PRICING SUPPLEMENT
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(to prospectus supplement and prospectus dated February 25, 2005)
Pricing Supplement Number: 2430
[Merrill Lynch Logo]
5,000 Units
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Zero Coupon Convertible Securities Exchangeable into
Berkshire Hathaway Inc. Class B Common Stock
due March 15, 2010
(the "Notes")
$1,000 original public offering price per unit
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The Notes:
o The Notes are designed for investors who want to protect their investment
by receiving at least the original offering price of their investment on
the maturity date and who want to participate to the extent provided
herein in possible increases in the value of Berkshire Hathaway Inc.
class B common stock.
o 100% principal protection on the maturity date.
o There will be no payments prior to the maturity date and we cannot redeem
the Notes prior to the maturity date.
o The Notes will be payable in cash or shares of Berkshire Hathaway Inc.
class B common stock (trading symbol "BRK-B"), as described in this
pricing supplement. Berkshire Hathaway Inc. has no obligations relating
to, and does not sponsor or endorse, the Notes.
o You may elect to exchange your Notes prior to the maturity date.
o The Notes will not be listed on any securities exchange.
o The Notes will be senior unsecured debt securities of Merrill Lynch &
Co., Inc. and part of a series entitled "Medium-Term Notes, Series C" and
will have the CUSIP No. 590188X37.
o Expected settlement date: March 15, 2005.
Payment on the maturity date:
o On the maturity date, if you have not elected to exchange your Notes, for
each $1,000 original public offering price per unit of your Notes, we
will pay you an amount in cash equal to the greater of:
o the product of the exchange ratio and the average closing price of
one share of class B common stock of Berkshire Hathaway Inc.
determined as described in this pricing supplement; or
o $1,000.
The price of Berkshire Hathaway Inc. class B common stock must increase
by more than 15.75% after the pricing date in order for you to receive
more than $1,000 per Note.
Exchange at holder's election:
o If you exchange your Notes prior to the maturity date, we will deliver to
you, for each $1,000 original public offering price per unit of your
Notes, a number of shares of Berkshire Hathaway Inc. class B common stock
equal to the exchange ratio.
o The exchange ratio equals 0.286259 for each $1,000 original public
offering price per unit of Notes subject to adjustment as described
herein. Therefore, the price of Berkshire Hathaway Inc. class B common
stock must increase by more than 15.75% after the pricing date in order
for you to receive class B common stock of Berkshire Hathaway Inc. having
an aggregate value that exceeds $1,000 per $1,000 original public
offering price per unit of Notes if you elect to exchange your Notes.
Information included in this pricing supplement supercedes information in
the accompanying prospectus supplement and prospectus to the extent that it is
different from that information.
Investing in the Notes involves risks that are described in the "Risk
Factors" section of this pricing supplement and the accompanying prospectus
supplement.
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Per Unit Total
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Public offering price....................................... $1,000.00 $5,000,000
Underwriting discount....................................... $0.00 $0.00
Proceeds, before expenses, to Merrill Lynch & Co., Inc...... $1,000.00 $5,000,000
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this pricing supplement or the accompanying prospectus supplement and
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Merrill Lynch & Co.
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The date of this pricing supplement is March 8, 2005.
TABLE OF CONTENTS
Pricing Supplement
SUMMARY INFORMATION--Q&A..................................................PS-3
RISK FACTORS..............................................................PS-7
DESCRIPTION OF THE NOTES.................................................PS-10
THE DELIVERABLE SHARES...................................................PS-19
UNITED STATES FEDERAL INCOME TAXATION....................................PS-21
ERISA CONSIDERATIONS.....................................................PS-26
USE OF PROCEEDS AND HEDGING..............................................PS-27
SUPPLEMENTAL PLAN OF DISTRIBUTION........................................PS-27
EXPERTS..................................................................PS-27
INDEX OF CERTAIN DEFINED TERMS...........................................PS-28
Prospectus Supplement
RISK FACTORS...............................................................S-3
DESCRIPTION OF THE NOTES...................................................S-4
UNITED STATES FEDERAL INCOME TAXATION.....................................S-21
PLAN OF DISTRIBUTION......................................................S-28
VALIDITY OF THE NOTES.....................................................S-29
Prospectus
Merrill Lynch & Co., Inc.....................................................2
Use of Proceeds..............................................................2
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.........................3
The Securities...............................................................3
Description of Debt Securities...............................................4
Description of Debt Warrants................................................15
Description of Currency Warrants............................................17
Description of Index Warrants...............................................18
Description of Preferred Stock..............................................24
Description of Depositary Shares............................................29
Description of Preferred Stock Warrants.....................................33
Description of Common Stock.................................................35
Description of Common Stock Warrants........................................38
Plan of Distribution........................................................41
Where You Can Find More Information.........................................42
Incorporation of Information We File With the SEC...........................42
Experts.....................................................................43
PS-2
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from this pricing supplement and the accompanying prospectus
supplement and prospectus to help you understand the Zero Coupon Convertible
Securities Exchangeable into Berkshire Hathaway Inc. class B common stock due
March 15, 2010 (the "Notes"). You should carefully read this pricing
supplement and the accompanying prospectus supplement and prospectus to fully
understand the terms of the Notes, certain matters related to Berkshire
Hathaway Inc. (the "Underlying Company") class B common stock (the
"Deliverable Shares"), and the tax and other considerations that are important
to you in making a decision about whether to invest in the Notes. You should
carefully review the "Risk Factors" section of this pricing supplement and the
accompanying prospectus supplement, which highlights certain risks associated
with an investment in the Notes, to determine whether an investment in the
Notes is appropriate for you.
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.
What are the Notes?
The Notes will be a series of senior debt securities issued by ML&Co.
entitled "Medium-Term Notes, Series C" and will not be secured by collateral.
The Notes will rank equally with all of our other unsecured and unsubordinated
debt. The Notes will mature on March 15, 2010, unless you have previously
elected to exchange your Notes for shares of the Deliverable Shares.
Each unit will represent a single Note with a $1,000 original public
offering price per unit. You may transfer the Notes only in whole units. You
will not have the right to receive physical certificates evidencing your
ownership except under limited circumstances. Instead, we will issue the Notes
in the form of a global certificate, which will be held by The Depository
Trust Company, also known as DTC, or its nominee. Direct and indirect
participants in DTC will record your ownership of the Notes. You should refer
to the section entitled "Description of the Debt Securities--Depositary" in
the accompanying prospectus.
Are there any risks associated with my investment?
Yes, an investment in the Notes is subject to certain risks. Please refer
to the section entitled "Risk Factors" in this pricing supplement and the
accompanying prospectus supplement.
What is the Underlying Company?
The Underlying Company has disclosed that it is a holding company owning
subsidiaries engaged in a number of diverse business activities and that the
most important of these are insurance businesses conducted on both a primary
basis and a reinsurance basis. You should independently investigate the
Underlying Company and decide whether an investment in the Notes is
appropriate for you.
Because the Deliverable Shares are registered under the Securities and
Exchange Act of 1934, the Underlying Company is required to file periodically
certain financial and other information specified by the SEC. Information
provided to or filed with the SEC by the Underlying Company can be located by
reference to SEC file number 000-1067983 and inspected at the SEC's public
reference facilities or accessed over the Internet through the SEC's web site.
In addition, information regarding the Underlying Company may be obtained from
other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated information. We make no
representation or warranty as to the accuracy or completeness of any such
information. For further information, please see the sections entitled "The
Deliverable Shares--The Underlying Company" and "Where You Can Find More
Information" in this pricing supplement and the accompanying prospectus.
What is the Underlying Company's role in the Notes?
The Underlying Company has not authorized or approved the Notes and has
no financial or legal obligations relating to the Notes or amounts to be paid
to you, including any obligation to take the needs of ML&Co. or of holders of
the Notes into consideration for any reason. The Underlying Company will not
receive any of the proceeds of the offering of the Notes and is not
responsible for, and has not participated in, the offering of the Notes and is
not responsible for, and will not participate in, the determination or
PS-3
calculation of the amount receivable by holders of the Notes. ML&Co. is not
affiliated with the Underlying Company.
How have the Deliverable Shares performed historically?
You can find a table with the high and low closing prices per share of
the Deliverable Shares during each calendar quarter from 1999 to the present
in the section entitled "The Deliverable Shares--Historical Data" in this
pricing supplement.
We have provided this historical information to help you evaluate the
behavior of the Deliverable Shares in various economic environments; however,
this information is not necessarily indicative of how the Deliverable Shares
will perform in the future.
What will I receive on the maturity date of the Notes?
On the maturity date, if you have not previously elected to exchange the
Notes, for each unit of Notes that you own, we will pay you an amount in cash
equal to the greater of:
o the product of the Exchange Ratio and the average Closing Market Price of
one share of the Deliverable Shares during a specified period immediately
preceding the maturity date, as described herein, or
o $1,000.
The "Exchange Ratio" equals 0.286259 and is subject to adjustment as
described in this pricing supplement upon the happening of certain corporate
events involving the Underlying Company. The Exchange Ratio was calculated by
dividing the $1,000 original offering price per unit of the Notes by
$3,493.335, a 15.75% increase in the price of the Deliverable Shares from
($3,018.00), the Closing Market Price of one share of the Deliverable Shares
on March 8, 2005, the date the Notes were priced for initial sale to the
public (the "Pricing Date"). The price of the Deliverable Shares will
therefore be required to increase by more than 15.75% from the Pricing Date to
the Calculation Period in order for you to receive more than the original
offering price of $1,000 per unit of the Notes.
In the event of certain reorganization events of the Underlying Company,
we will make an adjustment to any computation which is to be based on the
Exchange Ratio. For more specific information, please see the section entitled
"Description of the Notes--Reorganization Events".
PS-4
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Examples
Set forth below are three examples of the calculation of the cash payment
on the Notes on the maturity date, assuming that you have not exchanged your
Notes:
Example 1--The hypothetical average Closing Market Price of the Deliverable
Shares on the maturity date is 90% of the Closing Market Price of the
Deliverable Shares on the Pricing Date:
Closing Market Price of the Deliverable Shares on the Pricing Date: $3,018.00
Exchange Ratio: 0.286259
Hypothetical average Closing Market Price of the Deliverable Shares at
maturity: $2,716.20
0.286259 x $2,716.20 = $777.54
Amount payable at maturity = $1,000
(the amount payable on the maturity date cannot be less than $1,000)
Example 2--The hypothetical average Closing Market Price of the Deliverable
Shares on the maturity date is 110% of the Closing Market Price of the
Deliverable Shares on the Pricing Date:
Closing Market Price of the Deliverable Shares on the Pricing Date: $3,018.00
Exchange Ratio: 0.286259
Hypothetical average Closing Market Price of the Deliverable Shares at
maturity: $3,319.80
0.286259 x $3,319.80 = $950.32
Amount payable at maturity = $1,000
(the amount payable on the maturity date cannot be less than $1,000)
Example 3--The hypothetical average Closing Market Price of the Deliverable
Shares at maturity is 150% of the Closing Market Price of the Deliverable
Shares on the Pricing Date:
Closing value of the Deliverable Shares on the Pricing Date: $3,018.00
Exchange Ratio: 0.286259
Hypothetical average Closing Market Price of the Deliverable Shares at
maturity: $4,527.00
0.286259 x $4,527.00 = $1,295.90
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What will I receive if I elect to exchange my Notes?
You may require us to exchange your Notes by giving notice at any time,
beginning on March 15, 2005 and ending on the eighth scheduled Business Day
before the maturity date. If you elect to exchange your Notes, we will deliver
to you a number of shares of the Deliverable Shares equal to the Exchange
Ratio. For more information about exchange, please see the section entitled
"Description of the Notes--Early Exchange at Holder's Election" in this
pricing supplement.
We will not distribute any fractional shares of the Deliverable Shares.
Instead, we will pay the cash value of the fractional share as more fully
described in this pricing supplement. For more information, please see
"Description of the Notes--Fractional Shares" in this pricing supplement.
What about taxes?
Each year, you will be required to pay taxes on ordinary income from the
Notes over their term based upon an estimated yield for the Notes, even though
no cash will be paid to you until the maturity date or, if you elect to
exchange your Notes prior to the maturity date, even though no shares of the
PS-5
Deliverable Shares will be delivered to you until such early exchange of your
Notes. We have determined this estimated yield, in accordance with regulations
issued by the U.S. Treasury Department, solely in order for you to calculate
the amount of taxes that you will owe each year as a result of owning a Note.
This estimated yield is neither a prediction nor a guarantee of what the
actual amount of cash or the fair market value of shares of Deliverable Shares
payable on the Notes on the maturity date or upon an exchange of the Notes
will be, or that the actual amount payable on the Notes on the maturity date
will even exceed $1,000 per unit thereof. We have determined that this
estimated yield will equal 4.1% per annum, compounded semiannually.
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a unit of the Notes for $1,000 and hold the Note until
the maturity date, you will be required to pay taxes on the following amounts
of ordinary income from such unit of the Notes each year: $33.04 in 2005,
$42.79 in 2006, $44.49 in 2007, $46.48 in 2008, $48.33 in 2009 and $10.05 in
2010. However, in 2010, the amount of ordinary income that you will be
required to pay taxes on from owning each unit of the Notes may be greater or
less than $10.05, depending upon the actual amount of cash you receive on the
maturity date. Also, if the actual amount of cash payable per unit of the
Notes on the maturity date is less than $1,225.18, you may have a loss which
you could deduct against other income you may have in 2010, but under current
tax regulations, you would neither be required nor allowed to amend your tax
returns for prior years. For further information, see "United States Federal
Income Taxation" in this pricing supplement.
Will the Notes be listed on a stock exchange?
The Notes will not be listed on any securities exchange and we do not
expect a trading market for the Notes to develop, which may affect the price
that you receive for your Notes upon any sale prior to the maturity date. You
should review the section entitled "Risk Factors--A trading market for the
Notes is not expected to develop" in this pricing supplement.
What is the role of MLPF&S?
Our subsidiary MLPF&S is the underwriter for the offering and sale of the
Notes. After the initial offering, MLPF&S intends to buy and sell Notes to
create a secondary market for holders of the Notes, and may stabilize or
maintain the Closing Market Price of the Notes during the initial
distribution. However, MLPF&S will not be obligated to engage in any of these
market activities or to continue them once it has started.
MLPF&S also will be our agent for purposes of calculating, among other
things, the amount payable on the maturity date and the Exchange Ratio. Under
certain circumstances, these duties could result in a conflict of interest
between MLPF&S as our subsidiary and its responsibilities as calculation
agent.
What is ML&Co.?
Merrill Lynch & Co., Inc. is a holding company with various subsidiaries
and affiliated companies that provide investment, financing, insurance and
related services on a global basis.
For information about ML&Co., see the section entitled "Merrill Lynch &
Co., Inc." in the accompanying prospectus. You should also read the other
documents we have filed with the SEC, which you can find by referring to the
section entitled "Where You Can Find More Information" in the accompanying
prospectus.
PS-6
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.
Your yield may be lower than the yield on other debt securities of comparable
maturity
The amount we pay you on the maturity date, or the value of any
Deliverable Shares that you may receive upon an exchange, 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 traditional interest bearing debt
security of ML&Co. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you take into account factors
that affect the time value of money.
Your return may be limited and will not be identical to the return of owning
the Deliverable Shares
The price of the Deliverable Shares will need to increase by more than
15.75% from the Pricing Date to the Calculation Period or the Exchange Date,
as the case may be, in order for you to receive cash (or in the case of an
exchange, securities having a cash value) in excess of the original offering
price of the Notes.
The calculation of the average Closing Market Price of the Deliverable
Shares, and in certain circumstances, other securities, property and/or cash,
and any amounts payable to you upon any redemption or exchange, as the case
may be, does not take into consideration the value of cash dividends, if any,
paid on the Deliverable Shares, other than as described in the section
entitled "Description of the Notes--Dilution and Reorganization Adjustments"
in this pricing supplement.
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 holders of the Notes, it is not required to do so and may cease making
those 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 the maturity date.
Many factors affect the trading 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 trading value of the Notes will be affected by factors that
interrelate in complex ways. The effect of one factor may offset the increase
in the trading value of the Notes caused by another factor, and that the
effect of one factor may exacerbate the decrease in the trading value of the
Notes caused by another factor. For example, an increase in United States
interest rates may offset some or all of any increase in the trading value of
the Notes attributable to another factor, such as an increase in the price of
the Deliverable Shares. The following paragraphs describe the expected impact
on the market value of the Notes given a change in a specific factor, assuming
all other conditions remain constant.
The price of the Deliverable Shares is expected to affect the trading
value of the Notes. We expect that the market value of the Notes will depend
substantially on the price of the Deliverable Shares. In general, the value of
the Notes will decrease as the value of the Deliverable Shares decreases and
the value of the Notes will increase as the value of the Deliverable Shares
increases. However, you generally should not expect the increase or decrease
in the market value of your Notes to be identical to the increase or decrease
in the market value of the Deliverable Shares. You should understand that for
each $1,000 original public offering price per unit of the Notes that you own,
you will not receive more than $1,000 in cash on the maturity date unless the
average Closing Market Price of the Deliverable Shares has appreciated by more
than 15.75% from the Pricing Date to the Calculation Period.
Changes in the levels of interest rates are expected to affect the
trading value of the Notes. We expect that changes in interest rates will
affect the trading value of the Notes. Generally, if United States interest
rates increase,
PS-7
we expect that the trading value of the Notes will decrease and, conversely,
if United States interest rates decrease, we expect that the trading value of
the Notes will increase.
Changes in the volatility of the Deliverable Shares are expected to
affect the trading 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 Deliverable Shares increases, we expect the trading value of the Notes
will decrease; and, if the volatility of the Deliverable Shares decreases, we
expect that the trading value of the Notes will increase.
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 trade at a value above or below that
which would be expected based on the level of interest rates and the price of
the Deliverable Shares. This difference will reflect a "time premium or
discount" due to expectations concerning the price of the Deliverable Shares
during the period before the maturity date of the Notes. However, as the time
remaining to maturity decreases, any discount or premium attributed to the
trading value of the Notes will diminish, increasing or decreasing the trading
value of the Notes.
Changes in dividend yields of the Deliverable Shares are expected to
affect the trading value of the Notes. In general, if the dividend yield on
the Deliverable Shares increase, we expect the trading value of the Notes to
decrease and, conversely, if the dividend yield on the Deliverable Shares
decrease, we expect the trading value of the Notes will increase.
Changes in our credit ratings may affect the trading 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
trading value of the Notes. However, because your return on your Notes is
dependent upon factors in addition to our ability to pay our obligations under
the Notes, such as the percentage change, if any, in the price of the
Deliverable Shares on the maturity date, 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 trading 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. We expect, however, that the effect
on the trading value of the Notes of a given change in the price of the
Deliverable Shares will be greater 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 1983 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 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.
There is no affiliation between ML&Co. and the Underlying Company
We are not affiliated with the Underlying Company, and the Underlying
Company has not authorized or approved the Notes and has no financial or legal
obligations relating to the Notes or amounts to be paid to you, including any
obligation to take the needs of ML&Co. or of holders of the Notes into
consideration for any reason. The Underlying Company will not receive any of
the proceeds of the offering of the Notes and is not responsible for, and has
not participated in, the offering of the Notes and is not responsible for, and
will not participate in, the determination or calculation of the amount
receivable by holders of the Notes.
Neither ML&Co. nor MLPF&S have conducted any due diligence inquiry with
respect to the Underlying Company in connection with the offering of the
Notes; and they make no representation as to the completeness or accuracy of
publicly available information regarding the Underlying Company or as to the
future performance of the
PS-8
Deliverable Shares. Any prospective purchaser of the Notes should undertake
such independent investigation of the Underlying Company as in its judgment is
appropriate to make an informed decision with respect to an investment in the
Notes.
As a holder of the Notes, you are not entitled to stockholder's rights
Holders of the Notes will not be entitled to any rights in the
Deliverable Shares including, for example, the right to receive dividends or
other distributions, voting rights and the right to tender or exchange common
stock in any tender or exchange offer by the Underlying Company or any third
party.
Purchases and sales of the Deliverable Shares by us and our affiliates may
affect your return
We and our affiliates may from time to time buy or sell the Deliverable
Shares or futures or options contracts on the Deliverable Shares 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 the price of the Deliverable Shares and, in turn, the value of
the Notes in a manner that would be adverse to your investment in the Notes.
Any purchases or sales by us, our affiliates or others on our behalf on or
before the Pricing Date may temporarily increase the price of the Deliverable
Shares. Temporary increases or decreases in the market price of the
Deliverable Shares may also occur as a result of the purchasing activities of
other market participants. Consequently, the price of the Deliverable Shares
may change subsequent to the Pricing Date, affecting the market value of the
Notes and therefore the trading value of the Notes.
Potential conflicts of interest could arise
Our subsidiary MLPF&S is our agent for purposes of calculating, among
other things, the number of Deliverable Shares deliverable to you on the
maturity date. Under certain circumstances, MLPF&S 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 its determination of whether a Market Disruption Event, as
defined in this pricing supplement, has occurred, or in connection with
judgments that it would be required to make with regard to such adjustments.
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 obligations in connection with 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.
Tax consequences
You should consider the tax consequences of investing in the Notes. See
"United States Federal Income Taxation" below.
PS-9
DESCRIPTION OF THE NOTES
ML&Co. will issue the Notes as a series of senior debt securities
entitled "Medium-Term Notes, Series C" under the 1983 Indenture, which is more
fully described in the accompanying prospectus. Unless exchanged by the
holders, the Notes will mature on March 15, 2010. Information included in this
pricing supplement supercedes information in the accompanying prospectus
supplement and prospectus to the extent that it is different from that
information. The CUSIP for the Notes is 590188X37.
The Notes are not subject to redemption by us before the maturity date.
If an Event of Default occurs with respect to the Notes, holders of the Notes
may accelerate the maturity of the Notes, as described under "--Events of
Default and Acceleration" in this pricing supplement and "Description of Debt
Securities--Events of Default" in the accompanying prospectus.
ML&Co. will issue the Notes in denominations of whole units each with a
$1,000 original public offering price per unit. You may transfer the Notes
only in whole units. You will not have the right to receive physical
certificates evidencing your ownership except under limited circumstances.
Instead, we will issue the Notes in the form of a global certificate, which
will be held by The Depositary Trust Company, also known as DTC, or its
nominee. Direct and indirect participants in DTC will record your ownership of
the Notes. You should refer to the section entitled "Description of Debt
Securities--Depositary" in the accompanying prospectus.
The Notes will not have the benefit of any sinking fund.
Payment on the Maturity Date
Unless you have previously elected to exchange your Notes, a holder of a
Note will be entitled to an amount in cash equal to the greater of:
(i) the product of the Exchange Ratio and the average Closing Market
Price of the Deliverable Shares on the five Calculation Days, as
defined below; provided, however, that
o if there are fewer than five Calculation Days, then the amount
payable shall be calculated using the average on those
Calculation Days,
o if there is only one Calculation Day, then the amount payable
shall be calculated using the Closing Market Price of the
Deliverable Shares on that Calculation Day, and
o if no Calculation Days with respect to the Deliverable Shares,
then the amount payable shall be calculated using the Closing
Market Price on the last scheduled Calculation Day regardless
of whether a Market Disruption Event, as defined in this
pricing supplement, occurs on that date, or
(ii) $1,000.
If the maturity date is not a Business Day, we will pay the cash amount
due on the maturity date on the first Business Day following the maturity date
and no interest will accrue to such payment date.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination of a manifest
error, shall be conclusive for all purposes and binding on ML&Co. and holders
of the Notes.
"Exchange Ratio" equals 0.286259 and is subject to adjustment for certain
events described under "Dilution and Reorganization Adjustments--Exchange
Ratio Adjustments" and "--Alternative Dilution and Reorganization Adjustments"
in this section.
PS-10
"Business Day" means any day other than a Saturday or a Sunday that is
not a day on which banking institutions in The City of New York are authorized
or obligated by law, regulation or executive order to close.
"Calculation Day" means each of March 2, 2010, March 3, 2010, March 4,
2010, March 5, 2010 and March 8, 2010; provided that a Market Disruption Event
has not occurred on such date.
"Closing Market Price" means:
If the Deliverable Shares (or any other security for which a Closing
Market Price must be determined for purposes of the Notes) are listed on a
national securities exchange in the United States, is a Nasdaq National Market
System ("Nasdaq NMS") security or is included in the OTC Bulletin Board
Service ("OTC Bulletin Board") operated by the National Association of
Securities Dealers, Inc. (the "NASD"), then the "Closing Market Price" for any
date of determination on any Trading Day means for one share of the
Deliverable Shares (or any other security for which a Closing Market Price
must be determined for purposes of the Notes):
o the last reported sale price, regular way, on that day on the
principal United States securities exchange registered under the
Exchange Act on which that security is listed or admitted to trading
(without taking into account any extended or after-hours trading
session), or
o if not listed or admitted to trading on any such securities exchange
or if the last reported sale price is not obtainable, the last
reported sale price on the over-the-counter market as reported on
the Nasdaq NMS or OTC Bulletin Board on that day (without taking
into account any extended or after-hours trading session), or
o if the last reported sale price is not available for any reason,
including, without limitation, the occurrence of a Market Disruption
Event, as described below, the mean of the last reported bid and
offer price of the principal trading session on the over-the-counter
market as reported on The Nasdaq Stock Market or OTC Bulletin Board
on that day as determined by the calculation agent or from as many
dealers in such security, but not exceeding three, as have made the
bid prices available to the calculation agent after 3:00 p.m., local
time in the principal market, on that date (without taking into
account any extended or after-hours trading session).
If the Deliverable Shares (or any other security for which a Closing
Market Price must be determined for purposes of the Notes) are not listed on a
national securities exchange in the United States, is not a Nasdaq NMS
security or included in the OTC Bulletin Board Service operated by the NASD,
then the Closing Market Price for any date of determination on any Trading Day
means for one Deliverable Share (or any other security for which a Closing
Market Price must be determined for purposes of the Notes) the last reported
sale price on that day on the securities exchange on which that security is
listed or admitted to trading with the greatest volume of trading for the
calendar month preceding such Trading Day as determined by the calculation
agent; provided that if the last reported sale price is for a transaction
which occurred more than four hours prior to the close of that exchange, then
the Closing Market Price shall mean the average of the last available bid and
offer price on that exchange.
If the Deliverable Shares (or any other security for which a Closing
Market Price must be determined for purposes of the Notes) are not listed or
admitted to trading on any such securities exchange or if such last reported
sale price or bid and offer are not obtainable, then the Closing Market Price
shall mean the average of the last available bid and offer prices in such
market of the three dealers which have the highest volume of transactions in
that security in the immediately preceding calendar month as determined by the
calculation agent based on information that is reasonably available to it.
"Market Disruption Event" means either of the following events as
determined by the calculation agent:
(A) a suspension of, absence of, including the absence of an official
closing price, or material limitation on, trading of the Deliverable
Shares on the primary market for the Deliverable Shares for more
than two hours of trading or during the one-half hour period
preceding the close of trading, as determined by the calculation
agent in its sole discretion; or the suspension or material
limitation on the primary
PS-11
market for trading in options contracts related to the Deliverable
Shares, if available, during the one-half hour period preceding the
close of trading in the applicable market, in each case as
determined by the calculation agent in its sole discretion; and
(B) a determination by the calculation agent in its sole discretion that
the event described in clause (A) above materially interfered with
the ability of ML&Co., MLPF&S or any of their affiliates to unwind
all or a material portion of the hedge with respect to the Notes.
For purposes of determining whether a Market Disruption Event has
occurred:
(1) a limitation on the hours or number of days of trading will not
constitute a Market Disruption Event if it results from an announced
change in the regular business hours of the relevant exchange;
(2) a decision to permanently discontinue trading in the relevant options
contracts related to the Deliverable Shares will not constitute a
Market Disruption Event;
(3) limitations pursuant to any rule or regulation enacted or
promulgated by the NYSE or The Nasdaq Stock Market or other
regulatory organization with jurisdiction over the NYSE or The
Nasdaq Stock Market on trading during significant market
fluctuations will constitute a suspension or material limitation of
trading in the Deliverable Shares;
(4) a suspension of trading in an options contract on the Deliverable
Shares by the primary securities market trading in the options
contracts related to the Deliverable Shares, if available, by reason
of:
o a price change exceeding limits set by the securities exchange
or market;
o an imbalance of orders relating to options contracts on the
Deliverable Shares; or
o a disparity in bid and ask quotes relating to options contracts
on the Deliverable Shares will constitute a suspension or
material limitation of trading in options contracts related to
the Deliverable Shares; and
(5) a suspension of, absence of or material limitation on trading on the
primary securities market on which options contracts related to the
Deliverable Shares are traded will not include any time when that
securities market is itself closed for trading under ordinary
circumstances.
If the Exchange Property, as defined below under "--Reorganization
Events" in this pricing supplement, includes securities other than the
Deliverable Shares, then the above definition will be revised to include each
of those securities in the same manner as the Deliverable Shares are
considered in determining whether a Market Disruption Event exists.
As a result of terrorist attacks, the financial markets were closed from
September 11, 2001 through September 14, 2001. Those market closures would
have constituted Market Disruption Events. The occurrence of a Market
Disruption Event could affect the calculation of the payment on the maturity
date or the redemption date you will receive. See "--Payment on the Maturity
Date" in this pricing supplement.
"Trading Day" means a day on which the New York Stock Exchange (the
"NYSE"), the American Stock Exchange (the "AMEX") and The Nasdaq Stock Market
are open for trading as determined by the calculation agent.
Fractional Shares
We will not distribute fractional Deliverable Shares. If the number of
Deliverable Shares to be delivered on the maturity date is not divisible by a
whole number, we will aggregate all share amounts due to a registered holder
on the maturity date, and, in lieu of delivering a fractional Deliverable
Share, we will pay to the registered holder the cash value of the fractional
share based on the Closing Market Price of the Deliverable Shares. While the
Notes are held at the depositary, the sole registered holder will be the
depositary. Depositary participants have different policies pertaining to
fractional shares. You should consult the participant through which you hold
the Notes to ascertain the participant's specific policy.
PS-12
Hypothetical Returns on the Maturity Date
The following table illustrates, for a range of hypothetical average
Closing Market Prices of the Deliverable Shares on the maturity date:
o the percentage change in the price of the Deliverable Shares from
the Pricing Date to the maturity date,
o the amount payable on the Notes at the maturity date,
o the total annualized yield on the Notes on the maturity date, and
o the total annualized yield from direct ownership of the Deliverable
Shares.
The table below also assumes:
o original issue date: March 15, 2005
o Exchange Ratio: 0.286259 (based on the Closing Market
Price of the Underlying Company's
common stock on March 8, 2005 of
$3,018.00 and a required increase in
the price of the Deliverable Shares of
more than 15.75% for you to receive a
cash amount greater than the $1,000
original offering price of Notes).
o maturity date: March 15, 2010
Hypothetical Percentage Amount Total
average change in payable on annualized Total annualized
Closing Market the price the Notes on yield on the yield from direct
Price on the from the the maturity Notes on the ownership of the
maturity date Pricing Date date(1) maturity date(2) Deliverable Shares
- -------------- ------------ ------------ ---------------- ------------------
603.60 -80% 1,000.00 0.00% -27.51%
1,207.20 -60% 1,000.00 0.00% -16.74%
1,810.80 -40% 1,000.00 0.00% -9.71%
2,414.40 -20% 1,000.00 0.00% -4.36%
3,018.00(3) 0% 1,000.00 0.00% 0.00%
3,621.60 20% 1,036.72 0.72% 3.71%
4,225.20 40% 1,209.50 3.84% 6.96%
4,828.80 60% 1,382.29 6.58% 9.85%
5,432.40 80% 1,555.08 9.02% 12.47%
6,036.00 100% 1,727.86 11.24% 14.86%
- -------------------------------------------------------------------------------
(1) These hypothetical cash payment amounts are for illustrative purposes
only. An investor may choose to exchange the Notes at any time until the
eighth scheduled Business Day before the maturity date. Whether amounts
are actually paid at the times indicated depends on numerous factors,
including but not limited to future market conditions.
(2) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis assuming an investment
term from March 8, 2005 to March 8, 2010, a term expected to equal that
of the Notes.
(3) This was the Closing Market Price of the Deliverable Shares on March 8,
2005, the date the Notes were priced for initial sale to the public.
Early Exchange at Holder's Election
You may elect to exchange all or a portion of the Notes you own by giving
notice as described below on any Business Day which is also a Trading Day
during the period beginning on March 15, 2005 and ending on the eighth
scheduled Business Day before the maturity date. Your written notice must be
given to the calculation agent and the trustee by 3:00 p.m., New York City
time on such date. If the calculation agent receives your notice after 3:00
p.m., New York City time, on any Trading Day, your notice will be deemed to
have been given on the following Trading Day. Any date on which you give us
proper notice requiring us to exchange your Notes early, or day on which such
notice shall be deemed to have been given, is referred to as the "Exchange
Notice Date".
PS-13
If you exercise your exchange right, as described above, then as of the
applicable Exchange Notice Date, you will receive shares of the Deliverable
Shares, the value of which could be less than the cash amount which you would
otherwise have been entitled had you held the Notes until the maturity date.
Therefore, you should carefully consider this risk before exercising the
exchange right.
For each $1,000 original offering price per unit of the Notes you require
us to exchange, we will deliver to you a number of shares of the Deliverable
Shares equal to the Exchange Ratio (subject to adjustment for certain
corporate reorganization events, as described below), as determined on the
Exchange Notice Date.
We will deliver the shares of the Deliverable Shares to you no more than
five Business Days after the Exchange Notice Date. We refer to that fifth
Business Day after the Exchange Notice Date as the "Exchange Date."
The Notes will be issued in registered global form and will remain on
deposit with the depositary as described in this pricing supplement and the
accompanying prospectus. Therefore, you must exercise your exchange option in
respect of your Notes through the depositary, by delivering notice of your
election to the depositary. To ensure that the depositary will receive timely
notice of your election to exchange all or a portion of your Notes, you must
instruct the direct or indirect participant through which you hold an interest
in the Notes to notify the depositary of your election of exchange of your
Notes, in accordance with the then applicable operating procedures of the
depositary. 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.
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 holder of Notes upon any acceleration
permitted by the Notes, with respect to each $1,000 original offering price of
Notes, will be equal to an amount as described under "--Payment on the
Maturity Date" above, calculated as though the date of default were the
maturity date for the Notes. If a bankruptcy proceeding is commenced in
respect of ML&Co., the claim of the holder of the Notes may be limited, under
Section 502(b)(2) of Title 11 of the United States Code, to the original issue
price of the Notes plus an additional amount of contingent interest calculated
as though the date of commencement of the proceeding were the maturity date of
the Notes.
In case of default in payment of the Notes, whether at the maturity date,
the Exchange Date or upon acceleration, from and after that date the Notes
will bear interest, payable upon demand of their holders, at the rate of 2.25%
per year, to the extent that payment of such interest shall be 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.
Exchange Ratio Adjustments
The Exchange Ratio used to calculate amounts payable on any date of
determination is subject to adjustment by the calculation agent as a result of
the dilution and reorganization adjustments described in this section. No
adjustments to the Exchange Ratio will be required unless the Exchange Ratio
adjustment would require a change of at least 0.1% in the Exchange Ratio then
in effect. The Exchange Ratio resulting from any of the adjustments specified
in this section will be rounded to the nearest one thousandth with five
ten-thousandths being rounded upward. The calculation agent will not be
required to make any adjustments to the Exchange Ratio after the close of
business on the eighth scheduled Business Day immediately prior to the
maturity date or the Exchange Date, as applicable.
No adjustments to the Exchange Ratio will be required other than those
specified below. However, ML&Co. may, at its sole discretion, cause the
calculation agent to make additional adjustments to the Exchange Ratio to
reflect changes occurring in relation to the Deliverable Shares or any other
security received in a reorganization event in other circumstances where
ML&Co. determines that it is appropriate to reflect those changes. The
required adjustments specified in this section do not cover all events that
could affect the Closing
PS-14
Market Price of the Deliverable Shares, including, without limitation, a
partial tender or exchange offer for the Deliverable Shares.
MLPF&S as calculation agent shall be solely responsible for the
determination and calculation of any adjustments to the Exchange Ratio and of
any related determinations and calculations with respect to any distributions
of stock, other securities or other property or assets, including cash, in
connection with any corporate event described in this section, and its
determinations and calculations shall be conclusive absent manifest error.
No adjustments will be made for certain other events, such as offerings
of common stock by the Underlying Company for cash or in connection with
acquisitions or the occurrence of a partial tender or exchange offer for the
Deliverable Shares by the Underlying Company or any third party.
ML&Co. will, within ten Business Days following the occurrence of an
event that requires an adjustment to the Exchange Ratio, or if ML&Co. is not
aware of this occurrence, as soon as practicable after becoming so aware,
provide written notice to the trustee, which shall provide notice to the
holders of the Notes of the occurrence of this event and, if applicable, a
statement in reasonable detail setting forth the adjusted Exchange Ratio.
Stock splits and reverse stock splits
If the Deliverable Shares are subject to a stock split or reverse stock
split, then once any split has become effective, the Exchange Ratio relating
to the Deliverable Shares will be adjusted to equal the product of the prior
Exchange Ratio and the number of shares which a holder of one share of the
Deliverable Shares before the effective date of that stock split or reverse
stock split would have owned or been entitled to receive immediately following
the applicable effective date.
Stock dividends
If the Deliverable Shares are subject to a (i) stock dividend, i.e.,
issuance of additional shares of the Deliverable Shares, that is given ratably
to all holders of shares of the Deliverable Shares, or (ii) distribution of
shares of the Deliverable Shares as a result of the triggering of any
provision of the corporate charter of the Underlying Company, then, once the
dividend has become effective and the shares are trading ex-dividend, the
Exchange Ratio will be adjusted so that the new Exchange Ratio shall equal the
prior Exchange Ratio plus the product of:
o the prior Exchange Ratio; and
o the number of the Deliverable Shares which a holder of one
Deliverable Share before the date the dividend became effective and
the Deliverable Shares traded ex-dividend would have owned or been
entitled to receive immediately following that date.
Extraordinary Dividends
There will be no adjustments to the Exchange Ratio to reflect any cash
dividends or cash distributions paid with respect to the Deliverable Shares
other than Extraordinary Dividends, as described below, and distributions
described under the section entitled "--Reorganization Events" below.
An "Extraordinary Dividend" means, with respect to a cash dividend or
other distribution with respect to the Deliverable Shares, a dividend or other
distribution which exceeds the immediately preceding non-Extraordinary
Dividend for the Deliverable Shares (as adjusted for any subsequent corporate
event requiring an adjustment as described in this pricing supplement, such as
a stock split or reverse stock split) by an amount equal to at least 10% of
the Closing Market Price of the Deliverable Shares on the Trading Day
preceding the ex-dividend date with respect to the Extraordinary Dividend (the
"ex-dividend date"). If an Extraordinary Dividend occurs with respect to the
Deliverable Shares, the Exchange Ratio will be adjusted on the ex-dividend
date with respect to the Extraordinary Dividend so that the new Exchange Ratio
will equal the product of:
PS-15
o the prior Exchange Ratio, and
o a fraction, the numerator of which is the Closing Market Price per
share of the Deliverable Shares on the Trading Day preceding the
ex-dividend date, and the denominator of which is the amount by
which the Closing Market Price per Deliverable Share on the Trading
Day preceding the ex-dividend date exceeds the Extraordinary
Dividend Amount.
The "Extraordinary Dividend Amount" with respect to an Extraordinary
Dividend for the Deliverable Shares will equal:
o in the case of cash dividends or other distributions that constitute
quarterly dividends, the amount per Deliverable Share of that
Extraordinary Dividend minus the amount per share of the immediately
preceding non-Extraordinary Dividend for those shares of the
Deliverable Shares; or
o in the case of cash dividends or other distributions that do not
constitute quarterly dividends, the amount per Deliverable Share of
that Extraordinary Dividend.
To the extent an Extraordinary Dividend is not paid in cash, the value of
the non-cash component will be determined by the calculation agent, whose
determination shall be conclusive. A distribution on the Deliverable Shares
described in clause (a), (d) or (e) of the section entitled "--Reorganization
Events" below that also constitutes an Extraordinary Dividend shall only cause
an adjustment pursuant to clause (a), (d) or (e) under the section entitled
"--Reorganization Events". A distribution on the Deliverable Shares described
in the section entitled "--Issuance of transferable rights and warrants" that
also constitutes an Extraordinary Dividend shall only cause an adjustment
pursuant to that section.
Issuance of transferable rights or warrants
If the Underlying Company issues transferable rights or warrants to all
holders of the Deliverable Shares to subscribe for or purchase the Deliverable
Shares, including new or existing rights to purchase the Deliverable Shares
pursuant to a shareholder's rights plan or arrangement, then the Exchange
Ratio will be adjusted on the Business Day immediately following the issuance
of such transferable rights or warrants so that the new Exchange Ratio will
equal the prior Exchange Ratio plus the product of:
o the prior Exchange Ratio, and
o the number of shares of the Deliverable Shares that can be purchased
with the cash value of such warrants or rights distributed on a
single share of the Deliverable Shares.
The number of shares that can be purchased will be based on the Closing
Market Price of the Deliverable Shares on the date the new Exchange Ratio is
determined. The cash value of such warrants or rights, if the warrants or
rights are traded on a national securities exchange, will equal the closing
price of such warrant or right, or, if the warrants or rights are not traded
on a national securities exchange, will be determined by the calculation agent
and will equal the average of the bid prices obtained from three dealers at
3:00 p.m., New York City time, on the date the new Exchange Ratio is
determined, provided that if only two such bid prices are available, then the
cash value of such warrants or rights will equal the average of such bids and
if only one such bid is available, then the cash value of such warrants or
rights will equal such bid.
Reorganization Events
If prior to the maturity date of the Notes,
(a) there occurs any reclassification or change of the Deliverable
Shares, including, without limitation, as a result of the issuance
of tracking stock by the Underlying Company;
PS-16
(b) the Underlying Company, or any surviving entity or subsequent
surviving entity of the Underlying Company (a "Successor Entity"),
has been subject to a merger, combination or consolidation and is
not the surviving entity;
(c) any statutory exchange of securities of the Underlying Company or
any Successor Entity with another corporation occurs, other than
pursuant to clause (b) above;
(d) the Underlying Company is liquidated or is subject to a proceeding
under any applicable bankruptcy, insolvency or other similar law;
(e) the Underlying Company issues to all of its shareholders equity
securities of an issuer other than the Underlying Company, other
than in a transaction described in clauses (b), (c) or (d) above;
(f) a tender or exchange offer or going-private transaction is
consummated for all the outstanding shares of the Underlying
Company; or
(g) the Underlying Company ceases to file the financial and other
information with the SEC in accordance with Section 13(a) of the
Securities Exchange Act of 1934 (an event in clauses (a) through
(g), a "Reorganization Event"),
then the method of determining the amount payable on each Note will be
adjusted as set forth below.
"Exchange Property" will consist of the securities, cash or any other assets
distributed to holders of record of the Deliverable Shares in or as a result
of the Reorganization Event, and where the Deliverable Shares continue to be
held by the holders of the Deliverable Shares receiving that distribution, the
Deliverable Shares. The Exchange Property will either:
A. be delivered on the maturity date to the holders of the Notes in an
amount per unit equal to the amount of Exchange Property delivered
with respect to the number of Deliverable Shares equal to the
Exchange Ratio at the time of the Reorganization Event; or
B. at the option of the calculation agent, be liquidated and the cash
proceeds will be paid to the holders of the Notes as described
below.
If the Exchange Property received in a Reorganization Event:
o consists only of cash or if the calculation agent exercises its
option to liquidate the Exchange Property following its
distribution, then, the Notes will be redeemed: (i) in the case
where the Exchange Property delivered to the holders of record of
the Deliverable Shares consists of cash only, on the third Business
Day succeeding the day on which that cash is distributed to holders
of record of the Deliverable Shares, or (ii) in the case where the
Exchange Property is liquidated, on the date specified by ML&Co. as
described below, and holders of the Notes will receive, in lieu of
any Deliverable Shares and in full satisfaction of our obligations
under the Notes, the product of (a) the amount of cash received with
respect to one Deliverable Share and the then current Exchange Ratio
or (b) the value of the Exchange Property liquidated with respect to
one Deliverable Share and the then current Exchange Ratio, as
applicable, plus in either case accrued and unpaid interest to the
early redemption date, with no interest accruing on the Notes
following the early redemption date. If the calculation agent
exercises the option to liquidate the Exchange Property, ML&Co. will
give notice to the trustee as to the election to liquidate the
Exchange Property, which notice will specify the method by which the
Exchange Property will be sold. The date of early redemption of the
Notes will be the fifth Business Day following the last date on
which the Exchange Property is sold;
o consists of more than one type of property and the calculation agent
has not exercised its option to liquidate the Exchange Property,
then holders of Notes will receive on the maturity date a pro rata
share of each such type of Exchange Property; and
PS-17
o includes a cash component and the calculation agent has not
exercised its option to liquidate the Exchange Property, then
holders will not receive any interest accrued on that cash
component.
In the event Exchange Property consists of securities, those securities will,
in turn, be subject to the antidilution adjustments set forth in this pricing
supplement.
In the case of a consummated tender or exchange offer or going-private
transaction involving Exchange Property of a particular type, Exchange
Property will be deemed to include the amount of cash or other property paid
by the offeror in the tender or exchange offer with respect to that Exchange
Property (in an amount determined on the basis of the rate of exchange in that
tender or exchange offer or going-private transaction). In the event of a
tender or exchange offer or a going-private transaction with respect to
Exchange Property in which an offeree may elect to receive cash or other
property, Exchange Property will be deemed to include the kind and amount of
cash and other property received by offerees who elect to receive cash.
MLPF&S as calculation agent will be solely responsible for determination
and calculation of the Exchange Property if a Reorganization Event occurs and
the amount due upon early redemption, including the determination of the cash
value of any Exchange Property, if necessary, and its determinations and
calculations will be conclusive absent a determination of a manifest error.
If the Underlying Company ceases to file the financial and other
information with the SEC in accordance with Section 13(a) of the Securities
Exchange Act of 1934 and the calculation agent determines in its sole
discretion that sufficiently similar information is not otherwise available to
you, the maturity date of the Notes will be accelerated to the fifth Business
Day following the date of that determination and the amount payable to you
will be calculated as though the date of early repayment were the stated
maturity date of the Notes. If the calculation agent determines that
sufficiently similar information is available to you, the Reorganization Event
will be deemed to have not occurred.
Alternative Dilution and Reorganization Adjustments
The calculation agent may elect at its discretion to not make any of the
adjustments to the Exchange Ratio or to the method of determining the amount
payable on each Note described above under "-Exchange Ratio Adjustments" and
"-Reorganization Events", but may instead make adjustments in its discretion
to the Exchange Ratio or the method of determining the amount payable on each
Note that will reflect the adjustments to the extent practicable made by the
Options Clearing Corporation on option contracts on the Deliverable Shares or
any successor common stock. ML&Co. will provide notice of any such election to
the trustee not more than two Business Days following the date that the
Options Clearing Corporation publishes notice of its adjustments relating to
the Deliverable Shares and will detail in such notice the actual adjustment
made to the Exchange Ratio or to the method of determining the amount payable
on each Note.
PS-18
THE DELIVERABLE SHARES
The Underlying Company
The following information has been derived from publicly available
documents published by the Underlying Company. We make no representation or
warranty as to the accuracy or completeness of the following information.
The Underlying Company has disclosed that it is a holding company owning
subsidiaries engaged in a number of diverse business activities and that the
most important of these are insurance businesses conducted on both a primary
basis and a reinsurance basis. Because the Deliverable Shares are registered
under the Securities Exchange Act of 1934 the Underlying Company is required
to file periodically certain financial and other information specified by the
SEC. Information provided to or filed with the SEC by the Underlying Company
can be located at the SEC's facilities or through the SEC's web site by
reference to SEC file number 000-1067983. See "Where You Can Find More
Information" in the accompanying prospectus. ML&Co. makes no representation or
warranty as to the accuracy or completeness of the information or reports.
The selection of the Deliverable Shares is not a recommendation to buy or
sell the Deliverable Shares. Neither ML&Co. nor any of its affiliates make any
representation to any purchaser of the Notes as to the performance of the
Deliverable Shares.
The Deliverable Shares trade on The New York Stock Exchange under the
symbol "BRK-B".
ML&Co. is not affiliated with the Underlying Company. The Underlying
Company has no obligations with respect to the Notes. This pricing supplement
relates only to the Notes and does not relate to the Deliverable Shares or
other securities of the Underlying Company. All disclosures contained in this
pricing supplement regarding the Underlying Company are derived from the
publicly available documents described above. Neither ML&Co. nor MLPF&S has
participated in the preparation of these documents or made any due diligence
inquiry with respect to the Underlying Company in connection with the offering
of the Notes. Neither ML&Co. nor MLPF&S makes any representation that the
publicly available documents or any other publicly available information
regarding the Underlying Company are accurate or complete. Furthermore, there
can be no assurance that all events occurring prior to the date hereof,
including events that would affect the accuracy or completeness of the
publicly available documents described above, that would affect the trading
price of the Deliverable Shares have been publicly disclosed. Subsequent
disclosure of any events or the disclosure of or failure to disclose material
future events concerning the Underlying Company could affect the value of the
Deliverable Shares to be received on the maturity date of the Notes and
therefore the trading prices of the Notes. Neither ML&Co. nor any of its
affiliates make any representation to any purchaser of the Notes as to the
performance of the Deliverable Shares.
ML&Co. or its affiliates may presently or from time to time engage in
business, directly or indirectly, with the Underlying Company including
extending loans to, or making equity investments in, the Underlying Company or
providing investment banking or advisory services to the Underlying Company,
including merger and acquisition advisory services. In the course of that
business, ML&Co. or its affiliates may acquire non-public information with
respect to the Underlying Company and, in addition, one or more affiliates of
ML&Co. may publish research reports with respect to the Underlying Company.
Any prospective purchaser of the Notes should undertake an independent
investigation of the Underlying Company as in its judgment is appropriate to
make an informed decision with respect to an investment in the Notes.
Historical data
The Deliverable Shares are principally traded on NYSE. The following
table sets forth the high and low closing prices for the calendar quarters
during calendar years 1999 through 2005. On March 8, 2005, the last recorded
transaction price on NYSE for the Deliverable Shares was $3,018.00 per share.
The closing prices listed below were obtained from Bloomberg Financial
Markets. The historical closing prices of the Deliverable Shares should not be
taken as an indication of future performance, and no assurance can be given
that the price of the Deliverable Shares will not decrease. In addition, no
assurance can be given that the price of the Deliverable Shares
PS-19
will increase so that the value of the Deliverable Shares that the holders of
the Notes may receive upon an exchange will exceed the original offering price
of the Notes.
High Low
---- ---
1999
First Quarter........................ $2,642.00 $2,075.00
Second Quarter....................... 2,537.00 2,220.00
Third Quarter........................ 2,319.00 1,856.00
Fourth Quarter....................... 2,163.00 1,710.00
2000
First Quarter........................ 1,820.00 1,370.00
Second Quarter....................... 1,964.00 1,732.00
Third Quarter........................ 2,070.00 1,727.00
Fourth Quarter....................... 2,354.00 1,784.00
2001
First Quarter........................ 2,411.00 2,105.00
Second Quarter....................... 2,319.00 2,097.00
Third Quarter........................ 2,355.00 2,048.00
Fourth Quarter....................... 2,525.00 2,213.00
2002
First Quarter........................ 2,499.00 2,328.00
Second Quarter....................... 2,600.01 2,234.00
Third Quarter........................ 2,518.00 2,000.00
Fourth Quarter....................... 2,490.00 2,262.00
2003
First Quarter........................ 2,403.00 2,035.00
Second Quarter....................... 2,502.00 19.02
Third Quarter........................ 2,544.00 2,368.00
Fourth Quarter....................... 2,815.00 2,512.00
2004
First Quarter........................ 3,173.00 2,803.00
Second Quarter....................... 3,184.00 2,851.00
Third Quarter........................ 3,023.00 2,790.00
Fourth Quarter....................... 2,972.50 2,703.00
2005
First Quarter (through March 8, 2005) 3,058.00 2,855.00
PS-20
UNITED STATES FEDERAL INCOME TAXATION
Set forth in full below is the opinion of Sidley Austin Brown & Wood LLP,
tax 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 supplements
the discussion set forth under the section entitled "United States Federal
Income Taxation" that is contained in the accompanying prospectus supplement
and supercedes that discussion to the extent that it contains information that
is inconsistent with that which is contained in the accompanying prospectus
supplement. 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,
real estate investment trusts, dealers in securities or currencies, traders in
securities that elect to mark to market, tax-exempt entities (except to the
extent specifically discussed below), persons holding Notes in a tax-deferred
or tax-advantaged account or persons holding Notes as a hedge against currency
risks, as a position in a "straddle" or as part of a "hedging", "conversion"
or "integrated" transaction for tax purposes or persons whose functional
currency is not the United States dollar. It also does not deal with holders
other than original purchasers (except where otherwise specifically noted 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. If a partnership holds the
Notes, the tax treatment of a partner in the partnership will generally depend
upon the status of the partner and the activities of the partnership. Thus,
persons who are partners in a partnership holding the Notes should consult
their own tax advisors. Moreover, all 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 that is
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, and 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
PS-21
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.
U.S. Holders
On June 11, 1996, the Treasury Department issued final regulations (the
"CPDI Regulations") concerning the proper United States federal income tax
treatment of contingent payment debt instruments 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 CPDI 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 conventional noncontingent payment debt instrument.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as that interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a
U.S. Holder on the sale, exchange, or retirement of a contingent payment debt
instrument 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 CPDI 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 CPDI Regulations to
the Notes, ML&Co. has determined that the projected payment schedule per unit
of the Notes will consist of payment on the maturity date of the $1,000
principal amount thereof and a projected amount in excess of such $1,000
principal amount equal to $225.18 (the "Projected Supplemental Redemption
Amount"). The projected payment schedule includes an estimate for a payment on
the maturity date taking into account a calculation of the amount payable on
the maturity date based upon the Exchange Ratio and a hypothetical average
Closing Market Price of the Deliverable Shares on the five Calculation Days,
or as otherwise described herein, as a contingent payment with respect to the
Notes. The projected payment schedule represents an estimated yield on the
Notes equal to 4.1% per annum, compounded semiannually. For United States
federal income tax purposes, a U.S. Holder must use the estimated yield and
the schedule of projected payments in determining its interest accruals, and
the adjustments thereto described below, in respect of the Notes, unless such
U.S. Holder timely discloses and justifies the use of other estimates to the
IRS. A U.S. Holder that determines its own estimated yield or schedule of
projected payments must also establish that ML&Co.'s determination of the
estimated yield or schedule of projected payments is unreasonable.
Based upon the foregoing, 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 (i.e., $1,000 per unit), increased by the interest
previously accrued on the Note. On the maturity date of a Note, in the event
that the actual cash amount paid in excess of $1,000 principal amount per unit
(the "Actual Supplemental Redemption Amount"), if any, exceeds $225.18 per
unit (i.e., the Projected Supplemental Redemption Amount), a U.S. Holder will
be required to include the excess of the Actual Supplemental Redemption Amount
over $225.18 per unit (i.e., the Projected Supplemental Redemption Amount) in
income as ordinary interest on the maturity date. Alternatively, in the event
that the Actual Supplemental Redemption Amount, if any, is less than $225.18
per unit (i.e., the Projected Supplemental Redemption Amount), the amount by
which the Projected Supplemental Redemption Amount (i.e., $225.18 per unit)
exceeds the Actual Supplemental Redemption Amount will be treated first as an
offset to any interest otherwise includible in income by the U.S. Holder with
respect to the Note for the taxable year in which the 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 Supplemental Redemption Amount (i.e.,
$225.18 per unit) in excess of the Actual Supplemental Redemption Amount that
is not treated as an interest offset pursuant to the
PS-22
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 purchases) 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.
As described above, ML&Co.'s determination of the estimated yield and the
schedule of projected payments for the Notes includes an estimate for a
payment on the maturity date taking into account a calculation of the amount
payable on the maturity date based upon the Exchange Ratio and a hypothetical
average Closing Market Price of the Deliverable Shares on the five Calculation
Days, or as otherwise described herein, as a contingent payment with respect
to the Notes. Similarly, ML&Co. intends to treat the receipt of a payment of
shares of the Deliverable Shares by a U.S. Holder upon exercise of the early
exchange election as a contingent payment under the CPDI regulations. As
described above, U.S. Holders are generally bound by ML&Co.'s determination of
the estimated yield and the schedule of projected payments. Under this
treatment, such an early exchange will also result in taxable gain or loss to
a U.S. Holder. Accordingly, upon the sale or exchange of a Note prior to the
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 that sale or exchange (including the fair market value
of any Deliverable Shares) 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 the 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 CPDI Regulations will be
treated as original issue discount.
All prospective investors in the Notes should consult their own tax
advisors concerning the application of the CPDI 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 CPDI
Regulations to the Notes, by submitting a written request for that 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 Supplemental
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 CPDI Regulations to the Notes), and is neither a prediction nor a
guarantee of what the Actual Supplemental Redemption Amount will be, or that
the Actual Supplemental Redemption Amount will even exceed zero.
PS-23
The following table sets forth the amount of interest that would be
deemed to have accrued with respect to each unit of the Notes during each
accrual period over the term of the Notes based upon the projected payment
schedule for the Notes (including both the Projected Supplemental Redemption
Amount and an estimated yield equal to 4.1% per annum (compounded
semiannually)) as determined by ML&Co. for purposes of applying the CPDI
Regulations to the Notes:
Total interest
deemed to have
Interest deemed accrued on
to accrue on Notes as of
Notes during end of accrual
accrual period period
Accrual Period (per unit) (per unit)
-------------- --------------- --------------
March 15, 2005 through September 15, 2005.... $20.67 $ 20.67
September 16, 2005 through March 15, 2006.... 20.92 41.59
March 16, 2006 through September 15, 2006.... 21.35 62.94
September 16, 2006 through March 15, 2007.... 21.79 84.73
March 16, 2007 through September 15, 2007.... 22.24 106.97
September 16, 2007 through March 15, 2008.... 22.69 129.66
March 16, 2008 through September 15, 2008.... 23.16 152.82
September 16, 2008 through March 15, 2009.... 23.63 176.45
March 16, 2009 through September 15, 2009.... 24.12 200.57
September 16, 2009 through March 15, 2010.... 24.61 225.18
- -------------
Projected Supplemental Redemption Amount = $225.18 per unit of Notes.
Unrelated Business Taxable Income
Section 511 of the Internal Revenue Code of 1986, as amended (the
"Code"), generally imposes a tax, at regular corporate or trust income tax
rates, on the "unrelated business taxable income" of certain tax-exempt
organizations, including qualified pension and profit sharing plan trusts and
individual retirement accounts. In general, if the Notes are held for
investment purposes, the amount of income or gain realized with respect to the
Notes will not constitute unrelated business taxable income. However, if a
Note constitutes debt-financed property (as defined in Section 514(b) of the
Code) by reason of indebtedness incurred by a holder of a Note to purchase the
Note, all or a portion of any income or gain realized with respect to such
Note may be classified as unrelated business taxable income pursuant to
Section 514 of the Code. Moreover, prospective investors in the Notes should
be aware that whether or not any income or gain realized with respect to a
Note which is owned by an organization that is generally exempt from U.S.
federal income taxation pursuant to Section 501(a) of the Code constitutes
unrelated business taxable income will depend upon the specific facts and
circumstances applicable to such organization. Accordingly, any potential
investors in the Notes that are generally exempt from U.S. federal income
taxation pursuant to Section 501(a) of the Code are urged to consult with
their own tax advisors concerning the U.S. federal income tax consequences to
them of investing in the 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) on a Note, unless the non-U.S. Holder is a direct or
indirect 10% or greater shareholder of ML&Co., a controlled foreign
corporation related to ML&Co. or a bank receiving interest described in
Section 881(c)(3)(A) of the Code. 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 the 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,
PS-24
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, 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 the individual's death, payments in
respect of that Note would have been effectively connected with the conduct by
the 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
the seller is a non-U.S. Holder (and certain other conditions are met). This
type of 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 the
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
PS-25
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit
plan (a "plan") subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), should consider the fiduciary standards of ERISA
in the context of the plan's particular circumstances before authorizing an
investment in the Notes. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the
documents and instruments governing the plan, and whether the investment would
involve a prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of
the Code (also "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) ("non-ERISA 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 we, MLPF&S
or certain of our 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 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
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 it either (1) 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) 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 a non-ERISA
arrangement 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 any
similar law.
PS-26
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.
USE OF PROCEEDS AND HEDGING
The net proceeds from the sale of the Notes will be used as described
under "Use of Proceeds" in the accompanying prospectus and to hedge market
risks of ML&Co. associated with its obligations in connection with the Notes.
SUPPLEMENTAL PLAN OF DISTRIBUTION
MLPF&S has advised ML&Co. that is proposed initially to offer all or part
of the Notes directly to the public on a fixed price basis at the offering
prices set forth on the cover of this pricing supplement. After the initial
public offering, the public offering prices may be changed. The obligations of
MLPF&S are subject to certain conditions and it is committed to take and pay
for all of the Notes if any are taken.
EXPERTS
The restated consolidated financial statements and the related restated
financial statement schedule incorporated in this prospectus by reference from
Merrill Lynch & Co., Inc.'s Current Report on Form 8-K dated February 3, 2005
for the year ended December 26, 2003 have been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated in their
reports dated March 1, 2004 (May 4, 2004 as to the effects of the restatement
related to stock-based compensation described in Note 2 to the consolidated
financial statements) (February 3, 2005 as to the effects of the restatement
related to the accounting for certain retail account fees described in Note 2
to the consolidated financial statements) (which express unqualified opinions
and which report on the consolidated financial statements includes explanatory
paragraphs for the change in accounting method in 2002 for goodwill
amortization to conform to Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets, for the change in
accounting method in 2004 for stock-based compensation to conform to SFAS No.
123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation--Transition and Disclosure, by
retroactively restating its 2003, 2002 and 2001 consolidated financial
statements, and for the restatement to correct the accounting for certain
retail account fees), which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
With respect to the restated unaudited interim condensed consolidated
financial information for the periods ended March 26, 2004 and March 28, 2003,
June 25, 2004 and June 27, 2003 and September 24, 2004 and September 26, 2003
which is incorporated herein by reference, Deloitte & Touche LLP, an
independent registered public accounting firm, have applied limited procedures
in accordance with the standards of the Public Company Accounting Oversight
Board (United States) for a review of such information. However, as stated in
their reports dated May 4, 2004 (February 3, 2005 as to the effects of the
restatement related to the accounting for certain retail account fees
described in Note 2 to the restated unaudited interim condensed consolidated
financial statements), August 2, 2004 (February 3, 2005 as to the effects of
the restatement related to the accounting for certain retail account fees
described in Note 2 to the restated unaudited interim condensed consolidated
financial statements) and November 1, 2004 (February 3, 2005 as to the effects
of the restatement related to the accounting for certain retail account fees
described in Note 2 to the restated unaudited interim condensed consolidated
financial statements) included in Merrill Lynch & Co., Inc.'s Current Report
on Form 8-K dated February 3, 2005 and incorporated by reference herein, they
did not audit and they do not express opinions on that restated unaudited
interim condensed consolidated financial information. Accordingly, the degree
of reliance on their reports on such information should be restricted in light
of the limited nature of the review procedures applied. Deloitte & Touche LLP
are not subject to the liability provisions of Section 11 of the Securities
Act of 1933 for their reports on the restated unaudited interim condensed
consolidated financial information because those reports are not "reports" or
a "part" of the registration statement prepared or certified by an accountant
within the meaning of Sections 7 and 11 of the Act.
PS-27
INDEX OF CERTAIN DEFINED TERMS
Business Day.............................................................PS-11
Calculation Day..........................................................PS-11
Closing Market Price.....................................................PS-11
Deliverable Shares........................................................PS-3
Exchange Notice Date.....................................................PS-13
Exchange Property........................................................PS-17
Exchange Ratio............................................................PS-4
ex-dividend date.........................................................PS-15
Extraordinary Dividend Amount............................................PS-16
Market Disruption Event..................................................PS-11
Notes.....................................................................PS-3
Pricing Date..............................................................PS-4
Reorganization Event.....................................................PS-17
Trading Day..............................................................PS-12
Underlying Company........................................................PS-3
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[Merrill Lynch Logo]
5,000 Units
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Zero Coupon Convertible Securities Exchangeable
into Berkshire Hathaway Inc. Class B Common Stock
due March 15, 2010
$1,000 original public offering price per unit
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PRICING SUPPLEMENT
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Merrill Lynch & Co.
March 8, 2005
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