PRICING SUPPLEMENT DATED NOVEMBER 12, 2003
- ------------------------------------------
(To Prospectus Supplement and Prospectus dated June 3, 2003)
Pricing Supplement Number: 2339
MERRILL LYNCH & CO., INC.
Medium-Term Notes, Series B
Due Nine Months or More from Date of Issue
Protected Notes Linked to the Performance of the Global Equity Index Basket
due November 20, 2008
(the "Notes")
__________
The Notes, as further described below, have a five-year term and are
a U.S. dollar denominated investment linked to a basket of equity indices
designed to provide exposure to the performance of several equity markets
globally. The Notes are designed for investors who believe these equity
indices will, in the aggregate, appreciate during the term of the Notes. The
Notes are 100% principal protected, meaning that at maturity you will receive
no less than $1,000 per $1,000 principal amount of the Notes.
The Notes are part of a series of senior debt securities entitled
"Medium-Term Notes, Series B" as more fully described in the accompanying
Prospectus (which term includes the accompanying Prospectus Supplement).
Information included in this Pricing Supplement supercedes information in the
Prospectus to the extent it is different from the information included in the
Prospectus.
References in this Pricing Supplement to "ML&Co.", "we", "us" and
"our" are to Merrill Lynch & Co., Inc., and references to "MLPF&S" are to
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Investing in the Notes involves risks that are described in the "Risk
Factors" section of this Pricing Supplement and the accompanying Prospectus
Supplement.
Aggregate principal amount................... $2,500,000
Stated Maturity Date......................... November 20, 2008
Issue Price.................................. $1,000 per Note
Original Issue Date.......................... November 20, 2003
Amount Payable at Maturity................... At the Stated Maturity Date, for each $1,000 aggregate principal
amount of Notes that you own at maturity, you will receive a cash
payment (the "Redemption Amount") equal to:
(Ending Value - Starting Value)
$1,000 + (Participation Rate x $1,000 x -----------------------------
( Starting Value )
provided, however, you will not receive less than $1,000 per Note.
Participation Rate........................... The "Participation Rate" equals 79.25%. The Participation Rate
was set on November 12, 2003, the date the Notes were priced for
initial sale to the public (the "Pricing Date").
Starting Value............................... The "Starting Value" equals 100.
Ending Value................................. The "Ending Value" will be determined by the Calculation Agent (as
defined below) and will equal the average, arithmetic mean, of the
closing level of the Basket as determined by the Calculation
Agent, at its sole discretion, on each of the 24 Calculation Days
during the Calculation Period, as described herein.
The Basket................................... The Basket is comprised of the Standard & Poor's 500 Index ("S&P
500"), the Nasdaq-100 Index ("Nasdaq-100"), the Dow Jones
Nasdaq(R)100, Nasdaq-100 Index(R), and Nasdaq(R)are trade or service marks of The Nasdaq Stock Market, Inc. and are
licensed for use by Merrill Lynch & Co., Inc.
Standard & Poor's(R), Standard & Poor's 500(R), S&P 500(R), S&P(R)and 500 are trademarks of The McGraw-Hill Companies,
Inc. and have been licensed for use for certain purposes by Merrill Lynch Capital Services, and Merrill Lynch &
Co., Inc. is an authorized sublicensee. The Notes are not sponsored, endorsed, sold or promoted by Standard and
Poor's.
EURO STOXX 50 Index ("STOXX 50") and the Nikkei 225 Stock Average
("Nikkei 225") (each referred to individually as a "Basket
Component"). The level of the Basket was set to 100 on the
Pricing Date and each Basket Component was assigned a multiplier
which reflects the weighted contribution of each Basket Component
to the level of the Basket (each a "Multiplier"). The closing
level of the Basket will equal the sum of the products of the
closing value of each Basket Component on each Calculation Day (as
defined below) and the relevant Multiplier. For each Basket
Component, the symbol, the weight relative to the other Basket
Components, the closing value on the Pricing Date, the Multiplier
and the contribution to the Basket level are disclosed in the
chart below.
Closing Basket
Name Symbol Weight Value Multiplier Level
---- ------ ------ ------- ---------- -------
S&P 500 SPX 40 1,058.53 0.037788254 40.00
Nasdaq-100 NDX 20 1,443.52 0.013855021 20.00
STOXX 50 SX5E 20 2,627.15 0.007612812 20.00
Nikkei 225 NKY 20 10,337.67 0.001934672 20.00
Current information regarding the closing value of each Basket
Component is available from Standard & Poor's, the Nasdaq Stock
Market, Inc., STOXX Limited and the Nihon Keizai Shimbun, Inc.
as well as numerous market information services.
Please note that an investment in the Notes does not entitle
you to any ownership interest in the stocks of the companies
included in the Basket or the value of any dividends paid on
those stocks.
Business Day................................. "Business Day" means any day other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which commercial banks
are authorized or required by law, regulation or executive
order to close in The City of New York.
Basket Business Day.......................... "Basket Business Day" means a day on which each Basket Component
or any successor index is calculated and published.
Calculation Period........................... "Calculation Period" means the period from and including November
2006 to and including November 2008.
Calculation Day.............................. "Calculation Day" means the 12th of each month during the
Calculation Period or, if the 12th of any month is not a Basket
Business Day or a Market Disruption Event (as defined herein)
occurs or is continuing on such 12th day, the next scheduled
Basket Business Day immediately following the 12th regardless of
whether a Market Disruption Event occurs or is continuing.
CUSIP number................................. 59018YSC6
ISIN......................................... US59018YSC60
Form of Notes................................ Book-entry.
Denominations................................ We will issue and sell the Notes in denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
Trustee...................................... JPMorgan Chase Bank.
Calculation Agent............................ Merrill Lynch, Pierce, Fenner & Smith Incorporated.
All percentages resulting from any calculation on the Notes will be
PS-2
rounded to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded
upwards, e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655). All dollar amounts used in or resulting
from this calculation will be rounded to the nearest cent with
one-half cent being rounded upwards.
Underwriting Discount........................ 2% of the aggregate principal amount. MLPF&S may offer the Notes
through an affiliate to one or more dealers for resale to
investors and may allow a discount or pay a commission of up to
2% to such dealers.
Proceeds to ML&Co............................ 98% of the aggregate principal amount.
PS-3
RISK FACTORS
Your investment in the Notes will involve certain risks. You should
consider carefully the following discussion of risks before you decide that an
investment in the Notes is suitable for you.
You may not earn a return on your investment
You should be aware that if the Ending Value does not exceed the
Starting Value at maturity, the Redemption Amount will equal the principal
amount of the Notes. This will be true even if the level of the Basket was
higher than the Starting Value at some time during the life of the Notes but
the average of the closing levels of the Basket determined on the specified
days in the Calculation Period falls below, or is not sufficiently above, the
Starting Value. In such an event, we will pay you only the principal amount of
your Notes.
Your yield may be lower than the yield on other standard debt securities of
comparable maturity
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
ML&Co. with the same stated maturity date. Your investment may not reflect the
full opportunity cost to you when you take into account factors that affect
the time value of money.
Your return will not reflect the return of owning the stocks included in the
Basket Components
The Calculation Agent calculates the level of the Basket by reference
to the values of four major international market indices that reflect the
prices of the common stocks included in those indices without taking into
consideration the value of dividends paid on those stocks. The return on your
Notes will not reflect the return you would realize if you actually owned all
of the stocks underlying each of the Basket Components and received the
dividends paid on those stocks because the value of the Basket Components are
calculated by reference to the prices of the stocks included in the Basket
Components without taking into consideration the value of any dividends paid
on those stocks.
Your return may be affected by factors affecting international securities
markets
The Basket Components that comprise the Basket measure the value of
the equity securities of companies listed on various U.S., European and Asian
exchanges. The return on the Notes will be affected by factors affecting the
value of securities in these markets. The European and Asian securities
markets may be more volatile than U.S. or other securities markets and may be
affected by market developments in different ways than U.S. or other
securities markets. Direct or indirect government intervention to stabilize a
particular non-U.S. securities market and cross-shareholdings in European and
Asian companies on these markets may affect prices and the volume of trading
on those markets. Also, there is generally less publicly available information
about non-U.S. companies than about U.S. companies that are subject to the
reporting requirements of the Securities and Exchange Commission.
Additionally, non-U.S. companies are subject to accounting, auditing and
financial reporting standards and requirements that differ from those
applicable to U.S. reporting companies.
The prices and performance of securities of companies in Europe and
Asia may be affected by political, economic, financial and social factors in
those regions. In addition, recent or future changes in a country's
government, economic and fiscal policies, the possible imposition of, or
changes in, currency exchange laws or other laws or restrictions applicable to
non-U.S. companies or investments in non-U.S. equity securities, and possible
fluctuations in the rate of exchange between currencies are factors that could
negatively affect the international securities markets. Moreover, the relevant
European and Asian economies may differ favorably or unfavorably from the U.S.
economy in economic factors such as growth of gross national product, rate of
inflation, capital reinvestment, resources and self-sufficiency. Because some
of the Basket Components comprising the Basket have a greater weighting than
others in calculating the level of the Basket, fluctuations in the securities
markets that those Basket Components measure will have a greater relative
effect on the level of the Basket than will fluctuations in securities markets
measured by Basket Components with a lesser weighting.
PS-4
Your return may be affected by currency exchange rates
Although the stocks included in the Basket Components may be traded
in currencies other than U.S. dollars and the Notes are denominated in U.S.
dollars, we will not adjust the amount payable at maturity for currency
exchange rates in effect at the maturity of the Notes. Any amount in addition
to the principal amount of each unit payable to you at maturity is based
solely upon the percentage increase in the Basket. Changes in exchange rates,
however, may reflect changes in the relevant European and Asian economies
which in turn may affect the value of the Basket Components, the Basket and
the Notes.
The Component Publishers have no obligations relating to the Notes
The publishers that calculate and publish each of the Basket
Components (the "Component Publishers") have no obligations relating to the
Notes or amounts to be paid to you, including any obligation to take the needs
of ML&Co. or of beneficial owners of the Notes into consideration for any
reason. The Component Publishers will not receive any of the proceeds of the
offering of the Notes and are not responsible for, and has not participated
in, the offering of the Notes and are not responsible for, and will not
participate in, the determination or calculation of the amount receivable by
beneficial owners of the Notes.
The Component Publishers are under no obligation to continue the
calculation and dissemination of any of the Basket Components. The Notes are
not sponsored, endorsed, sold or promoted by the Component Publishers. No
inference should be drawn from the information contained in this Pricing
Supplement that the Component Publishers make any representation or warranty,
implied or express, to ML&Co., the holder of the Notes or any member of the
public regarding the advisability of investing in securities generally or in
the Notes in particular or the ability of the Basket Components or the Basket
to track general stock market performance.
ML&Co. does not make any representation to any purchasers of the
Notes regarding any matters whatsoever relating to the companies included in
the Basket Components. Any prospective purchaser of the Notes should undertake
an independent investigation of the companies included in the Basket
Components as in its judgment is appropriate to make an informed decision
regarding an investment in the Notes. The composition of the companies
included in the Basket Components does not reflect any investment or sell
recommendations of ML&Co. or its affiliates.
A trading market for the Notes is not expected to develop
The Notes will not be listed on any securities exchange and we do not
expect a trading market for the Notes to develop. Although our affiliate,
MLPF&S has indicated that it expects to bid for Notes offered for sale to it
by Note holders, it is not required to do so and may cease making such bids at
any time. The limited trading market for your Notes may affect the price that
you receive for your Notes if you do not wish to hold your investment until
maturity.
Many factors affect the value of the Notes; these factors interrelate in
complex ways and the effect of any one factor may offset or magnify the effect
of another factor
The value of the Notes will be affected by factors that interrelate
in complex ways. It is important for you to understand that the effect of one
factor may offset the increase in the value of the Notes caused by another
factor and that the effect of one factor may exacerbate the decrease in the
value of the Notes caused by another factor. For example, a change in the
volatility of the Basket may offset some or all of any increase in the value
of the Notes attributable to another factor, such as an increase in the level
of the Basket. In addition, an increase in interest rates may offset other
factors that would otherwise increase the level of the Basket, and therefore,
may decrease the value of the Notes. The following paragraphs describe the
expected impact on the value of the Notes given a change in a specific factor,
assuming all other conditions remain constant.
The level of the Basket is expected to affect the value of the Notes.
We expect that the market value of the Notes will depend substantially on the
amount by which the Basket exceeds the Starting Value. If you choose to sell
your Notes when the level of the Basket exceeds the Starting Value, you may
receive substantially less than the
PS-5
amount that would be payable at maturity based on that level because of the
expectation that the Basket will continue to fluctuate until the Ending Value
is determined. If you choose to sell your Notes when the level of the Basket
is below, or not sufficiently above, the Starting Value, you may receive less
than the $1,000 principal amount per Note.
Changes in the volatility of the Basket Components are expected to
affect the value of the Notes. Volatility is the term used to describe the
size and frequency of price and/or market fluctuations. If the volatility of
the Basket increases or decreases, the value of the Notes may be adversely
affected.
Changes in the levels of interest rates are expected to affect the
value of the Notes. We expect that changes in interest rates, even if they do
not affect the level of the Basket as described above, may affect the value of
the Notes and, depending upon other factors (such as the then current level of
the Basket, the magnitude of the changes in interest rates and the time
remaining to the maturity of the Notes), such changes may be adverse to
holders of the Notes.
As the time remaining to maturity of the Notes decreases, the "time
premium or discount" associated with the Notes will decrease. We anticipate
that before their maturity, the Notes may have a value above or below that
which would be expected based on the level of interest rates and the level of
the Basket. This difference will reflect a "time premium or discount" due to
expectations concerning the level of the Basket during the period before the
stated maturity of the Notes. As the time remaining to maturity decreases, any
discount or premium attributed to the value of the Notes will diminish,
increasing or decreasing the value of the Notes.
Changes in dividend yields of the stocks included in the Basket
Components are expected to affect the value of the Notes. In general, if
dividend yields on the stocks included in the Basket Components increase, we
expect that the value of the Notes will decrease and, conversely, if dividend
yields on these stocks decrease, we expect that the value of the Notes will
increase.
Changes in our credit ratings may affect the value of the Notes. 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
value of the Notes. However, because the return on your Notes is dependent
upon factors in addition to our ability to pay our obligations under the
Notes, such as the percentage increase in the level of the Basket at maturity,
an improvement in our credit ratings will not reduce the other investment
risks related to the Notes.
In general, assuming all relevant factors are held constant, we
expect that the effect on the value of the Notes of a given change in some of
the factors listed above will be less if it occurs later in the term of the
Notes than if it occurs earlier in the term of the Notes.
Amounts payable on the Notes may be limited by state law
New York State law governs the 1993 Indenture under which the Notes
will be issued. New York has usury laws that limit the amount of interest that
can be charged and paid on loans, which includes debt securities like the
Notes. Under present New York law, the maximum rate of interest is 25% per
annum on a simple interest basis. This limit may not apply to debt securities
in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state
or Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the holders of the Notes, to the
extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
Purchases and sales by us and our affiliates may affect your return
We and our affiliates may from time to time buy or sell the stocks
underlying the Basket Components or futures or options contracts on the Basket
Components for our own accounts for business reasons and expect to enter into
these transactions in connection with hedging our obligations under the Notes.
These transactions could affect
PS-6
the price of these stocks and, in turn, the value of the Basket Components and
the level of the Basket in a manner that could be adverse to your investment
in the Notes.
Potential conflicts of interest could arise
Our subsidiary, MLPF&S, is our agent for the purposes of calculating
any and all amounts payable on the Notes. Under certain circumstances, MLPF&S'
role as our subsidiary and its responsibilities as Calculation Agent for the
Notes could give rise to conflicts of interest. These conflicts could occur,
for instance, in connection with the determination of the closing value of a
Basket Component upon the occurrence of a Market Disruption Event, or in
connection with its determination as to whether the value of the Basket
Components can be calculated on a particular Basket Business Day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of any Basket Component. See the sections entitled "Adjustments
to the Basket Components; Market Disruption Events" and "Discontinuance of the
Basket Components" in this Pricing Supplement. MLPF&S is required to carry out
its duties as Calculation Agent in good faith and using its reasonable
judgment. However, you should be aware that because we control MLPF&S,
potential conflicts of interest could arise.
We have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the Notes. This subsidiary expects to make a profit in connection
with this arrangement. We did not seek competitive bids for this arrangement
from unaffiliated parties.
ML&Co. or its affiliates may presently or from time to time engage in
business with one or more of the companies included in the Basket Components
including extending loans to, or making equity investments in, the companies
included in the Basket Components or providing advisory services to the
companies included in the Basket Components, including merger and acquisition
advisory services. In the course of business, ML&Co. or its affiliates may
acquire non-public information relating to the companies included in the
Basket Components and, in addition, one or more affiliates of ML&Co. may
publish research reports about the companies included in the Basket
Components. ML&Co. does not make any representation to any purchasers of the
Notes regarding any matters whatsoever relating to the companies included in
the Basket Components. Any prospective purchaser of the Notes should undertake
an independent investigation of the companies included in the Basket
Components as in its judgment is appropriate to make an informed decision
regarding an investment in the Notes. The composition of the companies
included in the Basket Components does not reflect any investment or sell
recommendations of ML&Co. or its affiliates.
Tax consequences
You should consider the tax consequences of investing in the Notes.
See the section entitled "United States Federal Income Taxation" in this
Pricing Supplement.
PS-7
HYPOTHETICAL RETURNS AT MATURITY
The following table illustrates, for a range of hypothetical Ending
Values of the Basket during the Calculation Period:
o the percentage change from the Starting Value to the
hypothetical Ending Value;
o the total amount payable at maturity for each $1,000 principal
amount of the Notes;
o the total rate of return to beneficial owners of the Notes,
assuming the Notes are held to the Stated Maturity Date;
o the pretax annualized rate of return to beneficial owners of
Notes, assuming the Notes are held to the Stated Maturity Date;
and
o the pretax annualized rate of return of an investment in the
stocks included in the Basket Components comprising the Basket,
which includes an assumed aggregate dividend yield of 1.43% per
annum, as more fully described below.
Percentage
Change
Hypothetical From the
Ending Hypothetical Total Amount Total
Value Starting Payable at Rate of Pretax Annualized
during Value to the Maturity per Return Pretax Annualized Rate of Return of
Calculation Hypothetical Unit of the on the Rate of Return on Stocks included in
Period Ending Value Notes Notes the Notes(1) the Basket (1)(2)
- ------------------- ----------------- ----------------- ------------ ------------------- ---------------------
20.00 -80.00% $1,000.00 0.00% 0.00% -25.25%
40.00 -60.00% $1,000.00 0.00% 0.00% -15.09%
50.00 -50.00% $1,000.00 0.00% 0.00% -11.42%
60.00 -40.00% $1,000.00 0.00% 0.00% -8.26%
70.00 -30.00% $1,000.00 0.00% 0.00% -5.47%
80.00 -20.00% $1,000.00 0.00% 0.00% -2.96%
90.00 -10.00% $1,000.00 0.00% 0.00% -0.67%
100.00(3) 0.00% $1,000.00 0.00% 0.00% 1.44%
110.00 10.00% $1,079.25 7.93% 1.53% 3.39%
120.00 20.00% $1,158.50 15.85% 2.96% 5.22%
130.00 30.00% $1,237.50 23.78% 4.31% 6.94%
140.00 40.00% $1,317.00 31.70% 5.58% 8.56%
150.00 50.00% $1,396.25 39.63% 6.78% 10.11%
160.00 60.00% $1,475.50 47.55% 7.92% 11.57%
180.00 80.00% $1,634.00 63.40% 10.05% 14.32%
_________
(1) The annualized rate of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks included in the Basket
Components with the allocation of this amount reflecting the relative
weights of these stocks in each of the Basket Components as of the
Pricing Date;
(b) a percentage change in the aggregate price of the stocks comprising
each of the Basket Components, and consequently a percentage change in
each of the Basket Components, that equals the percentage change in the
Basket from the Starting Value to the relevant hypothetical Ending
Value;
(c) a constant dividend yield of 1.43% per annum (1.61% for S&P 500,
0.19% per annum for Nasdaq-100, 2.84% per annum for STOXX 50 and 0.88%
per annum for Nikkei 225), paid quarterly from the date of initial
delivery of the Notes, applied to the value of the Basket Component at
the end of each quarter assuming this value increases or decreases
linearly from the Starting Value to the applicable hypothetical Ending
Value.
(d) no transaction fees or expenses in connection with purchasing and
holding stocks included in each Basket Component;
(e) an investment term from November 20, 2003 to November 20, 2008, and
(f) a final level of the Basket equal to the hypothetical Ending Value.
(3) This is the Starting Value of the Basket.
PS-8
The above figures are for purposes of illustration only. The actual
amount receivable by you at maturity and the resulting total and pretax
annualized rate of return will depend on the actual Ending Value determined by
the Calculation Agent as described in this Pricing Supplement.
THE BASKET
The Calculation Agent will calculate the closing level of the Basket
on each Calculation Day. The Calculation Agent generally calculates the
closing level of the Basket based on the most recently reported closing values
of the Basket Components as determined on each Calculation Day.
Determination of the Multiplier for each Basket Component
The weighting of each Basket Component was set on November 12, 2003,
and the Multiplier for each Basket Component was then calculated and equaled:
o the weighting for the Basket Component, divided by
o the most recently available value of the Basket Component.
The Multipliers were calculated in this way so that the Basket would
equal 100.00 on November 12, 2003. The Calculation Agent may adjust the
Multiplier of any Basket Component in the event of a significant change in how
that Basket Component is calculated, as described below.
Computation of the Basket
The Calculation Agent calculates the closing level of the Basket by
summing the products of the most recently available closing value of each
Basket Component on a Calculation Day and the Multiplier applicable to each
Basket Component. Because some Basket Components are based on stocks traded on
exchanges in Europe and Asia, once the applicable exchanges close and the
values of the Basket Components become fixed until these exchanges reopen, the
value of such Basket Component will be fixed for calculation purposes. If a
scheduled Calculation Day is not a Basket Business Day or a Market Disruption
Event (as defined below) occurs or is continuing on such day, the next
scheduled Basket Business Day immediately following such day will be the
Calculation Day, regardless of whether a Market Disruption Event occurs or is
continuing on such day. All determinations made by the Calculation Agent will
be at the sole discretion of the Calculation Agent and, absent manifest error,
will be conclusive for all purposes and binding on ML&Co. and beneficial
owners of the Notes.
Basket Components
For each of the Basket Components, the following table sets forth the
name of the Basket Component, the symbol, the weight relative to the other
Basket Components, the closing value on the Pricing Date, the Multiplier and
the contribution to the Basket level as of the Pricing Date:
Closing Basket
Basket Component Symbol Weight Value Multiplier Level
---------------- ---------- --------- ------------- -------------- -------
S&P 500 Index.................................. SPX 40 1,058.53 0.037788254 40.00
Nasdaq-100 Index............................... NDX 20 1,443.52 0.013855021 20.00
Dow Jones EURO STOXX 50 Index.................. SX5E 20 2,627.15 0.007612812 20.00
Nikkei 225 Stock Average....................... NKY 20 10,337.67 0.001934672 20.00
Total................................. 100.00
The following is certain information concerning each Basket
Component. All disclosure contained in this Pricing Supplement regarding the
Basket Components is derived from publicly available information.
PS-9
S&P 500 Index
Description of S&P 500: The S&P 500 is intended to provide an
indication of the pattern of common stock price movement of the 100 common
stocks.
Publisher: Standard & Poor's
Required Disclosure: The Notes are not sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation or warranty, express or implied,
to the holders of the Notes or any member of the public regarding the
advisability of investing in securities generally or in the Notes particularly
or the ability of the S&P 500 to track general stock market performance. S&P's
only relationship to Merrill Lynch Capital Services, Inc. and ML&Co. (other
than transactions entered into in the ordinary course of business) is the
licensing of certain servicemarks and trade names of S&P and of the S&P 500
which is determined, composed and calculated by S&P without regard to ML&Co.
or the Notes. S&P has no obligation to take the needs of ML&Co. or the holders
of the Notes into consideration in determining, composing or calculating the
S&P 500. S&P is not responsible for and has not participated in the
determination of the timing of the sale of the Notes, prices at which the
Notes are to initially be sold, or quantities of the Notes to be issued or in
the determination or calculation of the equation by which the Notes are to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Notes.
The Nasdaq-100 Index
Description of Nasdaq-100: The NASDAQ-100 Index includes 100 of the
largest domestic and international non-financial companies listed on The
NASDAQ Stock Market based on market capitalization. The Index reflects
companies across major industry groups including computer hardware and
software, telecommunications, retail/wholesale trade and biotechnology. It
does not contain financial companies including investment companies.
Publisher: The Nasdaq Stock Market, Inc.
Required Disclosure: The Notes are not sponsored, endorsed, sold or
promoted by, The Nasdaq Stock Market, Inc. (including its affiliates) (the
Nasdaq, with its affiliates, are referred to as the "Corporations"). The
Corporations have not passed on the legality or suitability of, or the
accuracy or adequacy of descriptions and disclosures relating to, the Notes.
The Corporations make no representation or warranty, express or implied to the
owners of the Notes or any member of the public regarding the advisability of
investing in securities generally or in the Notes particularly, or the ability
of the NASDAQ-100 Index(R) to track general stock market performance. The
Corporations' only relationship to ML&Co. is in the licensing of the
NASDAQ-100(R), NASDAQ-100 Index(R), and Nasdaq(R) trademarks or service marks,
and certain trade names of the Corporations and the use of the NASDAQ-100
Index(R) which is determined, composed and calculated by Nasdaq without regard
to ML&Co. or the Notes. Nasdaq has no obligation to take the needs of ML&Co.
or the owners of the Notes into consideration in determining, composing or
calculating the NASDAQ-100 Index(R). The Corporations are not responsible for
and have not participated in the determination of the timing of, prices at, or
quantities of the Notes to be issued or in the determination or calculation of
the equation by which the Notes are to be converted into cash. The
Corporations have no liability in connection with the administration,
marketing or trading of the Notes.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE NASDAQ-100 INDEX(R) OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY ML&CO., OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE NASDAQ-100 INDEX(R) OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE NASDAQ-100 INDEX(R) OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY
LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
PS-10
The Dow Jones EURO STOXX 50 Index
Description of STOXX 50: The STOXX 50 is composed of 50 component
stocks of market sector leaders from within the Dow Jones Euro STOXX Index,
which includes stocks selected from the Eurozone.
Publisher: STOXX Limited
"STOXX" is the registered trademark of STOXX Limited.
Nikkei 225 Stock Average
Description of Nikkei 225: The Nikkei 225 is intended to provide an
indication of the pattern of common stock price movement of the 225 most
actively traded common stocks on the Tokyo Stock Exchange. The Nikkei 225 is a
modified price-weighted index which means that an underlying stock's weight in
the Nikkei 225 is based on its price per share rather than the total market
capitalization of the issuer.
Publisher: Nihon Keizai Shimbun, Inc. ("NKS")
Required Disclosure: NKS is under no obligation to continue the
calculation and dissemination of the Nikkei 225. The Notes are not sponsored,
endorsed, sold or promoted by NKS. No inference should be drawn from the
information contained in this Pricing Supplement that NKS makes any
representation or warranty, implied or express, to ML&Co., the holders of the
Notes or any member of the public regarding the advisability of investing in
securities generally or in the Notes in particular or the ability of the
Nikkei 225 to track general stock market performance. NKS has no obligation to
take the needs of ML&Co. or the holders of the Notes into consideration in
determining, composing or calculating the Nikkei 225. NKS is not responsible
for, and has not participated in the determination of the timing of, prices
for, or quantities of, the Notes to be issued or in the determination or
calculation of the equation by which the Notes are to be settled in cash. NKS
has no obligation or liability in connection with the administration,
marketing or trading of the Notes.
Each Component Publisher will add or delete stocks due to events such
as the bankruptcy or merger of the issuer of a stock. The Component Publisher
may reevaluate the composition of the stocks underlying the Basket Component
at specified intervals to assure that they still meet the selection criteria
or any ongoing eligibility criteria.
The Component Publisher is under no obligation to continue the
calculation and dissemination of that Basket Component and that Component
Publisher may change the method by which that Basket Component is calculated.
The Component Publishers are under no obligation to take the needs of ML&Co.
or the holders of the Notes into consideration in determining, composing or
calculating the Basket Components.
Adjustments to the Basket Components; Market Disruption Events
If at any time a Component Publisher changes its method of
calculating a Basket Component, or the value of a Basket Component changes, in
any material respect, or if a Basket Component is in any other way modified so
that such Basket Component does not, in the opinion of the Calculation Agent,
fairly represent the value of the Basket Component had any changes or
modifications not been made, then, from and after that time, the Calculation
Agent shall, at the close of business in New York, New York, on each date that
the closing level of the Basket is to be calculated, make any adjustments as,
in the good faith judgment of the Calculation Agent, may be necessary in order
to arrive at a calculation of a value of a stock index comparable to the
relevant Basket Component as if no changes or modifications had been made, and
calculate the closing level with reference to the Basket Component, as so
adjusted. Accordingly, if the method of calculating a Basket Component is
modified so that the value of such Basket Component is a fraction or a
multiple of what it would have been if it had not been modified, e.g., due to
a split, then the Calculation Agent shall adjust the Basket Component in order
to arrive at a value of the Basket Component as if it had not been modified,
e.g., as if a split had not occurred.
"Market Disruption Event" means the occurrence or existence of any
suspension of, or limitation imposed on, trading in securities comprising any
Basket Component, by reason of movements in price exceeding
PS-11
limits permitted by the relevant exchange or otherwise, during the one-half
hour period that ends at the regular official weekday time at which trading on
the Component Exchange (defined below) related to that Basket Component
occurs, on:
(A) the Component Exchange in securities that
comprise 20% or more of the value of that Basket Component; or
(B) any exchanges on which futures or options on that
Basket Component or the securities comprising such Basket Component
are traded in those options or futures if, in the determination of
the Calculation Agent, that suspension or limitation is material.
For the purpose of the above definition:
(1) a limitation on the hours and number of days of
trading will not constitute a Market Disruption Event if it results
from an announced change in the regular hours of the relevant
exchange; and
(2) a limitation on trading imposed during the course
of a day by reason of movements in price otherwise exceeding levels
permitted by the relevant exchange will constitute a Market
Disruption Event.
"Component Exchange" means, with respect to any Basket Component, the
principal exchange on which the shares comprising that Basket Component are
traded.
Discontinuance of a Basket Component
If a Component Publisher discontinues publication of a Basket
Component and the Component Publisher or another entity publishes a successor
or substitute index that the Calculation Agent determines, in its sole
discretion, to be comparable to such Basket Component (a "successor index"),
then, upon the Calculation Agent's notification of any determination to the
trustee and ML&Co., the Calculation Agent will substitute the successor index
as calculated by the relevant Component Publisher or any other entity for the
Basket Component and calculate the closing level of the Basket as described
above under "Amount Payable at Maturity". Upon any selection by the
Calculation Agent of a successor index, ML&Co. shall cause notice to be given
to holders of the Notes.
In the event that a Component Publisher discontinues publication of
the relevant Basket Component and:
o the Calculation Agent does not select a successor index; or
o the successor index is no longer published on any of the
Calculation Days,
the Calculation Agent will compute a substitute value for such Basket
Component in accordance with the procedures last used to calculate that Basket
Component before any discontinuance. If a successor index is selected or the
Calculation Agent calculates a value as a substitute for the Basket Component
as described below, the successor index or value will be used as a substitute
for the Basket Component for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If a Component Publisher discontinues publication of a Basket
Component before the period during which the Ending Value is to be determined,
and the Calculation Agent determines that no successor index is available at
that time, then on each Calculation Day until the earlier to occur of:
o the determination of the Ending Value and
o a determination by the Calculation Agent that a successor index
is available,
the Calculation Agent will determine the value that would be used in computing
the closing level of the Basket as described in the preceding paragraph as if
that day were a Calculation Day. The Calculation Agent will cause notice
PS-12
of each value to be published not less often than once each month in The Wall
Street Journal or another newspaper of general circulation, and arrange for
information with respect to these values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of any Basket Component may adversely affect the value of the
Notes.
Events of Default and Acceleration
In case an Event of Default with respect to any Notes has occurred
and is continuing, the amount payable to a beneficial owner of a Note upon any
acceleration permitted by the Notes, with respect to each $1,000 principal
amount of the Notes, will be equal to (i) $1,000 plus (ii) the product of (a)
the Participation Rate times (b) $1,000 times (c) the percentage increase in
the Ending Value over the Starting Value, if any, calculated as though the
date of early repayment was the stated maturity date of the Notes; provided,
however, the Ending Value equals the average of the closing levels determined
on the five Basket Business Days immediately preceding the date of the
acceleration, regardless of whether a Market Disruption Event occurs or is
continuing, plus the closing level determined on each of the Calculations
Days, if any, prior to such date of acceleration. See "Amount Payable at
Maturity" in this Pricing Supplement. If a bankruptcy proceeding is commenced
in respect of ML&Co., the claim of the beneficial owner of a Note may be
limited, under Section 502(b)(2) of Title 11 of the United States Code, to the
principal amount of the Note plus an additional amount of contingent interest
calculated as though the date of the commencement of the proceeding was the
maturity date of the Notes.
In case of default in payment at the maturity date of the Notes,
whether at their stated maturity or upon acceleration, from and after the
maturity date the Notes will bear interest, payable upon demand of their
beneficial owners, at the rate of 1.25% per annum to the extent that payment
of any interest is legally enforceable on the unpaid amount due and payable on
that date in accordance with the terms of the Notes to the date payment of
that amount has been made or duly provided for.
Hypothetical Historical Data on the Basket
The following table sets forth the hypothetical level of the Basket
at the end of each month (the "Hypothetical Historical Month-End Closing
Level"), in the period from January 1997 through October 2003 calculated as if
the Basket had existed during that period. The historical values of the Basket
Components used to calculate this hypothetical historical data can be found in
Annex A attached hereto. All hypothetical historical data presented in the
following table were calculated by the calculation agent. The closing levels
have been calculated hypothetically on the same basis that the Basket is
currently calculated. The Hypothetical Historical Month-End Closing Level was
set to 100 on November 12, 2003 and the Multipliers listed above were used to
provide an illustration of past movements of the Hypothetical Historical
Month-End Closing Level only. We have provided this historical information to
help you evaluate the behavior of the Basket in various economic environments;
however, these hypothetical historical data on the Basket are not necessarily
indicative of the future performance of the Basket or what the value of the
Notes may be. Any historical upward or downward trend in the level of the
Basket during any period set forth below is not any indication that the Basket
is more or less likely to increase or decrease at any time during the term of
the Notes.
PS-13
Hypothetical Historical Levels of the Basket
- -----------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003
------- -------- ---------- ----------- ---------- --------- -----------
January 93.205 104.426 132.883 175.622 150.716 111.469 79.206
February 93.382 110.671 127.790 188.823 131.099 108.732 78.252
March 90.755 114.526 135.533 196.871 122.654 113.623 77.096
April 95.931 113.324 140.974 182.313 134.324 107.833 82.818
May 101.073 113.616 136.948 170.929 131.747 105.906 87.046
June 104.834 117.937 146.451 179.969 129.025 96.375 89.466
July 111.097 119.615 143.931 173.503 123.190 87.336 92.798
August 102.468 101.939 145.532 185.864 112.428 86.909 96.148
September 105.256 103.343 143.830 171.638 99.531 77.278 93.709
October 98.279 109.143 152.621 166.122 105.494 83.075 99.361
November 101.295 118.554 162.337 149.224 113.717 88.900
December 99.195 124.113 180.861 145.337 114.606 81.650
The following graph sets forth the hypothetical historical
performance of the Basket at the end of each month from January 1997 through
October 2003. Past movements of the Basket are not necessarily indicative of
the future closing levels of the Basket. On November 12, 2003 the closing
level of the Basket was 100.00.
Hypothetical Historical Performance of the Basket
[GRAPHIC OMITTED]
[The graph appearing here sets forth the hypothetical historical performance
of the Basket at the end of each month from January 1997 through October 2003.
The horizontal axis shows months from January 1997 through October 2003. The
vertical axis shows numbers 0 to 250 in increments of 50.]
This graph is for historical information only and should not be used
or interpreted as a forecast or indication of future stock performance,
interest rate levels or variable returns applicable to the Notes.
PS-14
UNITED STATES FEDERAL INCOME TAXATION
Set forth in full below is the opinion of Sidley Austin Brown & Wood
LLP, counsel to ML&Co., as to certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes. 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 Notes held as capital assets and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
regulated investment companies, dealers in securities or currencies, traders
in securities that elect to mark to market, tax-exempt entities, persons
holding Notes in a tax-deferred or tax-advantaged account, U.S. Holders (as
defined below) whose functional currency is not the United States dollar,
persons subject to the alternative minimum tax, or persons holding Notes 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 in this Pricing Supplement). The following discussion also
assumes that the issue price of the Notes, as determined for United States
Federal income tax purposes, equals the principal amount thereof. Persons
considering the purchase of the Notes 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 Notes arising under the laws of any other
taxing jurisdiction.
As used in this Pricing Supplement, the term "U.S. Holder" means a
beneficial owner of a Note 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 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 decisions of the trust, or (e) any other person whose income or
gain in respect of a Note is effectively connected with the conduct of a
United States trade or business. Notwithstanding clause (d) of the preceding
sentence, to the extent provided in Treasury regulations, certain trusts in
existence on August 20, 1996, which are treated as United States persons prior
to that date that elect to continue to be treated as United States persons
also will be U.S. Holders. As used herein, the term "non-U.S. Holder" means a
beneficial owner of a Note 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 Notes or securities with terms
substantially the same as the Notes. However, although the matter is not free
from doubt, under current law, each Note should be treated as a debt
instrument of ML&Co. for United States Federal income tax purposes. ML&Co.
currently intends to treat each Note 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 (the "IRS") in
accordance with this treatment, in the absence of any change or clarification
in the law, by regulation or otherwise, requiring a different characterization
of the Notes. Prospective investors in the Notes should be aware, however,
that the IRS is not bound by ML&Co.'s characterization of the Notes as
indebtedness, and the IRS could possibly take a different position as to the
proper characterization of the Notes 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
Notes is based upon the assumption that each Note will be treated as a debt
instrument of ML&Co. for United States Federal income tax purposes. If the
Notes 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 Notes 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 Note could differ
from the timing and character of income, gain or loss recognized in respect of
a Note had the Notes in fact been treated as debt instruments of ML&Co. for
United States Federal income tax purposes.
PS-15
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 Notes, which
apply to debt instruments issued on or after August 13, 1996 and, accordingly,
will apply to the Notes. 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
that 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 Notes, ML&Co. has determined that the projected payment schedule for
the Notes will consist of payment on the Stated Maturity Date of an amount
equal to $1,177.17 per $1,000 principal amount of Notes (the "Projected
Redemption Amount"). This represents an estimated yield on the Notes equal to
3.29% per annum, compounded semiannually. Accordingly, during the term of the
Notes, a U.S. Holder of a Note will be required to include in income as
ordinary interest an amount equal to the sum of the daily portions of interest
on the Note 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 the Note. The amount of interest that will be deemed to accrue in
any accrual period (i.e., generally each six-month period during which the
Notes are outstanding) will equal the product of this estimated yield
(properly adjusted for the length of the accrual period) and the Note'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
Note's adjusted issue price will equal the Note's issue price per $1,000
principal amount of Notes (i.e., $1,000), increased by the interest previously
accrued on the Note. At maturity of a Note, in the event that the payment at
the Stated Maturity Date (the "Actual Redemption Amount") with respect to
$1,000 principal amount of Notes exceeds $1,177.17 per $1,000 principal amount
of Notes (i.e., the Projected Redemption Amount), a U.S. Holder will be
required to include the excess of the Actual Redemption Amount over $1,177.17
per $1,000 principal amount of Notes (i.e., the Projected Redemption Amount)
in income as ordinary interest on the Stated Maturity Date. Alternatively, in
the event that the Actual Redemption Amount, if any, is less than $1,177.17
per $1,000 principal amount of Notes (i.e., the Projected Redemption Amount),
the excess of $1,177.17 per $1,000 principal amount of Notes (i.e., the
Projected Redemption Amount) over the Actual 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 Note for the taxable year in which the Stated
Maturity Date occurs to the extent of the amount of that 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
Redemption Amount (i.e., $1,177.17 per $1,000 principal amount of Notes) in
excess of the Actual Redemption Amount that is not treated as an interest
offset pursuant to the foregoing rules. In addition, U.S. Holders purchasing a
Note at a price that differs from the adjusted issue price of the Note as of
the purchase date (e.g., subsequent purchasers) will be subject to rules
providing for certain adjustments to the foregoing rules and these U.S.
Holders should consult their own tax advisors concerning these rules.
Upon the sale or exchange of a Note 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 or exchange and the U.S. Holder's adjusted tax
basis in the Note as of the date of disposition. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any interest previously included in income with respect
to the Note by the U.S. Holder. Any taxable gain will be treated as ordinary
income. Any taxable loss will be treated as ordinary loss to the extent of the
U.S. Holder's total interest inclusions on the Note. 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 Note). 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.
PS-16
All prospective investors in the Notes should consult their own tax
advisors concerning the application of the Final Regulations to their
investment in the Notes. Investors in the Notes may also obtain the projected
payment schedule, as determined by ML&Co. for purposes of applying the Final
Regulations to the Notes, by submitting a written request for such information
to Merrill Lynch & Co., Inc., Corporate Secretary's Office, 222 Broadway, 17th
Floor, New York, New York 10038, (212) 670-0432,
corporatesecretary@exchange.ml.com.
The projected payment schedule (including both the Projected
Redemption Amount and the estimated yield on the Notes) has been determined
solely for United States Federal income tax purposes (i.e., for purposes of
applying the Final Regulations to the Notes), and is neither a prediction nor
a guarantee of what the Actual Redemption Amount will be, or that the Actual
Redemption Amount will even exceed $1,000 per $1,000 principal amount of
Notes.
The following table sets forth the amount of interest that will be
deemed to have accrued with respect to each Note during each accrual period
over the term of the Notes based upon the projected payment schedule for the
Notes (including both the Projected Redemption Amount and an estimated yield
equal to 3.29% (compounded semiannually)) as determined by ML&Co. for purposes
of applying the Final Regulations to the Notes:
Interest deemed to Total interest deemed
accrue on a Note to have accrued on
during accrual a Note as of end of
period (per $1,000 accrual period
principal amount of (per $1,000 principal
Accrual Period Notes) amount of Notes)
-------------- --------------------- -----------------------
November 20, 2003 through May 20, 2004................................. $16.40 $16.40
May 21, 2004 through November 20, 2004................................. $16.72 $33.12
November 21, 2004 through May 20, 2005................................. $17.00 $50.12
May 21, 2005 through November 20, 2005................................. $17.27 $67.39
November 21, 2005 through May 20, 2006................................. $17.56 $84.95
May 21, 2006 through November 20, 2006................................. $17.85 $102.80
November 21, 2006 through May 20, 2007................................. $18.14 $120.94
May 21, 2007 through November 20, 2007................................. $18.44 $139.38
November 21, 2007 through May 20, 2008................................. $18.74 $158.12
May 21, 2008 through November 20, 2008................................. $19.05 $177.17
_________
Projected Redemption Amount = $1,177.17 per $1,000 principal amount of Notes.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States Federal income
taxes on payments of principal, premium (if any) or interest (including
original issue discount, if any) on a Note, unless such non-U.S. Holder is a
direct or indirect 10% or greater shareholder of ML&Co., a controlled foreign
corporation related to ML&Co. or a bank receiving interest described in
section 881(c)(3)(A) of the 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 1042-S. For a non-U.S. Holder to qualify for
the exemption from taxation, any person, U.S. or foreign, that has control,
receipt, or custody of an amount subject to withholding, or who can disburse
or make payments of an amount subject to withholding (the "Withholding Agent")
must have received a statement that (a) is signed by the beneficial owner of
the Note under penalties of perjury, (b) certifies that such owner is a
non-U.S. Holder and (c) provides the name and address of the beneficial owner.
The statement may generally be made on IRS Form W-8BEN (or other applicable
form) 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 that change by filing a new IRS Form W-8BEN (or other applicable
form). Generally, an IRS Form W-8BEN provided without a U.S. taxpayer
identification number will remain in effect for a period starting on the date
the form is signed and ending on the last day of the third succeeding calendar
year, unless a change in circumstances makes any information on the form
incorrect. If a Note is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to the Withholding Agent. Under certain
circumstances,
PS-17
the signed statement must be accompanied by a copy of the applicable IRS Form
W-8BEN (or other applicable form) or the substitute form provided by the
beneficial owner to the organization or institution.
Under current law, a Note 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 Note would have been effectively connected with the conduct by
such individual of a trade or business in the United States.
Backup withholding
Backup withholding at the applicable statutory rate of United States
Federal income tax may apply to payments made in respect of the Notes to
registered owners who are not "exempt recipients" and who fail to provide
certain identifying information (such as the registered owner's taxpayer
identification number) in the required manner. Generally, individuals are not
exempt recipients, whereas corporations and certain other entities generally
are exempt recipients. Payments made in respect of the Notes to a U.S. Holder
must be reported to the IRS, unless the U.S. Holder is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in the preceding section would establish an exemption from backup
withholding for those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the
broker must withhold on 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 (e.g., an IRS Form W-9) 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-8BEN (or other applicable form) 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 the required
information is furnished to the IRS.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit
plan or an individual retirement account or a Keogh Plan (a "plan") should
consider whether an investment in the Notes would be consistent with the
documents and instruments governing the plan, and whether the investment would
involve a prohibited transaction under Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code (the "Code") or would be prohibited given the election
not to sell to certain entities subject to ERISA described below.
Section 406 of ERISA and Section 4975 of the Code prohibit plans,
from engaging in certain transactions involving "plan assets" with persons who
are "parties in interest" under ERISA or "disqualified persons" under the Code
("parties in interest") with respect to the plan or account. A violation of
these prohibited transaction rules may result in civil penalties or other
liabilities under ERISA and/or an excise tax under Section 4975 of the Code
for those persons, unless exemptive relief is available under an applicable
statutory, regulatory or administrative exemption. Certain employee benefit
plans and arrangements including those that are governmental plans (as defined
in section 3(32) of ERISA), certain church plans (as defined in Section 3(33)
of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA)
("similar law arrangements") are not subject to the requirements of ERISA or
Section 4975 of the Code but may be subject to similar provisions under
applicable federal, state, local, foreign or other regulations, rules or laws
("similar laws").
The acquisition of the Notes by a plan with respect to which the
ML&Co., MLPF&S, or certain of their affiliates is or becomes a party in
interest may constitute or result in prohibited transaction under ERISA or
Section 4975 of the Code, unless those Notes are acquired pursuant to and in
accordance with an applicable exemption. The U.S. Department of Labor has
issued five prohibited transaction class exemptions, or "PTCEs", that may
provide
PS-18
exemptive relief if required for direct or indirect prohibited transactions
that may arise from the purchase or holding of the Notes. These exemptions
are:
(1) PTCE 84-14, an exemption for certain transactions determined or
effected by independent qualified professional asset managers;
(2) PTCE 90-1, an exemption for certain transactions involving
insurance company pooled separate accounts;
(3) PTCE 91-38, an exemption for certain transactions involving
bank collective investment funds;
(4) PTCE 95-60, an exemption for transactions involving certain
insurance company general accounts; and
(5) PTCE 96-23, an exemption for plan asset transactions managed by
in-house asset managers.
The Notes may not be purchased or held by (1) any plan, (2) any
entity whose underlying assets include "plan assets" by reason of any plan's
investment in the entity (a "plan asset entity") or (3) any person investing
"plan assets" of any plan, unless in each case the purchaser or holder is not
subject to ERISA and is eligible for the exemptive relief available under one
or more of the PTCEs listed above or another applicable similar exemption. Any
purchaser or holder of the Notes or any interest in the Notes will be deemed
to have represented by its purchase and holding of the Notes that either (1)
it is not a plan or a plan asset entity and is not purchasing those Notes on
behalf of or with "plan assets" of any plan or plan asset entity or (2) it is
not subject to ERISA and, with respect to the purchase or holding, is eligible
for the exemptive relief available under any of the PTCEs listed above or
another applicable exemption. In addition, any purchaser or holder of the
Notes or any interest in the Notes which is subject to any similar laws will
be deemed to have represented by its purchase and holding of the Notes that
its purchase and holding will not violate the provisions of such laws.
The sale of any Notes to a plan is in no respect a representation by
ML&Co., MLPF&S or any of their respective affiliates that such an investment
meets all relevant legal requirements with respect to investments by plans
generally or any particular plan, or that such an investment is otherwise
appropriate for plans generally or any particular plan.
EACH PURCHASER OF THE NOTES WILL BE REQUIRED TO REPRESENT AND WARRANT
THAT EITHER (A) IT IS NOT, AND IS NOT ACTING ON BEHALF OF, A PLAN SUBJECT TO
ERISA OR SECTION 4975 OF THE CODE OR A FOREIGN, GOVERNMENTAL OR CHURCH PLAN
WHICH IS SUBJECT TO ANY FOREIGN, FEDERAL, STATE OR LOCAL LAW THAT IS
MATERIALLY SIMILAR TO THE PROHIBITED TRANSACTION PROVISIONS OF SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE OR (B) IT IS NOT, AND IS NOT ACTING ON
BEHALF OF, A PLAN SUBJECT TO ERISA, AND ITS PURCHASE AND OWNERSHIP OF NOTES
WILL NOT RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 4975 OF
THE CODE (OR, IN THE CASE OF A FOREIGN, GOVERNMENTAL OR CHURCH PLAN, A
VIOLATION OF ANY MATERIALLY SIMILAR FEDERAL, STATE OR LOCAL LAW).
Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
important that fiduciaries or other persons considering purchasing the Notes
on behalf of or with "plan assets" of any plan, plan asset entity or non-ERISA
arrangement consult with their counsel regarding the availability of exemptive
relief under any of the PTCEs listed above or any other applicable exemption,
or the potential consequences of any purchase or holding under similar laws,
as applicable.
PLAN OF DISTRIBUTION
As described in the "The Plan of Distribution" in the accompanying
Prospectus Supplement, MLPF&S is purchasing the Notes, as principal, from
ML&Co., for resale through an affiliate to dealers that will resell the Notes
to investors and other purchasers at the Issue Price set forth on the cover of
this Pricing Supplement. After the initial public offering, the Issue Price
may be changed.
PS-19
ANNEX A
The following tables set forth the value of each of the S&P 500, the
Nasdaq-100, the STOXX 50 and the Nikkei 225 indices at the end of each month,
in the period from January 1997 through October 2003. These historical data on
the Basket Components are not necessarily indicative of the future performance
of the Basket, the Notes or what the value of the Notes may be. Any historical
upward or downward trend in the value of any of the Basket Components during
any period set forth below is not an indication that any Basket Component is
more or less likely to increase or decrease at any time during the term of the
Notes.
S&P 500 Index Month-end Values
1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
January 786.16 980.28 1279.64 1394.46 1366.01 1130.20 855.70
February 790.82 1049.34 1238.33 1366.42 1239.94 1106.73 841.15
March 757.12 1101.75 1286.37 1498.58 1160.33 1147.39 848.18
April 801.34 1111.75 1335.18 1452.43 1249.46 1076.92 916.92
May 848.28 1090.82 1301.84 1420.6 1255.82 1067.14 963.59
June 885.14 1133.84 1372.71 1454.6 1224.42 989.82 974.50
July 954.29 1120.67 1328.72 1430.83 1211.23 911.62 990.31
August 899.47 957.28 1320.41 1517.68 1133.58 916.07 1008.01
September 947.28 1017.01 1282.71 1436.51 1040.94 815.28 995.97
October 914.62 1098.67 1362.93 1429.40 1059.78 885.76 1050.71
November 955.40 1163.63 1388.91 1314.95 1139.45 936.31
December 970.43 1229.23 1469.25 1320.28 1148.08 879.82
Nasdaq-100 Index Month-end Values
1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ----- ---- ----
January 921.55 1071.13 2127.19 3570.05 2593.00 1550.17 983.05
February 850.46 1194.13 1925.28 4266.94 1908.32 1359.22 1009.74
March 797.06 1220.66 2106.39 4397.84 1573.25 1452.81 1018.66
April 874.74 1248.12 2136.39 3773.18 1855.15 1277.07 1106.06
May 958.85 1192.07 2089.70 3324.08 1799.89 1208.34 1197.89
June 957.30 1337.34 2296.77 3763.79 1830.19 1051.41 1201.69
July 1107.03 1377.26 2270.93 3609.35 1683.61 962.11 1276.94
August 1074.17 1140.34 2396.87 4077.59 1469.70 942.38 1341.20
September 1097.17 1345.48 2407.90 3570.61 1168.37 832.52 1303.70
October 1019.62 1400.52 2637.44 3282.30 1364.78 989.54 1416.39
November 1050.51 1557.96 2966.71 2506.54 1596.05 1116.10
December 990.80 1836.01 3707.83 2341.70 1577.05 984.36
A-1
Dow Jones EURO STOXX 50 Index Month-end Values
1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
January 2005.36 2676.03 3547.15 4684.48 4779.90 3670.26 2248.17
February 2077.22 2878.04 3484.24 5182.62 4318.88 3624.74 2140.73
March 2137.28 3153.32 3559.86 5249.55 4185.00 3784.05 2036.86
April 2164.68 3120.94 3757.87 5303.95 4525.01 3574.23 2324.23
May 2220.86 3357.77 3629.46 5200.89 4426.24 3425.79 2330.06
June 2398.41 3406.82 3788.66 5145.35 4243.91 3133.39 2419.51
July 2674.83 3480.63 3638.62 5122.80 4091.38 2685.79 2519.79
August 2407.58 2978.12 3769.14 5175.12 3743.97 2709.29 2556.71
September 2581.36 2670.97 3669.71 4915.18 3296.66 2204.39 2395.87
October 2331.25 2887.11 3922.91 5057.46 3478.63 2518.99 2575.04
November 2423.74 3179.09 4314.38 4790.08 3658.27 2656.85
December 2531.99 3342.32 4904.46 4772.39 3806.13 2386.41
Nikkei 225 Stock Average Month-end Values
1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
January 18330 16628 14499 19540 13844 9998 8340
February 18557 16832 14368 19960 12884 10588 8363
March 18003 16527 15837 20337 13000 11025 7973
April 19151 15641 16702 17974 13934 11493 7831
May 20069 15671 16112 16332 13262 11764 8425
June 20605 15830 17530 17411 12969 10622 9083
July 20331 16379 17862 15727 11861 9878 9563
August 18229 14108 17437 16861 10714 9619 10344
September 17888 13406 17605 15747 9775 9383 10219
October 16459 13565 17942 14540 10366 8640 10560
November 16636 14884 18558 14649 10697 9216
December 15259 13842 18934 13786 10543 8579
A-2