PRELIMINARY PRICING SUPPLEMENT
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SUBJECT TO COMPLETION
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DATED JUNE 13, 2002
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PRICING SUPPLEMENT File No. 333-83374
- ------------------ Rule 424(b)(3)
(To Prospectus Supplement and Prospectus
dated April 1, 2002)
Pricing Supplement Number:
Merrill Lynch & Co., Inc.
Merrill Lynch Extendible Monthly Securities
The floating rate notes described in this pricing supplement, which we
refer to as Merrill Lynch Extendible Monthly Securities (the "Notes"), will be
issued as a series of Merrill Lynch & Co., Inc.'s (the "Company") Medium-Term
Notes, Series B, Due Nine Months or More from Date of Issue. The Notes will
mature on the Initial Stated Maturity Date, unless the maturity of all or any
portion of the principal amount of the Notes is extended in accordance with
the procedures described below. In no event will the maturity of the Notes be
extended beyond the Final Stated Maturity Date.
During the notice period relating to each election date, you may elect to
extend the maturity of all or any portion of the principal amount of your
Notes so that the maturity of your Notes will be extended to the date
occurring 366 calendar days from and including the th day of the next
succeeding month. However, if that 366th calendar day is not a Business Day,
the maturity of your Notes will be extended to the Business Day immediately
preceding such 366th Business Day. The election dates will be the th calendar
day of each month from July 2002 to June 2006 inclusive, whether or not any
such day is a Business Day.
You may elect to extend the maturity of all of your Notes or of any
portion thereof having a principal amount of $1,000 or any multiple of $1,000
in excess thereof. To make your election effective on any election date, you
must deliver a notice of election during the notice period for that election
date. The notice period for each election date will begin on the fifth
scheduled Business Day prior to the election date and end on the election
date; however, if that election date is not a Business Day, the notice period
will be extended to the following Business Day. Your notice of election must
be delivered to the Trustee for the Notes, through the normal clearing system
channels described in more detail below, no later than the close of business
in New York City time on the last Business Day in the notice period relating
to the applicable election date. Upon delivery to the Trustee of a notice of
election to extend the maturity of the Notes or any portion thereof during any
notice period, that election will be revocable during each day of such notice
period until 12:00 noon, New York City time, on the last Business Day in the
notice period relating to the applicable election date, at which time such
notice will become irrevocable.
If, with respect to any election date, you do not make an election to
extend the maturity of all or any portion of the principal amount of your
Notes, the principal amount of the Notes for which you have failed to make
such an election will become due and payable on the Initial Stated Maturity
Date, or any later date to which the maturity of your Notes has previously
been extended. The principal amount of the Notes for which such election is
not exercised will be represented by a note issued on the last Business Day of
the applicable notice period. The note so issued will have the same terms as
the Notes, except that it will not be extendible, will have a separate CUSIP
number and its maturity date will be the date that is 366 calendar days from
and including such election date or, if such 366th calendar day is not a
Business Day, the immediately preceding Business Day. The failure to elect to
extend the maturity of all or any portion of the Notes will be irrevocable and
will be binding upon any subsequent holder of such Notes.
The Notes will bear interest from the Original Issue Date until the
principal amount thereof is paid or made available for payment at a rate
determined for each Interest Reset Period by reference to the Interest Rate
Basis, based on the Index Maturity, plus the Spread applicable for the
relevant Interest Reset Date. We describe how floating rates are determined
and calculated in the section called "Interest-Floating Rate Notes" in the
accompanying prospectus supplement, subject to and as modified by the
provisions described below.
The Notes will be issued in registered global form and will remain on
deposit with the Depositary for the Notes. Therefore, you must exercise the
option to extend the maturity of your Notes through the Depositary. To ensure
that the Depositary will receive timely notice of your election to extend the
maturity of all or a portion of your Notes, so that it can deliver notice of
your election to the Trustee prior to the close of business in New York City
time on the last Business Day in the notice period, you must instruct the
direct or indirect participant through which you hold an interest in the Notes
to notify the Depositary of your election to extend the maturity of your Notes
in accordance with the then applicable operating procedures of the Depositary.
The Depositary must receive any notice of election from its participants
no later than 12:00 noon (New York City time) on the last Business Day in the
notice period for any election date. Different firms have different deadlines
for accepting instructions from their customers. You should consult the direct
or indirect participant through which you hold an interest in the Notes to
ascertain the deadline for ensuring that timely notice will be delivered to
the Depositary. If the election date is not a Business Day, notice of your
election to extend the maturity date of your Notes must be delivered to the
Depositary by its participants no later than 12:00 noon (New York City time)
on the first Business Day following the election date.
The Notes will initially be limited to $ in aggregate
principal amount. We may create and issue additional floating rate notes with
the same terms as the Notes so that such additional floating rate notes will
be combined with this initial issuance of Notes.
CAPITALIZED TERMS USED IN THIS PRICING SUPPLEMENT WHICH ARE DEFINED IN THE
PROSPECTUS SUPPLEMENT SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE
PROSPECTUS SUPPLEMENT.
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Original Issue Date: June , 2002
Initial Stated Maturity Date: July , 2003, or if such day is not a
Business Day, the immediately preceding
Business Day.
Final Stated Maturity Date: July , 2007, or if such day is not a
Business Day, the immediately preceding
Business Day.
Principal Amount:
Interest Calculation: |X| Regular Floating Rate
|_| Inverse Floating Rate
|_| Floating Rate/Fixed Interest Rate
Day Count Convention: |X| Actual/360
|_| 30/360
|_| Actual/Actual
Interest Rate Basis: |X| LIBOR |_| Commercial Paper Rate
|_| CMT Rate |_| Eleventh District Cost of Funds Rate
|_| Prime Rate |_| CD Rate
|_| Federal Funds Rate |_| Other (See Attached)
|_| Treasury Rate
Designated CMT Page Designated LIBOR Page:
CMT Moneyline Telerate Page: LIBOR Moneyline Telerate Page: 3750
LIBOR Reuters Page:
Spread: The table below indicates the applicable
Spread for the Interest Reset Dates
occurring during each of the indicated
periods.
For Interest Reset Dates occurring: Spread:
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From the Original Issue Date
to and including June 2003 Plus %
From and including July 2003 to
and including June 2004 Plus %
From and including July 2004 to
and including June 2005 Plus %
From and including July 2005 to
and including June 2006 Plus %
From and including July 2006 to
and including June 2007 Plus %
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Spread Multiplier: N/A
Index Maturity: One Month
LIBOR Currency: U.S. Dollars
Maximum Interest Rate: N/A
Minimum Interest Rate: N/A
Interest Payment Period: Monthly. See also "Interest Payment Dates."
Interest Payment Dates: The th day of each month, commencing
July , 2002. The final interest payment
date for any Notes maturing prior to the
Final Stated Maturity Date will be the
relevant maturity date, and interest for
the final interest payment period will
accrue from and including the interest
payment date in the month immediately
preceding such relevant maturity date to
but excluding the maturity date.
Initial Interest Rate: Calculated as if the Original Issue Date
was an Interest Reset Date.
Initial Interest Reset Date: July , 2002.
Interest Reset Dates: The th day of each month, commencing
July , 2002.
Interest Reset Periods: The first interest reset period will be the
period from and including July , 2002 to
but excluding the immediately succeeding
Interest Reset Date. Thereafter, the
interest reset periods will be the periods
from and including an Interest Reset Date
to but excluding the immediately
succeeding Interest Reset Date; provided
that the final interest reset period for
any Notes maturing prior to the Final
Stated Maturity Date will be the period
from and including the Interest Reset Date
in the month immediately preceding the
relevant maturity date of such Notes to
the relevant maturity date.
Interest Determination Dates: Two London Banking Days prior to the
Interest Reset Dates.
Election Dates and
Notice Periods: The election date shall be the th
calendar day of each month from July 2002
to June 2006 inclusive, whether or not such
day is a Business Day. The notice
period for each election date will begin on
the fifth scheduled Business Day
prior to the election date and end on the
election date; however, if that election
date is not a Business Day, the notice
period will be extended to the following
Business Day.
Form: The Notes are being issued in fully
registered book-entry form.
Repayment at the Option
of the Holder: The Notes cannot be repaid prior to the
relevant maturity date.
Redemption at the Option
of the Company: The Notes cannot be redeemed prior to the
relevant maturity date.
Original Issue Discount: N/A
Amortization Schedule: N/A
Calculation Agent: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Trustee: JPMorgan Chase Bank
CUSIP No.:
Dated: June , 2002
Plan of Distribution: The Notes are being purchased by Merrill
Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), ABN AMRO Incorporated and HSBC
Securities (USA) Inc. (collectively, the
"Underwriters"), as principal, in the
amounts set forth below at % of their
aggregate principal amount less an
underwriting discount equal to % of the
principal amount of the Notes. MLPF&S is
acting as the Lead Underwriter.
Principal Amount
Underwriter of the Notes
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated $
ABN AMRO Incorporated $
HSBC Securities (USA) Inc. $
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Total $
The Company has agreed to indemnify the Underwriters against and to
contribute toward certain liabilities, including liability under the
Securities Act of 1933, as amended.
United States Federal Taxation:
The following discussion is based on the opinion of Sidley Austin Brown &
Wood LLP, tax counsel to the Company ("Tax Counsel").
An election to extend the maturity of all or any portion of the principal
amount of the Notes in accordance with the procedures described above should
not be a taxable event for U.S. federal income tax purposes. Tax Counsel has
reached this conclusion based, in part, upon the Treasury regulations
governing original issue discount on debt instruments (the "OID Regulations").
Pursuant to Treasury regulations governing modifications to the terms of
debt instruments (the "Modification Regulations"), the exercise of an option
by a holder of a debt instrument to defer any scheduled payment of principal
is a taxable event if, based on all the facts and circumstances, such deferral
is considered material under the Modification Regulations. The Modification
Regulations do not specifically address the unique features of the Notes
(including their economic equivalence to a five-year debt instrument
containing put options). However, under the OID Regulations, for purposes of
determining the yield and maturity of a debt instrument that provides the
holder with an unconditional option or options, exercisable on one or more
dates during the term of the debt instrument, that, if exercised, require
payments to be made on the debt instrument under an alternative payment
schedule or schedules (e.g., an option to extend the maturity of the debt
instrument), a holder is deemed to exercise or not exercise an option or
combination of options in a
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manner that maximizes the yield on the debt instrument. Since the Spread will
periodically increase during the term of the Notes from an initial amount
equal to % to an amount equal to % for Interest Reset Dates occurring
from and including July , 2006 to and including June , 2007, under these
rules, as of the Original Issue Date, original holders of the Notes should be
deemed to elect to extend the maturity of all of the principal amount of the
Notes to the Final Stated Maturity Date in accordance with the procedures
described above. Accordingly, under these rules, the Final Stated Maturity Date
should be treated as the maturity date of the Notes. Although it is unclear
how the OID Regulations should apply in conjunction with the Modification
Regulations to the Notes, Tax Counsel is of the opinion that, based upon the
OID Regulations, an election to extend the maturity of all or any portion of
the principal amount of the Notes in accordance with the procedures described
above should not be a taxable event for U.S. federal income tax purposes. In
addition, the Notes should not constitute contingent payment debt instruments
that would be subject to certain Treasury regulations governing contingent
payment obligations (the "Contingent Payment Regulations").
Under the treatment described above, the Notes will be treated as having
been issued with de minimis original issue discount. Therefore, the Notes will
not constitute Discount Notes.
Prospective investors should note that no assurance can be given that the
IRS will accept, or that the courts will uphold, the characterization and the
tax treatment of the Notes described above. If the IRS were successful in
asserting that an election to extend the maturity of all or any portion of the
principal amount of the Notes is a taxable event for U.S. federal income tax
purposes, then you would be required to recognize any gain inherent in the
Notes at such time upon the exercise of such election. However, because the
Notes bear a variable interest rate that is reset monthly, the Company expects
that the amount of any gain recognized with respect to the Notes should not be
significant (but the amount of any such gain will depend upon all of the facts
and circumstances present at the time of the recognition event). Also, if the
IRS were successful in asserting that the Notes were subject to the Contingent
Payment Regulations, the timing and character of income thereon would be
affected. Among other things, you may be required to accrue original issue
discount income, subject to adjustments, at a "comparable yield" on the issue
price. Furthermore, any gain recognized with respect to the Notes would
generally be treated as ordinary income. However, because the Notes bear a
variable interest rate that is reset monthly, the Company expects that (i) the
accrual of income at the comparable yield should not significantly alter the
timing of income inclusion and (ii) the amount of any gain recognized with
respect to the Notes should not be significant (but the amount of any such
gain will depend upon all of the facts and circumstances present at the time
of the recognition event). The foregoing is a summary of certain of the
material U.S. federal income tax considerations applicable to an investment in
the Notes and is not to be construed as tax advice for investors. Prospective
investors should consult their tax advisor regarding the U.S. federal income
tax consequences of an investment in, and extending the maturity of, the
Notes.
Prospective investors should also consult the summary describing the
principal U.S. federal income tax consequences of the ownership and
disposition of the Notes contained in the section called "United States
Federal Income Taxation" in the accompanying Prospectus Supplement.
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