staples SPDR Fund is appropriate for you.
The Consumer Staples SPDR Fund is one of nine investment funds comprising
the Select Sector SPDR 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 supplement and prospectus of ML&Co. to fully understand the
operation and management of the Consumer Staples SPDR Fund. In addition,
because the Select Sector SPDR Trust is subject to the registration
requirements of the Securities Act of 1933, as amended, and the Investment
Company Act, the Select Sector SPDR Trust is required to file periodically
certain information specified by the SEC. For more information about the
Consumer Staples SPDR Fund and the shares that you may receive at maturity,
information provided to or filed with the SEC by the Select Sector SPDR 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 Select
Sector SPDR Trust at (800) 843-2639 or by writing the Select Sector SPDR Trust
S-7
<PAGE>
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 we make no
representation or warranty as to the accuracy or completeness of this
information.
What about taxes?
Each year, even though you will not receive any payments from us until
maturity, you will be required to pay taxes on ordinary income from the MITTS
Securities over their term based upon an estimated yield for the MITTS
Securities. We have determined this estimated yield, in accordance with
regulations issued by the U.S. Treasury Department, solely in order for you to
figure the amount of taxes that you will owe each year as a result of owning a
MITTS Security. This amount 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. We have determined that this estimated
yield will equal 5.94% per annum, compounded semiannually.
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a MITTS Security for $10 and hold the MITTS Security until
maturity, you will be required to pay taxes on the following amounts of
ordinary income from the MITTS Securities each year: $0.4198 in 1999, $0.6289
in 2000, $0.6660 in 2001, $0.7062 in 2002, $0.7479 in 2003, $0.7948 in 2004,
$0.8417 in 2005 and $0.2602 in 2006. However, in 2006, the amount of ordinary
income that you will be required to pay taxes on from owning a MITTS Security
may be greater or less than $0.2602, depending upon the Supplemental Redemption
Amount, if any, you receive. Also, if the Supplemental Redemption Amount is
less than $5.0655, you may have a loss which you could deduct against other
income you may have in 2006; but under current tax regulations, you would
neither be required nor permitted to amend your tax returns for prior years. If
you receive shares of the Consumer Staples SPDR Fund on the stated maturity
date, your aggregate initial tax basis in such shares of the Consumer Staples
SPDR Fund should be an amount equal to the sum of $10 and the Supplemental
Redemption Amount, less any cash received by you. Your holding period for any
shares of the Consumer Staples SPDR Fund that you receive on the maturity date
should begin on the day immediately following the maturity date. For further
information, see "United States Federal Income Taxation" in this prospectus
supplement.
Will the MITTS Securities be listed on a stock exchange?
The MITTS Securities have been approved for listing on the AMEX under the
trading symbol "CSM", subject to official notice of issuance. 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 the section entitled "Risk Factors--There may be an uncertain
trading market for the MITTS Securities" in this prospectus supplement.
What is the role of MLPF&S?
Our subsidiary, MLPF&S, is the underwriter for the offering and sale of
the MITTS Securities. After the initial offering, MLPF&S intends to buy and
sell MITTS Securities to create a secondary market for holders of the MITTS
Securities, and may stabilize or maintain the market price of the MITTS
Securities during the initial distribution of the MITTS Securities. However,
MLPF&S will not be obligated to engage in any of these market activities, or
continue them once it has started.
MLPF&S will also be our agent for purposes of calculating the Adjusted
Ending Value and the Supplemental Redemption Amount. Under certain
circumstances, these duties could result in a conflict of interest between
MLPF&S' status as our subsidiary and its responsibilities as calculation agent.
MLPF&S also is a soliciting dealer in the shares of the Consumer Staples
SPDR Fund and is the index compilation agent for the Consumer Staples Select
Sector Index. Under certain circumstances, these duties could result in a
conflict of interest between MLPF&S' status as our subsidiary and its
responsibilities to the Consumer Staples SPDR Fund and the Consumer Staples
S-8
<PAGE>
Select Sector Index. Please see the section entitled "Risk Factors--Potential
conflicts of interests" in this prospectus supplement.
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 the accompanying prospectus of
ML&Co. 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 supplement.
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 supplement.
S-9
<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 Consumer
Staples 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
Consumer Staples SPDR Fund as if you had made a direct investment in those
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 Consumer Staples SPDR Fund, as
reduced by the Adjustment Factor over the term of the MITTS Securities.
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 date, the Supplemental Redemption Amount
will be zero. This will be true even if the Net Asset Value per share of the
Consumer Staples SPDR Fund, as reduced by the Adjustment Factor over the term
of the MITTS Securities, was higher than the Starting Value at some time during
the life of the MITTS Securities 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 return will not reflect the return of owning shares of the Consumer
Staples SPDR Fund or the securities and other assets comprising the Consumer
Staples SPDR Fund's investment portfolio
When determining the Supplemental Redemption Amount, if any, paid to you
at maturity, the Consumer Staples SPDR Fund's Net Asset Value per share, which
reflects the reduction of fund assets resulting from the accrual of the
Consumer Staples SPDR Fund's fees and expenses and any distributions made by
the Consumer Staples SPDR Fund, will also be reduced by the application of the
Adjustment Factor over the term of the MITTS Securities. Consequently, your
return on the MITTS Securities will not reflect the return of owning the shares
of the Consumer Staples SPDR Fund or the securities and other assets included
in the Consumer Staples SPDR Fund's investment portfolio.
Changes in the Net Asset Value per share of the Consumer Staples SPDR Fund will
not exactly mirror changes in the Consumer Staples Select Sector Index
As indicated in the Fund Prospectus, the Consumer Staples 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 included in the Consumer Staples Select Sector Index.
However, changes in the value of the Consumer Staples Select Sector Index and
in the Net Asset Value per share of the Consumer Staples SPDR Fund are not
expected to be identical because:
. the Consumer Staples SPDR Fund's investment portfolio may not hold all of
the stocks in the Consumer Staples Select Sector Index or may not hold
each stock in the same weighting as the Consumer Staples Select Sector
Index,
. the Consumer Staples SPDR Fund may hold assets other than equity
securities, and
. the Net Asset Value per share of the Consumer Staples SPDR Fund reflects
the reduction of fund assets resulting from the accrual of fees and
expenses and the payment of distributions, if any.
S-10
<PAGE>
As stated in the Fund Prospectus, the investment adviser to the Consumer
Staples SPDR Fund believes that "over time, "the tracking error' of the
Consumer Staples SPDR Fund relative to the performance of the Consumer Staples
Select Sector Index, adjusted for the effect of the Consumer Staples 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
The MITTS Securities have been approved for listing on the AMEX under the
trading symbol "CSM", subject to official notice of issuance. While there have
been a number of issuances of different series of Market Index Target-Term
Securities, trading volumes have varied historically from one series to another
and it is therefore impossible to predict how the MITTS Securities will trade.
You cannot assume that a trading market will develop for the MITTS Securities.
If a trading market does develop, there can be no assurance that there will be
liquidity in the trading market. The development of a trading market for the
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 Consumer
Staples SPDR Fund.
If the trading market for the MITTS Securities is limited, there may be a
limited number of buyers when you decide to sell 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 market value of the MITTS Securities will be affected
by the Net Asset Value per share of the Consumer Staples SPDR Fund and by a
number of other factors. 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.
. 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 Consumer Staples 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 Consumer Staples
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 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 Consumer
Staples 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.
. Interest Rates. Because the MITTS Securities repay, at a minimum, the
principal amount at the maturity date, 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 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 Consumer Staples SPDR Fund.
Rising interest rates may lower the
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<PAGE>
Net Asset Value per share of the Consumer Staples 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
Consumer Staples SPDR Fund and, as a result, may increase the trading
value of the MITTS Securities.
. Volatility. 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 Consumer Staples 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
Consumer Staples SPDR Fund decreases, we expect that the trading value of
the MITTS Securities will decrease.
. 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 Net Asset Value per share of
the Consumer Staples SPDR Fund. This difference will reflect a "time
premium" due to expectations concerning the Net Asset Value per share of
the Consumer Staples 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.
. Dividend Yields. Generally, if dividend yields on the stocks comprising
the Consumer Staples 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 Consumer Staples SPDR Fund's investment
portfolio decrease, we expect that the trading value of the MITTS
Securities will increase.
. 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 the 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 increase in the Net Asset Value
per share of the Consumer Staples SPDR Fund at maturity, an improvement
in our credit ratings will not reduce other 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 Net Asset Value per
share of the Consumer Staples 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 Consumer Staples 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 Consumer Staples SPDR Fund
The Consumer Staples SPDR Fund is a recently organized investment company
and has a limited operating history. Although its 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 develop for the shares of the Consumer Staples SPDR Fund. If a trading
market does develop, there is no assurance that there will be liquidity in the
trading market.
Concentration in consumer-related securities
Because the Consumer Staples SPDR Fund's investment portfolio is
predominantly comprised of securities of companies involved in the development
and production of consumer staples, the value of the
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MITTS Securities may be adversely affected by several factors. These companies
are subject to government regulation affecting the permissibility of using
various food additives and production methods, which regulations could affect
their earnings and profitability. Tobacco companies may be adversely affected
by the adoption of proposed legislation and/or by litigation. Also, the success
of food, soft drink, and fashion-related products may be strongly affected by
fads, marketing campaigns and other factors affecting supply and demand. Weak
demand for these companies' products or services, as well as negative
developments in these other areas, would adversely affect the performance of
the Consumer Staples SPDR Fund and in turn, the trading value of the MITTS
Securities.
No affiliation between ML&Co. and the Consumer Staples SPDR Fund
Our affiliate MLPF&S is both a soliciting dealer in the shares of the
Consumer Staples SPDR Fund and the Index Compilation Agent for the Consumer
Staples Select Sector Index. However, we are not affiliated with the Consumer
Staples SPDR Fund or the Consumer Staples Select Sector Index. The Consumer
Staples 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 Consumer Staples SPDR Fund will 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 Consumer Staples 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.
No shareholder's rights
Unless and until we deliver shares of the Consumer Staples 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 Consumer Staples SPDR Fund sets a record date for a matter to be voted on
by shareholders before our delivery of the shares of the Consumer Staples 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
will be issued. New York has certain usury laws that limit the amount of
interest that can be charged and paid on loans, which includes debt securities
like the MITTS Securities. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not apply
to debt securities in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the holders of the MITTS
Securities, to the extent permitted by law, not to voluntarily claim the
benefits of any laws concerning usurious rates of interest.
Potential conflicts of interests
The calculation agent for the MITTS Securities is one of our
subsidiaries. Under certain circumstances, MLPF&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 Consumer Staples SPDR
Fund. Under certain circumstances, MLPF&S' role as calculation agent for the
MITTS Securities and its role as a soliciting dealer
S-13
<PAGE>
in these 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 Consumer
Staples 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 are to be
included in the Consumer Staples Select Sector Index. Under certain
circumstances, MLPF&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 this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
Uncertain tax consequences
You should also consider the tax consequences of investing in the MITTS
Securities, aspects of which are uncertain. See "United States Federal Income
Taxation" below.
RATIO OF EARNINGS TO FIXED CHARGES OF ML&CO.
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc., in a
transaction accounted for as a pooling-of-interests. The following information
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 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.
S-14
<PAGE>
DESCRIPTION OF THE MITTS SECURITIES
ML&Co. will issue the MITTS Securities as a series of Senior Debt
Securities under the Senior Indenture, referred to as the "1983 Indenture",
which is more fully described in the accompanying prospectus of ML&Co. The
MITTS Securities will mature on April 19, 2006.
While at maturity a beneficial owner of a MITTS Security will receive the
number of shares of the Consumer Staples SPDR Fund, or cash with an equal
value, equal in value to the sum of the principal amount of such 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 number of
shares to be delivered at maturity will be determined based on the Ending
Value.
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" in this prospectus supplement and
"Description of Debt Securities--General--Events of Default" in the
accompanying prospectus of ML&Co.
ML&Co. will issue the MITTS Securities 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 Consumer Staples SPDR Fund, or cash with an
equal value, equal in 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 that 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 Consumer Staples SPDR Fund, or cash
with an equal value, equal in value to the principal amount of the MITTS
Security. The number of shares to be delivered at maturity will be determined
based on the Ending Value.
If ML&Co. chooses to deliver shares of the Consumer Staples SPDR Fund to
holders of the MITTS Securities at the maturity date, ML&Co. or one of its
affiliates will deliver shares of the Consumer Staples SPDR Fund that are then
newly issued by the Consumer Staples SPDR Fund.
ML&Co. may, at its option, in lieu of delivering shares of the Consumer
Staples 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 Consumer Staples SPDR Fund, ML&Co. will pay the amount due to
holders of the MITTS Securities in cash instead of shares.
"Determination of the Supplemental Redemption Amount"
The Supplemental Redemption Amount for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<S> <C>
(Adjusted Ending Value - Starting Value)
principal amount of each MITTS Security ($10 per unit) X (--------------------------------------)
( Starting Value )
</TABLE>
"provided, however", that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Value" equals 27.4089, the Net Asset Value of one share of
the Consumer Staples SPDR Fund on April 13, 1999, the date the MITTS Securities
were priced for initial sale to the public.
S-15
<PAGE>
"Net Asset Value" means the net asset value per share of the Consumer
Staples SPDR Fund as determined by the Consumer Staples SPDR Fund. The
Consumer Staples 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
Consumer Staples 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 Consumer Staples SPDR Fund is determined by the Consumer Staples SPDR Fund
each Business Day after the close of trading on the New York Stock Exchange,
ordinarily 4:00 p.m., New York City time. Shares of the Consumer Staples SPDR
Fund are listed on the AMEX under the trading symbol "XLP".
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 to the Net Asset Value used to calculate the Ending Value on
each Calculation Day during the Calculation Period.
The "Ending Value" will equal the average, or arithmetic mean, of the
Net Asset Values per share of the Consumer Staples 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 arithmetic mean, of the Net Asset Values of the Consumer
Staples SPDR Fund on each of these 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 Consumer Staples 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 Consumer Staples SPDR Fund on the last Trading Day before the
Calculation Period for which a Net Asset Value per share of the Consumer
Staples SPDR Fund was determined.
The "Adjustment Factor" equals 1.95% per year and will be applied over
the entire term of the MITTS Securities. On each calendar day during the term
of the MITTS Securities, we will apply this percentage on a prorated basis
based on a 365-day year to reduce the values used to calculate the
Supplemental Redemption Amount. As a result of the cumulative effect of this
reduction, the values used to calculate the Supplemental Redemption Amount at
the maturity of the MITTS Securities will be approximately 12.77% less than
the actual Net Asset Values per share of the Consumer Staples SPDR Fund on
each Calculation Day during the Calculation Period.
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 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 Consumer Staples SPDR
Fund:
. 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
. 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 Consumer
Staples SPDR Fund.
Fractional Shares
ML&Co. will not distribute fractional shares of the Consumer Staples
SPDR Fund at maturity. In the event ML&Co. elects to pay holders of the MITTS
Securities in shares of the Consumer Staples 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 that fractional
share based on the Ending Value.
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<PAGE>
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values:
. the percentage change from the Starting Value to the hypothetical Ending
Value,
. the Adjusted Ending Value used to calculate the Supplemental Redemption
Amount,
. the principal amount and Supplemental Redemption Amount, if any, paid at
maturity per unit,
. the total rate of return to beneficial owners of the MITTS Securities,
. the pretax annualized rate of return to beneficial owners of MITTS
Securities, and
. the pretax annualized rate of return of an investment in shares of the
Consumer Staples SPDR Fund.
<TABLE>
<CAPTION>
Principal Pretax
Percentage Amount and Pretax Annualized
Hypothetical Change from the Supplemental Total Rate of Annualized Rate of Return
Ending Value Starting Value to Redemption Return on the Rate of Return of Shares of the
During the the Hypothetical Adjusted Ending Amount paid at MITTS on the MITTS Consumer Staples
Calculation Period Ending Value Value(1) Maturity per unit Securities Securities(2) SPDR Fund(2)(3)
- ------------------ ----------------- --------------- ----------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
5.48 -80.00% 4.78 $10.00 0.00% 0.00% -20.32%
10.96 -60.00% 9.56 $10.00 0.00% 0.00% -11.39%
16.45 -40.00% 14.35 $10.00 0.00% 0.00% -5.91%
21.93 -20.00% 19.13 $10.00 0.00% 0.00% -1.91%
27.41(4) 0.00% 23.91 $10.00 0.00% 0.00% 1.27%
32.89 20.00% 28.69 $10.47 4.68% 0.65% 3.91%
38.37 40.00% 33.47 $12.21 22.12% 2.87% 6.18%
43.85 60.00% 38.25 $13.96 39.57% 4.82% 8.17%
49.34 80.00% 43.04 $15.70 57.02% 6.55% 9.94%
54.82 100.00% 47.82 $17.45 74.46% 8.10% 11.54%
60.30 120.00% 52.60 $19.19 91.91% 9.52% 13.00%
65.78 140.00% 57.38 $20.94 109.35% 10.83% 14.35%
71.26 160.00% 62.16 $22.68 126.80% 12.04% 15.60%
76.74 180.00% 66.95 $24.42 144.25% 13.16% 16.76%
82.23 200.00% 71.73 $26.17 161.69% 14.21% 17.85%
</TABLE>
- --------
(1) The Adjusted Ending Values specified in this column are approximately
12.77% less than the hypothetical Ending Values as a result of the
cumulative effect of the application of the Adjustment Factor of 1.95% per
annum 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 constant dividend yield of 1.27% per annum, paid quarterly during the
investment term and applied to the Net Asset Value per share of the
Consumer Staples SPDR Fund at the end of each quarter, assuming the Net
Asset Value per share of the Consumer Staples 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 purchasing and
holding shares of the Consumer Staples SPDR Fund;
(c) an investment term equal to the term of the MITTS Securities; and
(d) a Net Asset Value per share of the Consumer Staples SPDR Fund on the
maturity date equal to the Ending Value.
(4) The Starting Value equals 27.4089.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount 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 supplement.
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<PAGE>
Adjustments to the Net Asset Value; Market Disruption Events
If at any time the shares of the Consumer Staples SPDR Fund are subject
to a split or reverse split, the calculation agent shall adjust the Net Asset
Value per share of the Consumer Staples SPDR Fund used to calculate the Ending
Value in order to arrive at a Net Asset Value per share of the Consumer Staples
SPDR Fund as if such 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:
(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 Consumer Staples Select Sector Index;
(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 option contracts related to the shares of the
Consumer Staples SPDR Fund which are traded on any major U.S.
exchange; or
(c) the Consumer Staples SPDR Fund (1) is unable or otherwise fails to
issue a Net Asset Value for any shares of the Consumer Staples SPDR
Fund after the close of business on the NYSE or (2) suspends the
creation or redemption of shares of the Consumer Staples SPDR Fund.
For the purpose 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".
For the purposes of clauses (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.
Termination of the Consumer Staples SPDR Fund
If the Consumer Staples SPDR Fund is liquidated or otherwise terminated,
for purposes of calculating the Supplemental Redemption Amount payable at the
maturity of the MITTS Securities, the calculation agent will calculate the Net
Asset Value as follows: The Net Asset Value per share of the Consumer Staples
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 following the Pre-liquidation Date (each
date, a "Determination 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 Consumer Staples Select Sector
Index increases or decreases from the immediately preceding Trading Day to that
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 Consumer Staples 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 Consumer Staples SPDR Fund
had it not been liquidated or terminated, from the immediately preceding
Trading Day to that 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 such values to be made available by telephone.
If the Consumer Staples SPDR Fund is liquidated or otherwise terminated
and the Consumer Staples Select Sector Index is no longer calculated or
published (an "Index Termination Event"), the calculation agent
S-18
<PAGE>
will select a successor index that it determines, in its sole discretion, to
be comparable to the Consumer Staples Select Sector Index, and, upon the
calculation agent's notification of such determination to the trustee and
ML&Co., the calculation agent will substitute the successor index for the
Consumer Staples 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 to be given
to holders of the MITTS Securities.
In the event that an Index Termination Event occurs and a successor index
to the Consumer Staples 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 Consumer Staples
Select Sector Index for that Calculation Day in accordance with the procedures
last used to calculate the Consumer Staples Select Sector Index before 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 a substitute index. Upon any selection by the
calculation agent of a substitute index, ML&Co. shall cause notice 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
. a successor index to the Consumer Staples Select Sector Index is
not selected by the calculation agent or is no longer published on
any of the Calculation Days and
. the calculation agent is unable to calculate a substitute index for
the Consumer Staples Select Sector Index,
the calculation agent will compute a substitute index for the S&P 500 Index
for that 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 a substitute index for the S&P 500 Index, the calculation
agent will use that substitute index to calculate the substitute index for the
Consumer Staples Select Sector Index.
Notwithstanding these alternative arrangements, liquidation or
termination of the Consumer Staples SPDR Fund or the discontinuance of the
publication of the Consumer Staples 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 of the MITTS Securities, will be equal to
the principal amount and the Supplemental Redemption Amount, if any,
calculated assuming (1) the date of early repayment is the maturity date of
the MITTS Securities and (2) 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 Consumer Staples SPDR Fund used to calculate the Supplemental
Redemption Amount. See "--Delivery at Maturity" in this prospectus supplement.
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 was 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 5.94% 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.
S-19
<PAGE>
Depositary
"Description of the Global Securities"
Upon issuance, all MITTS Securities will be represented by one or more
fully registered global securities. Each such global security will be deposited
with, or on behalf of, 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 by 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 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 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 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
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 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 nominee. One or more fully registered global securities
will be issued for the MITTS Securities in the aggregate principal amount of
the 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 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.
S-20
<PAGE>
Purchases of the 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 such
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 such 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 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
shall be the responsibility of DTC, and disbursement of these payments to the
beneficial owners shall be 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 successor depositary is not appointed by ML&Co.
within 60 days,
. ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable or
. an Event of Default 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. These definitive MITTS Securities will be
registered in the name or names as the depositary shall instruct the trustee.
It is expected that the instructions may be based upon directions received by
the depositary from participants with respect to ownership of beneficial
interests in such global securities.
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<PAGE>
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 such 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 the accuracy of this information.
Same-Day Settlement and Delivery
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, by delivery of shares of the Consumer
Staples SPDR Fund in an equal value. If ML&Co. elects, at its option, to pay
cash in lieu of delivering shares of the Consumer Staples SPDR Fund, ML&Co.
will make payment in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE CONSUMER STAPLES SPDR FUND
ML&Co. has attached the Fund Prospectus describing the Consumer Staples
SPDR Fund and is delivering it to purchasers of the MITTS Securities together
with this prospectus supplement and the accompanying prospectus of ML&Co. for
the convenience of reference only. The Fund Prospectus does not constitute a
part of this prospectus supplement or the accompanying prospectus of ML&Co.,
nor is it incorporated by reference in this prospectus supplement or the
accompanying prospectus of ML&Co. The summary description below is qualified in
its entirety by the information describing the Consumer Staples SPDR Fund and
the Consumer Staples Select Sector Index included in the attached Fund
Prospectus.
As stated in the Fund Prospectus, the Consumer Staples 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 Consumer Staples Select
Sector Index. The Consumer Staples 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 consumer staples,
including cosmetic and personal care products, pharmaceuticals, soft drinks,
tobacco and food products. As of April 13, 1999, the Consumer Staples Select
Sector Index included 71 component stocks.
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<PAGE>
The components of the Consumer Staples Select Sector Index by index
weight as of April 13, 1999 are listed below.
<TABLE>
<CAPTION>
Company Name Trading Symbol Index Weight
- ------------ -------------- ------------
<S> <C> <C>
Merck and Company Inc. ............................. MRK 8.660%
Pfizer Inc. ........................................ PFE 8.463%
Coca-Cola Co. ...................................... KO 6.811%
Proctor and Gamble Co. ............................. PG 5.961%
Bristol Myers Squibb Co. ........................... BMY 5.853%
Johnson & Johnson................................... JNJ 5.787%
Eli Lilly and Company............................... LLY 4.196%
American Home Products Corp. ....................... AHP 3.936%
Schering-Plough Corp. .............................. SGP 3.836%
Philip Morris Companies Inc. ....................... MO 3.745%
Abbott Laboratories................................. ABT 3.502%
Warner-Lambert Co. ................................. WLA 2.599%
Pepsico Inc. ....................................... PEP 2.441%
Gillette Co. ....................................... G 2.433%
Unilever NV......................................... UN 1.973%
Medtronic Inc. ..................................... MDT 1.845%
Anheuser Busch Companies Inc. ...................... BUD 1.606%
Pharmacia and UpJohn Inc. .......................... PNU 1.458%
Walgreen Co. ....................................... WAG 1.272%
Colgate Palmolive Co. .............................. CL 1.213%
Kimberly Clark Corp. ............................... KMB 1.150%
Safeway Inc. ....................................... SWY 1.135%
Sara Lee Corp. ..................................... SLE 0.968%
Cardinal Health Inc. ............................... CAH 0.842%
Baxter International Inc. .......................... BAX 0.839%
Guidant Corp. ...................................... GDT 0.836%
CVS Corp. .......................................... CVS 0.806%
Campbell Soup Co. .................................. CPB 0.793%
McKesson HBOC....................................... MCK 0.780%
H.J. Heinz Co. ..................................... HNZ 0.757%
Boston Scientific Corp. ............................ BSX 0.711%
Kroger Co. ......................................... KR 0.658%
Kellogg Co. ........................................ K 0.616%
Avon Products Inc. ................................. AVP 0.610%
Bestfoods........................................... BFO 0.586%
Clorox Co. ......................................... CLX 0.575%
Albertson's Inc. ................................... ABS 0.549%
ConAgra Inc. ....................................... CAG 0.520%
Coca-Cola Enterprises Inc. ......................... CCE 0.518%
General Mills Inc. ................................. GIS 0.509%
Wm. Wrigley Jr. Co. ................................ WWY 0.489%
Becton Dickinson and Co. ........................... BDX 0.419%
Ralston Purina Company.............................. RAL 0.396%
Fred Meyer Inc. .................................... FMY 0.396%
Pioneer Hi-Bred International Inc. ................. PHB 0.393%
Sysco Corp. ........................................ SYY 0.388%
Quaker Oats Co. .................................... OAT 0.379%
American Stores Co. ................................ ASC 0.371%
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
Company Name Trading Symbol Index Weight
- ------------ -------------- ------------
<S> <C> <C>
Archer Daniels Midland Corp. ....................... ADM 0.358%
RJR Nabisco Holdings Corp. ......................... RN 0.353%
Fort James Corp. ................................... FJ 0.336%
Hershey Foods Corp. ................................ HSY 0.334%
Fortune Brands Inc. ................................ FO 0.296%
Rite Aid Corp. ..................................... RAD 0.277%
Allergan, Inc. ..................................... AGN 0.273%
Winn-Dixie Stores Inc. ............................. WIN 0.242%
UST Inc. ........................................... UST 0.215%
BioMet Inc. ........................................ BMET 0.202%
Watson Pharmaceuticals, Inc. ....................... WPI 0.193%
Brown Forman Corporation............................ BF/B 0.191%
Bausch & Lomb Inc. ................................. BOL 0.177%
International Flavor and Fragrance Inc. ............ IFF 0.164%
Alza Corporation.................................... AZA 0.148%
Bard C.R. Inc. ..................................... BCR 0.124%
SuperValu Inc. ..................................... SVU 0.110%
St. Jude Medical.................................... STJ 0.097%
Adolph Coors Co. ................................... RKY 0.090%
Mallinckrodt Inc. .................................. MKG 0.081%
Alberto-Culver Co. ................................. ACV 0.056%
Longs Drug Store Corp. ............................. LDG 0.055%
Great Atlantic & Pacific Tea Co. Inc. .............. GAP 0.050%
</TABLE>
Percentages may not add to 100% due to rounding.
Holdings and weightings are subject to change subsequent to April 13,
1999.
Although ML&Co.'s subsidiary, MLPF&S, provides certain services to the
Consumer Staples SPDR Fund and the Consumer Staples Select Sector Index, ML&Co.
is not affiliated with the Consumer Staples SPDR Fund or the Consumer Staples
Select Sector Index, and the Consumer Staples SPDR Fund will 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
Consumer Staples SPDR Fund is appropriate.
The Consumer Staples SPDR Fund is one of nine investment funds comprising
the Select Sector SPDR 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 Consumer
Staples SPDR Fund's initial public offering occurred on December 16, 1998 and
therefore has limited operating history.
Because the Select Sector SPDR Trust is subject to the registration
requirements of the Securities Act and the Investment Company Act, the Select
Sector SPDR Trust is required to file periodically certain information
specified by the SEC. For more information about the Consumer Staples 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 Select Sector SPDR 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 Select Sector
SPDR Trust at (800) 843-2639 or by writing the Select Sector SPDR 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 these documents.
S-24
<PAGE>
ML&Co. is not affiliated with the Consumer Staples SPDR Fund, and the
Consumer Staples SPDR Fund has no obligations with respect to the MITTS
Securities. This prospectus supplement relates only to the MITTS Securities
offered by this prospectus supplement and does not relate to the shares of the
Consumer Staples SPDR Fund or any other securities relating to the Consumer
Staples SPDR Fund. The information contained in this prospectus supplement
regarding the Consumer Staples 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 Consumer Staples SPDR Fund are accurate or
complete. Furthermore, there can be no assurance that all events occurring
prior to the date of this prospectus supplement, 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 Consumer Staples SPDR Fund, and therefore the trading price
of the MITTS Securities, have been publicly disclosed. Subsequent disclosure of
any of these events or the disclosure of or failure to disclose material future
events concerning the Consumer Staples 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 Consumer Staples SPDR Fund. Additionally, MLPF&S serves as index
compilation agent for the Consumer Staples 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 Consumer Staples 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 certain
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 registered
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 Consumer Staples 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 Consumer Staples 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 Consumer Staples SPDR Fund and the Consumer
Staples 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 Consumer Staples SPDR Fund to track the
performance and yield of the Consumer Staples Select Sector Index or in the
ability of the Consumer Staples Select Sector Index to track the performance of
the consumer staples sector represented in the stock market. The stocks
included in the Consumer Staples 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 consumer staples
products and represented by the S&P 500 Index. The composition and weightings
of the stocks included in the Consumer Staples 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
certain trademarks and trade names of S&P and of the S&P 500 Index which is
determined,
S-25
<PAGE>
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 the
MITTS Securities are to be converted into shares of the Consumer Staples 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 Consumer Staples 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 Consumer Staples 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 Consumer Staples 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 such
damages."
All disclosures contained in this prospectus supplement regarding the S&P
500 Index or the Consumer Staples 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 Select Sector SPDR
Trust, respectively. ML&Co. and MLPF&S do not assume any responsibility for the
accuracy or completeness of this information.
UNITED STATES FEDERAL INCOME TAXATION
Set forth in full below is the opinion of Brown & Wood LLP, counsel to
ML&Co., as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the MITTS Securities. This opinion is
based upon laws, regulations, rulings and decisions now in effect, all of which
are subject to change (including retroactive changes in effective dates) or
possible differing interpretations. The discussion below deals only with MITTS
Securities 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, tax-exempt
entities, persons holding MITTS Securities in a tax-deferred or tax-advantaged
account, or persons holding MITTS Securities as a hedge against currency risks,
as a position in a "straddle" or as part of a "hedging" or "conversion"
transaction for tax purposes. It also does not deal with holders other than
original purchasers (except where otherwise specifically noted herein). The
following discussion also assumes that the issue price of the MITTS Securities,
as determined for United States Federal income tax purposes, equals the
principal amount thereof. Persons considering the purchase of the MITTS
Securities should consult their own tax advisors concerning the application of
the United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
MITTS Securities arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
MITTS Security that is for United States Federal income tax purposes (a) a
citizen or resident of the United States, (b) a corporation, partnership or
other 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 (other than a
partnership that is not treated as a United States person under any applicable
Treasury regulations), (c) an estate the income of which is subject to United
States Federal income taxation regardless of its source, (d) 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
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<PAGE>
decisions of the trust, or (e) any other person whose income or gain in respect
of a MITTS Security is effectively connected with the conduct of a United
States trade or business. Notwithstanding clause (d) of the preceding 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 also will be a U.S.
Holder. As used herein, the term "Non-U.S. Holder" means a beneficial owner of
a MITTS Security that is not a U.S. Holder.
General
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization, for United
States Federal income tax purposes, of the MITTS Securities or securities with
terms substantially the same as the MITTS Securities. However, although the
matter is not free from doubt, under current law, each MITTS Security should be
treated as a debt instrument of ML&Co. for United States Federal income tax
purposes. ML&Co. currently intends to treat each MITTS Security as a debt
instrument of ML&Co. for United States Federal income tax purposes and, where
required, intends to file information returns with the Internal Revenue Service
in accordance with such treatment, in the absence of any change or
clarification in the law, by regulation or otherwise, requiring a different
characterization of the MITTS Securities. Prospective investors in the MITTS
Securities should be aware, however, that the IRS is not bound by ML&Co.'s
characterization of the MITTS Securities as indebtedness, and the IRS could
possibly take a different position as to the proper characterization of the
MITTS Securities for United States Federal income tax purposes. The following
discussion of the principal United States Federal income tax consequences of
the purchase, ownership and disposition of the MITTS Securities is based upon
the assumption that each MITTS Security will be treated as a debt instrument of
ML&Co. for United States Federal income tax purposes. If the MITTS Securities
are not in fact treated as debt instruments of ML&Co. for United States Federal
income tax purposes, then the United States Federal income tax treatment of the
purchase, ownership and disposition of the MITTS Securities could differ from
the treatment discussed below with the result that the timing and character of
income, gain or loss recognized in respect of a MITTS Security could differ
from the timing and character of income, gain or loss recognized in respect of
a MITTS Security had the MITTS Securities in fact been treated as debt
instruments of ML&Co. for United States Federal income tax purposes.
U.S. Holders
On June 11, 1996, the Treasury Department issued final regulations (the
"Final Regulations") concerning the proper United States Federal income tax
treatment of contingent payment debt instruments such as the MITTS Securities,
which apply to debt instruments issued on or after August 13, 1996 and,
accordingly, will apply to the MITTS Securities. In general, the Final
Regulations 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 prior United States Federal income tax
law. Specifically, the Final 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 Final Regulations, any gain
recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument is 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 Final Regulations provide
no definitive guidance as to whether or not an instrument is properly
characterized as a debt instrument for United States Federal income tax
purposes.
In particular, solely for purposes of applying the Final Regulations 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 $5.0655 per unit (the "Projected Supplemental Redemption Amount"). This
represents an estimated yield on the MITTS Securities equal to 5.94% per annum
(compounded semiannually). Accordingly, during the term of the MITTS
Securities, a U.S. Holder of a MITTS Security will be required to include in
income as ordinary
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<PAGE>
interest an amount equal to the sum of the daily portions of interest on the
MITTS Security that are deemed to accrue at this estimated yield for each day
during the taxable year (or portion of the taxable year) on which the U.S.
Holder holds such MITTS Security. The amount of interest that will be deemed to
accrue in any accrual period (i.e., generally each six-month period during
which the MITTS Securities are outstanding) will equal the product of this
estimated yield (properly adjusted for the length of the accrual period) and
the MITTS Security's adjusted issue price (as defined below) at the beginning
of the accrual period. The daily portions of interest will be determined by
allocating to each day in the accrual period the ratable portion of the
interest that is deemed to accrue during the accrual period. In general, for
these purposes a MITTS Security's adjusted issue price will equal the MITTS
Security's issue price (i.e., $10), increased by the interest previously
accrued on the MITTS Security. At maturity of a MITTS Security, in the event
that the actual Supplemental Redemption Amount, if any, exceeds $5.0655 per
unit (i.e., the Projected Supplemental Redemption Amount), a U.S. Holder will
be required to include the excess of the actual Supplemental Redemption Amount
over $5.0655 per unit (i.e., the Projected Supplemental Redemption Amount) in
income as ordinary interest on the stated maturity date. Alternatively, in the
event that the actual Supplemental Redemption Amount, if any, is less than
$5.0655 per unit (i.e., the Projected Supplemental Redemption Amount), the
amount by which the Projected Supplemental Redemption Amount (i.e., $5.0655 per
unit) exceeds the actual Supplemental Redemption Amount will be treated first
as an offset to any interest otherwise includible in income by the U.S. Holder
with respect to the MITTS Security for the taxable year in which the stated
maturity date occurs to the extent of the amount of such includible interest.
Further, a U.S. Holder will be permitted to recognize and deduct, as an
ordinary loss that is not subject to the limitations applicable to
miscellaneous itemized deductions, any remaining portion of the Projected
Supplemental Redemption Amount (i.e., $5.0655 per unit) in excess of the actual
Supplemental Redemption Amount that is not treated as an interest offset
pursuant to the foregoing rules. In general, if a U.S. Holder receives shares
of the Consumer Staples SPDR Fund on the maturity date, such U.S. Holder's
initial aggregate tax basis in the shares of the Consumer Staples SPDR Fund
received by the U.S. Holder should equal the sum of the principal amount of the
MITTS Security and the actual Supplemental Redemption Amount (less any cash
received in lieu of fractional shares of the Consumer Staples SPDR Fund). This
aggregate tax basis should be allocated among the shares of the Consumer
Staples SPDR Fund received by the U.S. Holder in accordance with the relative
fair market value of such shares of the Consumer Staples SPDR Fund. Moreover,
such U.S. Holder's holding period for any shares of the Consumer Staples SPDR
Fund received by the U.S. Holder should begin on the day immediately following
the maturity date. In addition, U.S. Holders purchasing a MITTS Security at a
price that differs from the adjusted issue price of the MITTS Security as of
the purchase date (e.g., subsequent purchases) will be subject to rules
providing for certain adjustments to the foregoing rules and such U.S. Holders
should consult their own tax advisors concerning these rules.
Upon the sale, exchange or redemption of a MITTS Security prior to the
stated maturity date, a U.S. Holder will be required to recognize taxable gain
or loss in an amount equal to the difference, if any, between the amount
realized by the U.S. Holder upon such sale, exchange or redemption and the U.S.
Holder's adjusted tax basis in the MITTS Security as of the date of
disposition. A U.S. Holder's adjusted tax basis in a MITTS Security generally
will equal such U.S. Holder's initial investment in the MITTS Security
increased by any interest previously included in income with respect to the
MITTS Security by the U.S. Holder. Any such taxable gain will be treated as
ordinary income. Any such taxable loss will be treated as ordinary loss to the
extent of the U.S. Holder's total interest inclusions on the MITTS Security.
Any remaining loss generally will be treated as long-term or short-term capital
loss (depending upon the U.S. Holder's holding period for the MITTS Security).
All amounts includible in income by a U.S. Holder as ordinary interest pursuant
to the Final Regulations will be treated as original issue discount.
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.
S-28
<PAGE>
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 5.94% 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
Interest Deemed to Accrued on MITTS
Accrue During Securities as of End
Accrual Period of Accrual Period
Accrual Period (per unit) (per unit)
-------------- ------------------ --------------------
<S> <C> <C>
April 19, 1999 through October 19,
1999................................. $0.2978 $0.2978
October 20, 1999 through April 19,
2000................................. $0.3059 $0.6037
April 20, 2000 through October 19,
2000................................. $0.3149 $0.9186
October 20, 2000 through April 19,
2001................................. $0.3243 $1.2429
April 20, 2001 through October 19,
2001................................. $0.3339 $1.5768
October 20, 2001 through April 19,
2002................................. $0.3438 $1.9206
April 20, 2002 through October 19,
2002................................. $0.3541 $2.2747
October 20, 2002 through April 19,
2003................................. $0.3645 $2.6392
April 20, 2003 through October 19,
2003................................. $0.3754 $3.0146
October 20, 2003 through April 19,
2004................................. $0.3865 $3.4011
April 20, 2004 through October 19,
2004................................. $0.3981 $3.7992
October 20, 2004 through April 19,
2005................................. $0.4098 $4.2090
April 20, 2005 through October 19,
2005................................. $0.4220 $4.6310
October 20, 2005 through April 19,
2006................................. $0.4345 $5.0655
</TABLE>
- --------
Projected Supplemental Redemption Amount=$5.0655 per unit.
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 MITTS Security, 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 Internal Revenue Code of 1986, as
amended. However, income allocable to non-U.S. Holders will generally be
subject to annual tax reporting on IRS Form 1042S. For a non-U.S. Holder 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 (a) is signed by the beneficial owner of the MITTS Security under
penalties of perjury, (b) certifies that such owner is not a U.S. Holder and
(c) 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 MITTS Security 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.
S-29
<PAGE>
Under current law, a MITTS Security 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 such MITTS Security 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 MITTS Securities 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 MITTS Securities 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 MITTS Security to (or through) a broker,
the broker must withhold 31% of the entire purchase price, unless either (a)
the broker determines that the seller is a corporation or other exempt
recipient or (b) 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 (a) the
broker determines that the seller is an exempt recipient or (b) 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.
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 that the required
information is furnished to the IRS.
New Withholding Regulations
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
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.
USE OF PROCEEDS AND HEDGING
The net proceeds from the sale of the MITTS Securities will be used as
described under "Use of Proceeds" in the accompanying prospectus of ML&Co. and
to hedge market risks of ML&Co. associated with its obligation to pay the
principal amount and the Supplemental Redemption Amount.
S-30
<PAGE>
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 at 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, 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. The prospectus of ML&Co. accompanying this prospectus supplement
summarizes material provisions of contracts and other documents that we refer
you to. Because the prospectus of ML&Co. 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.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement. We have 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
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
supplement is accurate as of the date of this prospectus supplement only. Our
business, financial condition and results of operations may have changed since
that date.
The Consumer Staples SPDR Fund
The Select Sector SPDR Trust is subject to the registration requirements
of the Securities Act and the Investment Company Act and is required to file
periodically certain information specified by the SEC. For more information
about the Consumer Staples SPDR Fund and the shares that you may receive at
maturity, information provided to or filed with the SEC by the Select Sector
SPDR 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 Select Sector SPDR Trust at (800)
843-2639 or by writing the Select Sector SPDR 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 we make no representation or warranty as to the
accuracy or completeness of that information.
S-31
<PAGE>
UNDERWRITING
MLPF&S, the underwriter of the offering, has agreed, subject to the terms
and conditions of the underwriting agreement and a terms agreement, to purchase
from ML&Co. $72,000,000 aggregate principal amount of MITTS Securities. The
underwriting agreement provides that the obligations of the underwriter are
subject to certain conditions precedent and that the underwriter will be
obligated to purchase all of the MITTS Securities if any are purchased.
The underwriter has advised ML&Co. that it proposes initially to offer
all or part of the MITTS Securities directly to the public at the offering
price set forth on the cover page of this prospectus supplement. After the
initial public offering, the public offering price may be changed. The
underwriter is offering the MITTS Securities subject to receipt and acceptance
and subject to the underwriter's right to reject any order in whole or in part.
In addition to the commissions payable at the time of the original sale
of the MITTS Securities, the underwriter will pay a commission on each of up to
six anniversary dates of the issuance of the MITTS Securities to brokers whose
clients purchased the units in the initial distribution and who continue to
hold their MITTS Securities.
The underwriting 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.
The underwriter is permitted to engage in certain transactions that
stabilize the price of the MITTS Securities. These transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
MITTS Securities.
If the underwriter creates a short position in the MITTS Securities in
connection with the offering, i.e., if it sells more units of the MITTS
Securities than are set forth on the cover page of this prospectus supplement,
the underwriter may reduce that short position by purchasing units of the MITTS
Securities 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.
Neither ML&Co. nor the underwriter 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 MITTS Securities. In addition, neither ML&Co. nor
the underwriter makes any representation that the underwriter will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The underwriter may use this prospectus supplement, the accompanying
prospectus of ML&Co. and the Fund Prospectus for offers and sales related to
market-making transactions in the MITTS Securities. The underwriter 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.
VALIDITY OF THE MITTS SECURITIES
The validity of the MITTS Securities will be passed upon for ML&Co. and
for the underwriter by Brown & Wood LLP, New York, New York.
S-32
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Adjusted Ending Value...................................................... S-5
Adjustment Factor.......................................................... S-5
Calculation Day............................................................ S-16
Calculation Period......................................................... S-16
Consumer Staples SPDR Fund................................................. S-4
Determination Date......................................................... S-18
Ending Value............................................................... S-5
Final Regulations.......................................................... S-27
Fund Expenses.............................................................. S-18
Index Termination Event.................................................... S-18
Market Disruption Event.................................................... S-18
ML&Co...................................................................... S-4
MLPF&S..................................................................... S-4
Net Asset Value............................................................ S-6
New Regulations............................................................ S-30
Non-U.S. Holder............................................................ S-27
Pre-liquidation Date....................................................... S-18
Pricing Date............................................................... S-5
Projected Supplemental Redemption Amount................................... S-27
Starting Value............................................................. S-5
Supplemental Redemption Amount............................................. S-5
Trading Day................................................................ S-16
U.S. Holder................................................................ S-26
Withholding Agent.......................................................... S-29
</TABLE>
S-33
<PAGE>
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[LOGO]
7,200,000 Units
Merrill Lynch & Co., Inc.
Consumer Staples Select Sector SPDR(R) Fund
Market Index Target-Term Securities(R)
due April 19, 2006
"MITTS(R) Securities"
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
Merrill Lynch & Co.
April 13, 1999
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