PRICING SUPPLEMENT DATED MARCH 11, 2005
- ---------------------------------------
(To Prospectus Supplement and Prospectus dated February 25, 2005)
Pricing Supplement Number: 2431
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Inflation-Linked Notes Linked to the Performance of the
Consumer Price Index due April 5, 2006
(the "Notes")
------------
The Notes are part of a series of senior debt securities entitled
"Medium-Term Notes, Series C" as more fully described in the accompanying
prospectus (which term includes the accompanying prospectus supplement).
Information included in this pricing supplement supercedes information in the
prospectus to the extent it is different from the information included in the
prospectus.
References in this pricing supplement to "ML&Co.", "we", "us" and "our"
are to Merrill Lynch & Co., Inc., and references to "MLPF&S" are to Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
Investing in the Notes involves risks that are described in the "Risk
Factors" section of this pricing supplement and the accompanying prospectus
supplement.
Aggregate Principal Amount........... $100,000,000.
Stated Maturity Date................. April 5, 2006.
Issue Price.......................... $1,000 per Note.
Original Issue Date.................. March 15, 2005.
Interest Calculation Type............ Floating Rate Note.
Day Count Convention................. Interest will be calculated by multiplying the principal
amount of the Notes by an interest factor. The interest
factor for each day will be computed by dividing the
interest rate applicable to each day by the actual number
of days in the year.
Floating Interest Rate Basis......... [(CPI(t) - CPI(t-12))/CPI(t-12)] + 0.50%
but will not be less than 0.00%.
where:
CPI(t) equals the value of the Consumer Price Index (as
defined below) for the third calendar month prior to but
not including the month in which the applicable Interest
Reset Date occurs, and CPI(t-12) equals the value of the
Consumer Price Index for the fifteenth calendar month prior
to but not including the month in which the applicable
Interest Reset Date occurs.
Spread Multiplier.................... Not Applicable.
Initial Interest Rate................ 3.756% per annum.
Maximum Interest Rate................ None.
Minimum Interest Rate................ For any interest period, 0.00% per annum.
Interest Payment Dates............... Monthly, on the 5th day of each month, commencing April 5,
2005, and on the maturity date. If any Interest Payment
Date falls on a day that is not a Business Day, payment
will be made on the immediately succeeding Business Day and
no interest will accrue as a result of the delayed payment.
Interest Reset Dates................. Monthly, on the 5th day of each month commencing April 5,
2005. If any Interest Reset Date is not a Business Day, the
applicable Interest Reset Date will be postponed to the
next succeeding Business Day.
CUSIP Number......................... 59018YVD0.
Form of Notes........................ Book-entry.
Denominations........................ We will issue and sell the Notes in denominations of $1,000
and integral multiples of $1,000 in excess thereof.
Trustee.............................. JPMorgan Chase Bank, N.A.
Calculation Agent.................... Merrill Lynch Capital Services, Inc.
All determinations made by the Calculation Agent will be at
the sole discretion of the Calculation Agent and, absent
manifest error, will be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the Notes.
All percentages resulting from any calculation on the Notes
will be rounded to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage
point rounded upwards, e.g., 9.876545% (or .09876545) would
be rounded to 9.87655% (or .0987655). All dollar amounts
used in or resulting from this calculation will be rounded
to the nearest cent, with one-half cent being rounded
upwards.
Proceeds to ML&Co.................... 99.9% of the Aggregate Principal Amount.
Underwriter.......................... Merrill Lynch, Pierce, Fenner & Smith Incorporated
Underwriting Discount................ 0.10% of the Aggregate Principal Amount.
PS-2
RISK FACTORS
Your investment in the Notes involves certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks, as well as the risk
described in the accompanying prospectus supplement, before deciding whether
an investment in the Notes is suitable for you.
Structure risks of Notes indexed to the Consumer Price Index
The interest payable on the Notes is indexed to the performance of the
Consumer Price Index over twelve month periods. As a result, the possibility
exists that you could receive little or no interest on a given Interest
Payment Date. The Consumer Price Index is likely to increase only slightly or
decrease during periods of deflation or little or no inflation. We have no
control over a number of matters, including economic, financial and political
events, that are important in determining the existence, magnitude and
longevity of such events and their results. In recent years, values of certain
indices such as the Consumer Price Index have been volatile and such
volatility may be expected in the future. However, past experience is not
necessarily indicative of what may occur in the future.
Your yield may be lower than the yield on other debt securities of comparable
maturity
The yield that you will receive on your Notes 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.
CONSUMER PRICE INDEX
The amount of interest payable on the Notes will be linked to changes in
the Consumer Price Index. The "Consumer Price Index" for purposes of the Notes
is the nonseasonally adjusted U.S. City Average All Items Consumer Price Index
for All Urban Consumers, published monthly by the Bureau of Labor Statistics
of the U.S. Department of Labor. The Consumer Price Index is expressed in
relative terms in relation to the 1982-1984 time base reference period for
which the level of Consumer Price Index was set at 100. The Consumer Price
Index for any given month is published during the following month.
The Consumer Price Index is a measure of the average change in consumer
prices over time for a fixed market basket of goods and services, including
food, clothing, shelter, fuels, transportation, charges for doctors and
dentists services, and drugs. In calculating the Consumer Price Index, price
changes for the various items are averaged together with weights that
represent their importance in the spending of urban households in the United
States. The contents of the market basket of goods and services and the
weights assigned to the various items are updated periodically by the Bureau
of Labor Statistics to take into account changes in consumer expenditure
patterns.
The value of the Consumer Price Index for any given month will be the
value reported on Bloomberg page CPURNSA or any successor service or successor
page thereto. If the relevant values for the Consumer Price Index are not
available on Bloomberg page CPURNSA or on a successor page or successor
service on or before any Interest Reset Date, such value will be determined in
the sole discretion of the Calculation Agent.
PS-3
The following table sets forth the value of the Consumer Price Index from
January 2000 to February 2005, as reported by the Bureau of Labor Statistics
and reported on Bloomberg page CPURNSA. This historical data is presented for
informational purposes only. Past movements of the Consumer Price Index is not
necessarily indicative of future values.
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
January 168.8 175.1 177.1 181.7 185.2 190.7
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
February 169.8 175.8 177.8 183.1 186.2
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
March 171.2 176.2 178.8 184.2 187.4
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
April 171.3 176.9 179.8 183.8 188.0
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
May 171.5 177.7 179.8 183.5 189.1
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
June 172.4 178.0 179.9 183.7 189.7
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
July 172.8 177.5 180.1 183.9 189.4
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
August 172.8 177.5 180.7 184.6 189.5
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
September 173.7 178.3 181.0 185.2 189.9
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
October 174.0 177.7 181.3 185.0 190.9
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
November 174.1 177.4 181.3 184.5 191.0
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
December 174.0 176.7 180.9 184.3 190.3
- ----------------- ---------- ----------- ---------- ----------- ---------- -----------
To illustrate the Floating Interest Rate Basis applicable to the Notes,
assuming March 15, 2005 were an Interest Reset Date, based on the historical
information presented in the table above, the per annum interest rate
applicable to the Notes until the next Interest Reset Date would have been
3.756%, calculated as follows:
190.3 minus 184.3 = 6
6 divided by 184.3 = 3.256%
3.256% plus 0.50% = 3.756%
In accordance with the formula used in determining the Floating Interest
Rate Basis, the December 2004 and December 2003 values of the Consumer Price
Index were used in the calculating the above example.
PS-4
UNITED STATES FEDERAL INCOME TAXATION
The following discussion supplements and, to the extent that it is
inconsistent with, replaces the discussion contained in the accompanying
prospectus supplement in the section entitled "United States Federal Income
Taxation".
U.S. Holders
Payments of Interest. For the reasons discussed below, payments of
interest on a Note generally will be taxable to a U.S. Holder as ordinary
interest income at the time such payments are accrued or are received (in
accordance with the U.S. Holder's regular method of tax accounting).
The following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") under the
original issue discount provisions of the Code. Under the OID Regulations,
debt instruments having terms similar to the Notes (hereinafter "Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if:
o its issue price does not exceed the total noncontingent principal
payments due under the Variable Note by more than a specified de minimis
amount and
o it provides for stated interest, paid or compounded at least annually,
at current values of:
o one or more qualified floating rates,
o a single fixed rate and one or more qualified floating rates,
o a single objective rate, or
o a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
An "objective rate" is a rate that is not itself a qualified floating
rate but which is determined using a single fixed formula that is based on
objective financial or economic information. A rate will not qualify as an
objective rate if it is based on information that is within the control of the
issuer (or a related party) or that is unique to the circumstances of the
issuer (or a related party), such as dividends, profits, or the value of the
issuer's stock (although a rate does not fail to be an objective rate merely
because it is based on the credit quality of the issuer). Based upon the
foregoing, the Notes should qualify as variable rate debt instruments which
provide for stated interest at a single objective rate.
If a Variable Note that provides for stated interest at a single
objective rate throughout the term thereof qualifies as a "variable rate debt
instrument" under the OID Regulations and if the interest on the Variable Note
is unconditionally payable in cash or property (other than debt instruments of
the issuer) at least annually, then all stated interest on the Variable Note
will constitute qualified stated interest and will be taxed accordingly. In
general, payments of qualified stated interest are includible in a U.S.
Holder's income as interest at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). Thus, a Variable Note that provides for stated interest at a
single objective rate throughout the term thereof and that qualifies as a
"variable rate debt instrument" under the OID Regulations, such as the Notes,
will generally not be treated as having been issued with original issue
discount unless the Variable Note is issued at a "true" discount (i.e., at a
price below the Variable Note's stated principal amount) in excess of a
specified de minimis amount. Since the Notes will be originally issued at a
price equal to $1,000 per Note, the Notes will be treated as providing only
for qualified stated interest and not as having been issued with original
issue discount. The specific amount of qualified stated interest that accrues
during an accrual period on a Variable Note is determined under the rules
applicable to fixed rate debt instruments by assuming that the variable rate
is a fixed rate equal to
(1) in the case of a qualified floating rate or qualified inverse
floating rate, the value as of the issue date, of the qualified floating
rate or qualified inverse floating rate, or
(2) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note.
PS-5
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or
is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
Prospective investors should also consult the summary describing the
principal U.S. federal income tax consequences of the ownership and
disposition of the Notes contained in the section entitled "United States
Federal Income Taxation" in the accompanying prospectus supplement.
PS-6