As Filed with the Securities and Exchange Commission on March 29, 1999
Registration No. 333-68747
============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
and
POST-EFFECTIVE AMENDMENTS
under
THE SECURITIES ACT OF 1933
---------------------
MERRILL LYNCH & CO., INC. DELAWARE 13-2740599
(Exact name of registrant as specified in charter) (State of incorporation) (I.R.S. employer identification number)
MERRILL LYNCH PREFERRED FUNDING VI, L.P. DELAWARE 13-4034253
(Exact name of registrant as specified in certificate of (State of organization) (I.R.S. employer identification number)
limited partnership)
MERRILL LYNCH PREFERRED CAPITAL TRUST VI DELAWARE 13-7174482
(Exact name of registrant as specified in certificate of trust) (State of organization) (I.R.S. employer identification number)
World Financial Center
North Tower
New York, New York 10281-1334
(212)449-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
MARK B. GOLDFUS, ESQ.
General Counsel
Corporate Law
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281-1334
(212)449-6990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
NORMAN D. SLONAKER, ESQ. DONALD R. CRAWSHAW, ESQ. RICHARD T. PRINS, ESQ.
Brown & Wood LLP Sullivan & Cromwell Skadden, Arps, Slate,
One World Trade Center 125 Broad Street Meagher & Flom LLP
New York, New York 10048 New York, New York 10004 919 Third Avenue
New York, New York 10022
---------------------
Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
---------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
The Registrants hereby amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this Registration Statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
EXPLANATORY NOTE
This registration statement contains:
(a) a prospectus which is to be used by Merrill Lynch & Co., Inc.
("ML&Co.") in connection with offerings of its:
o debt securities;
o warrants;
o common stock;
o preferred stock; and
o depositary shares;
(b) a prospectus which is to be used by ML&Co. in connection with
offerings of its Structured Yield Product Exchangeable for Stock; and
(c) a prospectus including alternate pages, which is to be used in
connection with offerings of:
o the preferred securities of Merrill Lynch Preferred Capital Trust VI
("ML Trust");
o the preferred securities of Merrill Lynch Preferred Funding VI, L.P.
("ML Partnership");
o the subordinated debentures of ML&Co.; and
o the guarantees of ML&Co. of:
o the preferred securities of ML Trust;
o the preferred securities of ML Partnership; and
o specified debentures issued by ML&Co.'s affiliates.
o Additionally, there is a prospectus supplement relating to ML&Co.'s
medium-term notes and 32 prospectuses to be used by ML&Co.'s
wholly-owned subsidiary, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated in connection with market-making
transactions.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
[LOGO]
Merrill Lynch & Co., Inc.
DEBT SECURITIES, WARRANTS, PREFERRED STOCK,
DEPOSITARY SHARES AND COMMON STOCK
o By this prospectus, we may o When we offer securities, we
offer from time to time up to will provide you with a
$ of our: prospectus supplement or a term
sheet describing the terms of
o debt securities; the specific issue of securities
including the offering price of
o warrants; the securities.
o warrants; o You should read this prospectus
and the prospectus supplement or
o common stock; the term sheet relating to the
specific issue of securities
o preferred stock; and carefully before you invest.
o depositary shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------------
The date of this prospectus is , 199 .
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Asset Management L.P. and Merrill Lynch Mercury Asset Management, provides
investment, financing, advisory, insurance, and related products on a global
basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281; our telephone number is (212)
449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically to
Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of all the
securities offered under this prospectus.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
general corporate purposes, unless otherwise specified in the prospectus
supplement or term sheet relating to a specific issue of securities. Our general
corporate purposes may include financing the activities of our subsidiaries,
financing our assets and those of our subsidiaries, lengthening the average
maturity of our borrowings and financing acquisitions. Until we use the net
proceeds from the sale of any of our securities for general corporate purposes,
we will use the net proceeds to reduce our short-term indebtedness or for
temporary investments. We expect that we will, on a recurrent basis, engage in
additional financings as the need arises to finance our growth, through
acquisitions or otherwise, or to lengthen the average maturity of our
borrowings. To the extent that securities being purchased for resale by our
subsidiary, Merrill Lynch Pierce, Fenner & Smith Incorporated, referred to in
this prospectus as MLPF&S, are not resold, the aggregate proceeds that we and
our subsidiaries would receive would be reduced.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc., in
a transaction accounted for as a pooling-of-interests. The following information
for the fiscal years 1994 through 1997 has been restated as if the two entities
had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges and ratios of earnings to combined fixed charges and preferred
stock dividends for the periods indicated:
YEAR ENDED LAST FRIDAY IN DECEMBER
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)................. 1.2 1.2 1.2 1.2 1.1
Ratio of earnings to combined fixed charges
and preferred stock dividends(a)............... 1.2 1.2 1.2 1.2 1.1
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
THE SECURITIES
ML&Co. intends to sell its securities from time to time. These securities
may include the following, in each case, as specified by ML&Co. at the time of
offering:
o common stock;
o preferred stock;
o depositary shares representing preferred stock;
o debt securities, comprising senior debt securities and subordinated
debt securities, each of which may be convertible into common stock or
preferred stock;
o warrants to purchase debt securities;
o warrants to purchase shares of common stock;
o warrants to purchase shares of preferred stock;
o warrants entitling the holders to receive from ML&Co. a payment or
delivery determined by reference to decreases or increases in the
level of an index or portfolio ("Index Warrants") based on:
o one or more equity or debt securities;
o any statistical measure of economic or financial performance such
as a currency or a consumer price or mortgage index; or
o the price or value of any commodity or any other item or index;
o warrants to receive from ML&Co. the cash value in U.S. dollars of the
right to purchase ("Currency Call Warrants") or to sell ("Currency Put
Warrants" and, together with the Currency Call Warrants, the "Currency
Warrants") specified foreign currencies or units of two or more
specified foreign currencies;
o preferred stock which may be:
o convertible into preferred stock or common stock or
o exchangeable for debt securities, preferred stock or depositary
shares representing preferred stock.
We may offer the securities independently or together with other securities
and the securities may be attached to, or separate from other securities. We
will offer the securities to the public on terms determined by market conditions
at the time of sale and set forth in a prospectus supplement or term sheet
relating to the specific issue of securities.
ML&Co. will offer the securities described in this prospectus either
separately or together in one or more series of up to $ aggregate public
offering price or its equivalent in foreign currencies or units of two or more
currencies, based on the applicable exchange rate at the time of offering, as
shall be designated by ML&Co. at the time of offering, subject to reduction on
account of the sale of other securities under the registration statement of
which this prospectus is a part.
DESCRIPTION OF DEBT SECURITIES
Unless otherwise specified in a prospectus supplement, the senior debt
securities are to be issued under an indenture (the "1983 Indenture"), dated as
of April 1, 1983, as amended and restated and as further amended, between ML&Co.
and The Chase Manhattan Bank, as trustee or issued under an indenture (the "1993
Indenture"), dated as of October 1, 1993, as amended, between ML&Co. and The
Chase Manhattan Bank, as trustee (each, a "Senior Debt Trustee"). The 1983
Indenture and the 1993 Indenture are referred to as the "Senior Indentures".
Unless otherwise specified in a prospectus supplement, the subordinated debt
securities are to be issued under an indenture (the "Subordinated Indenture"),
between ML&Co. and The Chase Manhattan Bank, as trustee (the "Subordinated Debt
Trustee"). The Senior Debt Securities and Subordinated Debt Securities may also
be issued under one or more other indentures (each, a "Subsequent Indenture")
and have one or more other trustees (each, a "Subsequent Trustee"). Any
Subsequent Indenture relating to senior debt securities will have terms and
conditions identical in all material respects to the above-referenced Senior
Indentures and any Subsequent Indenture relating to subordinated debt securities
will have terms and conditions identical in all material respects to the
above-referenced Subordinated Indenture, including, but not limited to, the
applicable terms and conditions described below. Any Subsequent Indenture
relating to a series of debt securities, and the applicable trustee, will be
identified in the applicable prospectus supplement or term sheet. A copy of each
indenture is filed, or, in the case of a Subsequent Indenture, will be filed, as
an exhibit to the registration statement relating to the securities. The
following summaries of the material provisions of the indentures are not
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the respective indentures, including the definitions of
terms.
TERMS OF THE DEBT SECURITIES
ML&Co. may issue the debt securities from time to time, without limitation
as to aggregate principal amount and in one or more series. ML&Co. may issue
debt securities upon the satisfaction of conditions, including the delivery to
the applicable Trustee of a resolution of the Board of Directors of ML&Co., or a
committee of the Board of Directors, or a certificate of an officer of ML&Co.
who has been authorized by the Board of Directors to take that kind of action,
which fixes or establishes the terms of the debt securities being issued. Any
resolution or officer's certificate approving the issuance of any issue of debt
securities will include the terms of that issue of debt securities, including:
o the aggregate principal amount and whether there is any limit
upon the aggregate principal amount that ML&Co. may subsequently
issue;
o the stated maturity date;
o the principal amount payable whether at maturity or upon earlier
acceleration, and whether the principal amount will be determined
with reference to an index, formula or other method;
o any fixed or variable interest rate or rates per annum;
o any interest payment dates;
o any provisions for redemption, the redemption price and any
remarketing arrangements;
o any sinking fund requirements;
o whether the debt securities are denominated or payable in United
States dollars or a foreign currency or units of two or more
foreign currencies;
o the form in which ML&Co. will issue the debt securities, whether
registered, bearer or both, and any restrictions applicable to
the exchange of one form for another and to the offer, sale and
delivery of the debt securities in either form;
o whether and under what circumstances ML&Co. will pay additional
amounts ("Additional Amounts") under any debt securities held by
a person who is not a U.S. person for specified taxes,
assessments or other governmental charges and whether ML&Co. has
the option to redeem the affected debt securities rather than pay
any Additional Amounts;
o whether the debt securities are to be issued in global form;
o the title and series designation;
o the minimum denominations;
o whether, and the terms and conditions relating to when, ML&Co.
may satisfy all or part of its obligations with regard to payment
upon maturity, or any redemption or required repurchase or in
connection with any exchange provisions by delivering to the
holders of the debt securities, other securities, which may or
may not be issued by or be obligations of ML&Co., or a
combination of cash, other securities and/or property ("Maturity
Consideration");
o any additions or deletions in the terms of the debt securities
with respect to the Events of Default set forth in the respective
indentures;
o the terms, if any, upon which the debt securities are convertible
into common stock or preferred stock of ML&Co. and the terms and
conditions upon which any conversion will be effected, including
the initial conversion price or rate, the conversion period and
any other provisions in addition to or instead of those described
in this prospectus;
o whether, and the terms and conditions relating to when, holders
may transfer the debt securities separately from warrants if the
debt securities and warrants are issued together; and
o any other terms of the debt securities which are not inconsistent
with the provisions of the applicable indenture.
Please see the accompanying prospectus supplement or the terms sheet you
have received or will receive for the terms of the specific debt securities
being offered. ML&Co. may deliver this prospectus before or concurrently with
the delivery of a terms sheet. ML&Co. may issue debt securities under the
indentures upon the exercise of warrants to purchase debt securities. See
"Description of Debt Warrants". Nothing in the indentures or in the terms of the
debt securities will prohibit the issuance of securities representing
subordinated indebtedness that is senior or junior to the subordinated debt
securities.
Prospective purchasers of debt securities should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as the debt securities. The prospectus supplement relating to
an issue of debt securities will describe these considerations, if they apply.
ML&Co. will issue each series of debt securities, as described in the
prospectus supplement, in fully registered form without coupons, and/or in
bearer form with or without coupons, and in denominations set forth in the
prospectus supplement. There will be no service charge for any registration of
transfer of registered debt securities or exchange of debt securities, but
ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charges imposed in connection with any registration of transfer or
exchange. Each indenture provides that ML&Co. may issue debt securities in
global form. If any series of debt securities is issued in global form, the
applicable prospectus supplement will describe the circumstances, if any, under
which beneficial owners of interests in any of those global debt securities may
exchange their interests for debt securities of that series and of like tenor
and principal amount in any authorized form and denomination.
The provisions of the indentures permit ML&Co., without the consent of
holders of any debt securities, to issue additional debt securities with terms
different from those of debt securities previously issued and to reopen a
previous series of debt securities and issue additional debt securities of that
series.
The senior debt securities will be unsecured and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. The subordinated debt
securities will be unsecured and will be subordinated to all existing and future
senior indebtedness of ML&Co. Because ML&Co. is a holding company, the right of
ML&Co. and its creditors, including the holders of the debt securities, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that a bankruptcy
court may recognize the claims of ML&Co. itself as a creditor of the subsidiary.
In addition, dividends, loans and advances from certain subsidiaries,
including MLPF&S, to ML&Co. are restricted by net capital requirements under the
Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
ML&Co. will pay or deliver principal and any premium, Additional Amounts,
Maturity Consideration and interest in the manner, at the places and subject to
the restrictions set forth in the applicable indenture, the debt securities and
the applicable prospectus supplement. However, at its option, ML&Co. may pay any
interest and any Additional Amounts by check mailed to the holders of registered
debt securities at their registered addresses.
Holders may present debt securities for exchange, and registered debt
securities for transfer, in the manner, at the places and subject to the
restrictions set forth in the applicable indenture, the debt securities and the
applicable prospectus supplement. Holders may transfer debt securities in bearer
form and the coupons, if any, pertaining to the debt securities by delivery.
There will be no service charge for any transfer or exchange of debt securities,
but ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with a transfer or exchange.
Unless otherwise indicated in the applicable prospectus supplement, ML&Co.
will issue the debt securities under the indentures. If so specified in a
prospectus supplement, ML&Co. may issue subordinated debt securities under a
separate indenture which provides for a single issue of zero coupon convertible
subordinated debt securities, a form of which is filed as an exhibit to the
registration statement of which this prospectus is a part. If ML&Co. issues debt
securities under any indenture, the applicable prospectus supplement will set
forth the terms of the debt securities and will identify the applicable
indenture and trustee.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation, and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay or deliver the principal of, and any premium, Additional
Amounts, Maturity Consideration or interest on, the debt
securities; and
o perform and observe all of ML&Co.'s other obligations under the
indentures, and
o ML&Co. or any successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
indentures.
MODIFICATION AND WAIVER
Each indenture may be modified and amended by ML&Co. and the applicable
trustee with the consent of holders of at least 66 2/3% in principal amount or
aggregate issue price of each series of debt securities affected. However,
without the consent of each holder of any debt security affected, no amendment
or modification to any indenture may:
o change the stated maturity of the principal or Maturity
Consideration of, or any installment of interest or Additional
Amounts on, any debt security or any premium payable on
redemption, or change the redemption price;
o reduce the principal amount of, or the interest or Additional
Amounts payable on, or reduce the amount or change the type of
Maturity Consideration deliverable on, any debt security or
reduce the amount of principal or Maturity Consideration which
could be declared due and payable before the stated maturity;
o change the place or currency of any delivery or payment of
principal or Maturity Consideration of, or any premium, interest
or Additional Amounts on any debt security;
o impair the right to institute suit for the enforcement of any
delivery or payment on any debt security;
o reduce the percentage in principal amount or aggregate issue
price of the outstanding debt securities of any series, the
consent of whose holders is required to modify or amend the
applicable indenture; or
o modify the foregoing requirements or reduce the percentage in
principal amount or aggregate issue price of outstanding debt
securities necessary to waive any past default to less than a
majority.
No modification or amendment of the Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of each
holder affected. The holders of at least a majority in principal amount or
aggregate issue price of the outstanding debt securities of any series may, with
respect to that series, waive past defaults under the applicable indenture and
waive compliance by ML&Co. with certain provisions of that indenture, except as
described under "-Events of Default".
EVENTS OF DEFAULT
Each of the following will be an Event of Default with respect to each
series of debt securities issued under each indenture:
o default in the payment of any interest or Additional Amounts when
due, and continuing for 30 days;
o default in the payment of any principal or premium, when due;
o default in the delivery or payment of the Maturity Consideration
when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co.
contained in the applicable indenture for the benefit of that
series or in the debt securities of that series, and continuing
for 60 days after written notice as provided in the applicable
indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co. and
o any other Event of Default provided with respect to debt
securities of that series.
If an Event of Default occurs and is continuing for any series of debt
securities, the applicable trustee or the holders of at least 25% in principal
amount or aggregate issue price of the outstanding debt securities of that
series may declare all amounts, or any lesser amount provided for in the debt
securities of that series, due and payable or deliverable immediately. At any
time after the applicable trustee or the holders have made a declaration of
acceleration with respect to the debt securities of any series but before the
applicable trustee has obtained a judgment or decree for payment of money due,
the holders of a majority in principal amount or aggregate issue price of the
outstanding debt securities of that series may rescind any declaration of
acceleration and its consequences, provided that all payments and/or deliveries
due, other than those due as a result of acceleration, have been made and all
Events of Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue price of
the outstanding debt securities of any series may waive an Event of Default with
respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable
under the debt securities of that series; or
o in respect of an obligation of ML&Co. contained in, or a
provision of, any indenture which cannot be modified under the
terms of that indenture without the consent of each holder of
each series of debt securities affected.
The holders of a majority in principal amount or aggregate issue price of
the outstanding debt securities of a series may direct the time, method and
place of conducting any proceeding for any remedy available to the applicable
trustee or exercising any trust or power conferred on the trustee with respect
to debt securities of that series, provided that any direction is not in
conflict with any rule of law or the applicable indenture. Subject to the
provisions of each indenture relating to the duties of the appropriate trustee,
before proceeding to exercise any right or power under an indenture at the
direction of the holders, the applicable trustee is entitled to receive from
those holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any direction.
Unless otherwise stated in the applicable prospectus supplement, any series
of debt securities issued under any indenture will not have the benefit of any
cross-default provisions with other indebtedness of ML&Co.
ML&Co. will be required to furnish to each trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the applicable
indenture.
SPECIAL TERMS RELATING TO THE SENIOR DEBT SECURITIES
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than any lien specifically
permitted by the Senior Indentures, on the Voting Stock owned directly or
indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the Senior Indentures as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the Senior Indentures, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF
ASSETS BY, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock of
MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its Voting
Stock, unless, after giving effect to the transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the Senior Indentures to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which are
owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a
Controlled Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
SPECIAL TERMS RELATING TO THE SUBORDINATED DEBT SECURITIES
Upon any distribution of assets of ML&Co. resulting from any dissolution,
winding up, liquidation or reorganization, payments on subordinated debt
securities are subordinated to the extent provided in the Subordinated Indenture
in right of payment to the prior payment in full of all senior indebtedness, but
the obligation of ML&Co. to make payments on the subordinated debt securities
will not otherwise be affected. ML&Co. may not make any payment on subordinated
debt securities at any time when there is a default in the payment or delivery
of any amounts due on any senior indebtedness, including payment of any sinking
fund. Because the subordinated debt securities are subordinated in right of
payment to any senior indebtedness, in the event of a distribution of assets
upon insolvency, some creditors of ML&Co. may recover more, ratably, than
holders of subordinated debt securities. Holders of subordinated debt securities
will be subrogated to the rights of holders of senior indebtedness to the extent
of payments made on senior indebtedness upon any distribution of assets in any
proceedings in respect of subordinated debt securities.
As of December 25, 1998, a total of approximately $75.4 billion of ML&Co.'s
indebtedness would have been senior indebtedness.
SPECIAL TERMS RELATING TO CONVERTIBLE DEBT SECURITIES
The following provisions will apply to debt securities that will be
convertible into common stock or preferred stock of ML&Co. unless otherwise
provided in the prospectus supplement relating to the specific issue of debt
securities.
The holder of any convertible debt securities will have the right,
exercisable at any time during the time period specified in the applicable
prospectus supplement, unless previously redeemed, to convert convertible debt
securities into shares of common stock or preferred stock of ML&Co. as specified
in the prospectus supplement, at the conversion rate per principal amount of
convertible debt securities set forth in the applicable prospectus supplement.
In the case of convertible debt securities called for redemption, conversion
rights will expire at the close of business on the date fixed for the redemption
specified in the applicable prospectus supplement, except that, in the case of
redemption at the option of the holder, if applicable, the conversion right will
terminate upon receipt of written notice of the exercise of the option.
For each series of convertible debt securities, the conversion price or
rate will be subject to adjustment as contemplated in the applicable indenture.
Unless otherwise provided in the applicable prospectus supplement, these
adjustments may occur as a result of:
o the issuance of shares of ML&Co. common stock as a dividend;
o subdivisions and combinations of ML&Co. common stock;
o the issuance to all holders of ML&Co. common stock of rights or
warrants entitling holders to subscribe for or purchase shares of
ML&Co. common stock at a price per share less than the current market
price per share; and
o the distribution to all holders of ML&Co. common stock of:
o shares of ML&Co. capital stock other than common stock;
o evidences of indebtedness of ML&Co. or assets other than cash
dividends paid from retained earnings and dividends payable in
common stock referred to above; or
o subscription rights or warrants other than those referred to
above.
In any case, no adjustment of the conversion price or rate will be required
unless an adjustment would require a cumulative increase or decrease of at least
1% in such price or rate. ML&Co. will not issue any fractional shares of ML&Co.
common stock upon conversion, but, instead, ML&Co. will pay a cash adjustment.
If indicated in the applicable prospectus supplement, convertible debt
securities convertible into common stock of ML&Co. which are surrendered for
conversion between the record date for an interest payment, if any, and the
interest payment date, other than convertible debt securities called for
redemption on a redemption date during that period, must be accompanied by
payment of an amount equal to interest which the registered holder is entitled
to receive.
ML&Co. will determine the adjustment provisions for convertible debt
securities at the time of issuance of each series of convertible debt
securities. These adjustment provisions will be described in the applicable
prospectus supplement.
Except as set forth in the applicable prospectus supplement, any
convertible debt securities called for redemption, unless surrendered for
conversion on or before the close of business on the redemption date, are
subject to being purchased from the holder of the convertible debt securities by
one or more investment banking firms or other purchasers who may agree with
ML&Co. to purchase convertible debt securities and convert them into common
stock or preferred stock of ML&Co., as the case may be.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed
in accordance with, the laws of the State of New York.
DESCRIPTION OF DEBT WARRANTS
ML&Co. may issue warrants for the purchase of debt securities ("Debt
Warrants"). The Debt Warrants are to be issued under debt warrant agreements to
be entered into between ML&Co. and a bank or trust company, as debt warrant
agent as set forth in the prospectus supplement relating to the specific issue
of Debt Warrants being offered. We have filed a copy of the form of debt warrant
agreement, including the form of warrant certificates representing the Debt
Warrants, reflecting the alternative provisions to be included in the debt
warrant agreements that will be entered into with respect to particular
offerings of Debt Warrants, as an exhibit to the registration statement of which
this prospectus is a part. The following summaries of the material provisions of
the debt warrant agreement and the debt warrant certificates are not complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the debt warrant agreement and the debt warrant certificates,
respectively, including the definitions of terms.
TERMS OF THE DEBT WARRANTS
The applicable prospectus supplement will describe the terms of the
specific issue of Debt Warrants being offered, the debt warrant agreement
relating to the Debt Warrants and the debt warrant certificates representing the
Debt Warrants, including the following:
o the designation and aggregate principal amount of the debt
securities that holder of a Debt Warrant may purchase upon
exercise of the Debt Warrant and the price at which the purchase
may be made;
o the terms of the debt securities purchasable upon exercise of the
Debt Warrants, including whether the debt securities will be
senior debt securities or subordinated debt securities;
o the procedures and conditions relating to the exercise of the
Debt Warrants;
o the designation and terms of any debt securities with which the
Debt Warrants are issued, including whether the debt securities
will be senior debt securities or subordinated debt securities
and under which indenture the debt securities will be issued;
o the number of Debt Warrants issued with each debt security;
o any date on and after which the Debt Warrants and any related
debt securities are separately transferable;
o the date on which the right to exercise the Debt Warrants begins;
o date on which the right to exercise the Debt Warrants expires;
o whether the Debt Warrants represented by the debt warrant
certificates will be issued in registered or bearer form, and, if
registered, where they may be transferred and registered;
o any circumstances which will cause the Debt Warrants to be deemed
to be automatically exercised;
o any material risk factors relating to the Debt Warrants;
o the identity of the debt warrant agent; and
o any other terms of the Debt Warrants which are not inconsistent
with the provisions of the debt warrant agreement.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations. Holders may exercise Debt Warrants at
the corporate trust office of the debt warrant agent or any other office
indicated in the applicable prospectus supplement. Before the exercise of their
Debt Warrants, holders of Debt Warrants will not have any of the rights of
holders of the debt securities that may be purchased upon exercise of the Debt
Warrants and will not be entitled to payment or delivery of any amounts which
may be due on the debt securities purchasable upon exercise of the Debt
Warrants.
Prospective purchasers of Debt Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as Debt Warrants and to the debt securities purchasable upon
exercise of the Debt Warrants. The prospectus supplement relating to any issue
of Debt Warrants will describe these considerations.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Debt Warrants will be issued in the form of global debt warrant
certificates, registered in the name of a depositary or its nominee. Except as
may otherwise be provided in the applicable prospectus supplement, beneficial
owners will not be entitled to receive definitive certificates representing Debt
Warrants unless the depositary is unwilling or unable to continue as depositary
or ML&Co. decides to have the Debt Warrants represented by definitive
certificates. A beneficial owner's interest in a Debt Warrant will be recorded
on or through the records of the brokerage firm or other entity that maintains
the beneficial owner's account. In turn, the total number of Debt Warrants held
by an individual brokerage firm for its clients will be maintained on the
records of the depositary in the name of the brokerage firm or its agent.
Transfer of ownership of any Debt Warrant will be effected only through the
selling beneficial owner's brokerage firm.
EXERCISE OF DEBT WARRANTS
Each Debt Warrant will entitle the holder to purchase for cash a principal
amount of debt securities at the exercise price set forth in, or determined in
the manner set forth in, the applicable prospectus supplement. Holders may
exercise Debt Warrants at any time up to the close of business on the expiration
date set forth in the applicable prospectus supplement. After the close of
business on the expiration date, unexercised Debt Warrants will become void.
Holders may exercise Debt Warrants in the manner described in the
applicable prospectus supplement. Upon receipt of payment and properly completed
and duly executed debt warrant certificate at the corporate trust office of the
debt warrant agent or any other office indicated in the applicable prospectus
supplement, ML&Co. will, as soon as practicable, forward the debt securities
purchased. If less than all of the Debt Warrants represented by any debt
warrant certificate are exercised, a new debt warrant certificate will be issued
for the remaining amount of Debt Warrants.
LISTING
ML&Co. may list an issue of Debt Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
DESCRIPTION OF CURRENCY WARRANTS
ML&Co. may issue Currency Warrants either in the form of:
o Currency Put Warrants entitling the holders to receive from ML&Co. the
cash settlement value in U.S. dollars of the right to sell a specified
amount of a specified foreign currency or currency units for a
specified amount of U.S. dollars, or
o Currency Call Warrants entitling the holders to receive from ML&Co.
the cash settlement value in U.S. dollars of the right to purchase a
specified amount of a specified foreign currency or units of two or
more currencies for a specified amount of U.S. dollars.
ML&Co. may issue the Currency Warrants under a currency put warrant
agreement or a currency call warrant agreement, as applicable, to be entered
into between ML&Co. and a bank or trust company, as currency warrant agent as
set forth in the applicable prospectus supplement relating to Currency Warrants
being offered. Copies of the forms of currency put warrant agreement and
currency call warrant agreement, including the forms of certificates
representing the Currency Put Warrants and Currency Call Warrants, reflecting
the provisions to be included in the currency warrant agreements that will be
entered into with respect to particular offerings of Currency Warrants, are
filed as exhibits to the registration statement of which this prospectus is a
part. The following summaries of the material provisions of the currency warrant
agreements and the currency warrant certificates are not complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the currency warrant agreements and the currency warrant
certificates, respectively, including the definitions of terms.
TERMS OF THE CURRENCY WARRANTS
The applicable prospectus supplement will describe the terms of the
specific issue of Currency Warrants being offered, the currency warrant
agreement relating to the Currency Warrants and the currency warrant
certificates representing the Currency Warrants, including the following:
o whether the Currency Warrants are Currency Put Warrants, Currency Call
Warrants, or both;
o the formula for determining the cash settlement value of each Currency
Warrant;
o the procedures and conditions relating to the exercise of the Currency
Warrants;
o any circumstances that will cause the Currency Warrants to be deemed
to be automatically exercised;
o any minimum number of Currency Warrants which must be exercised at any
one time, other than upon automatic exercise;
o the date on which the right to exercise the Currency Warrants begins
and the date on which the right to exercise the Currency Warrants
expires, which may be the same date;
o any material risk factors relating to the Currency Warrants;
o the identity of the currency warrant agent; and
o any other terms of the Currency Warrants that are not inconsistent
with the provisions of the applicable currency warrant agreement.
Prospective purchasers of Currency Warrants should be aware that special
U.S. Federal income tax, accounting and other considerations may be applicable
to instruments such as Currency Warrants. The prospectus supplement relating to
any issue of Currency Warrants will describe these considerations, if they
apply.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Currency Warrants will be issued in the form of global currency
warrant certificates, registered in the name of a depositary or its nominee. In
that case, beneficial owners will not be entitled to receive definitive
certificates representing Currency Warrants unless the depositary is unwilling
or unable to continue as depositary or ML&Co. decides to have the Currency
Warrants represented by definitive certificates. A beneficial owner's interest
in a Currency Warrant will be recorded on or through the records of the
brokerage firm or other entity that maintains a beneficial owner's account. In
turn, the total number of Currency Warrants held by an individual brokerage firm
for its clients will be maintained on the records of the depositary in the name
of the brokerage firm or its agent. Transfer of ownership of any Currency
Warrant will be effected only through the selling beneficial owner's brokerage
firm.
EXERCISE OF CURRENCY WARRANTS
Each Currency Warrant will entitle the holder to the cash settlement value
of that Currency Warrant on the applicable exercise date as described in the
applicable prospectus supplement. If a Currency Warrant has more than one
exercise date and is not exercised before the time specified in the applicable
prospectus supplement, on the fifth business day preceding the expiration date,
the Currency Warrants will be deemed automatically exercised.
LISTING
ML&Co. will apply to list each issue of Currency Warrants on a national
securities exchange. In the event that the Currency Warrants are delisted from,
or permanently suspended from trading on, any exchange, the expiration date for
the exercise of the Currency Warrants will be the date the delisting or trading
suspension becomes effective and Currency Warrants not previously exercised will
be deemed automatically exercised on the business day immediately preceding the
expiration date. Under the applicable currency warrant agreement, ML&Co. will
agree not to seek delisting of the Currency Warrants, or suspension of their
trading, on any exchange.
DESCRIPTION OF INDEX WARRANTS
ML&Co. may issue from time to time Index Warrants consisting of index put
warrants or index call warrants. Subject to applicable law, ML&Co. will pay or
deliver consideration on each Index Warrant in an amount determined by reference
to the level or value of an index such as:
o an equity or debt security, or a portfolio or basket of indices or
securities, which may include the price or yield of securities;
o any statistical measure of economic or financial performance, which
may include any currency or consumer price, or mortgage index; or
o the price or value of any commodity or any other item or index or any
combination.
The payment or delivery of any consideration on any index put warrant will
be determined by the decrease in the level or value of the applicable index and
the payment or delivery of any consideration on any index call warrant will be
determined by the increase in the level or value of the applicable Index.
The Index Warrants involve a high degree of risk, including the risk that
the Index Warrants will expire without value other than any Minimum Expiration
Value, as defined below. Investors should therefore be prepared to sustain a
total loss of the purchase price of the Index Warrants, other than any
applicable Minimum Expiration Value. Investors who consider purchasing Index
Warrants should be experienced with respect to options and option transactions
and reach an investment decision only after carefully considering the
suitability of the Index Warrants in light of their particular circumstances and
the information set forth below as well as additional information contained in
the prospectus supplement relating to the Index Warrants.
METHOD OF ISSUANCE
Index Warrants issued without a Minimum Expiration Value will be issued
under one or more index warrant agreements to be entered into between ML&Co. and
a bank or trust company, as index warrant agent, all as described in the
prospectus supplement relating to the specific issue of Index Warrants. The
index warrant agent will act solely as the agent of ML&Co. under the applicable
index warrant agreement and will not assume any obligation or relationship of
agency or trust for or with any index warrantholders. A single bank or trust
company may act as index warrant agent for more than one issue of Index
Warrants.
Index Warrants issued with a Minimum Expiration Value will be issued under
one or more index warrant trust indentures to be entered into between ML&Co. and
a corporation or other person permitted to so act by the Trust Indenture Act of
1939, as amended from time to time, to act as index warrant trustee, all as
described in the prospectus supplement relating to the Index Warrants. Any index
warrant trust indenture will be qualified under the Trust Indenture Act. To the
extent allowed by the Trust Indenture Act, a single qualified corporation may
act as index warrant trustee for more than one issue of Index Warrants.
ML&Co. has filed forms of index warrant agreement and index warrant trust
indenture and the related global index warrant certificates as exhibits to the
registration statement of which this prospectus is a part. The summaries set
forth in this section of the material provisions of the index warrant agreement,
the index warrant trust indenture and global index warrant certificates are not
complete, are subject to, and are qualified in their entirety by reference to,
all the provisions of the index warrant agreement, the index warrant trust
indenture and global index warrant certificates, respectively.
Unless otherwise specified in the accompanying prospectus supplement,
payments, if any, upon exercise of the Index Warrants will be made in U.S.
dollars. The Index Warrants will be offered on terms to be determined at the
time of sale. ML&Co. will have the right to reopen a previous issue of Index
Warrants and to issue additional Index Warrants of that issue without the
consent of any index warrantholder.
RANKING
The Index Warrants are unsecured contractual obligations of ML&Co. and will
rank equally with its other unsecured contractual obligations and with its
unsecured and unsubordinated debt. Because ML&Co. is a holding company, the
right of ML&Co. and its creditors, including the index warrantholders, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that a bankruptcy
court may recognize claims of ML&Co. itself as a creditor of the subsidiary. In
addition, dividends, loans and advances from certain subsidiaries, including
MLPF&S, to ML&Co. are restricted by net capital requirements under the Exchange
Act and under rules of certain exchanges and other regulatory bodies.
TERMS OF THE INDEX WARRANTS
The applicable prospectus supplement will describe the specific issue of
Index Warrants being offered, the indenture or agreement under which the Index
Warrants will be issued, as the case may be, and the index warrant certificates
representing the Index Warrants, including the following:
o whether the Index Warrants to be issued will be Index Put Warrants,
Index Call Warrants or both;
o the aggregate number and initial public offering price or purchase
price;
o the applicable index;
o whether the Index Warrants will be deemed automatically exercised as
of a specified date or whether the Index Warrants may be exercised
during a period and the date on which the right to exercise the Index
Warrants commences and the date on which the exercise right expires;
o the manner in which the Index Warrants may be exercised and any
restrictions on, or other special provisions relating to, the exercise
of the Index Warrants;
o any minimum number of the Index Warrants exercisable at any one time;
o any maximum number of the Index Warrants that may, subject to ML&Co.'s
election, be exercised by all index warrantholders, or by any person
or entity, on any day;
o any provisions permitting an index warrantholder to condition an
exercise notice on the absence of certain specified changes in the
level of the applicable index after the exercise date, any provisions
permitting ML&Co. to suspend exercise of the Index Warrants based on
market conditions or other circumstances and any other special
provision relating to the exercise of the Index Warrants;
o any provisions for the automatic exercise of the Index Warrants other
than at the expiration date;
o any provisions permitting ML&Co. to cancel the Index Warrants upon the
occurrence of certain events;
o any additional circumstances that would constitute an Event of Default
under the Index Warrants;
o the method of determining:
o the payment or delivery, if any, to be made in connection with
the exercise or deemed exercise of the Index Warrants (the
"Settlement Value "),
o the minimum payment or delivery, if any, to be made upon
expiration of the Index Warrants (the "Minimum Expiration
Value"),
o the payment or delivery to be made upon the exercise of any right
which ML&Co. may have to cancel the Index Warrants, and
o the value of the index;
o in the case of Index Warrants relating to an index for which the
trading prices of underlying securities, commodities or rates are
expressed in a foreign currency, the method of converting amounts in
the relevant foreign currency or currencies into U.S. dollars, or any
other currency or composite currency in which the Index Warrants are
payable;
o any method of providing for a substitute index or otherwise
determining the payment or delivery to be made in connection with the
exercise of the Index Warrants if the index changes or ceases to be
made available by its publisher;
o any time or times at which ML&Co. will make payment or delivery on the
Index Warrants following exercise or automatic exercise;
o any provisions for issuing the Index Warrants in other than book-entry
form;
o if the Index Warrants are not issued in book-entry form, any place or
places at which ML&Co. will make payment or delivery on cancellation
and any Minimum Expiration Value of the Index Warrants;
o any circumstances that will cause the Index Warrants to be deemed to
be automatically exercised;
o any material risk factors relating to the Index Warrants;
o the identity of the Index Warrant Agent; and
o any other terms of the Index Warrants which are not inconsistent with
the provisions of the index warrant agreement.
Prospective purchasers of Index Warrants should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to
instruments such as the Index Warrants. The prospectus supplement relating to
any issue of Index Warrants will describe these considerations, if they apply.
PAYMENT AND DELIVERY
If specified, and under the circumstances described in the prospectus
supplement:
o ML&Co. will pay or deliver to each index warrantholder an amount equal
to the greater of the applicable Settlement Value and a Minimum
Expiration Value of the Index Warrants;
o upon cancellation of the Index Warrants by ML&Co. which may occur upon
specified events, ML&Co. will pay or deliver to each index
warrantholder an amount specified in the prospectus supplement; and
o following the occurrence of an extraordinary event, the Settlement
Value of an Index Warrant may, at the option of ML&Co., be determined
on a different basis, including in connection with automatic exercise
at expiration.
Unless otherwise specified in the related prospectus supplement, the Index
Warrants will be deemed to be automatically exercised upon expiration or any
earlier date that may be specified. Upon any automatic exercise, ML&Co. will
deliver or pay to each index warrantholder an amount equal to the Settlement
Value of the Index Warrants, except that holders of Index Warrants having a
Minimum Expiration Value will be entitled to receive a payment or delivery equal
to the greater of the Settlement Value and the applicable Minimum Expiration
Value. The Minimum Expiration Value may be either a predetermined payment or
delivery or a payment or delivery that varies during the term of the Index
Warrants in accordance with a schedule or formula. Any Minimum Expiration Value
applicable to an issue of Index Warrants, as well as any additional
circumstances resulting in the automatic exercise of the Index Warrants, will be
specified in the applicable prospectus supplement.
CANCELLATION OR POSTPONEMENT
If so specified in the applicable prospectus supplement, ML&Co. may cancel
the Index Warrants. In addition, ML&Co. may delay or postpone the exercise or
valuation of, or payment or delivery for, the Index Warrants upon the occurrence
of an extraordinary event. Any extraordinary events relating to an issue of
Index Warrants will be described in the applicable prospectus supplement. Upon
cancellation, the related index warrantholders will be entitled to receive only
the applicable payment or delivery on cancellation specified in the applicable
prospectus supplement. The amount payable or deliverable upon cancellation may
be either a predetermined amount or an amount that varies during the term of the
Index Warrants in accordance with a schedule or formula.
WAIVER OF DEFAULT
If ML&Co. defaults with respect to any of its obligations under any Index
Warrants issued with a Minimum Expiration Value under an index warrant trust
indenture, the index warrantholders of a majority in interest of all outstanding
Index Warrants may waive a default, except a default:
o in the payment or delivery of the Settlement Value, Minimum Expiration
Value or payment or delivery of any amount upon cancellation of the
Index Warrants; or
o in respect of a covenant or provision of the applicable index warrant
trust indenture which cannot be modified or amended without the
consent of each index warrantholder of each outstanding Index Warrant
affected.
MODIFICATION
ML&Co. and the index warrant agent or index warrant trustee, as the case
may be, may amend any index warrant agreement or index warrant indenture and the
terms of the related Index Warrants by a supplemental agreement or supplemental
indenture (each, a "Supplemental Agreement"), without the consent of the holders
of any Index Warrants, for the purpose of:
o curing any ambiguity, or of curing, correcting or supplementing any
defective or inconsistent provision, or of making any other provisions
with respect to matters or questions arising under the index warrant
agreement or index warrant trust indenture, as the case may be, which
are not inconsistent with the provisions of the respective agreement
or indenture or of the Index Warrants,
o evidencing the succession to ML&Co. and the assumption by the
successor of ML&Co.'s covenants contained in the index warrant
agreement or the index warrant trust indenture, as the case may be,
and the Index Warrants,
o appointing a successor depositary,
o evidencing and providing for the acceptance of appointment by a
successor index warrant agent or index warrant trustee with respect to
the Index Warrants, as the case may be,
o adding to the covenants of ML&Co., for the benefit of the index
warrantholders or surrendering any right or power conferred upon
ML&Co. under the index warrant agreement or index warrant trust
indenture, as the case may be,
o issuing Index Warrants in definitive form, or
o amending the index warrant agreement or index warrant trust indenture,
as the case may be, in any manner which ML&Co. may deem to be
necessary or desirable and which will not materially and adversely
affect the interests of the Index Warrantholders.
ML&Co. and the index warrant agent may also amend any index warrant
agreement or index warrant trust indenture, as the case may be, and the terms of
the related Index Warrants, by a Supplemental Agreement, with the consent of the
index warrantholders holding not less than 66 2/3% in number of the then
outstanding unexercised Index Warrants affected by the amendment, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the index warrant agreement or index warrant trust
indenture, as the case may be, or of modifying in any manner the rights of the
index warrantholders. However, without the consent of each index warrantholder
affected, no amendment may be made that:
o changes the determination, or any aspects of the determination, of the
Settlement Value or any payment or delivery to be made on
cancellation, or any Minimum Expiration Value of the Index Warrants so
as to reduce the payment or delivery to be made upon exercise or
deemed exercise,
o shortens the period of time during which the Index Warrants may be
exercised, or otherwise materially and adversely affects the exercise
rights of the index warrantholders, or
o reduces the number of outstanding Index Warrants, the consent of whose
holders is required for amendment of the index warrant agreement, the
index warrant trust indenture or the terms of the related Index
Warrants.
EVENTS OF DEFAULT
Specified events in bankruptcy, insolvency or reorganization of ML&Co. will
constitute Events of Default with respect to Index Warrants having a Minimum
Expiration Value which are issued under an index warrant trust indenture. Upon
the occurrence of an Event of Default, the holders of 25% of unexercised Index
Warrants may elect to receive a settlement payment or delivery for any
unexercised Index Warrants. Any settlement payment or delivery will immediately
become due to the index warrantholders upon any election. Assuming ML&Co. is
able to satisfy its obligations when due under the Index Warrants, the
settlement payment or delivery will be an amount equal to the market value of
the Index Warrants as of the date ML&Co. is notified of the intended
liquidation. The market value of the Index Warrants will be determined by a
nationally recognized securities broker-dealer unaffiliated with ML&Co. and
mutually selected by ML&Co. and the index warrant trustee.
MERGER, CONSOLIDATION, SALE, LEASE OR OTHER DISPOSITIONS
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay or deliver the Settlement Value, any Minimum Expiration Value
or any consideration payable or deliverable upon cancellation, if
applicable with respect to all the unexercised Index Warrants;
and
o perform and observe all of the obligations and conditions of the
index warrant agreement or index warrant trust indenture, as the
case may be, to be performed or observed by ML&Co.; and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any merger or consolidation, in default under the
index warrant agreement or index warrant trust indenture, as the case
may be.
ENFORCEABILITY OF RIGHTS BY INDEX WARRANTHOLDERS
Any index warrantholder may, without the consent of the related index
warrant agent, enforce by appropriate legal action, in and for its own behalf,
its right to exercise, and receive payment or delivery for, its Index Warrants.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Index Warrants will be issued in book-entry form and represented
by global Index Warrants, registered in the name of a depositary or its nominee.
In that case, index warrantholders will not be entitled to receive definitive
certificates representing Index Warrants, unless the depositary is unwilling or
unable to continue as depositary or ML&Co. decides to have the Index Warrants
represented by definitive certificates. A beneficial owner's interest in an
Index Warrant represented by a global Index Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains the
beneficial owner's account. In turn, the total number of Index Warrants held by
an individual brokerage firm or other entity for its clients will be maintained
on the records of the depositary in the name of the brokerage firm or other
entity or its agent. Transfer of ownership of any Index Warrant will be effected
only through the selling beneficial owner's brokerage firm.
LISTING
ML&Co. may list an issue of Index Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms of preferred
stock which ML&Co. may issue. The terms of any series of the preferred stock
will be described in the applicable prospectus supplement relating to the
preferred stock being offered. The description set forth below and in any
prospectus supplement is not complete, and is subject to, and qualified in its
entirety by reference to, ML&Co.'s restated certificate of incorporation, as
amended, which is filed as an exhibit to the registration statement of which
this prospectus is a part, and the certificate of designations relating to each
particular series of the preferred stock, which was or will be filed with the
SEC at or before the issuance of the series of preferred stock.
TERMS OF THE PREFERRED STOCK
Under ML&Co.'s restated certificate of incorporation, ML&Co. is authorized
to issue up to 25,000,000 shares of preferred stock, par value $1.00 per share.
The Board of Directors of ML&Co. has the authority, without approval of the
stockholders, to issue all of the shares of preferred stock which are currently
authorized in one or more series and to fix the number of shares and the rights,
preferences, privileges, qualifications, restrictions and limitations of each
series. As of December 25, 1998, ML&Co. had 24,957,500 shares of preferred stock
available for issuance.
ML&Co. has authorized the issuance of shares of Series A junior preferred
stock, par value $1.00 per share, of ML&Co. upon exercise of preferred share
purchase rights associated with each share of common stock outstanding. See
"Description of Common Stock--Rights to Purchase Series A Junior Preferred
Stock".
In addition, as described under "Description of Depositary Shares", ML&Co.,
at its option, instead of offering full shares of any series of preferred stock,
may offer depositary shares evidenced by depositary receipts, each representing
a fraction of a share of the particular series of preferred stock issued and
deposited with a depositary. The fraction of a share of preferred stock which
each depositary share represents will be set forth in the prospectus supplement
relating to the depositary shares.
The applicable prospectus supplement will describe the terms of each series
of preferred stock, including, where applicable, the following:
o the designation, stated value, liquidation preference and number of
shares offered;
o the offering price or prices;
o the dividend rate or rates, or method of calculation, the dividend
periods, the date on which dividends shall be payable and whether
dividends are cumulative or noncumulative and, if cumulative, the
dates from which dividends begin to cumulate;
o any redemption or sinking fund provisions;
o any conversion or exchange provisions;
o any voting rights;
o to the extent permitted by applicable law, whether the preferred stock
will be issued in certificated or book-entry form;
o whether the preferred stock will be listed on a national securities
exchange;
o information with respect to any book-entry procedures; and
o any additional rights, preferences, privileges, limitations and
restrictions of the preferred stock which are not inconsistent with
the provisions of the certificate of incorporation.
The preferred stock will be, when issued against payment, fully paid and
nonassessable. Holders will have no preemptive rights to subscribe for any
additional securities which ML&Co. may issue. Unless otherwise specified in the
applicable prospectus supplement, the shares of each series of preferred stock
will rank equally with all other outstanding series of preferred stock issued by
ML&Co. as to payment of dividends, other than with respect to cumulation of
dividends, and as to the distribution of assets upon liquidation, dissolution,
or winding up of ML&Co. As of December 25, 1998, there were 42,500 shares of
ML&Co.'s 9% Cumulative Preferred Stock, Series A (the "9% Preferred Stock")
represented by 17,000,000 depositary shares and one Special Voting Share
outstanding. See "--Outstanding Preferred Stock". Each series of preferred stock
will rank senior to the common stock, and any other stock of ML&Co. that is
expressly made junior to that series of preferred stock.
Unless otherwise specified in the applicable prospectus supplement,
Citibank, N.A., will be the transfer agent, dividend disbursing agent and
registrar for the shares of the preferred stock.
Because ML&Co. is a holding company, its rights and the rights of holders
of its securities, including the holders of preferred stock, to participate in
the distribution of assets of any subsidiary of ML&Co. upon its liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors and preferred stockholders, except to the extent ML&Co. may itself be
a creditor with recognized claims against the subsidiary or a holder of
preferred stock of the subsidiary.
DIVIDENDS AND DISTRIBUTIONS
Holders of shares of the preferred stock will be entitled to receive, as,
if and when declared by the Board of Directors of ML&Co., or a duly authorized
committee of the Board of Directors, out of funds legally available for the
payment of dividends, cash dividends at the rate set forth in, or calculated in
accordance with the formula set forth in, the prospectus supplement relating to
the preferred stock being offered.
Dividends on the preferred stock may be cumulative or noncumulative as
provided in the applicable prospectus supplement. Dividends on the cumulative
preferred stock will accumulate from the date of original issue and will be
payable quarterly in arrears on the dates specified in the applicable prospectus
supplement. If any date so specified as a dividend payment date is not a
business day, declared dividends on the preferred stock will be paid on the
immediately succeeding business day, without interest. The applicable prospectus
supplement will set forth the applicable dividend period with respect to a
dividend payment date. If the Board of Directors of ML&Co. or a duly authorized
committee of the Board of Directors, fails to declare a dividend on any series
of noncumulative preferred stock for any dividend period, ML&Co. will have no
obligation to pay a dividend for that period, whether or not dividends on that
series of noncumulative preferred stock are declared for any future dividend
period. Dividends on the preferred stock will be payable to record holders as
they appear on the stock books of ML&Co. on each record date, not more than 30
nor less than 15 days preceding the applicable payment date, as shall be fixed
by the Board of Directors of ML&Co. or a duly authorized committee of the Board
of Directors.
No dividends will be declared or paid or set apart for payment on the
preferred stock of any series ranking, as to dividends, equally with or junior
to any other series of preferred stock for any period unless dividends have been
or are contemporaneously declared and paid or declared and a sum sufficient for
the payment of those dividends has been set apart for,
o in the case of cumulative preferred stock, all dividend periods
terminating on or before the date of payment of full cumulative
dividends, or
o in the case of noncumulative preferred stock, the immediately
preceding dividend period.
When dividends are not paid in full upon any series of preferred stock, and
any other preferred stock ranking equally as to dividends with that series of
preferred stock, all dividends declared upon shares of that series of preferred
stock and any other preferred stock ranking equally as to dividends will be
declared pro rata so that the amount of dividends declared per share on that
series of preferred stock and any other preferred stock ranking equally as to
dividends will in all cases bear to each other the same ratio that accrued
dividends per share on the shares of that series of preferred stock and the
other preferred stock bear to each other. In the case of noncumulative preferred
stock, any accrued dividends described in the immediately preceding paragraph
will not include any cumulation in respect of unpaid dividends for prior
dividend periods.
Except as provided in the immediately preceding paragraph, unless full
dividends on all outstanding shares of any series of preferred stock have been
declared and paid,
o in the case of a series of cumulative preferred stock, for all past
dividend periods, or
o in the case of noncumulative preferred stock, for the immediately
preceding dividend period,
then:
o ML&Co. may not declare dividends or pay or set aside for payment or
other distribution on any of its capital stock ranking junior to or
equally with that series of preferred stock as to dividends or upon
liquidation, other than dividends or distributions paid in shares of,
or options, warrants or rights to subscribe for or purchase shares of,
the common stock of ML&Co. or other capital stock of ML&Co. ranking
junior to that series of preferred stock as to dividends and upon
liquidation, and
o other than in connection with the distribution or trading of any of
its capital stock, ML&Co. may not redeem, purchase or otherwise
acquire any of its capital stock ranking junior to or equally with
that series of preferred stock as to dividends or upon liquidation,
for any consideration or any moneys paid to or made available for a
sinking fund for the redemption of any shares of any of its capital
stock, except by conversion or exchange for capital stock of ML&Co.
ranking junior to that series of preferred stock as to dividends and
upon liquidation.
Unless otherwise specified in the applicable prospectus supplement, the
amount of dividends payable for any period shorter than a full dividend period
shall be computed on the basis of twelve 30-day months, a 360-day year and the
actual number of days elapsed in any period of less than one month.
As of the date of this prospectus, subsidiaries of ML&Co. have issued
$2.575 billion of perpetual Trust Originated Preferred Securities/SM/("TOPrS").
In connection with the issuance of the TOPrS, ML&Co. has agreed, among other
things, that if full distributions on the TOPrS have not been paid or set apart
for payment or if ML&Co. is in default of their related guarantee obligations,
ML&Co., with certain exceptions, will not declare or pay dividends, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to any of its capital stock, including the
preferred stock.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
ML&Co., the holders of the preferred stock will have preference and priority
over the common stock of ML&Co. and any other class of stock of ML&Co. ranking
junior to the preferred stock upon liquidation, dissolution or winding up, for
payments out of or distributions of the assets of ML&Co. or proceeds from any
liquidation, whether from capital or surplus, of the amount per share set forth
in the applicable prospectus supplement plus all accrued and unpaid dividends,
whether or not earned or declared, to the date of final distribution to such
holders. After any liquidating payment, the holders of preferred stock will be
entitled to no other payments. If, in the case of any liquidation, dissolution
______________
/SM/Service mark of Merrill Lynch & Co., Inc.
or winding up of ML&Co., the assets of ML&Co. or the proceeds from any
liquidation should be insufficient to make the full liquidation payment in the
amount per share set forth in the applicable prospectus supplement relating to a
series of preferred stock, plus all accrued and unpaid dividends on that
preferred stock, and liquidating payments on any other preferred stock ranking
as to liquidation, dissolution or winding up equally with that preferred stock,
then any assets and proceeds will be distributed among the holders of the
preferred stock and any other preferred stock ratably in accordance with the
respective amounts which would be payable on those shares of preferred stock and
any other preferred stock if all amounts payable were paid in full. In the case
of noncumulative preferred stock, accrued and unpaid dividends will not include
cumulation of unpaid dividends from prior dividend periods. A consolidation or
merger of ML&Co. with one or more corporations will not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of ML&Co.
REDEMPTION
If specified in the prospectus supplement relating to a series of preferred
stock being offered, ML&Co. may, at its option, at any time or from time to time
on not less than 30 nor more than 60 days notice, redeem that series of
preferred stock in whole or in part at the redemption prices and on the dates
set forth in the applicable prospectus supplement.
If less than all outstanding shares of a series of preferred stock are to
be redeemed, the selection of the shares to be redeemed shall be determined by
lot or pro rata as may be determined by the Board of Directors of ML&Co. or a
duly authorized committee of the Board of Directors to be equitable. From and
after the redemption date, unless ML&Co. is in default in providing for the
payment of the redemption price, dividends shall cease to accrue on the shares
of that series of preferred stock called for redemption and all rights of the
holders shall cease, other than the right to receive the redemption price.
VOTING RIGHTS
Unless otherwise described in the applicable prospectus supplement, holders
of the preferred stock will have no voting rights except as set forth below or
as otherwise required by law.
Whenever dividends payable on the preferred stock are in arrears for a
number of dividend periods, whether or not consecutive, which in the aggregate
is equivalent to six calendar quarters, the holders of outstanding shares of the
preferred stock, voting as a class with holders of shares of all other series of
preferred stock ranking equally with the preferred stock either as to dividends
or the distribution of assets upon liquidation, dissolution or winding up and
upon which like voting rights have been conferred and are exercisable, will be
entitled to vote for the election of two additional directors on the terms set
forth below. These voting rights will continue, in the case of any series of
cumulative preferred stock, until all past dividends accumulated on shares of
cumulative preferred stock are paid in full and, in the case of noncumulative
preferred stock, until all dividends on shares of noncumulative preferred stock
are paid in full for at least one calendar year. Upon payment in full of these
dividends, the voting rights will terminate except as expressly provided by law.
These voting rights are subject to re-vesting in the event of each and every
subsequent default in the payment of dividends. Holders of all series of
preferred stock which are granted these voting rights and which rank equally
with the preferred stock will vote as a class, and, unless otherwise specified
in the applicable prospectus supplement, each holder of shares of the preferred
stock will have one vote for each share of stock held and each other series will
have the number of votes, if any, for each share of stock held as may be granted
to them. In the event that the holders of shares of the preferred stock are
entitled to vote as described in this paragraph, the Board of Directors of
ML&Co. will be increased by two directors, and the holders of the preferred
stock will have the exclusive right as members of that class, as outlined above,
to elect two directors at the next annual meeting of stockholders.
Upon termination of the right of the holders of the preferred stock to vote
for directors as discussed in the preceding paragraph, the term of office of all
directors then in office elected by those holders will terminate immediately.
Whenever the term of office of the directors elected by those holders ends and
the related special voting rights expire, the number of directors will
automatically be decreased to the number of directors as would otherwise
prevail.
So long as any shares of preferred stock remain outstanding, ML&Co. shall
not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the preferred stock outstanding at the time, voting
as a class with all other series of preferred stock ranking equally with the
preferred stock either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up and upon which like voting rights have
been conferred and are exercisable, given in person or by proxy, either in
writing or at a meeting:
o authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking senior to the
preferred stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up of
ML&Co.; or
o amend, alter or repeal, whether by merger, consolidation or otherwise,
the provisions of ML&Co.'s restated certificate of incorporation or
the certificate of designations of the preferred stock so as to
materially and adversely affect any right, preference, privilege or
voting power of the preferred stock or the holders of the preferred
stock;
provided, however, that any increase in the amount of authorized preferred stock
or the creation and issuance, or an increase in the authorized or issued amount,
of other series of preferred stock, or any increase in the amount of authorized
shares of preferred stock, in each case ranking equally with or junior to the
preferred stock with respect to the payment of dividends and the distribution of
assets upon liquidation, dissolution or winding of ML&Co. up will not be deemed
to materially and adversely affect these rights, preferences, privileges or
voting powers.
The foregoing voting provisions will not apply if all outstanding shares of
preferred stock have been redeemed or sufficient funds have been deposited in
trust to effect such a redemption which is scheduled to be consummated within
three months after the time that such rights would otherwise be exercisable.
CONVERSION OR EXCHANGE RIGHTS
The prospectus supplement relating to a series of preferred stock that is
convertible or exchangeable will state the terms on which shares of that series
are convertible or exchangeable into common stock, another series of preferred
stock or debt securities.
OUTSTANDING PREFERRED STOCK
At December 25, 1998, there were 42,500 shares of 9% Preferred Stock
represented by 17,000,000 depositary shares and one Special Voting Share
outstanding.
9% PREFERRED STOCK
The 9% Preferred Stock has preference over ML&Co.'s common stock and the
Series A junior preferred stock issuable under the Rights Plan described under
"Description of Common Stock" with respect to the payment of dividends and the
distribution of assets in the event of liquidation, dissolution or winding up of
ML&Co. Holders of the 9% Preferred Stock do not have any preemptive rights to
subscribe for any additional securities which may be issued by ML&Co. Dividends
on the 9% Preferred Stock are cumulative and payable quarterly at the rate per
annum of 9% of the $10,000 liquidation preference per share. Holders of the 9%
Preferred Stock have no voting rights except as set forth above under "--Voting
Rights" above. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of ML&Co., the holders of outstanding shares of 9%
Preferred Stock are entitled to receive out of assets of ML&Co. available for
distribution to stockholders a distribution of $10,000 per share, plus
accumulated and unpaid dividends, if any. The 9% Preferred Stock is not
redeemable before December 30, 2004. On and after that date, the 9% Preferred
Stock is redeemable at the option of ML&Co., in whole at any time or from time
to time in part, upon not less than 30 nor more than 60 days notice, at a
redemption price of $10,000 per share, plus accumulated and unpaid dividends, if
any.
SPECIAL VOTING SHARE
In connection with the acquisition of Midland Walwyn Inc. by ML&Co. in
August 1998, ML&Co. issued a single share of preferred stock with special voting
rights (the "Special Voting Share"), under the terms of a Voting and Exchange
Trust Agreement entered into by Merrill Lynch & Co., Canada Ltd. ("ML Canada"),
ML&Co. and Montreal Trust Company of Canada, as trustee (the "Voting Trust
Agreement"). The Special Voting Share possesses a number of votes equal to the
number of exchangeable shares of ML Canada (the "Exchangeable Shares") issued
and outstanding from time to time that are not owned by ML&Co. or its
affiliates, which votes may be exercised for the election of directors and on
all other matters submitted to a vote of ML&Co.'s stockholders. The holders of
ML&Co.'s common stock and the holder of the Special Voting Share vote together
as a class on all matters. See "Description of Common Stock--Voting Rights". The
Special Voting Share was issued to the trustee under the Voting Trust Agreement.
The holder of the Special Voting Share is not entitled to receive dividends,
and, in the event of any liquidation, dissolution or winding up of ML&Co., will
receive an amount equal to the par value of the Special Voting Share. When the
Special Voting Share has no votes attached to it because there are no
Exchangeable Shares outstanding not owned by ML&Co. or any of its affiliates,
the Special Voting Share will cease to have any rights.
DESCRIPTION OF DEPOSITARY SHARES
ML&Co. may issue depositary receipts evidencing depositary shares, each of
which will represent a fraction of a share of preferred stock. ML&Co. will
deposit shares of preferred stock of each class or series represented by
depositary shares under deposit agreements to be entered into among ML&Co., a
bank or trust company, as depositary, and the holders from time to time of the
depositary receipts. A copy of the form of deposit agreement, including the form
of certificates representing the depositary receipts, is filed as an exhibit to
the registration statement of which this prospectus is a part. The following
summaries of the material provisions of the deposit agreements and the
depositary receipt certificates are not complete, are subject to, and are
qualified in their entirety by reference to, all the provisions of the deposit
agreement and the depositary receipt certificates, respectively, including the
definitions of terms.
TERMS OF THE DEPOSITARY SHARES
Depositary receipts issued under the applicable Deposit Agreement will
evidence the depositary shares. Immediately following the issuance and delivery
of the preferred stock by ML&Co. to the depositary, ML&Co. will cause the
depositary to issue, on behalf of ML&Co., the depositary receipts. Subject to
the terms of the applicable deposit agreement, each holder of a depositary
receipt will be entitled, in proportion to the fraction of a share of preferred
stock represented by the applicable depositary shares, to all the rights and
preferences of the preferred stock being represented, including dividend,
voting, conversion, redemption and liquidation rights, all as will be set forth
in the prospectus supplement relating to the depositary shares being offered.
The depositary shares will have the dividend, liquidation, redemption,
voting and conversion or exchange rights set forth below unless otherwise
specified in the applicable prospectus supplement. The applicable prospectus
supplement will describe the terms of the specific issue of the depositary
shares being offered, the deposit agreement relating to the depositary shares
and the depositary receipts evidencing the depositary shares, including the
following:
o the designation, stated value and liquidation preference of the
depositary shares and the number of shares offered;
o the offering price or prices;
o the dividend rate or rates, or method of calculation, the dividend
periods, the dates on which dividends will be payable and whether
dividends are cumulative or noncumulative and, if cumulative, the
dates from which dividends will begin to cumulate;
o any redemption or sinking fund provisions;
o any conversion or exchange provisions;
o any material risk factors relating to the depositary shares;
o the identity of the depositary; and
o any other terms of the depositary shares which are not inconsistent
with the provisions of the deposit agreement.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the depositary shares will be issued in the form of a global
depositary receipt certificates, registered in the name of a depositary or its
nominee. In that case, beneficial owners will not be entitled to receive
depositary receipts evidencing their depositary shares unless the depositary is
unwilling or unable to continue as depositary or ML&Co. decides to have the
depositary shares represented by separate depositary receipts. A beneficial
owner's interest in depositary shares will be recorded on or through the records
of the brokerage firm or other entity that maintains the beneficial owner's
account. In turn, the total number of depositary shares held by an individual
brokerage firm for its clients will be maintained on the records of the
depositary in the name of the brokerage firm or its agent. Transfer of ownership
of depositary shares will be effected only through the selling beneficial
owner's brokerage firm.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts in proportion to the number of depositary shares owned by
those holders, subject to the obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the depositary.
In the event of a distribution in respect of the preferred stock other than
in cash, the depositary will distribute property it receives to the record
holders of the depositary shares, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to the depositary, unless the depositary, after consultation with
ML&Co., determines that it is not feasible to make the distribution, in which
case the depositary may, with the approval of ML&Co., sell any property and
distribute the net proceeds from the sale to the holders.
WITHDRAWAL OF STOCK
Unless the related depositary shares have been previously called for
redemption, upon surrender of the depositary receipts at the corporate trust
office of the depositary, the holder of the depositary shares will be entitled
to delivery, at the corporate trust office of the depositary to or upon his or
her order, of the number of whole shares of the preferred stock and any money or
other property represented by the depositary shares. If the depositary receipts
delivered by the holder evidence a number of depositary shares in excess of the
number of depositary shares representing the number of whole shares of preferred
stock to be withdrawn, the depositary will deliver to the holder at the same
time a new depositary receipt evidencing the excess number of depositary shares.
In no event will the depositary deliver fractional shares of preferred stock
upon surrender of depositary receipts.
REDEMPTION OF DEPOSITARY SHARES
Whenever ML&Co. redeems shares of preferred stock held by the depositary,
the depositary will redeem as of the same redemption date the number of
depositary shares representing shares of the preferred stock so redeemed,
provided ML&Co. has paid in full to the depositary the redemption price of the
preferred stock to be redeemed plus an amount equal to any accumulated and
unpaid dividends on the preferred stock to the date fixed for redemption. The
redemption price per depositary share will be equal to the redemption price and
any other amounts per share payable with respect to the preferred stock
multiplied by the fraction of a share of preferred stock represented by one
depositary share. If less than all the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by the lot or pro rata as may
be determined by the depositary.
After the date fixed for redemption, depositary shares called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of depositary shares called for redemption will cease, except the right
to receive any moneys payable upon redemption and any money or other property to
which the holders of the depositary shares were entitled upon redemption upon
surrender to the depositary of the depositary receipts evidencing the depositary
shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
relating to that preferred stock. The record date for the depositary receipts
relating to the preferred stock will be the same date as the record date for the
preferred stock. Each record holder of the depositary shares on the record date
will be entitled to instruct the depositary as to the exercise of the voting
rights pertaining to the amount of preferred stock represented by that holder's
depositary shares. The depositary will endeavor, insofar as practicable, to vote
the amount of preferred stock represented by the depositary shares in accordance
with those instructions, and ML&Co. will agree to take all reasonable action
which may be deemed necessary by the depositary in order to enable the
depositary to do so. The depositary will not vote any shares of preferred stock
except to the extent it receives specific instructions from the holders of
depositary shares representing that number of shares of preferred stock.
EXCHANGE OF PREFERRED STOCK
Whenever ML&Co. exchanges all of the shares of a series of preferred stock
held by the depositary for debt securities, common stock or other shares of
preferred stock, the depositary will exchange as of the same exchange date the
number of depositary shares representing all of the shares of the preferred
stock so exchanged for debt securities, common stock or other shares of
preferred stock, provided ML&Co. has issued and deposited with the depositary,
debt securities, common stock or other shares of preferred stock, as applicable,
for all of the shares of the preferred stock to be exchanged. The exchange rate
per depositary share will be equal to the exchange rate per share of preferred
stock multiplied by the fraction of a share of preferred stock represented by
one depositary share, plus all money and other property, if any, represented by
those depositary shares, including all amounts paid by ML&Co. in respect of
dividends which on the exchange date have accumulated on the shares of preferred
stock to be so exchanged and have not already been paid.
CONVERSION OF PREFERRED STOCK
The depositary shares are not convertible or exchangeable into common stock
or any other securities or property of ML&Co. Nevertheless, if so specified in
the applicable prospectus supplement, each depositary receipt may be surrendered
by its holder to the depositary with written instructions to the depositary to
instruct ML&Co. to cause conversion or exchange of the preferred stock
represented by the depositary shares evidenced by that depositary receipt into
whole shares of common stock, other shares of preferred stock or debt securities
of ML&Co. ML&Co. has agreed that upon the receipt of any instructions to convert
or exchange any depositary shares and the payment of any fees or other amounts
applicable to any conversion or exchange, it will convert or exchange the
depositary shares using the same procedures as those provided for delivery of
preferred stock to effect conversions or exchange. If the depositary shares
represented by a depositary receipt are converted in part only, a new depositary
receipt or receipts will be issued for any depositary shares not converted or
exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between ML&Co. and the depositary. However, any amendment that materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless it has been approved by the holders of at least a majority of
the depositary shares then outstanding. No amendment to the form of depositary
receipt or any provision of the deposit agreement relating to or affecting
rights to receive dividends or distributions or voting, redemption or conversion
rights will be effective unless approved by the holders of at least two-thirds
of the depositary shares then outstanding.
ML&Co. may terminate the deposit agreement at any time upon 60 days prior
written notice to the depositary, in which case the depositary will deliver to
the record holders, upon surrender of the depositary receipts, the number of
whole or fractional shares of preferred stock as is represented by those
depositary receipts. The deposit agreement will automatically terminate if:
o all outstanding depositary shares have been redeemed,
o all shares of preferred stock deposited with the depositary in
accordance with the terms of the deposit agreement and all money and
other property relating to those shares of preferred stock have been
withdrawn in accordance with the terms of the deposit agreement, or
o there has been a final distribution in respect of the preferred stock
in connection with any liquidation, dissolution or winding up of
ML&Co. and the distribution has been distributed to the holders of
depositary receipts.
CHARGES OF DEPOSITARY
ML&Co. will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. ML&Co. will
pay the fees and expenses of the depositary in connection with the performance
of its duties under the deposit agreement. Holders of depositary receipts will
pay transfer and other taxes and governmental charges and any other charges that
are expressly provided in the deposit agreement to be for their accounts. The
depositary may refuse to effect any transfer of a depositary receipt or any
withdrawals of preferred stock evidenced by a depositary receipt until all taxes
and charges with respect to the depositary receipt or preferred stock are paid
by their holders.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to ML&Co. notice of its
election to do so, and ML&Co. may remove the depositary at any time. Any
resignation or removal of the depositary will take effect upon ML&Co.'s
appointment of a successor depositary, which must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
NOTICES
The depositary will forward to holders of depositary receipts all reports
and communications received from ML&Co. and the depositary and which ML&Co. is
required to furnish to holders of the related underlying preferred stock. The
depositary will also, promptly after its receipt, transmit to the holders of
depositary receipts, copies of all notices and reports required by law, the
rules of any national securities exchange or ML&Co.'s restated certificate of
incorporation to be furnished to the record holders of depositary receipts.
LIMITATION OF LIABILITY
Neither the depositary nor ML&Co. will assume any obligation or be subject
to any liability under the deposit agreement to holders of depositary receipts
other than for negligence, willful misconduct or bad faith. The depositary will
not be obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or any shares of preferred stock unless it is furnished with
satisfactory indemnification. ML&Co. and the depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of preferred stock for deposit, holders of depositary receipts or other
persons believed to be competent and on documents believed to be genuine.
Neither the depositary nor ML&Co. will be liable if it is prevented from or
delayed, by law, by provision of ML&Co.'s restated certificate of incorporation
or any circumstances beyond its control, in performing its obligations under the
deposit agreement.
DESCRIPTION OF PREFERRED STOCK WARRANTS
ML&Co. may issue warrants for the purchase of preferred stock ("Preferred
Stock Warrants"). Each series of Preferred Stock Warrants is to be issued under
a preferred stock warrant agreement to be entered into between ML&Co. and a bank
or trust company, as preferred stock warrant agent, as described in the
applicable prospectus supplement relating to the Preferred Stock Warrants being
offered. A copy of the form of preferred stock warrant agreement, including the
form of warrant certificates representing the Preferred Stock Warrants, is filed
as an exhibit to the registration statement of which this prospectus is a part.
The following summaries of the material provisions of the preferred stock
warrant agreement and preferred stock warrant certificates are not complete and
are subject to and are qualified in their entirety by reference to, all the
provisions of the preferred stock warrant agreement and the preferred stock
warrant certificates, respectively, including the definitions of terms.
TERMS OF THE PREFERRED STOCK WARRANTS
The applicable prospectus supplement will describe the terms of the
specific issue of Preferred Stock Warrants being offered, the preferred stock
warrant agreement relating to the Preferred Stock Warrants and the preferred
stock warrant certificates representing the Preferred Stock Warrants, including
the following:
o the offering price or prices;
o designation, aggregate number and terms of the series of preferred
stock that may be purchased upon exercise of the Preferred Stock
Warrants and the minimum number of Preferred Stock Warrants that are
exercisable;
o any designation and terms of the securities with which the Preferred
Stock Warrants are being offered and the number of Preferred Stock
Warrants being offered with each Security;
o any date on and after which the Preferred Stock Warrants and the
related securities will be transferable separately;
o the number and stated values of the series of preferred stock that may
be purchased upon exercise of each Preferred Stock Warrant and the
price at which the shares of preferred stock of that series may be
purchased upon exercise, and events or conditions under which the
number of shares that may be purchased may be adjusted;
o the date on which the right to exercise the Preferred Stock Warrants
will begin and the date on which the right to exercise will expire;
o any circumstances that will cause the Preferred Stock Warrants to be
deemed to be automatically exercised;
o any material risk factors relating to the Preferred Stock Warrants;
o the identity of the preferred stock warrant agent; and
o any other terms of the Preferred Stock Warrants which are not
inconsistent with the provisions of the preferred stock warrant
agreement.
Holders may exchange preferred stock warrant certificates for new preferred
stock warrant certificates of different denominations, may, if in registered
form, present for registration of transfer, and exercise the Preferred Stock
Warrants at the corporate trust office of the preferred stock warrant agent or
any other office indicated in the applicable prospectus supplement. Before the
exercise of any Preferred Stock Warrant, a holder will not have the rights of a
holder of shares of the preferred stock that may be purchased upon exercise of
the Preferred Stock Warrant, including the right to receive payment of
dividends, if any, on the underlying preferred stock or the right to vote the
underlying preferred stock.
Prospective purchasers of Preferred Stock Warrants should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to instruments such as Preferred Stock Warrants. The prospectus
supplement relating to any issue of Preferred Stock Warrants will describe these
considerations.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Preferred Stock Warrants will be issued in the form of global
preferred stock warrant certificates, registered in the name of a depositary or
its nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Preferred Stock Warrants unless the
depositary is unwilling or unable to continue as depositary, specified events of
bankruptcy or insolvency occur with respect to ML&Co. or ML&Co. decides to have
the Preferred Stock Warrants represented by definitive certificates. A
beneficial owner's interest in a Preferred Stock Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains the
beneficial owner's account. In turn, the total number of Preferred Stock
Warrants held by an individual brokerage firm for its clients will be maintained
on the records of the depositary in the name of the brokerage firm or its agent.
Transfer of ownership of any Preferred Stock Warrant will be effected only
through the selling beneficial owner's brokerage firm.
EXERCISE OF PREFERRED STOCK WARRANTS
Each Preferred Stock Warrant will entitle its holder to purchase a number
of shares of preferred stock at the exercise price described in the applicable
prospectus supplement. After the close of business on the date the right to
exercise the Preferred Stock Warrants expires, or any later date if extended by
ML&Co., unexercised Preferred Stock Warrants will become void.
Holders may exercise the Preferred Stock Warrants in the manner set forth
in the applicable prospectus supplement. Upon receipt of payment and a properly
completed and duly executed preferred stock warrant certificate at the corporate
trust office of the preferred stock warrant agent or any other office indicated
in the applicable prospectus supplement, ML&Co. will, as soon as practicable,
issue and deliver the shares of preferred stock purchased upon exercise. If less
than all of the Preferred Stock Warrants represented by any preferred stock
warrant certificate are exercised, ML&Co. will issue a new preferred stock
warrant certificate for the remaining number of Preferred Stock Warrants.
LISTING
ML&Co. may list an issue of Preferred Stock Warrants on a national
securities exchange. Any listing will be specified in the applicable prospectus
supplement.
MODIFICATIONS
ML&Co. and the preferred stock warrant agent may amend any preferred stock
warrant agreement and the terms of the related Preferred Stock Warrants, without
the consent of the holders of the Preferred Stock Warrants, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which ML&Co. may deem necessary
or desirable and which will not materially and adversely affect the interests of
the preferred stock warrantholders.
ML&Co. and the preferred stock warrant agent also may amend any preferred
stock warrant agreement and the terms of the related Preferred Stock Warrants,
with the consent of the holders of not less than a majority in number of the
then outstanding unexercised Preferred Stock Warrants affected by the amendment.
However, without the consent of each of the preferred stock warrantholders
affected, no amendment will be effective that:
o shortens the period of time during which the Preferred Stock Warrants
may be exercised;
o otherwise materially and adversely affects the exercise rights of the
preferred stock warrantholders; or
o reduces the number of outstanding Preferred Stock Warrants the consent
of whose holders is required to approve an amendment of the preferred
stock warrant agreement or the terms of the related Preferred Stock
Warrants.
ENFORCEABILITY OF RIGHTS BY PREFERRED STOCK WARRANTHOLDERS
Any preferred stock warrantholder may, without the consent of the related
preferred stock warrant agent, enforce by appropriate legal action, in and of
its own behalf, its right to exercise its Preferred Stock Warrants.
DESCRIPTION OF COMMON STOCK
The following description sets forth the general terms of common stock
which ML&Co. may issue. The description set forth below and in any prospectus
supplement is not complete, is subject to, and is qualified in its entirety by
reference to, ML&Co's restated certificate of incorporation which is filed as an
exhibit to the registration statement of which this prospectus is a part.
TERMS OF THE COMMON STOCK
Under ML&Co.'s restated certificate of incorporation, ML&Co. is authorized
to issue up to 1,000,000,000 shares of common stock, par value $1.331/3 per
share. As of February 24, 1999, there were 359,808,565 shares of common stock
and 4,414,794 Exchangeable Shares outstanding. The Exchangeable Shares are
exchangeable at any time into common stock on a one-for-one basis and entitle
holders to dividend, voting and other rights equivalent to common stock. The
common stock is traded on the New York Stock Exchange under the symbol "MER" and
also on the Chicago Stock Exchange, the Pacific Exchange, the Paris Bourse, the
London Stock Exchange and the Tokyo Stock Exchange.
The common stock has the dividend, voting, liquidation and preemptive
rights set forth below unless otherwise specified in the prospectus supplement
being used to offer the common stock. The applicable prospectus supplement will
describe the terms of the common stock including, where applicable, the
following:
o the number of shares to be offered;
o the offering price or prices;
o to the extent permitted by applicable law, whether the common stock
will be issued in certificated or book-entry form;
o information with respect to any book-entry procedures; and
o any additional terms of the common stock which are not inconsistent
with the provisions of ML&Co.'s restated certificate of incorporation.
The common stock will be, when issued against payment therefor, fully paid
and nonassessable. Holders of the common stock will have no preemptive rights to
subscribe for any additional securities which may be issued by ML&Co. The rights
of holders of common stock will be subject to, and may be adversely affected by,
the rights of holders of any preferred stock that has been issued and may be
issued in the future. As of December 25, 1998, 17,000,000 depositary shares,
each representing a one-four-hundredth interest in a share of 9% Preferred
Stock, and one Special Voting Share were outstanding. See "Description of
Preferred Stock--Outstanding Preferred Stock" for a description of that
preferred stock. The Board of Directors of ML&Co. may issue additional shares
of preferred stock to obtain additional financing, in connection with
acquisitions, to officers, directors and employees of ML&Co. and its
subsidiaries pursuant to benefit plans or otherwise and for other proper
corporate purposes.
ML&Co. is the principal transfer agent for the common stock.
Because ML&Co. is a holding company, its rights, and the rights of holders
of its securities, including the holders of common stock, to participate in the
distribution of assets of any subsidiary of ML&Co. upon the subsidiary's
liquidation or recapitalization will be subject to the prior claims of the
subsidiary's creditors and preferred stockholders, except to the extent ML&Co.
may itself be a creditor with recognized claims against the subsidiary or a
holder of preferred stock of the subsidiary.
DIVIDENDS
ML&Co. may pay dividends on the common stock out of funds legally available
for the payment of dividends as, if and when declared by the Board of Directors
of ML&Co. or a duly authorized committee of the Board of Directors.
As of the date of this prospectus, subsidiaries of ML&Co. have issued
$2.575 billion of perpetual TOPrS. In connection with the issuance of the TOPrS,
ML&Co. has agreed, among other things, that if full distributions on the TOPrS
have not been paid or set apart for payment or ML&Co. is in default of its
related guarantee obligations, ML&Co., with certain exceptions, will not declare
or pay dividends, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to any of its capital stock,
including the common stock.
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of ML&Co., the holders of its common stock will be entitled to receive, after
payment of all of its debts, liabilities and of all sums to which holders of any
preferred stock may be entitled, all of the remaining assets of ML&Co.
VOTING RIGHTS
Except as described under "Description of Preferred Stock--Outstanding
Preferred Stock", the holders of the common stock currently possess exclusive
voting rights in ML&Co. The Board of Directors of ML&Co. may, however, give
voting power to any preferred stock which may be issued in the future. Each
holder of common stock is entitled to one vote per share with respect to all
matters. There is no cumulative voting in the election of directors. Actions
requiring approval of stockholders generally require approval by a majority vote
of outstanding shares.
The Board of Directors of ML&Co. is currently comprised of 14 directors,
divided into three classes, the precise number of members to be fixed from time
to time by the Board of Directors. The directors of the class elected at each
annual election hold office for a term of three years, with the term of each
class expiring at successive annual meetings of stockholders.
RIGHTS TO PURCHASE SERIES A JUNIOR PREFERRED STOCK
Under the Amended and Restated Rights Agreement, adopted on December 2,
1997 (the "Rights Agreement"), preferred purchase rights were distributed to
holders of common stock. The preferred purchase rights are attached to each
outstanding share of common stock and will attach to all subsequently issued
shares, including common stock that may be offered by ML&Co. pursuant to an
applicable prospectus supplement. The preferred purchase rights entitle the
holder to purchase fractions of a share ("Units") of Series A junior preferred
stock at an exercise price of $300 per Unit, subject to adjustment from time to
time as provided in the Rights Agreement. The exercise price and the number of
Units issuable are subject to adjustment to prevent dilution.
The preferred purchase rights will separate from the common stock ten days
following the earlier of:
o an announcement of an acquisition by a person or group of 15% or more
of the outstanding common stock of ML&Co.; or
o the commencement of a tender or exchange offer for 15% or more of the
shares of common stock of ML&Co. outstanding.
If, after the preferred purchase rights have separated from the common
stock,
o ML&Co. is the surviving corporation in a merger with an acquiring
party,
o a person becomes the beneficial owner of 15% or more of the common
stock,
o an acquiring party engages in one or more defined "self-dealing"
transactions, or
o an event occurs which results in such acquiring party's ownership
interest being increased by more than 1%,
then, in each case, each holder of a preferred purchase right will have the
right to purchase Units of Series A junior preferred stock having a value equal
to two times the exercise price of the preferred purchase right. In addition,
preferred purchase rights held by or transferred in certain circumstances by an
acquiring party may immediately become void.
In the event that, at any time,
o ML&Co. is acquired in a merger or other business combination
transaction and ML&Co. is not the surviving corporation, or
o any person consolidates or merges with ML&Co. and all or part of
ML&Co.'s common stock is converted or exchanged for securities, cash
or property of any other person or
o 50% or more of ML&Co.'s assets or earning power is sold or
transferred,
each holder of a right will have the right to purchase common stock of the
acquiring party having a value equal to two times the exercise price of the
preferred purchase right.
The preferred purchase rights expire on December 2, 2007. The preferred
purchase rights are redeemable at the option of a majority of the independent
directors of ML&Co. at $.01 per right at any time until the tenth day following
an announcement of the acquisition of 15% or more of the common stock.
The foregoing provisions of the Rights Agreement may have the effect of
delaying, deferring or preventing a change in control of ML&Co.
The certificate of designations of the Series A junior preferred stock
provides that the holders of Units of the Series A junior preferred stock will
be entitled to receive quarterly dividends in an amount to be determined in
accordance with the formula set forth in the certificate of designations. These
dividend rights are cumulative. The Series A junior preferred stock rank junior
in right of payment of dividends to the 9% Preferred Stock and to all other
preferred stock issued by ML&Co., unless the terms of any other preferred stock
provide otherwise. The holders of Units of the Series A junior preferred stock
will have one vote per Unit on all matters submitted to the stockholders of
ML&Co., subject to adjustment. If at any time dividends on any Units of the
Series A junior preferred stock are in arrears for a number of periods, whether
or not consecutive, which in the aggregate is equivalent to six calendar
quarters, then during that period of default, the holders of all Units, voting
separately as a class, will have the right to elect two directors to the Board
of Directors of ML&Co. Additionally, whenever quarterly dividends or other
dividends or distributions payable on the Series A junior preferred stock are in
arrears, ML&Co. shall not, among other things, declare or pay dividends on or
make any other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares or capital stock of ML&Co. which ranks junior in right
of payment to the Series A junior preferred stock, including the common stock.
In the event of any voluntary or involuntary liquidation, dissolution or winding
up of ML&Co., the holders of outstanding Units of the Series A junior preferred
stock will be entitled to receive a distribution in an amount to be determined
in accordance with the formula set forth in the certificate of designations
before the payment of any distribution to the holders of common stock. The Units
of Series A junior preferred stock are not redeemable. As of the date of this
prospectus, there are no shares of Series A junior preferred stock outstanding.
MATERIAL CHARTER PROVISIONS
ML&Co.'s restated certificate of incorporation provides that, except under
specified circumstances, ML&Co. may not merge or consolidate with any one or
more corporations, joint-stock associations or non-stock corporations; sell,
lease or exchange all or substantially all of its property and assets or
dissolve without the affirmative vote of two-thirds of the entire Board of
Directors of ML&Co. and the holders of a majority of the outstanding shares of
common stock entitled to vote. Additionally, ML&Co.'s restated certificate of
incorporation provides that specified business combinations involving ML&Co. and
an interested stockholder or an affiliate or associate of that stockholder must
be approved by 80% of the voting power of the outstanding shares of capital
stock of ML&Co. entitled to vote generally in the election of directors. The
vote of 80% of the voting power of the voting stock referred to in the
immediately preceding sentence is required for amendment of these provisions.
ML&Co.'s restated certificate of incorporation also provides that only the Board
of Directors of ML&Co. has the authority to call special stockholder meetings.
The foregoing provisions of ML&Co.'s restated certificate of incorporation
may have the effect of delaying, deferring or preventing a change in control of
ML&Co.
DESCRIPTION OF COMMON STOCK WARRANTS
ML&Co. may issue warrants for the purchase of common stock ("Common Stock
Warrants"). Each series of Common Stock Warrants will be issued under a common
stock warrant agreement to be entered into between ML&Co. and a bank or trust
company, as common stock warrant agent, all as set forth in the applicable
prospectus supplement. A copy of the form of common stock warrant agreement,
including the form of warrant certificates representing the Common Stock
Warrants, reflecting the provisions to be included in the common stock warrant
agreements that will be entered into with respect to particular offerings of
Common Stock Warrants, is filed as an exhibit to the registration statement of
which this prospectus is a part. The following summaries of the material
provisions of the common stock warrant agreement and common stock warrant
certificates are not complete, are subject to, and are qualified in their
entirety by reference to, all of the provisions of the common stock warrant
agreement and the common stock warrant certificates, including the definitions
of terms.
TERMS OF THE COMMON STOCK WARRANTS
The applicable prospectus supplement will describe the terms of the Common
Stock Warrants being offered, the common stock warrant agreement relating to the
Common Stock Warrants and the common stock warrant certificates, including the
following:
o the offering price or prices;
o the aggregate number of shares of common stock that may be purchased
upon exercise of the Common Stock Warrants and minimum number of
Common Stock Warrants that are exercisable;
o the number of securities, if any, with which the Common Stock Warrants
are being offered and the number of the Common Stock Warrants being
offered with each security;
o the date on and after which the Common Stock Warrants and the related
securities, if any, will be transferable separately;
o the number of shares of common stock purchasable upon exercise of each
Common Stock Warrant, the price at which the common stock may be
purchased, and events or conditions under which the number of shares
purchasable may be adjusted;
o the date on which the right to exercise the Common Stock Warrants will
begin and the date on which the right to exercise will expire;
o the circumstances, if any, which will cause the Common Stock Warrants
to be deemed to be automatically exercised;
o any material risk factors relating to the Common Stock Warrants;
o the identity of the common stock warrant agent; and
o any other terms of the Common Stock Warrants which are not
inconsistent with the provisions of the common stock warrant
agreement.
Holders may exchange common stock warrant certificates for new common stock
warrant certificates of different denominations, if in registered form, may
present for registration of transfer, and may exercise the Common Stock Warrants
at the corporate trust office of the common stock warrant agent or any other
office indicated in the applicable prospectus supplement. Before the exercise of
any Common Stock Warrants to purchase common stock, holders of the Common Stock
Warrants will not have any rights of holders of common stock purchasable upon
exercise of the Common Stock Warrants, including the right to receive payments
of dividends, if any, on the common stock purchasable upon any exercise or the
right to vote the underlying common stock.
Prospective purchasers of Common Stock Warrants should be aware that
special U.S. Federal income tax, accounting and other considerations may be
applicable to instruments such as Common Stock Warrants. The prospectus
supplement relating to any issue of Common Stock Warrants will describe these
considerations.
BOOK-ENTRY PROCEDURES
Except as may otherwise be provided in the applicable prospectus
supplement, the Common Stock Warrants will be issued in the form of global
common stock warrant certificates, registered in the name of a depositary or its
nominee. In that case, beneficial owners will not be entitled to receive
definitive certificates representing Common Stock Warrants unless the depositary
is unwilling or unable to continue as depositary, certain specified events of
bankruptcy or insolvency occur with respect to ML&Co. or ML&Co. decides to have
the Common Stock Warrants represented by definitive certificates. A beneficial
owner's interest in a Common Stock Warrant will be recorded on or through the
records of the brokerage firm or other entity that maintains a beneficial
owner's account. In turn, the total number of Common Stock Warrants held by an
individual brokerage firm for its clients will be maintained on the records of
the depositary in the name of the brokerage firm or its agent. Transfer of
ownership of any Common Stock Warrant will be effected only through the selling
beneficial owner's brokerage firm.
EXERCISE OF COMMON STOCK WARRANTS
Each Common Stock Warrant will entitle its holder to purchase a specific
number of shares of common stock at the exercise price described in the
applicable prospectus supplement. After the close of business on the date the
right to exercise the Common Stock Warrants expires, or any later date if
extended by ML&Co., unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised as set forth in the applicable
prospectus supplement. Upon receipt of payment and a properly completed and duly
executed common stock warrant certificate at the corporate trust office of the
common stock warrant agent or any other office indicated in the applicable
prospectus supplement, ML&Co. will, as soon as practicable, issue and deliver
the shares of common stock purchased upon exercise. If less than all of the
Common Stock Warrants represented by any common stock warrant certificate are
exercised, a new common stock warrant certificate will be issued for the
remaining Common Stock Warrants.
LISTING
ML&Co. may list an issue of Common Stock Warrants on a national securities
exchange. Any listing will be specified in the applicable prospectus supplement.
MODIFICATIONS
ML&Co. and the common stock warrant agent may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, without
the consent of the holders of the Common Stock Warrants, for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision, or in any other manner which ML&Co. may deem necessary
or desirable and which will not materially and adversely affect the interests of
the common stock warrantholders.
ML&Co. and the common stock warrant agent also may amend any common stock
warrant agreement and the terms of the related Common Stock Warrants, with the
consent of the holders of not less than a majority in number of the then
outstanding unexercised Common Stock Warrants affected by amendment. However,
without the consent of each of the common stock warrantholders affected, no
amendment will be effective that:
o shortens the period of time during which the Common Stock Warrants may
be exercised;
o otherwise materially and adversely affects the exercise rights of the
common stock warrantholders; or
o reduces the number of outstanding Common Stock Warrants the consent of
whose holders is required to approve an amendment of the common stock
warrant agreement or the terms of the related Common Stock Warrants.
ENFORCEABILITY OF RIGHTS BY COMMON STOCK WARRANTHOLDERS
Any common stock warrantholder may, without the consent of the related
common stock warrant agent, enforce by appropriate legal action, in and for its
own behalf, its right to exercise its Common Stock Warrant.
PLAN OF DISTRIBUTION
ML&Co. may sell securities:
o to the public through MLPF&S, or through a group of underwriters
managed or co-managed by, one or more underwriters, including MLPF&S,
o through MLPF&S as agent, or
o directly to purchasers.
The prospectus supplement with respect to the securities of a particular
series describes the terms of the offering of the securities, including the name
of the agent or the name or names of any underwriters, the public offering or
purchase price, any discounts and commissions to be allowed or paid to the agent
or underwriters, all other items constituting underwriting compensation, any
discounts and commissions to be allowed or paid to dealers and any exchanges on
which the securities will be listed. Only the agents or underwriters so named in
the prospectus supplement are agents or underwriters in connection with the
securities being offered. Under certain circumstances, ML&Co. may repurchase
securities and reoffer them to the public as set forth above. ML&Co. may also
arrange for repurchases and resales of the securities by dealers.
If so indicated in the prospectus supplement, ML&Co. will authorize
underwriters to solicit offers by certain institutions to purchase debt
securities from ML&Co. pursuant to delayed delivery contracts providing for
payment and delivery on the date stated in the prospectus supplement. Each
contract will be for an amount not less than, and, unless ML&Co. otherwise
agrees, the aggregate principal amount of debt securities sold pursuant to the
contracts shall not be more than, the respective amounts stated in the
prospectus supplement. Institutions with whom the contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions, and other
institutions, but shall in all cases be subject to the approval of ML&Co.
Delayed delivery contracts will not be subject to any conditions except that the
purchase by an institution of the debt securities covered under that contract
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which that institution is subject.
ML&Co. has agreed to indemnify the agent and the several underwriters
against certain civil liabilities, including liabilities under the Securities
Act or contribute to payments the agent or the underwriters may be required to
make.
The distribution of securities will conform to the requirements set forth
in the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms. You may also inspect our SEC reports and other
information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
We have filed a registration statement on Form S-3 with the SEC covering
the securities and other securities. For further information on ML&Co. and the
securities, you should refer to our registration statement and its exhibits.
This prospectus summarizes material provisions of contracts and other documents
that we refer you to. Because the prospectus may not contain all the information
that you may find important, you should review the full text of these documents.
We have included copies of these documents as exhibits to our registration
statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not, and MLPF&S has not, authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and MLPF&S
is not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report
on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
(which express an unqualified opinion and which report on the consolidated
financial statements includes an explanatory paragraph for the change in
accounting method for certain internal-use software development costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
- ----------
[LOGO]
MERRILL LYNCH & CO., INC.
STRUCTURED YIELD PRODUCT EXCHANGEABLE FOR STOCK/SM/
STRYPES/SM/
----------------------
OFFERING OF THE STRYPES: Distributions at Maturity:
o We will offer from time to time o On the stated maturity date of
our STRYPES, which are senior each series of STRYPES, or any
debt securities of ML&Co. that earlier date described in the
are exchangeable into the common applicable prospectus supplement,
stock or other securities of an we will pay and discharge the
unaffiliated company. STRYPES by delivering to you a
number of shares of common stock
o We will offer the STRYPES in or other securities of an
series and on terms determined by unaffiliated company or property
market conditions at the time of determined in accordance with a
sale. We will describe these payment formula all as described
terms in the prospectus in the prospectus supplement.
supplement used to offer the
specific series of STRYPES.
o Each series of STRYPES may be o Instead of delivering shares of
listed on a national securities common stock or other securities
exchange described in the or property, we may deliver cash,
prospectus supplement. or a combination of cash and the
common stock or other securities,
with an equal value.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
The date of this prospectus is , 199 .
______________
/SM/Service mark of Merrill Lynch & Co., Inc.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Asset Management L.P. and Merrill Lynch Mercury Asset Management, provides
investment, financing, advisory, insurance, and related products on a global
basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281; our telephone number is (212)
449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically to
Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
STRYPES described in this prospectus.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the STRYPES for general
corporate purposes, unless otherwise specified in the prospectus supplement
relating to a specific issue of STRYPES. Our general corporate purposes may
include financing the activities of our subsidiaries, financing our assets and
those of our subsidiaries, lengthening the average maturity of our borrowings
and financing acquisitions. Until we use the net proceeds from the sale of any
of our securities for general corporate purposes, we will use the net proceeds
to reduce our short-term indebtedness or for temporary investments. We expect
that we will, on a recurrent basis, engage in additional financings as the need
arises to finance our growth, through acquisitions or otherwise, or to lengthen
the average maturity of our borrowings. To the extent that STRYPES being
purchased for resale by our subsidiary, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, referred to in this prospectus as MLPF&S, are not resold, the
aggregate proceeds that we and our subsidiaries would receive would be reduced.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc., in a
transaction accounted for as a pooling-of-interests. The following information
for the fiscal years 1994 through 1997 has been restated as if the two entities
had always been combined.
The following table sets forth our historical ratios of earnings to fixed
charges for the periods indicated:
YEAR ENDED LAST FRIDAY IN DECEMBER
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF THE STRYPES
Each issue of STRYPES will be a series of senior debt securities of ML&Co.
to be issued under an indenture (the "1983 Indenture"), dated as of April 1,
1983, as amended and restated, between ML&Co. and The Chase Manhattan Bank, as
trustee. For each series of STRYPES, ML&Co. and the trustee will enter into a
supplemental indenture which will further amend and supplement the 1983
Indenture. Any supplemental indenture relating to a specific series of STRYPES
and the 1983 Indenture are collectively referred to as the indenture. The
following summary of the material provisions of the indenture is not complete
and is qualified in its entirety by reference to the indenture.
TERMS OF THE STRYPES
The supplemental indenture will provide that ML&Co. may issue STRYPES of
the related series from time to time under the indenture, up to a specified
aggregate issue price, upon the satisfaction of certain conditions before
issuance. The supplemental indenture will establish the terms of the related
series of STRYPES, including:
o the issue price per STRYPES;
o the date on which the STRYPES will mature;
o the consideration deliverable or payable with respect to each STRYPES,
whether at maturity or upon earlier acceleration, and the formula or
other method by which the amount of any consideration deliverable or
payable will be determined;
o any fixed or variable rate or rates per annum;
o the interest payment dates;
o any provisions for redemption, the redemption price and any
remarketing arrangements;
o any sinking fund requirements;
o whether the STRYPES are denominated or provide for payment in United
States dollars or a foreign currency or units of two or more foreign
currencies;
o whether and under what circumstances ML&Co. will pay additional
amounts ("Additional Amounts") under any STRYPES held by a person who
is not a U.S. person for specified taxes, assessments or other
governmental charges and whether ML&Co. has the option to redeem the
affected STRYPES rather than pay any Additional Amounts;
o the title and series designation;
o whether the STRYPES are to be issued in global form;
o the obligation of ML&Co. to pay and discharge the STRYPES at maturity
by delivery of a number of shares of common stock or other securities
or property (the "Underlying Securities") of an unaffiliated
corporation or cash or a combination of cash and Underlying Securities
with an equal value;
o the formula or other method by which the consideration deliverable or
payable at maturity of the STRYPES or any earlier date will be
determined and the terms and conditions upon which any payment and
discharge of the STRYPES will be effected.
The terms of the specific series of STRYPES being offered will be described
in the applicable prospectus supplement.
Under the indenture, ML&Co., without the consent of holders of any STRYPES,
is permitted to issue STRYPES with terms different from those of STRYPES
previously issued and to reopen a previous series of STRYPES and issue
additional STRYPES of that series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the indenture, the
applicable supplemental indenture, the form of the STRYPES and the applicable
prospectus supplement, provided that payment of any interest and any Additional
Amounts may be made at the option of ML&Co. by check mailed to the holders of
registered STRYPES at their registered addresses.
Holders may present the STRYPES for exchange, and may present registered
STRYPES for transfer, in the manner, at the places and subject to the
restrictions set forth in the indenture, the applicable supplemental indentures
the form of the STRYPES and the applicable prospectus supplement. There will be
no service charge for any transfer or exchange of STRYPES, but ML&Co. may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with a transfer or exchange.
RANKING
The STRYPES will be unsecured obligations and will rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. Because ML&Co. is a
holding company, the rights of ML&Co. and its creditors, including the holders
of the STRYPES, to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of the subsidiary, except to the extent
that a bankruptcy court may recognize the claims of ML&Co. itself as a creditor
of the subsidiary. In addition, dividends, loans and advances from certain
subsidiaries, including MLPF&S, to ML&Co. are restricted by net capital
requirements under the Securities Exchange Act of 1934 and under rules of
exchanges and other regulatory bodies.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay or deliver the Underlying Securities, cash with an equal
value or a combination of both in respect of, any interest and
Additional Amounts on, and any other amounts payable with respect
to, the STRYPES of each series; and
o perform and observe all of ML&Co.'s obligations under the
indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
indenture.
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than any liens
specifically permitted by the indenture, on the voting stock owned directly or
indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
STRYPES are secured equally and ratably with the secured indebtedness.
"Voting Stock" is defined in the indenture as the stock of the class or
classes having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the indenture, stock that carries
only the right to vote conditionally on the occurrence of an event is not
considered voting stock whether or not the event has happened.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS BY,
MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock of
MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its Voting
Stock, unless, after giving effect to the transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the indenture to mean a corporation
more than 80% of the outstanding shares of Voting Stock of which are owned
directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
EVENTS OF DEFAULT
Unless otherwise specified in a prospectus supplement, each of the
following will be an Event of Default under the indenture with respect to each
series of STRYPES:
o failure to pay and discharge the STRYPES of that series with the
Underlying Securities or, if ML&Co. so elects, to pay an equivalent
amount in cash instead of Underlying Securities when due,
o failure to pay the redemption price or any redemption premium with
respect to any STRYPES of that series when due;
o failure to deposit any sinking fund payment, when and as due by the
terms of any STRYPES of that series;
o failure to pay any interest on or any Additional Amounts in respect of
any STRYPES of that series when due, and continuing for 30 days;
o failure to perform any other obligation of ML&Co. contained in the
indenture for the benefit of that series or in the STRYPES of that
series, continuing for 60 days after written notice has been given to
ML&Co. by the trustee, or to ML&Co. and the trustee by the holders of
at least 10% of the aggregate issue price of the outstanding STRYPES
of that series, as provided in the indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to STRYPES of that
series.
Unless otherwise specified in a prospectus supplement, if an Event of
Default occurs and is continuing for any series of STRYPES, the trustee or the
holders of at least 25% in aggregate issue price of the outstanding STRYPES of
that series, by notice as provided in the indenture, may declare an amount equal
to the aggregate issue price of all the STRYPES of that series, the accrued
interest on the STRYPES and all Additional Amounts payable with respect to the
STRYPES of that series immediately due and payable in cash. The trustee or the
holders of at least 25% in aggregate issue price of the outstanding STRYPES may
declare these amounts due immediately as described in the preceding sentence
without any other declaration or other action by the trustee or any holder. At
any time after a declaration of acceleration, but before the trustee has
obtained a judgment or decree based on acceleration, the holders of a majority
of the aggregate issue price of the outstanding STRYPES of that series may,
under certain circumstances, rescind and annul any acceleration if all Events of
Default, other than the non-payment of the amount equal to the aggregate issue
price of all the STRYPES of that series due by reason of acceleration, have been
cured or waived as provided in the indenture. See "Modification and Waiver"
below.
The holders of a majority in aggregate issue price of the outstanding
STRYPES of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust power
conferred on the trustee with respect to the STRYPES of that series, provided
that any direction is not in conflict with any rule of law or the indenture.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders of STRYPES of any
series, unless the holders of that series shall have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with any request or direction.
Unless otherwise described in the applicable prospectus supplement, the
STRYPES and other series of senior debt securities issued under the indenture
will not have the benefit of any cross-default provisions with other
indebtedness of ML&Co.
ML&Co. will be required to furnish to the trustee annually a statement as
to the fulfillment by ML& Co. of its obligations under the indenture.
MODIFICATION AND WAIVER
Unless otherwise specified in a prospectus supplement, ML&Co. and the
trustee may modify and amend provisions in the indenture affecting a series of
STRYPES with the consent of holders of at least 662/3% in aggregate issue price
of the series of STRYPES affected. However, without the consent of each holder
of any STRYPES affected, no amendment or modification to any indenture may:
o change the maturity date or the stated maturity date or any
installment of interest or Additional Amounts on any STRYPES or any
premium payable on redemption, or change the redemption price,
o reduce the amount of Underlying Securities payable with respect to any
STRYPES or reduce the amount of cash, or cash and Underlying
Securities, payable instead of Underlying Securities,
o reduce the amount of interest or Additional Amounts payable on any
STRYPES or reduce the amount of cash payable with respect to any
STRYPES upon acceleration,
o change the place or currency of payment of interest or Additional
Amounts on, or any amount of cash payable with respect to, any
STRYPES,
o impair the right to institute suit for the enforcement of any payment
on any STRYPES, including the payment of Underlying Securities with
respect to any STRYPES,
o reduce the percentage of the aggregate issue price of outstanding
STRYPES of that series, the consent of whose holders is required to
modify or amend the indenture,
o reduce the percentage of the aggregate issue price of outstanding
STRYPES of that series necessary for waiver of compliance with certain
provisions of the indenture or for waiver of certain defaults or
o modify the provisions with respect to modification and waiver.
Except as provided in the indenture, no modification of or amendment to the
indenture may adversely affect the rights of a holder of any other senior debt
security without the consent of each holder affected.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by ML&Co. with certain restrictive provisions of
the indenture. Any past default with respect to any series of STRYPES may be
waived by the holders of a majority in aggregate issue price of the outstanding
STRYPES of any series may waive any past default with respect to that series,
except a default:
o in the payment of the Underlying Securities or any other amounts due
and payable or deliverable under the STRYPES of that series; or
o in respect of an obligation of ML & Co. contained in, or a provision
of, the indenture which cannot be modified under the terms of that
indenture without the consent of each holder of each outstanding
series of STRYPES affected.
GOVERNING LAW
The indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
PLAN OF DISTRIBUTION
ML&Co. may sell STRYPES to the public through MLPF&S. The accompanying
prospectus supplement describes the terms of the STRYPES being offered,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid, all other items constituting underwriting compensation,
the discounts and commissions to be allowed or paid to dealers, if any, and the
exchanges, if any, on which the STRYPES will be listed. Under certain
circumstances, ML&Co. may repurchase STRYPES and reoffer them to the public as
set forth above. ML&Co. may also arrange for repurchases and resales of the
STRYPES by dealers.
The underwriting of STRYPES will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms. You may also inspect our SEC reports and other
information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
We have filed a registration statement on Form S-3 with the SEC covering
the STRYPES and other securities. For further information on ML&Co. and the
STRYPES, you should refer to our registration statement and its exhibits. This
prospectus summarizes material provisions of contracts and other documents that
we refer you to. Because the prospectus may not contain all the information that
you may find important, you should review the full text of these documents. We
have included copies of these documents as exhibits to our registration
statement.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not, and MLPF&S has not, authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and MLPF&S
is not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report
on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
(which express an unqualified opinion and which report on the consolidated
financial statements includes an explanatory paragraph for the change in
accounting method for certain internal-use software development costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
- ----------
[LOGO]
%Trust Originated Preferred Securities
Merrill Lynch Preferred Capital Trust VI
Liquidation Amount $25 per TOPrS
guaranteed to the extent described in this prospectus by
Merrill Lynch & Co., Inc.
------------------------------
THE TOPrS: DISTRIBUTIONS ON THE TOPrS:
o TOPrS represent preferred ownership o Each TOPrS pays a quarterly
interests in the assets of ML distribution at the rate of ____%,
Trust. The sole assets of ML Trust or $__ per TOPrS per year, if ML
will be the partnership preferred Partnership pays distributions on
securities of ML Partnership which the partnership preferred
represent preferred ownership securities.
interests in the assets of ML
Partnership.
o The sole assets of ML Partnership o If ML Trust and ML Partnership
will be the debentures issued by redeem the TOPrS and the
ML&Co. and its affiliates and cash partnership preferred securities,
and other permitted securities you will receive $25 plus
described in this prospectus. accumulated distributions for each
TOPrS you own.
o The TOPrS and the partnership
preferred securities do not have
any stated maturity.
o If ML Trust redeems the TOPrS or is
o ML Trust will apply to have the liquidated, but ML Partnership does
TOPrS trade on the New York Stock not redeem the partnership
Exchange starting within 30 days preferred securities, you will
after the TOPrS are issued. receive the partnership preferred
securities rather than cash.
o Closing Date: [DATE]
o ML&Co. will guarantee the TOPrS to
the extent described in this
prospectus.
INVESTING IN THE TOPrS INVOLVES RISKS.
PLEASE SEE "RISK FACTORS" ON PAGE 6.
Per TOPrS Total
--------- -----
Public offering price.................... $25.00 $
Proceeds to ML Trust..................... $25.00 $
If you purchase the TOPrS and settlement occurs after _________, 1999, you
will be required to pay accumulated distributions on the aggregate liquidation
amount of your TOPrS at a rate of ___% per year from that date. Expenses of the
offering and underwriting commissions of $____ per TOPrS, or $_____ per TOPrS
for sales of more than 10,000 TOPrS to a single purchaser, will be paid by
ML&Co.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------------
Merrill Lynch & Co.
------------------------------
The date of this prospectus is , 199 .
/SM/"TOPrS" and "Trust Originated Preferred Securities" are service marks owned
by Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
----
SUMMARY INFORMATION--Q&A.......................................................3
RISK FACTORS...................................................................6
MERRILL LYNCH & CO., INC......................................................10
USE OF PROCEEDS...............................................................10
RATIO OF EARNINGS TO FIXED CHARGES............................................11
MERRILL LYNCH PREFERRED CAPITAL TRUST VI......................................12
MERRILL LYNCH PREFERRED FUNDING VI, L.P......................................14
DESCRIPTION OF THE TOPrS......................................................16
DESCRIPTION OF THE TRUST GUARANTEE............................................28
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES...........................31
DESCRIPTION OF THE PARTNERSHIP GUARANTEE......................................44
UNITED STATES FEDERAL INCOME TAXATION.........................................47
UNDERWRITING..................................................................51
WHERE YOU CAN FIND MORE INFORMATION...........................................52
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.............................53
LEGAL MATTERS.................................................................53
EXPERTS.......................................................................54
INDEX OF CERTAIN DEFINED TERMS................................................55
INDEX TO FINANCIAL STATEMENTS................................................F-1
INDEPENDENT AUDITORS' REPORT.................................................F-2
NOTES TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING VI, L.P............F-3
INDEPENDENT AUDITORS' REPORT.................................................F-4
NOTES TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST VI...........F-5
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand the TOPrS. This summary
may not contain all the information that may be important to you. You should
carefully read this prospectus to fully understand the terms of the TOPrS, as
well as the tax and other considerations that should be important to you in
making a decision about whether to invest in the TOPrS. You should pay special
attention to the "Risk Factors" section to determine whether an investment in
the TOPrS is appropriate for you.
In this prospectus:
o references to "ML&Co.", "we", "us" and "our" are to Merrill Lynch &
Co., Inc.,
o references to "ML Trust" are to Merrill Lynch Capital Preferred Trust
VI, and
o references to "ML Partnership" are to Merrill Lynch Preferred Funding
VI, L.P.
WHAT ARE THE TOPrS?
Each TOPrS is a preferred interest in the assets of ML Trust. We will own
all of the common securities of ML Trust. The sole assets of ML Trust will be
the partnership preferred securities issued by ML Partnership, which represent
preferred ownership interests in the assets of ML Partnership. ML Partnership
will use substantially all of the proceeds from the sale of its partnership
preferred securities and our capital contribution as general partner of ML
Partnership to purchase debentures from us and one or more of our affiliates.
WHAT IS THE ML TRUST?
ML Trust is a business trust established under Delaware law that exists for
the sole purpose of issuing the TOPrS and investing the proceeds and engaging in
incidental activities.
WHAT IS ML PARTNERSHIP?
ML Partnership is a limited partnership established under Delaware law. The
assets of ML Partnership will be:
o the debentures issued by us and our affiliates; and
o cash and securities not issued by us or our affiliates.
We are the general partner of ML Partnership.
WHAT DISTRIBUTIONS WILL I RECEIVE ON THE TOPrS?
The TOPrS provide for a quarterly cash distribution at the rate of % or
$___ per year for each TOPrS you own. Distributions are payable on each ,
, and , beginning , .
Distributions will accumulate from the date ML Trust originally issues the
TOPrS. Because the sole assets of ML Trust will be the partnership preferred
securities of ML Partnership and substantially all of ML Partnership's assets
will be the debentures issued by us and our affiliates, ML Trust's ability to
pay distributions on the TOPrS is ultimately dependent upon our and our
affiliates' ability to make interest payments on those debentures. If we or our
affiliates exercise our right to defer making an interest payment on our
debentures then held by ML Partnership, ML Partnership will not be able to pay
any distributions on its preferred partnership securities and ML Trust will not
be able to pay quarterly distributions to you until we resume making interest
payments on those debentures.
In addition, ML Partnership is required to pay dividends on its partnership
preferred securities only if they are declared by us as general partner of ML
Partnership. As a result, you may not receive any distributions on your TOPrS if
ML Trust does not receive dividends on the partnership preferred securities.
WHAT ARE THE DEBENTURES?
The debentures are long term loans made by ML Partnership to us or our
affiliates from time to time. These debentures will be substantially all of ML
Partnership's assets. The debentures that we issue to ML Partnership will be our
senior unsecured obligations and will rank equally with all of our other senior
unsecured obligations. The debentures issued by our affiliates to ML Partnership
will be unsecured obligations of our affiliates and we will guarantee those
obligations on a subordinated basis. We and our affiliates may exercise our
right to defer interest payments on the debentures for a period of not more than
six consecutive calendar quarters.
CAN THE TOPrS BE REDEEMED?
Yes. If ML Partnership redeems the partnership preferred securities, each
TOPrS will be redeemed for $25 plus any accumulated and unpaid distributions to
the date of redemption. ML Partnership can redeem the partnership preferred
securities in whole or in part from time to time on or after .
The trustees of ML Trust can elect to liquidate ML Trust and distribute the
partnership preferred securities to you if at any time the specified changes in
U.S. tax law or U.S. investment company law described in this prospectus occur.
Additionally, we, as general partner of ML Partnership, have the right to
redeem the partnership preferred securities and you will receive cash from the
subsequent automatic redemption of the TOPrS if at any time the specified
changes in U.S. tax law or U.S. investment company law described in this
prospectus occur.
Neither the partnership preferred securities nor the TOPrS can be redeemed
at any time at the option of their holders. Neither the TOPrS nor the
partnership preferred securities have any scheduled maturity.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, an investment in the TOPrS is subject to risk. Please refer to the
section entitled "Risk Factors" in this prospectus for a description of these
risks.
WHAT HAPPENS IF ML TRUST DOESN'T PAY DISTRIBUTIONS ON THE TOPrS?
If you have not received a distribution on the TOPrS for six consecutive
calendar quarters, during that period until all scheduled quarterly
distributions are paid or set aside for payment to you, we may not declare or
pay dividends on, acquire, or make a liquidation payment with respect to, any of
our outstanding capital stock. In addition, we will not permit any of our
finance subsidiaries to make any dividend payment on, any distribution with
respect to, any acquisition of or any liquidation payment with respect to, any
of their outstanding preferred securities.
This limitation prevents us from paying cash or other dividends to the
shareholders of our capital stock if payments are not being made on the TOPrS,
any debenture issued by us or our affiliates and held by ML Partnership or the
guarantees. However, these provisions will not restrict:
o our ability to pay dividends or distributions on our capital stock in
shares of, or options, warrants or rights to subscribe for or purchase
shares of our capital stock;
o our ability to convert or exchange our common stock of one class into
our common stock of another class;
o our ability to redeem or purchase any rights under a rights agreement
described in this prospectus or issue preferred stock under those
rights; and
o the ability of us and our affiliates to purchase our capital stock in
connection with transactions for the account of customers of ours or
our affiliates or in connection with the distribution or trading of
our capital stock.
WHAT ARE THE GUARANTEES?
We will guarantee, to the extent described in this prospectus:
o declared distributions by ML Partnership to ML Trust and distribution
of quarterly payments on the TOPrS by ML Trust to you to the extent ML
Trust receives distributions on the partnership preferred securities;
o the redemption amount due to you if ML Trust redeems the TOPrS;
o the liquidation amount of the TOPrS if ML Trust is liquidated; and
o interest payments on debentures issued by our affiliates and held by
ML Partnership.
However, these guarantees do not apply to either:
o current distributions on the partnership preferred securities unless
and until ML Partnership declares distributions out of funds legally
available for payment; or
o liquidating distributions on the partnership preferred securities
unless ML Partnership has assets available for payment.
If ML Partnership does not declare distributions on the partnership
preferred securities, ML Trust will not have sufficient funds to pay
distributions on the TOPrS. In that case, you will have no right to receive
those distributions because our guarantee does not cover the non-payment of
distributions on the partnership preferred securities unless the distributions
are declared.
Our obligations under the guarantees are subordinate and junior in right of
payment to all other of our liabilities and rank equally with our most senior
preferred stock and similar guarantees of ours with respect to previous and
future issues of TOPrS and other preferred stock by any other of our finance
subsidiaries.
WHAT HAPPENS IF ML TRUST IS LIQUIDATED?
If ML Trust is liquidated, other than in connection with any change in U.S.
tax or investment company law described above, for each TOPrS you own, you will
be entitled to receive $25 plus any accumulated and unpaid distributions per
TOPrS.
DO I HAVE VOTING RIGHTS?
Generally, you will not have any voting rights, except under the limited
circumstances described below. The holders of a majority of the TOPrS, however,
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the property trustee, or direct the exercise of any
trust or power conferred upon the property trustee.
IN WHAT FORM WILL THE TOPrS BE ISSUED?
The TOPrS will be issued in the form of a global certificate or
certificates registered in the name of Cede & Co., as nominee for The Depository
Trust Company also known as DTC. This means you will not receive a certificate
for your TOPrS. Your interests in the TOPrS will be evidenced by, and transfers
of the TOPrS will be effected only through, records maintained by the
participants in DTC.
CAN YOU TELL ME MORE ABOUT ML&CO.?
Merrill Lynch & Co., Inc. is a holding company. Our subsidiary and
affiliated companies provide investment, financing, insurance and related
products on a global basis. Our principal executive offices are located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281. Our
telephone number is (212) 449-1000. For information about us, see the section
"Merrill Lynch & Co., Inc." in this 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 this prospectus.
WILL THE TOPrS BE LISTED ON AN EXCHANGE?
ML Trust has applied to list the TOPrS on the NYSE under the trading symbol
" ". If approved for listing, trading on the NYSE will begin within 30 days
after ML Trust issues the TOPrS. The listing of the TOPrS will not necessarily
ensure that a liquid trading market will be available for the TOPrS.
RISK FACTORS
Your investment in the TOPrS will involve risks. You should carefully
consider the following discussion of risks before deciding whether an investment
in the TOPrS is suitable for you.
YOU WILL ONLY RECEIVE DISTRIBUTIONS IF DISTRIBUTIONS ON THE PARTNERSHIP
PREFERRED SECURITIES ARE DECLARED
ML Trust's ability to pay distributions on the TOPrS to you is dependent
upon its receipt of distributions on the partnership preferred securities. If we
or our affiliates defer or fail to make interest or principal payments on the
debentures and we fail to make guarantee payments on the guarantees, ML
Partnership will lack the funds necessary to pay distributions on the
partnership preferred securities. If ML Partnership does not pay current
distributions on the partnership preferred securities, either because we, as the
general partner, did not declare distributions to be made or because ML
Partnership lacks sufficient funds, ML Trust will not have funds to make current
distributions on the TOPrS. If ML Trust does not make payments to you on the
TOPrS, we will be restricted from, among other things, paying cash or certain
other dividends on our capital stock.
THERE MAY BE TAX CONSEQUENCES TO YOU IF WE FAIL TO PAY YOU DISTRIBUTIONS
As a holder of the TOPrS, each of which represents a preferred ownership
interest in the assets of ML Trust, even if ML Partnership fails to pay current
distributions on the partnership preferred securities, you will be required to
accrue income, for U.S. federal income tax purposes, on the cumulative deferred
distributions and accumulated interest allocable to your proportionate share of
the partnership preferred securities held by ML Trust. As a result, you will
recognize income for U.S. federal income tax purposes in advance of the receipt
of cash and will not receive the cash from ML Trust related to that distribution
if you dispose of your TOPrS before the record date for the date on which those
distributions are made.
YOU MAY NOT RECEIVE FULL DISTRIBUTIONS IF ML PARTNERSHIP HAS INSUFFICIENT INCOME
OR ASSETS
You are subject to the risk that the quarterly or liquidating distributions
paid on the TOPrS will not match the rate paid on the assets held by ML
Partnership, including the debentures and any other securities acquired by ML
Partnership in the future.
This mismatch could occur if:
o we, as the general partner of ML Partnership, in our sole discretion,
do not declare distributions on the partnership preferred securities
or if ML Partnership receives insufficient amounts from its
investments to pay the additional compounded distributions that will
accumulate on any unpaid distributions,
o ML Partnership reinvests the proceeds received from the assets it
initially holds upon their retirement or at their maturities in other
assets which do not generate income sufficient to pay full dividends
in respect of the partnership preferred securities at a rate of % per
annum, or
o ML Partnership invests in assets that are not guaranteed by us and
that cannot be liquidated by ML Partnership for an amount sufficient
to pay any distributions on the partnership preferred securities in
full or if ML Partnership does not make any distributions.
ML Trust will not have sufficient funds available to pay you full quarterly
or liquidating distributions on the TOPrS if ML Partnership lacks sufficient
funds to make quarterly or liquidating distributions on the partnership
preferred securities in full.
OUR OBLIGATIONS UNDER THE GUARANTEES AND OUR DEBENTURES ARE SUBORDINATED
Our obligations under the guarantees are unsecured and will rank in
priority of payment:
o subordinate and junior in right of payment to all of our other
liabilities; and
o equally with:
o any of our most senior preferred stock issued from time to time, and
o similar guarantees of ours with respect to previous and future issues
of TOPrS and other series of preferred stock by any of our finance
subsidiaries.
This means that our obligations under the guarantees will not be paid unless we
can satisfy in full all of our other obligations ranking senior to the
guarantees.
Our obligations under our debentures issued to ML Partnership are
subordinate and junior in right of payment to all of our senior indebtedness. At
December 25, 1998, we had outstanding senior indebtedness aggregating
approximately $75.4 billion which would have ranked senior to our obligations
under the guarantees and our debentures.
There are no terms in the TOPrS, the partnership preferred securities, the
guarantees or the debentures that limit our ability to incur additional
indebtedness, including indebtedness that ranks senior to the guarantees.
ML TRUST'S AND ML PARTNERSHIP'S INVESTMENTS ARE NOT DIVERSIFIED
Because the investments of ML Trust and ML Partnership are not diversified,
you are subject to a greater risk that their assets will not generate sufficient
income to pay current and liquidating distributions on the TOPrS and the
partnership preferred securities than you would with a vehicle whose investments
were diversified and less exposed to the risk that non-payment on any particular
investment asset would impair its ability to pay distributions to holders of its
capital stock.
REDEMPTION OF THE TOPrS OR THE PARTNERSHIP PREFERRED SECURITIES MAY AFFECT YOUR
RETURN
If your TOPrS are exchanged for the partnership preferred securities,
o the trading value of the partnership preferred securities may be lower
than the trading value of the TOPrS which may result in a lower return
upon your sale of the partnership preferred securities; and
o you may incur an additional tax liability in excess of what you
originally contemplated.
Your TOPrS may be redeemed for cash or you may receive the partnership
preferred securities in exchange for your TOPrS in the event that:
(1) a change in U.S. tax law occurs which causes:
o ML Trust to be subject to U.S. federal income tax on the
distributions it receives or accrues on the partnership preferred
securities;
o ML Partnership to be subject to U.S. federal income tax on the
income or interest payments it receives or accrues on the
investments it holds;
o ML Trust or ML Partnership to be subject to more than a minimal
amount of other taxes, duties or governmental charges; or
o interest payable by us or any of our affiliates on the debentures
then held by ML Partnership to not be deductible for U.S. federal
income tax purposes; or
(2) a change in U.S. investment company law occurs which requires ML Trust
or ML Partnership to register as an investment company.
Because you may receive partnership preferred securities upon the
occurrence of one of the events described above, in connection with your
investment decision with regard to the TOPrS, you are also making an investment
decision with regard to the partnership preferred securities. You should
carefully review all the information regarding the partnership preferred
securities contained in this prospectus.
ENFORCEMENT OF CERTAIN RIGHTS BY OR ON YOUR BEHALF IS LIMITED
The special representative's ability to take action on your behalf under
our guarantee of the partnership preferred securities is limited, and it is
uncertain that you would receive a distribution on the TOPrS even if the special
representative took any action or was successful in recovering funds under our
guarantee. This is because under no circumstances will the special
representative have authority to cause the general partner to declare
distributions on the partnership preferred securities. As a result, although the
special representative may be able to enforce ML Partnership's creditors' rights
to accelerate and receive payments in respect of our and our affiliates'
debenture and our guarantee of those debentures, rather than being required to
declare and make distributions on the partnership preferred securities, ML
Partnership would be entitled to reinvest those payments in additional
debentures of ours and our affiliates, subject to satisfying the reinvestment
criteria.
If at any time:
o you have not received a distribution on the TOPrS for six consecutive
calendar quarters;
o an event of default occurs and is continuing on any debenture issued
by us or our affiliates and then held by ML Partnership; and
o we default on our obligations under our guarantee of the TOPrS or the
partnership preferred securities;
then:
o you would rely on the enforcement by the property trustee of its
rights, as a holder of the partnership preferred securities, against
us, as guarantor of the partnership preferred securities, including
the right to direct the special representative to enforce
(1) ML Partnership's creditors' rights and other rights with respect
to our and our affiliate's debentures and our guarantee of those
debentures,
(2) the rights of the holders of the partnership preferred securities
under our guarantee of the partnership preferred securities, and
(3) the rights of the holders of the partnership preferred securities
to receive distributions, only if and to the extent declared out
of funds legally available for payment, on the partnership
preferred securities, and
o ML Trustee under our guarantee of the TOPrS will have the right to
enforce the terms of the guarantee.
YOU HAVE LIMITED VOTING RIGHTS
As a holder of the TOPrS you will have limited voting rights and will not
be entitled to vote to appoint, change, or to increase or decrease the number of
trustees of ML Trust. As holder of all of ML Trust's common securities, those
rights are ours exclusively.
THERE IS NO PRIOR MARKET FOR THE TOPrS
This series of TOPrS constitutes a new issue of securities with no
established trading market. ML Trust has applied to list the TOPrS on the NYSE.
There can be no assurance that an active market for the TOPrS will develop or be
sustained in the future on the NYSE. Although the underwriters have indicated to
us that they intend to make a market in the TOPrS, as permitted by applicable
laws and regulations, they are not obligated to do so and may discontinue any
market-making activities at any time without notice. Accordingly, there is no
assurance that a trading market for the TOPrS will exist and no assurance as to
the liquidity of any trading market.
We will only sell the TOPrS to those investors for whom the TOPrS are
considered suitable in light of their particular circumstances.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Asset Management L.P. and Merrill Lynch Mercury Asset Management, provides
investment, financing, advisory, insurance, and related products on a global
basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281; our telephone number is (212)
449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
USE OF PROCEEDS
ML Trust will use the proceeds that it receives from the sale of the TOPrS
and its common securities to purchase the partnership preferred securities, and
those proceeds will be used by ML Partnership to invest in debentures and other
permitted investments. See "Description of the Partnership Preferred
Securities--Partnership Investments". We and our affiliates, the issuers of the
debentures, intend to use the net proceeds from the sale of the debentures for
general corporate purposes. Our general corporate purposes may include financing
the activities of our subsidiaries, financing our assets and those of our
subsidiaries, lengthening the average maturity of our borrowings and financing
acquisitions. Until we use the net proceeds from the sale of any of our
securities for general corporate purposes, we will use the net proceeds to
reduce our short-term indebtedness or for temporary investments. We expect that
we will, on a recurrent basis, engage in additional financings as the need
arises to finance our growth, through acquisitions or otherwise, or to lengthen
the average maturity of our borrowings. To the extent that TOPrS being purchased
for resale by MLPF&S are not resold, the aggregate proceeds that we and our
subsidiaries would receive would be reduced.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc., in a
transaction accounted for as a pooling-of-interests. The following information
for the fiscal years 1994 through 1997 has been restated as if the two entities
had always been combined.
The following table sets forth our historical ratios of earnings to fixed
charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI is a statutory business trust
formed under the Delaware Business Trust Act, as amended, pursuant to a
declaration of trust and the filing of a certificate of trust with the Secretary
of State of the State of Delaware on December 7, 1998; the declaration will be
amended and restated in its entirety substantially in the form filed as an
exhibit to the registration statement of which this prospectus is a part. The
declaration will be qualified as an indenture under the Trust Indenture Act of
1939, as amended. Upon issuance of the TOPrS, the purchasers of the TOPrS will
own all the TOPrS issued by ML Trust. See "Description of the TOPrS". ML&Co.
will acquire ML Trust's common securities in an amount equal to at least 3% of
the total capital of ML Trust. ML Trust will use all the proceeds derived from
the issuance of the TOPrS and the common securities (collectively, the "Trust
Securities") to purchase the partnership preferred securities from ML
Partnership and, accordingly, the assets of ML Trust will consist solely of the
partnership preferred securities. ML Trust exists for the exclusive purpose of:
o issuing the Trust Securities representing undivided beneficial
ownership interests in the assets of ML Trust,
o investing the gross proceeds of the Trust Securities in the
partnership preferred securities, and
o engaging in only those other activities necessary or incidental to the
foregoing purposes.
Under the declaration, there will initially be four trustees for ML Trust.
o Two regular trustees who will be individuals who are employees or
officers of or who are affiliated with ML&Co.
o A property trustee who will be a financial institution that is
unaffiliated with ML&Co. and is the indenture trustee for purposes of
compliance with the provisions of the Trust Indenture Act.
o The Delaware trustee who will be an entity that maintains its
principal place of business in the State of Delaware.
Initially, The Chase Manhattan Bank, a New York banking corporation, will
act as property trustee, and its affiliate, Chase Manhattan Bank Delaware, a
Delaware corporation, will act as Delaware trustee until, in each case, removed
or replaced by the holder of the common securities. For purposes of compliance
with the Trust Indenture Act, The Chase Manhattan Bank will also act as trustee
under the Trust Guarantee, as defined in this prospectus, as property trustee
under the declaration and as trustee under the indenture under which the ML&Co.
Debenture, as defined in this prospectus, is issued.
The property trustee will hold title to the partnership preferred
securities for the benefit of the holders of the Trust Securities, and the
property trustee will have the power to exercise all rights, powers and
privileges with respect to the partnership preferred securities under the
Amended and Restated Agreement of Limited Partnership to be entered into by
ML&Co. and ML Trust as the holder of the partnership preferred securities. In
addition, the property trustee will maintain exclusive control of the property
account which is a segregated non-interest bearing bank account to hold all
payments made in respect of the partnership preferred securities for the benefit
of the holders of the Trust Securities. The trust guarantee trustee will hold
the Trust Guarantee for the benefit of the holders of the TOPrS. ML&Co., as the
holder of all the common securities, will have the right to appoint, remove or
replace any of the trustees and to increase or decrease the number of trustees,
provided that at least one trustee shall be a Delaware trustee, at least one
trustee shall be the property trustee and at least one trustee shall be a
regular trustee. ML&Co. will pay all fees and expenses related to the
organization and operations of ML Trust, including any taxes, duties,
assessments or governmental charges of whatever nature imposed by the United
States or any other domestic taxing authority upon ML Trust, other than
withholding taxes, and the offering of the TOPrS and be responsible for all
debts and obligations of ML Trust, other than those obligations with respect to
the Trust Securities.
For so long as the TOPrS remain outstanding, ML&Co. will be obligated to:
o maintain 100% direct ownership of the common securities,
o cause ML Trust to remain a statutory business trust and not to
voluntarily dissolve, wind-up, liquidate or be terminated, except as
permitted by the declaration, and
o use its commercially reasonable efforts to ensure that ML Trust will
not be
(A) an investment company for purposes of the Investment Company Act
of 1940, as amended, or
(B) classified as other than a grantor trust for United States
Federal income tax purposes.
The rights of the holders of the TOPrS, including economic rights, rights
to information and voting rights, are as set forth in the declaration and the
Delaware Trust Act. See "Description of the TOPrS". The declaration and the
Trust Guarantee also incorporate by reference the terms of the Trust Indenture
Act.
The location of the principal executive office of ML Trust is c/o Merrill
Lynch & Co., Inc., World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281, and its telephone number is (212) 449-1000.
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. is a limited partnership that was
formed under the Delaware Revised Uniform Limited Partnership Act, as amended,
on December 7, 1998 for the exclusive purposes of purchasing debt securities of
ML&Co. and wholly-owned subsidiaries of ML&Co. (the "Affiliate Investment
Instruments") and other permitted investments, with the proceeds from the sale
of partnership preferred securities to ML Trust and a capital contribution from
ML&Co. in exchange for the general partner interest in ML Partnership. Under the
certificate of limited partnership, as amended, and the limited partnership
agreement, ML&Co. is the sole general partner of ML Partnership. Upon the
issuance of the partnership preferred securities, which securities represent
limited partner interests in ML Partnership, ML Trust will be the sole limited
partner of ML Partnership. Contemporaneously with the issuance of the
partnership preferred securities, ML&Co. as general partner will contribute
capital to ML Partnership in an amount sufficient to establish its initial
capital account at an amount equal to at least 15% of the total capital of ML
Partnership.
ML Partnership is managed by ML&Co. as general partner and exists for the
sole purpose of:
o issuing its partnership interests,
o investing the proceeds from the sale of the partnership preferred
securities in Affiliate Investment Instruments and other eligible debt
securities, as described in this prospectus, and
o engaging in only those other activities necessary or incidental for
these purposes.
To the extent that aggregate payments to ML Partnership on its investments
exceed distributions accumulated or payable with respect to the partnership
preferred securities, ML Partnership may at times have excess funds which shall
be allocated to and may, in ML&Co.'s sole discretion, be distributed to ML&Co.
For so long as the partnership preferred securities remain outstanding,
ML&Co. will be obligated under the limited partnership agreement:
o to remain the sole general partner of ML Partnership and to maintain
100% direct ownership of the general partner's interest in ML
Partnership, which interest will at all times represent at least 1% of
the total capital of ML Partnership,
o to cause ML Partnership to remain a limited partnership and not to
voluntarily dissolve, liquidate, wind-up or be terminated, except as
permitted by the limited partnership agreement, and
o to use its commercially reasonable efforts to ensure that ML
Partnership will not be,
o an investment company for purposes of the Investment Company Act
or
o an association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes.
ML&Co. or the then general partner may transfer its obligations as general
partner to a wholly-owned direct or indirect subsidiary of ML&Co. provided that:
o the successor entity expressly accepts the transfer of the obligations
as general partner, and
o before any transfer, ML&Co. has received an opinion of nationally
recognized independent counsel to ML Partnership experienced in these
matters to the effect that:
(A) ML Partnership will be treated as a partnership for United States
Federal income tax purposes;
(B) any transfer would not cause ML Trust to be classified as an
association taxable as a corporation for United States Federal
income tax purposes;
(C) following any transfer, ML&Co. and the successor entity will be
in compliance with the Investment Company Act without being
subject to registration as an investment company; and
(D) any transfer will not adversely affect the limited liability of
the holders of the partnership preferred securities.
The rights of the holders of the partnership preferred securities,
including economic rights, rights to information and voting rights, are set
forth in the limited partnership agreement and the Delaware Limited Partnership
Act. See "Description of the Partnership Preferred Securities".
The limited partnership agreement provides that the general partner will
have liability for the fees and expenses of ML Partnership, including any taxes,
duties, assessments or governmental charges of whatever nature imposed by the
United States or any other domestic taxing authority upon ML Partnership, other
than withholding taxes, and be responsible for all debts and obligations of ML
Partnership, other than with respect to the partnership preferred securities.
Under Delaware law, assuming a limited partner in a Delaware limited partnership
such as ML Partnership, i.e., a holder of the partnership preferred securities,
does not participate in the control of the business of the limited partnership,
that limited partner will not be personally liable for the debts, obligations
and liabilities of the limited partnership, whether arising in contract, tort or
otherwise, solely by reason of being a limited partner of the limited
partnership, subject to any obligation such limited partner may have to repay
any funds that may have been wrongfully distributed to it. ML Partnership's
business and affairs will be conducted by ML&Co. as general partner.
The location of the principal executive offices of ML Partnership is c/o
Merrill Lynch & Co., Inc., World Financial Center, North Tower, 250 Vesey
Street, New York, New York 10281 and its telephone number is (212) 449-1000.
DESCRIPTION OF THE TOPrS
The TOPrS will be issued under the terms of the declaration. The
declaration will be qualified as an indenture under the Trust Indenture Act. The
property trustee, The Chase Manhattan Bank, will act as trustee for the TOPrS
under the declaration for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the TOPrS will include those stated in the
declaration and those made part of the declaration by the Trust Indenture Act.
The following summary of the material terms and provisions of the TOPrS is not
complete and is subject to, and qualified in its entirety by reference to, the
declaration, a copy of which is filed as an exhibit to the registration
statement of which this prospectus is a part, the Delaware Trust Act and the
Trust Indenture Act.
The TOPrS will be issued in fully registered form without coupons. The
TOPrS will not be issued in bearer form. See "--Book-Entry Only Issuance--The
Depository Trust Company".
The declaration authorizes the regular trustees of ML Trust to issue the
Trust Securities, which represent undivided beneficial ownership interests in
the assets of ML Trust. Title to the partnership preferred securities will be
held by the property trustee for the benefit of the holders of the Trust
Securities.
The declaration does not permit ML Trust to:
o acquire any assets other than the partnership preferred securities,
o issue any securities other than the Trust Securities, or
o incur any indebtedness.
The payment of distributions out of money held by ML Trust, and payments out of
money held by ML Trust upon redemption of the TOPrS or liquidation of ML Trust,
are guaranteed by ML&Co. to the extent described under "Description of the Trust
Guarantee".
The Trust Guarantee will be held by The Chase Manhattan Bank, the trust
guarantee trustee, for the benefit of the holders of the TOPrS. The Trust
Guarantee does not cover payment of distributions when ML Trust does not have
sufficient available funds to pay such distributions. In any event of
non-payment, holders of the TOPrS will have the remedies described below under
"--Trust Enforcement Events".
DISTRIBUTIONS
The distribution rate on the TOPrS will be fixed at a rate per annum of %
of the stated liquidation amount of $25 per TOPrS and will be paid if, as and
when ML Trust has funds available for distribution. Distributions not paid on
the scheduled payment date will accumulate and compound quarterly at a rate per
annum equal to %. The term "distribution" as used in this prospectus includes
any compounded amounts unless otherwise stated or the context otherwise
requires. The amount of distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months.
Distributions on the TOPrS will be cumulative, will accumulate from the
date of initial issuance and will be payable quarterly in arrears on each
, , and , commencing , 199
if, as and when available for payment, by the property trustee, except as
otherwise described below. If distributions are not paid when scheduled, the
accumulated distributions shall be paid to the holders of record of the TOPrS as
they appear on the books and records of ML Trust on the record date with respect
to the payment date for the TOPrS which corresponds to the payment date fixed by
ML Partnership with respect to the payment of cumulative distributions on the
partnership preferred securities.
Distributions on the TOPrS will be made to the extent that ML Trust has
funds available for the payment of the distributions in the property account.
Amounts available to ML Trust for distribution to the holders of the TOPrS will
be limited to payments received by ML Trust from ML Partnership with respect to
the partnership preferred securities or from ML&Co. on ML&Co.'s guarantee on the
TOPrS (the "Trust Guarantee") or its guarantee on the partnership preferred
securities (the "Partnership Guarantee") as described in this prospectus.
Distributions on the partnership preferred securities will be paid only if, as
and when declared in the sole discretion of ML&Co., as the general partner of ML
Partnership. Under the limited partnership agreement, ML&Co. is not obligated to
declare distributions on the partnership preferred securities at any time,
including upon or following a Partnership Enforcement Event. See "Description of
Partnership Preferred Securities--Partnership Enforcement Events".
The assets of ML Partnership will consist only of Affiliate Investment
Instruments, which initially will be the debentures issued by ML&Co. and another
wholly-owned subsidiary of ML&Co., and other eligible debt securities. To the
extent that the issuers and, where applicable, ML&Co., as guarantor, of the
securities in which ML Partnership invests defer or fail to make any payment in
respect of the securities or, if applicable, the guarantees, ML Partnership will
not have sufficient funds to pay and will not declare or pay distributions on
the partnership preferred securities. If ML Partnership does not declare and pay
distributions on the partnership preferred securities out of funds legally
available for distribution, ML Trust will not have sufficient funds to make
distributions on the TOPrS, in which event the Trust Guarantee will not apply to
those distributions until ML Trust has sufficient funds available to pay those
distributions. See "Description of the Partnership Preferred
Securities--Distributions" and "Description of The Trust Guarantee". In
addition, ML Partnership may not have sufficient funds to pay current or
liquidating distributions on the partnership preferred securities if:
o at any time that ML Partnership is receiving current payments in
respect of the securities held by ML Partnership, including the
debentures, ML&Co, in its sole discretion, does not declare
distributions on the partnership preferred securities and ML
Partnership receives insufficient amounts to pay the additional
compounded distributions that will accumulate in respect of the
partnership preferred securities,
o ML Partnership reinvests the proceeds received in respect of the
debentures upon their retirement or at their maturities in Affiliate
Investment Instruments that do not generate income in an amount that
is sufficient to pay full distributions in respect of the partnership
preferred securities, or
o ML Partnership invests in debt securities of Investment Affiliates, as
defined below, that are not guaranteed by ML&Co. and that cannot be
liquidated by ML Partnership for an amount sufficient to pay the
distributions in full.
Distributions on the TOPrS will be payable to their holders as they appear
on the books and records of ML Trust on the relevant record dates, which will be
one Business Day, as defined below, before the relevant payment dates. These
distributions will be paid through the property trustee who will hold amounts
received in respect of the partnership preferred securities in the property
account for the benefit of the holders of the Trust Securities. Subject to any
applicable laws and regulations and the provisions of the declaration, each
payment will be made as described under "--Book-Entry Only Issuance--The
Depository Trust Company" below. In the event that the TOPrS do not remain in
book-entry only form, the relevant record dates shall be the 15th day of the
month of the relevant payment dates. In the event that any date on which
distributions are payable on the TOPrS is not a Business Day, payment of the
distribution payable on that date will be made on the next succeeding day which
is a Business Day, without any interest or other payment in respect of the
distribution subject to delay, except that, if that Business Day falls in the
next succeeding calendar year, the relevant payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on that date. A "Business Day" shall mean any day other than a day on
which banking institutions in The City of New York are authorized or required by
law to close.
TRUST ENFORCEMENT EVENTS
The occurrence, at any time, of:
o the non-payment of distributions on the TOPrS for six consecutive
quarterly distribution periods,
o a default by ML&Co. in respect of any of its obligations under the
Trust Guarantee, or
o a Partnership Enforcement Event under the limited partnership
agreement,
will constitute an enforcement event under the declaration with respect to the
Trust Securities (a "Trust Enforcement Event"); provided, that under the
declaration, the holder of the common securities will be deemed to have waived
any Trust Enforcement Event with respect to the common securities until all
Trust Enforcement Events with respect to the TOPrS have been cured, waived or
otherwise eliminated. Until any Trust Enforcement Event with respect to the
TOPrS have been so cured, waived or otherwise eliminated, the property trustee
will be deemed to be acting solely on behalf of the holders of the TOPrS and
only the holders of the TOPrS will have the right to direct the property trustee
with respect to certain matters under the declaration and, in the case of a
Partnership Enforcement Event, the special representative with respect to
certain matters under the limited partnership agreement. See "Description of the
Partnership Preferred Securities--Partnership Enforcement Events" for a
description of the events which will trigger the occurrence of a Partnership
Enforcement Event.
Upon the occurrence of a Trust Enforcement Event,
o the property trustee, as the holder of the partnership preferred
securities, shall have the right to enforce the terms of the
partnership preferred securities, including the right to direct the
special representative to enforce:
o ML Partnership's creditors' rights and other rights with respect to
the Affiliate Investment Instruments and ML&Co.'s guarantee of the
Affiliate Investment Instruments (the "Investment Guarantees", and
together with the Trust Guarantee and the Partnership Guarantee, the
"Guarantees"),
o the rights of the holders of the partnership preferred securities
under the Partnership Guarantee, and
o the rights of the holders of the partnership preferred securities to
receive distributions on the partnership preferred securities, only if
and to the extent declared out of funds legally available for the
payment of distributions, and
o the trust guarantee trustee shall have the right to enforce the terms
of the Trust Guarantee, including the right to enforce the restriction
on the payment of distributions by ML&Co. and its finance subsidiaries
on its securities as described in the Trust Guarantee.
If the property trustee fails to enforce its rights under the partnership
preferred securities after a holder of the TOPrS has made a written request,
that holder may directly institute a legal proceeding against ML Partnership and
the special representative to enforce the property trustee's rights under the
partnership preferred securities without first instituting any legal proceeding
against the property trustee, ML Trust or any other person or entity. In
addition, for so long as ML Trust holds any partnership preferred securities, if
the special representative fails to enforce its rights on behalf of ML
Partnership under the Affiliate Investment Instruments after a holder of the
TOPrS has made a written request, any holder may on behalf of ML Partnership
directly institute a legal proceeding against the Investment Affiliates under
the Affiliate Investment Instruments, without first instituting any legal
proceeding against the property trustee, ML Trust, the special representative or
ML Partnership. In any event, for so long as ML Trust is the holder of any
partnership preferred securities, if a Trust Enforcement Event has occurred and
is continuing and such event is attributable to the failure of an Investment
Affiliate to make any required payment when due on any Affiliate Investment
Instrument or the failure of ML&Co. to make any required payment when due on any
Investment Guarantee, then a holder of the TOPrS may on behalf of ML Partnership
directly institute a proceeding against the Investment Affiliate with respect to
any Affiliate Investment Instrument or against ML&Co. with respect to any the
Investment Guarantee, in each case for enforcement of payment.
Under no circumstances, however, shall the special representative have
authority to cause ML&Co to declare distributions on the partnership preferred
securities. As a result, although the special representative may be able to
enforce ML Partnership's creditors' rights to accelerate and receive payments in
respect of the Affiliate Investment Instruments and the Investment Guarantees,
subject to satisfying the reinvestment criteria described under "Description of
the Partnership Preferred Securities--Partnership Investments", ML Partnership
would be entitled to reinvest any payments in additional Affiliate Investment
Instruments and other eligible debt securities, rather than declaring and making
distributions on the partnership preferred securities.
ML&Co. and ML Trust are each required to file annually with the property
trustee an officer's certificate as to its compliance with all conditions and
obligations under the declaration.
MANDATORY REDEMPTION
At the option of ML&Co., ML Partnership may redeem the partnership
preferred securities, in whole or in part, at any time on or after ,
or at any time in certain circumstances upon the occurrence of a Partnership
Special Event. Upon the redemption of the partnership preferred securities
either at the option of ML&Co. or under to a Partnership Special Event, the
proceeds from the repayment shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the partnership
preferred securities so redeemed at an amount per Trust Security equal to $25
plus accumulated and unpaid distributions; provided, that holders of the Trust
Securities shall be given not less than 30 nor more than 60 days notice of any
redemption. See "Description of the Partnership Preferred Securities--General"
and "--Optional Redemption".
TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Trust Tax Event or a Trust Investment Company Event
(each as defined below, and each, a "Trust Special Event") occurs and is
continuing, the regular trustees shall, unless the partnership preferred
securities are redeemed in the limited circumstances described below, within 90
days following the occurrence of such Trust Special Event elect to either:
(1) dissolve ML Trust upon not less than 30 nor more than 60 days
notice with the result that, after satisfaction of creditors of
ML Trust, if any, partnership preferred securities would be
distributed on a pro rata basis to the holders of the TOPrS and
the common securities in liquidation of the holders' interests in
ML Trust; provided, however, that if at the time there is
available to ML Trust the opportunity to eliminate, within the
90-day period, the Trust Special Event by taking some ministerial
action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which in the sole judgment
of ML&Co. has or will cause no adverse effect on ML Trust, ML
Partnership, ML&Co. or the holders of the Trust Securities and
will involve no material cost, ML Trust will pursue that measure
in lieu of dissolution or
(2) cause the TOPrS to remain outstanding, provided that in the case
of this clause (2), ML&Co. shall pay any and all expenses
incurred by or payable by ML Trust attributable to ML Trust
Special Event.
Furthermore, if in the case of the occurrence of a Trust Tax Event, the regular
trustees have received an opinion of nationally recognized independent tax
counsel experienced in these matters that there is more than an insubstantial
risk that interest payable by one or more of the Investment Affiliates with
respect to the debentures issued by any Investment Affiliate is not, or will not
be, deductible by any Investment Affiliate for United States Federal income tax
purposes even if the partnership preferred securities were distributed to the
holders of the Trust Securities in liquidation of the holders' interests in ML
Trust as described above, then ML&Co. shall have the right, within 90 days
following the occurrence of the Trust Tax Event, to elect to cause ML
Partnership to redeem the partnership preferred securities in whole, but not in
part, for cash upon not less than 30 nor more than 60 days notice and promptly
following any redemption, the Trust Securities will be redeemed by ML Trust at
the redemption price.
"Trust Tax Event" means that ML&Co. shall have requested and received and
shall have delivered to the Regular Trustees an opinion of nationally recognized
independent tax counsel experienced in these matters to the effect that there
has been:
o an amendment to, change in or announced proposed change in the laws,
or any regulations under those laws of the United States or any
political subdivision or taxing authority of that jurisdiction,
o a judicial decision interpreting, applying, or clarifying these laws
or regulations,
o an administrative pronouncement or action that represents an official
position, including a clarification of an official position, of the
governmental authority or regulatory body making the administrative
pronouncement or taking any action, or
o a threatened challenge asserted in connection with an audit of ML&Co.
or any of its subsidiaries, ML Partnership, or ML Trust, or a
threatened challenge asserted in writing against any other taxpayer
that has raised capital through the issuance of securities that are
substantially similar to the debentures, the partnership preferred
securities, or the TOPrS, which amendment or change is adopted or
which proposed change, decision or pronouncement is announced or which
action, clarification or challenge occurs on or after the date of this
prospectus (collectively a "Tax Action"), which Tax Action relates to
any of the items described in (1) through (3) below, and that
following the occurrence of any Tax Action there is more than an
insubstantial risk that:
(1) ML Trust is, or will be, subject to United States federal income
tax with respect to income accrued or received on the partnership
preferred securities,
(2) ML Trust is, or will be, subject to more than a minimal amount of
other taxes, duties or other governmental charges or
(3) interest payable by an Investment Affiliate with respect to the
Affiliate Investment Instrument issued by the Investment
Affiliate is not, or will not be, deductible by the Investment
Affiliate for United States Federal income tax purposes.
Recently, the Internal Revenue Service asserted that the interest payable
on a security issued in circumstances with certain similarities to the issuance
of the debentures issued by the Investment Affiliates to ML Partnership was not
deductible for United States Federal income tax purposes. The taxpayer in that
case has filed a petition in the United States Tax Court challenging the IRS's
position on this matter. If this matter were to be litigated and the Tax Court
were to sustain the IRS's position on this matter, the judicial decision could
constitute a Trust Tax Event, which could result in an early redemption of the
TOPrS.
"Trust Investment Company Event" means that ML&Co. shall have requested and
received and shall have delivered to the regular trustees an opinion of
nationally recognized independent legal counsel experienced in these matters to
the effect that as a result of the occurrence on or after the date of this
prospectus of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in Investment Company Act Law"), ML
Trust is or will be considered an investment company which is required to be
registered under the Investment Company Act.
If the partnership preferred securities are distributed to the holders of
the TOPrS, ML&Co. will use its best efforts to cause the partnership preferred
securities to be listed on the NYSE or on any other national securities exchange
or similar organization as the TOPrS are then listed or quoted.
On the date fixed for any distribution of partnership preferred securities,
upon dissolution of ML Trust,
o the Trust Securities will no longer be deemed to be outstanding, and
o certificates representing the Trust Securities will be deemed to
represent the partnership preferred securities having a liquidation
preference equal to the stated liquidation amount of the Trust
Securities until the certificates are presented to ML&Co. or its agent
for transfer or reissuance.
There can be no assurance as to the market price for the partnership
preferred securities which may be distributed in exchange for TOPrS if a
dissolution and liquidation of ML Trust were to occur. Accordingly, the
partnership preferred securities which an investor may subsequently receive on
dissolution and liquidation of ML Trust may trade at a discount to the price of
the TOPrS exchanged.
REDEMPTION PROCEDURES
ML Trust may not redeem fewer than all of the outstanding TOPrS unless all
accumulated and unpaid distributions have been paid on all TOPrS for all
quarterly distribution periods terminating on or before the date of redemption.
If ML Trust gives a notice of redemption in respect of the TOPrS, which
notice will be irrevocable, and if ML&Co. has paid to the property trustee a
sufficient amount of cash in connection with the related redemption of the
partnership preferred securities, then, by 12:00 noon, New York City time, on
the redemption date, ML Trust will irrevocably deposit with DTC funds sufficient
to pay the amount payable on redemption of all book-entry certificates and will
give DTC irrevocable instructions and authority to pay the redemption amount to
holders of the TOPrS. See "--Book-Entry Only Issuance--The Depository Trust
Company". If notice of redemption shall have been given and funds are deposited
as required, then upon the date of deposit, all rights of holders of any TOPrS
so called for redemption will cease, except the right of the holders of those
TOPrS to receive the redemption price, but without interest. In the event that
any date fixed for redemption of the TOPrS is not a Business Day, then payment
of the amount payable on that date will be made on the next succeeding day which
is a Business Day, without any interest or other payment in respect of the
amount payable subject to delay, except that, if that Business Day falls in the
next calendar year, the payment will be made on the immediately preceding
Business Day. In the event that payment of the redemption price in respect of
the TOPrS is improperly withheld or refused and not paid either by ML Trust or
by ML&Co. under the Trust Guarantee described under "Description of the Trust
Guarantee", distributions on the TOPrS will continue to accumulate from the
original redemption date to the date of payment.
In the event that fewer than all of the outstanding TOPrS are to be
redeemed, the TOPrS will be redeemed in accordance with the procedures of DTC.
See "--Book-Entry Only Issuance--The Depository Trust Company". In the event
that the TOPrS do not remain in book-entry only form and fewer than all of the
outstanding TOPrS are to be redeemed, the TOPrS shall be redeemed on a pro rata
basis or pursuant to the rules of any securities exchange on which the TOPrS are
listed.
Subject to the foregoing and applicable law, including, without limitation,
United States Federal securities laws, ML&Co. or its subsidiaries may at any
time and from time to time purchase outstanding TOPrS by tender, in the open
market or by private agreement.
SUBORDINATION OF THE COMMON SECURITIES
Payment of amounts upon liquidation of the Trust Securities shall be made
pro rata based on the liquidation amount of the Trust Securities; provided,
however, that upon:
o the occurrence of an event of default by an Investment Affiliate,
including ML&Co., under any Affiliate Investment Instrument, or
o default by ML&Co. on any of its obligations under any guarantee
described in this prospectus, the holders of the TOPrS will have a
preference over the holders of the common securities with respect to
payments upon liquidation of ML Trust.
In the case of any Trust Enforcement Event, the holder of the common
securities will be deemed to have waived the Trust Enforcement Event until all
Trust Enforcement Events with respect to the TOPrS have been cured, waived or
otherwise eliminated. Until all Trust Enforcement Events with respect to the
TOPrS have been so cured, waived or otherwise eliminated, the property trustee
shall act solely on behalf of the holders of the TOPrS and not on behalf of the
holder of the common securities, and only the holders of the TOPrS will have the
right to direct the property trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of ML Trust, the holders of the TOPrS will be entitled
to receive out of the assets of ML Trust, after satisfaction of liabilities to
creditors, distributions in cash or other immediately available funds in an
amount equal to the aggregate of the stated liquidation amount of $25 per TOPrS
plus accumulated and unpaid distributions to the date of payment, unless, in
connection with ML Trust's liquidation, partnership preferred securities have
been distributed on a pro rata basis to the holders of the Trust Securities.
If, upon ML Trust's liquidation, the liquidation distribution can be paid
only in part because ML Trust has insufficient assets available to pay in full
the aggregate liquidation distribution, then the amounts payable directly by ML
Trust on the TOPrS shall be paid on a pro rata basis. The holders of the common
securities will be entitled to receive distributions upon liquidation pro rata
with the holders of the TOPrS, except in the limited circumstances described
above under "--Subordination of the Common Securities".
Under to the declaration, ML Trust shall terminate:
(1) upon the bankruptcy of ML&Co.,
(2) upon the filing of a certificate of dissolution or the equivalent with
respect to ML&Co., the filing of a certificate of cancellation with
respect to ML Trust after having obtained the consent of at least a
majority in liquidation amount of the Trust Securities, voting
together as a single class, to file such certificate of cancellation,
or the revocation of the charter of ML&Co. and the expiration of 90
days after the date of revocation without reinstatement,
(3) upon the distribution of all of the partnership preferred securities
upon the occurrence of a Trust Special Event,
(4) upon the entry of a decree of a judicial dissolution of ML&Co. or ML
Trust, or
(5) upon the redemption of all the Trust Securities.
VOTING RIGHTS
Except as described in this prospectus, under the Delaware Trust Act, the
Trust Indenture Act and under "Description of The Trust Guarantee--Amendments
and Assignment", and as otherwise required by law and the declaration, the
holders of the TOPrS will have no voting rights.
Subject to the requirement of the property trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in liquidation amount of the TOPrS have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the property
trustee, or direct the exercise of any trust or power conferred upon the
property trustee under the declaration, including the right to direct the
property trustee, as holder of the partnership preferred securities, to:
o exercise the remedies available to it under the limited partnership
agreement as a holder of the partnership preferred securities,
including the right to direct the special representative to exercise
its rights in the manner described above under "--Trust Enforcement
Events", and
o consent to any amendment, modification, or termination of the limited
partnership agreement or the partnership preferred securities where
consent is required; provided, however, that where a consent or action
under the limited partnership agreement would require the consent or
act of the holders of more than a majority of the aggregate
liquidation preference of partnership preferred securities affected,
only the holders of the percentage of the aggregate stated liquidation
amount of the Trust Securities which is at least equal to the
percentage required under the limited partnership agreement may direct
the property trustee to give consent or take action on behalf of ML
Trust. See "Description of the Partnership Preferred
Securities--Voting Rights".
The property trustee shall notify all holders of the TOPrS of any notice of
any Partnership Enforcement Event received from ML&Co., as general partner with
respect to the partnership preferred securities and the Affiliate Investment
Instruments. The notice shall state that the Partnership Enforcement Event also
constitutes a Trust Enforcement Event. Except with respect to directing the
time, method, and place of conducting a proceeding for a remedy as described
above, the property trustee shall be under no obligation to take any of the
actions described in immediately preceding clauses above unless the property
trustee has obtained an opinion of independent tax counsel to the effect that as
a result of that action, ML Trust will not fail to be classified as a grantor
trust for United States Federal income tax purposes and that after that action
each holder of Trust Securities will continue to be treated as owning an
undivided beneficial ownership interest in the partnership preferred securities.
A waiver of a Partnership Enforcement Event with respect to the partnership
preferred securities held by the property trustee will constitute a waiver of
the corresponding Trust Enforcement Event.
Any required approval or direction of holders of the TOPrS may be given at
a separate meeting of holders of the TOPrS convened for that purpose, at a
meeting of all of the holders of Trust Securities or pursuant to written
consent. The regular trustees will cause a notice of any meeting at which
holders of the TOPrS are entitled to vote, or of any matter upon which action by
written consent of the holders is to be taken, to be mailed to each holder of
record of the TOPrS. Each notice will include a statement setting forth the
following information:
(1) the date of the meeting or the date by which any action is to be
taken;
(2) a description of any resolution proposed for adoption at the meeting
on which the holders are entitled to vote or of the matter upon which
written consent is sought; and
(3) instructions for the delivery of proxies or consents.
No vote or consent of the holders of the TOPrS will be required for ML Trust to
redeem and cancel the TOPrS or distribute partnership preferred securities in
accordance with the declaration.
Notwithstanding that holders of the TOPrS are entitled to vote or consent
under any of the circumstances described above, any of the Trust Securities that
are beneficially owned at that time by ML&Co. or any entity directly or
indirectly controlled by, or under direct or indirect common control with,
ML&Co., except for TOPrS purchased or acquired by ML&Co. or its affiliates in
connection with transactions effected by or for the account of customers of
ML&Co. or any of its subsidiaries or in connection with the distribution or
trading of the TOPrS, shall not be entitled to vote or consent and shall, for
purposes of any vote or consent, be treated as if the Trust Securities were not
outstanding; provided, however, that persons, other than affiliates of ML&Co.,
to whom ML&Co. or any of its subsidiaries have pledged the TOPrS may vote or
consent with respect to the pledged TOPrS pursuant to the terms of the pledge.
The procedures by which holders of the TOPrS represented by the global
certificates may exercise their voting rights are described below. See
"--Book-Entry Only Issuance--The Depository Trust Company".
Holders of the TOPrS will have no rights to appoint or remove the regular
trustees, who may be appointed, removed or replaced solely by ML&Co., as the
holder of all of the common securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF ML TRUST
ML Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. ML Trust may, with the consent of a majority of the regular
trustees and without the consent of the holders of the Trust Securities, the
property trustee or the Delaware trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; provided, that:
(1) if ML Trust is not the surviving entity, the successor entity either:
o expressly assumes all of the obligations of ML Trust under the
Trust Securities, or
o substitutes for the TOPrS other securities having substantially
the same terms as the TOPrS, so long as the successor securities
rank the same as the Trust Securities rank with respect to
distributions, assets and payments,
(2) ML&Co. expressly acknowledges a trustee of the successor entity
possessing the same powers and duties as the property trustee as the
holder of the partnership preferred securities,
(3) the TOPrS or any successor securities are listed, or any successor
securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which the
TOPrS are then listed or quoted,
(4) any merger, consolidation, amalgamation or replacement does not cause
the TOPrS, including any successor securities, to be downgraded by any
nationally recognized statistical rating organization,
(5) any merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the holders
of the TOPrS, including any successor securities, in any material
respect,
(6) the successor entity has a purpose substantially identical to that of
ML Trust,
(7) ML&Co. guarantees the obligations of the successor entity under the
successor securities to the same extent as provided by the Trust
Guarantee and
(8) before any merger, consolidation, amalgamation or replacement, ML&Co.
has received an opinion of a nationally recognized independent counsel
to ML Trust experienced in these matters to the effect that:
o any merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the
holders of the TOPrS, including any successor securities, in any
material respect, other than with respect to any dilution of the
holders' interest in the new entity,
o following any merger, consolidation, amalgamation or replacement,
neither ML Trust nor the successor entity will be required to
register as an investment company under the Investment Company
Act,
o following any merger, consolidation, amalgamation or replacement,
ML Trust, or any successor trust, will not be classified as an
association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes, and
o following any merger, consolidation, amalgamation or replacement,
ML Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United
States Federal income tax purposes.
Notwithstanding the foregoing, ML Trust shall not, except with the consent of
holders of 100% in liquidation amount of the TOPrS, consolidate, amalgamate,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it, if any
consolidation, amalgamation, merger or replacement would cause ML Trust or the
successor entity to be classified as an association or a publicly traded
partnership taxable as a corporation for United States Federal income tax
purposes.
MODIFICATION OF THE DECLARATION
The declaration may be modified and amended if approved by a majority of
the regular trustees, and in the circumstances described in the declaration, the
property trustee and the Delaware trustee. However, if any proposed amendment
provides for, or the regular trustees otherwise propose to effect,
(1) any action that would adversely affect the powers, preferences or
special rights of the Trust Securities, whether by way of amendment to
the declaration or otherwise, or
(2) the dissolution, winding-up or termination of ML Trust other than
under the terms of the declaration,
then, in each case, the holders of the Trust Securities voting together as a
single class will be entitled to vote on the amendment or proposal and the
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected;
provided, further that if any amendment or proposal referred to in clause (2)
above would adversely affect only the TOPrS or the common securities, then only
the affected class will be entitled to vote on the amendment or proposal and the
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of that class of Trust Securities.
The declaration may be amended without the consent of the holders of the
Trust Securities to:
o cure any ambiguity,
o correct or supplement any provision in the declaration that may be
defective or inconsistent with any other provision of the declaration,
o add to the restrictions or obligations of the sponsor,
o conform to any change in the Investment Company Act, the Trust
Indenture Act or the rules or regulations under either law and
o modify, eliminate and add to any provision of the declaration to the
extent as may be necessary or desirable;
provided that no amendment shall have a material adverse effect on the rights,
preferences or privileges of the holders of the Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the declaration if the amendment or modification would
o cause ML Trust to fail to be classified as a grantor trust for United
States Federal income tax purposes,
o cause ML Partnership to be classified as an association or publicly
traded partnership taxable as a corporation for those purposes,
o reduce or otherwise adversely affect the powers of the property
trustee, or
o cause ML Trust or ML Partnership to be deemed an investment company
which is required to be registered under the Investment Company Act.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DESCRIPTION OF THE GLOBAL CERTIFICATES
DTC will act as securities depository for the TOPrS and, to the extent
distributed to the holders of the TOPrS, the partnership preferred securities.
The TOPrS will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates, representing the total aggregate number of TOPrS, will be issued
and will be deposited with DTC.
DTC PROCEDURES
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants deposit with
DTC. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its participants and by the NYSE, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly. The rules applicable to DTC and
its participants are on file with the SEC.
Purchases of the TOPrS within the DTC system must be made by or through
participants, which will receive a credit for the TOPrS on DTC's records. The
ownership interest of each beneficial owner of the TOPrS is in turn to be
recorded on the participants' and indirect participants' records. Beneficial
owners will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the participants or indirect participants through which the beneficial
owners purchased TOPrS. Transfers of ownership interests in the TOPrS are to be
accomplished by entries made on the books of participants and indirect
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in the TOPrS, except
in the event that use of the book-entry system for the TOPrS is discontinued.
DTC has no knowledge of the actual beneficial owners of the TOPrS; DTC's
records reflect only the identity of the participants to whose accounts the
TOPrS are credited, which may or may not be the beneficial owners. The
participants and indirect participants will remain responsible for keeping
account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
global certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the TOPrS being represented for all purposes under
the declaration and the TOPrS. No beneficial owner of an interest in a global
certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
declaration.
DTC has advised ML&Co. that it will take any action permitted to be taken
by a holder of the TOPrS, including the presentation of the TOPrS for exchange
as described below, only at the direction of one or more participants to whose
account the DTC interests in the global certificates are credited and only in
respect of such portion of the aggregate liquidation amount of the TOPrS as to
which the participant or participants has or have given the direction. Also, if
there is a Trust Enforcement Event under the TOPrS, DTC will exchange the global
certificates for certificated securities, which it will distribute to its
participants in accordance with its customary procedures.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the TOPrS held in book-entry form will be
sent to Cede & Co. If less than all of the TOPrS are being redeemed, DTC will
determine the amount of the interest of each participant to be redeemed in
accordance with its procedures.
Although voting with respect to the TOPrS is limited, in those cases where
a vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to the TOPrS. Under its usual procedures, DTC would mail an omnibus
proxy to ML Trust as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those participants to whose
accounts the TOPrS are allocated on the record date identified in a listing
attached to the omnibus proxy.
Distributions on the TOPrS held in book-entry form will be made to DTC in
immediately available funds. DTC's practice is to credit participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payments on the payment date. Payments by participants and indirect participants
to beneficial owners will be governed by standing instructions and customary
practices and will be the responsibility of the participants and indirect
participants and not of DTC, ML Trust or ML&Co., subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of any
distributions to DTC is the responsibility of ML Trust, disbursement of those
payments to participants is the responsibility of DTC, and disbursement of those
payments to the beneficial owners is the responsibility of participants and
indirect participants.
Except as described, a beneficial owner of an interest in a global
certificate will not be entitled to receive physical delivery of the TOPrS.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the TOPrS.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global certificates among participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither ML&Co. nor ML Trust
will have any responsibility for the performance by DTC or its participants or
indirect participants under the rules and procedures governing DTC. DTC may
discontinue providing its services as securities depository with respect to the
TOPrS at any time by giving notice to ML Trust. Under these circumstances, in
the event that a successor securities depository is not obtained, the TOPrS
certificates are required to be printed and delivered to the property trustee.
Additionally, ML Trust, with the consent of ML&Co., may decide to discontinue
use of the system of book-entry transfers through DTC or any successor
depository. In that event, certificates for the TOPrS will be printed and
delivered to the property trustee. In each of the above circumstances, ML&Co.
will appoint a paying agent with respect to the TOPrS.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer beneficial interests in the global TOPrS as
represented by a global certificate.
The information in this section concerning DTC and DTC's system has been
obtained from sources that ML&Co. believes to be reliable, but ML&Co. takes no
responsibility for the accuracy of the information.
PAYMENT
Payments in respect of the TOPrS represented by the global certificates
shall be made to DTC, which shall credit the relevant accounts at DTC on the
scheduled payment dates or, in the case of certificated securities, if any,
payments shall be made by check mailed to the address of the holder entitled to
receive the payment as the holder's address shall appear on the register. The
paying agent shall be permitted to resign as paying agent upon 30 days written
notice to the regular trustees. In the event that The Chase Manhattan Bank shall
no longer be the paying agent, the regular trustees shall appoint a successor to
act as paying Agent which shall be a bank or trust company.
REGISTRAR, TRANSFER AGENT, AND PAYING AGENT
The property trustee will act as registrar, transfer Agent and paying agent
for the TOPrS.
Registration of transfers of the TOPrS will be effected without charge by
or on behalf of ML Trust, but upon payment and with the giving of any indemnity
as ML Trust or ML&Co. may require, in respect of any tax or other government
charges which may be imposed in relation to it.
ML Trust will not be required to register or cause to be registered the
transfer of the TOPrS after the TOPrS have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, before the occurrence of a default with respect to
the Trust Securities, undertakes to perform only the duties as are specifically
set forth in the declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to these provisions, the property trustee is under no
obligation to exercise any of the powers vested in it by the declaration at the
request of any holder of the TOPrS, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred in
connection with the exercise of any powers. The holders of the TOPrS will not be
required to offer any indemnity in the event the holders, by exercising their
voting rights, direct the property trustee to take any action following a Trust
Enforcement Event.
GOVERNING LAW
The declaration and the TOPrS will be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The regular trustees are authorized and directed to conduct the affairs of
and to operate ML Trust in such a way that ML Trust will not be deemed to be an
investment company required to be registered under the Investment Company Act or
characterized as other than a grantor trust for United States Federal income tax
purposes. In this connection, the regular trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
declaration that the regular trustees determine in their discretion to be
necessary or desirable for those purposes as long as such action does not
adversely affect the interests of the holders of the TOPrS.
Holders of the TOPrS have no preemptive rights.
DESCRIPTION OF THE TRUST GUARANTEE
Set forth below is a summary of material information concerning the Trust
Guarantee which will be executed and delivered by ML&Co. for the benefit of the
holders from time to time of the TOPrS. The summary is not complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Trust Guarantee, which is filed as an exhibit to the
registration statement of which this prospectus is a part. The Trust Guarantee
incorporates by reference the terms of, and will be qualified as an indenture
under, the Trust Indenture Act. The Chase Manhattan Bank, as the trust guarantee
trustee, will hold the Trust Guarantee for the benefit of the holders of the
TOPrS and will act as indenture trustee for the purposes of compliance with the
Trust Indenture Act.
Under the Trust Guarantee, ML&Co. will irrevocably agree, on a subordinated
basis and to the extent set forth in the Trust Guarantee, to pay in full to the
holders of the TOPrS, except to the extent paid by ML Trust, as and when due,
regardless of any defense, right of set off or counterclaim which ML Trust may
have or assert, the following payments (the "Trust Guarantee Payments"), without
duplication:
o any accumulated and unpaid distributions on the TOPrS to the extent ML
Trust has funds available for distribution,
o the redemption price with respect to any TOPrS called for redemption
by ML Trust, to the extent ML Trust has funds available for payment,
and
o upon a voluntary or involuntary dissolution, winding-up or termination
of ML Trust, other than in connection with the distribution of
partnership preferred securities to the holders of the TOPrS or the
redemption of all of the TOPrS, the lesser of:
(1) the aggregate of the liquidation amount and all accumulated and
unpaid distributions on the TOPrS and
(2) the amount of assets of ML Trust remaining available for
distribution to holders of the TOPrS upon the liquidation of ML
Trust.
ML&Co.'s obligation to make a Trust Guarantee Payment may be satisfied by direct
payment of the required amounts by ML&Co. to the holders of the TOPrS or by
causing ML Trust to pay these amounts to holders.
The Trust Guarantee will be a guarantee on a subordinated basis with
respect to the TOPrS from the time of issuance of the TOPrS but will only apply
to any payment of distributions or the redemption price, or to payments upon the
dissolution, winding-up or termination of ML Trust, to the extent ML Trust shall
have funds available. If ML Partnership fails to declare distributions on the
partnership preferred securities, ML Trust would lack available funds for the
payment of distributions or amounts payable on redemption of the TOPrS or
otherwise, and in such event holders of the TOPrS would not be able to rely upon
the Trust Guarantee for payment of these amounts. Instead, holders of the TOPrS
will have the remedies described under "Description of the TOPrS--Trust
Enforcement Events", including the right to direct the trust guarantee trustee
to enforce the restriction of payments by ML&Co. and its finance subsidiaries on
its capital stock. See "-- Obligations of ML&Co." below.
The Guarantees, when taken together with the debentures issued by ML&Co.
and ML&Co.'s obligations to pay all fees and expenses of ML Trust and ML
Partnership, constitute a guarantee to the extent set forth in this prospectus
by ML&Co. of the distribution, redemption and liquidation payments payable to
the holders of the TOPrS. The Guarantees do not apply, however, to current
distributions by ML Partnership unless and until these distributions are
declared by ML Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in ML
Partnership, each as more fully described under "Risk Factors--Insufficient
Income or Assets Available to Partnership".
OBLIGATIONS OF ML&CO.
Under the Trust Guarantee, ML&Co. will agree that, if
o for any distribution period, full distributions on a cumulative basis
on any TOPrS have not been paid,
o an event of default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing, or
o it is in default of its obligations under the Trust Guarantee, the
Partnership Guarantee or any Investment Guarantee,
then, during that period:
o it may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock or comparable equity
interest, except for:
(1) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
and conversions or exchanges of common stock of one class into
common stock of another class,
(2) redemptions or purchases of any rights pursuant to the rights
agreement dated as of December 2, 1997 between ML&Co. and The
Chase Manhattan Bank (the "Rights Agreement") and the issuance of
preferred stock under those rights and
(3) purchases or acquisitions by ML&Co. or its affiliates in
connection with transactions effected by or for the account of
customers of ML&Co. or any of its subsidiaries or in connection
with the distribution or trading of its capital stock or
comparable equity interest; and
o it may not make, permit any finance subsidiary to make, or make any
payments that would enable any finance subsidiary to make, any payment
of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation
payment with respect to, any preferred security or comparable equity
interest of any finance subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE
An event of default under the Trust Guarantee will occur upon the failure
of ML&Co. to perform any of its payment or other obligations set forth in the
Trust Guarantee.
The holders of a majority in liquidation amount of the TOPrS have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the trust guarantee trustee or to direct the exercise of any trust
or power conferred upon the trust guarantee trustee under the trust guarantee.
If the trust guarantee trustee fails to enforce its rights under the Trust
Guarantee after a holder of the TOPrS has made a written request, the holder may
institute a legal proceeding directly against ML&Co. to enforce the trust
guarantee trustee's rights under the Trust Guarantee, without first instituting
a legal proceeding against ML Trust, the trust guarantee trustee or any other
person or entity. In any event, if ML&Co. has failed to make a guarantee payment
under the Trust Guarantee, a holder of the TOPrS may directly institute a
proceeding in the holder's own name against ML&Co. for enforcement of the Trust
Guarantee for payment.
STATUS OF THE TRUST GUARANTEE; SUBORDINATION
The Trust Guarantee will constitute an unsecured obligation of ML&Co. and
will rank subordinate and junior in right of payment to all other liabilities of
ML&Co. and will rank equally with the most senior preferred stock, if any,
issued from time to time by ML&Co., with similar guarantees issued by ML&Co. in
connection with:
o the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
o the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
o the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
o the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
o the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V, and
o with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
"Finance Subsidiary" means Merrill Lynch Preferred Capital Trust I, Merrill
Lynch Preferred Capital Trust II, Merrill Lynch Preferred Capital Trust III,
Merrill Lynch Preferred Capital Trust IV, Merrill Lynch Preferred Capital Trust
V and any other wholly-owned subsidiary of ML&Co. the principal purpose of which
is to raise capital for ML&Co. by issuing securities that are guaranteed by
ML&Co. and the proceeds of which are loaned to or invested in ML&Co. or one or
more of its affiliates.
Accordingly, the rights of the holders of the TOPrS to receive payments
under the Trust Guarantee will be subject to the rights of the holders of any
obligations of ML&Co. that are senior in priority to the obligations under the
Trust Guarantee. Furthermore, the holders of obligations of ML&Co. that are
senior to the obligations under the Trust Guarantee, including, but not limited
to, obligations constituting senior indebtedness of ML&Co., will be entitled to
the same rights upon payment default or dissolution, liquidation and
reorganization in respect of the Trust Guarantee that inure to the holders of
senior indebtedness as against the holders of the ML&Co. Debenture. The terms of
the TOPrS that each holder of the TOPrS, by acceptance, agrees to the
subordination provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the TOPrS, in which case no vote will be required, the
Trust Guarantee may be amended only with the prior approval of the holders of at
least a majority in liquidation amount of all the outstanding TOPrS. The manner
of obtaining any approval of holders of the TOPrS will be as set forth under
"Description of the TOPrS--Voting Rights". All guarantees and agreements
contained in the Trust Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of ML&Co. and shall inure to the benefit of the
holders of the TOPrS then outstanding. Except in connection with permitted
merger or consolidation of ML&Co. with or into another entity or permitted sale,
transfer or lease of ML&Co.'s assets to another entity in which the surviving
corporation, if other than ML&Co., assumes ML&Co.'s obligations under the Trust
Guarantee, ML&Co. may not assign its rights or delegate its obligations under
the Trust Guarantee without the prior approval of the holders of at least a
majority of the aggregate stated liquidation amount of the TOPrS then
outstanding.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to each holder of the TOPrS upon:
o full payment of the redemption price of all the TOPrS,
o distribution of the partnership preferred securities held by ML Trust
to the holders of the TOPrS or
o full payment of the amounts payable in accordance with the declaration
upon liquidation of ML Trust.
The Trust Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the TOPrS must restore payment of
any sum paid under the TOPrS or the Trust Guarantee.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The trust guarantee trustee, before the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only those duties as are
specifically set forth in the Trust Guarantee and, after default with respect to
the Trust Guarantee, shall exercise the same degree of care as a prudent man
would exercise in the conduct of his own affairs. Subject to that provision, the
trust guarantee trustee is under no obligation to exercise any of the powers
vested in it by the Trust Guarantee at the request of any holder of TOPrS unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred in connection with the exercise of those powers.
GOVERNING LAW
The Trust Guarantee will be governed by, and construed in accordance with,
the internal laws of the State of New York.
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES
All of the partnership interests in ML Partnership, other than the
partnership preferred securities acquired by ML Trust, are owned directly by
ML&Co.. Initially, ML&Co. will be the sole general partner of ML Partnership.
The limited partnership agreement authorizes and creates the partnership
preferred securities, which represent limited partner interests in ML
Partnership. The limited partner interests represented by the partnership
preferred securities will have a preference with respect to distributions and
amounts payable on redemption or liquidation over ML&Co.'s interest in ML
Partnership.
Except as otherwise described in this prospectus or provided in the limited
partnership agreement, the limited partnership agreement does not permit ML
Partnership to issue any additional partnership interests or to incur any
indebtedness.
The summary of certain material terms and provisions of the partnership
preferred securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the limited
partnership agreement, which is filed as an exhibit to the registration
statement of which this prospectus is a part, and the Delaware Limited
Partnership Act.
DISTRIBUTIONS
Holders of partnership preferred securities will be entitled to receive
cumulative cash distributions, if, as and when declared by ML&Co., as general
partner, in its sole discretion out of assets of ML Partnership legally
available for payment. The distributions payable on each partnership preferred
security will be fixed at a rate per annum of % of the stated liquidation
preference of $25 per partnership preferred security. Distributions not paid on
the scheduled payment date will accumulate and compound quarterly at the rate
per annum equal to %. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the partnership preferred securities will be payable
quarterly in arrears on , , , and
of each year, commencing , 199 . If distributions are not declared
and paid when scheduled, the accumulated distributions shall be paid to the
holders of record of partnership preferred securities as they appear on the
books and records of ML Partnership on the record date with respect to the
payment date for the partnership preferred securities.
ML Partnership's earnings available for distribution to the holders of the
partnership preferred securities will be limited to payments made on the
Affiliate Investment Instruments and Investment Guarantees and payments on other
eligible debt securities in which ML Partnership has invested from time to time.
See "--Partnership Investments". To the extent that the issuers and, where
applicable, ML&Co., as guarantor, of the securities in which ML Partnership
invests fail to make any payment in respect of the securities or, if applicable,
the guarantees, ML Partnership will not have sufficient funds to pay and will
not declare or pay distributions on the partnership preferred securities, in
which event the Partnership Guarantee will not apply to those distributions
until ML Partnership has sufficient funds available for distribution. See
"Description of the Partnership Guarantee". In addition, distributions on the
partnership preferred securities may be declared and paid only as determined in
the sole discretion of ML&Co. as general partner of ML Partnership. If ML
Partnership fails to declare and pay distributions on the partnership preferred
securities out of funds legally available for distribution, ML Trust will not
have sufficient funds to make distributions on the TOPrS, in which event the
Trust Guarantee will not apply to those distributions until ML Trust has
sufficient funds available. In addition, ML Partnership may not have sufficient
funds to pay current or liquidating distributions on the partnership preferred
securities if:
o at any time that ML Partnership is receiving current payments in
respect of the securities held by ML Partnership including the
debentures, ML&Co., in its sole discretion, does not declare
distributions on the partnership preferred securities and ML
Partnership receives insufficient amounts to pay the additional
compounded distributions that will accumulate in respect of the
partnership preferred securities,
o ML Partnership reinvests the proceeds received in respect of the
debentures upon their retirement or at their maturities in Affiliate
Investment Instruments that do not generate income in an amount that
is sufficient to pay full distributions in respect of the partnership
preferred securities, or
o ML Partnership invests in debt securities of Investment Affiliates
that are not guaranteed by ML&Co. and that cannot be liquidated by ML
Partnership for an amount sufficient to pay any distributions in full.
Distributions on the partnership preferred securities will be payable to
holders as they appear on the books and records of ML Partnership on the
relevant record dates, which, as long as the TOPrS remain or, in the event that
ML Trust is liquidated in connection with a Trust Special Event, as long as the
partnership preferred securities remain, in book-entry only form, will be one
Business Day before the relevant payment dates. In the event the TOPrS, or in
the event that ML Trust is liquidated in connection with a Trust Special Event,
the partnership preferred securities, shall not continue to remain in book-entry
only form, the relevant record dates shall be the 15th day of the month of the
relevant payment dates. In the event that any date on which distributions are
payable on the partnership preferred securities is not a Business Day, then
payment of the distribution payable on that date will be made on the next
succeeding day that is a Business Day and without any interest or other payment
in respect of any delay, except that, if that Business Day is in the next
succeeding calendar year, that payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on that date.
PARTNERSHIP ENFORCEMENT EVENTS
If one or more of the following events shall occur and be continuing (each
a "Partnership Enforcement Event"):
o The non-payment of distributions on the partnership preferred
securities for six consecutive quarterly periods,
o ML&Co. is in default on any of its obligations under the Partnership
Guarantee or any Investment Guarantee or
o an Investment Event of Default occurs and is continuing on any
Affiliate Investment Instrument,
then the property trustee, for so long as the partnership preferred securities
are held by the property trustee, will have the right, or holders of the
partnership preferred securities will be entitled by the vote of a majority in
aggregate liquidation preference of the holders:
o under the limited partnership agreement to enforce the terms of the
partnership preferred securities, including the right to appoint and
authorize a special representative of ML Partnership and the limited
partners to enforce:
(1) ML Partnership's creditors' rights and other rights with respect
to the Affiliate Investment Instruments and the Investment
Guarantees,
(2) the rights of the holders of the partnership preferred securities
under the Partnership Guarantee and
(3) the rights of the holders of the partnership preferred securities
to receive distributions on the partnership preferred securities,
only if and to the extent declared out of funds legally available
for distribution, and
o under the Partnership Guarantee to enforce the terms of the
Partnership Guarantee, including the right to enforce the covenant
restricting certain payments by ML&Co. and Finance Subsidiaries.
If the special representative fails to enforce its rights under the
Affiliate Investment Instruments after a holder of partnership preferred
securities has made a written request, the holder of record of partnership
preferred securities may directly institute a legal proceeding against ML&Co. to
enforce the rights of the special representative and ML Partnership under the
Affiliate Investment Instruments without first instituting any legal proceeding
against the special representative, ML Partnership or any other person or
entity. In any event, if a Partnership Enforcement Event has occurred and is
continuing and this event is attributable to the failure of an Investment
Affiliate to make any required payment when due on any Affiliate Investment
Instrument, then a holder of partnership preferred securities may on behalf of
ML Partnership directly institute a proceeding against the Investment Affiliate
with respect to the Affiliate Investment Instrument for enforcement of payment.
A holder of partnership preferred securities may also bring a direct action
against ML&Co. to enforce the holder's right under the Partnership Guarantee.
See "Description of the Partnership Guarantee--Events of Default; Enforcement of
Partnership Guarantee".
Under no circumstances, however, shall the special representative have
authority to cause ML&Co. to declare distributions on the partnership preferred
securities. As a result, although the special representative may be able to
enforce ML Partnership's creditors' rights to accelerate and receive payments in
respect of the Affiliate Investment Instruments and the Investment Guarantees,
ML Partnership would be entitled to reinvest those payments in additional
Affiliate Investment Instruments, subject to satisfying the reinvestment
criteria described under "--Partnership Investments", and Eligible Debt
Securities, rather than declaring and making distributions on the partnership
preferred securities. The special representative shall not, by virtue of acting
in such capacity, be admitted as a general partner in ML Partnership or
otherwise be deemed to be a general partner in ML Partnership and shall have no
liability for the debts, obligations or liabilities of ML Partnership.
PARTNERSHIP INVESTMENTS
ML Partnership will use approximately 99% of the proceeds from the issuance
of the partnership preferred securities and ML&Co.'s contemporaneous capital
contribution to purchase the debentures and the remaining 1% of the initial
partnership proceeds will be used to purchase Eligible Debt Securities. ML
Partnership's purchase of the debentures will occur contemporaneously with the
issuance of the partnership preferred securities.
The initial Affiliate Investment Instruments purchased by the Partnership
will consist of two or more debt instruments. ML&Co. anticipates that
approximately 85% of the Initial Partnership Proceeds will be used to purchase a
debenture of ML&Co. (the "ML&Co. Debenture"), and approximately 14% of the
initial partnership proceeds will be used to purchase debentures of one or more
eligible controlled affiliates of ML&Co. Each debenture is expected to have a
term of 20 years and to provide for interest payable on , ,
and of each year, commencing , at market rates for the debentures. The
debentures will be general unsecured debt obligations of the relevant issuer,
except that the ML&Co. Debenture will rank subordinate and junior to all senior
indebtedness of ML&Co.
The payment of interest on each of the debentures may be deferred at any
time, and from time to time, by the relevant issuer for a period not exceeding
six consecutive quarters. If an issuer were to defer the payment of interest,
interest would continue to accrue and compound at the stated interest rate on
the applicable debenture. The debentures will contain covenants appropriate for
unsecured debt securities issued or guaranteed by similar borrowers pursuant to
a public offering or private placement under Rule 144A of the Securities Act of
a comparable debt security, including a limitation on consolidation, merger and
sale or conveyance of assets. The debentures will contain redemption provisions
that correspond to the redemption provisions applicable to the partnership
preferred securities, including an option to redeem the debentures by the
relevant issuer, in whole or in part, from time to time, on or after ,
, and following the occurrence of a Partnership Special Event,
in each case, in the same manner described under "Optional Redemption" and
"Partnership Special Event Redemption". The debentures, and any other Affiliate
Investment Instruments that are debt instruments acquired by ML Partnership in
the future, will also contain customary events of default, including:
o events of default for defaults in payments on the securities when due,
provided that no default shall occur upon a valid deferral of an
interest payment by an issuer,
o defaults in the performance of the relevant issuer's obligations under
its debenture or Affiliate Investment Instruments, as the case may be,
and
o certain bankruptcy, insolvency or reorganization events, subject to
customary exceptions and grace periods.
The payment of interest and principal when due and other payment terms of
the debentures other than ML&Co. Debenture, will be guaranteed to the extent
described in this prospectus (each, an "Investment Guarantee") by ML&Co. for the
benefit of the holders of partnership preferred securities. See "--Investment
Guarantees".
ML Partnership will invest approximately 1% of the initial partnership
proceeds in eligible debt securities. These eligible debt securities will
comprise cash or book-entry securities, negotiable instruments, or other
securities of entities not affiliated with ML&Co. which evidence any of the
following:
o any security issued or guaranteed as to principal or interest by the
United States, or by a person controlled or supervised by and acting
as an instrumentality of the Government of the United States pursuant
to authority granted by the Congress of the United States, or any
certificate of deposit for any of the foregoing;
o commercial paper issued pursuant to Section 3(a)(3) of the Securities
Act and having, at the time of the investment or contractual
commitment to invest therein, a rating from each of Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc.
("S&P") and Moody's Investors Service, Inc. ("Moody's") in the highest
investment rating category granted by such rating agency and having a
maturity not in excess of nine months;
o demand deposits, time deposits and certificates of deposit which are
fully insured by the Federal Deposit Insurance Corporation;
o repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the Government of the United
States of America or any agency or instrumentality thereof, the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a
depository institution or trust company which is an Eligible
Institution and the deposits of which are insured by the FDIC; and
o any other security which is identified as a permitted investment of a
finance subsidiary pursuant to Rule 3a-5 under the Investment Company
Act at the time it is acquired by ML Partnership.
"Eligible Institution" means, a depository institution organized under the
laws of the United States or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank, which has either:
o a long-term unsecured debt rating of AA or better by S&P and Aa or
better by Moody's or
o a short-term unsecured debt rating or a certificate of deposit rating
of A-1+ by S&P and P-1 by Moody's,
and whose deposits are insured by the FDIC or whose the parent has a long-term
or short-term unsecured debt rating which signifies investment grade and whose
deposits are insured by the FDIC.
ML Partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the Affiliate
Investment Instruments and the eligible debt securities in additional Affiliate
Investment Instruments and eligible debt securities. As of the date of this
prospectus, ML&Co., as the General Partner, does not intend to cause ML
Partnership to reinvest regularly scheduled, periodic payments of interest or
dividends received by ML Partnership in the manner described below, although
there can be no assurance that ML&Co.'s intention in respect of any
reinvestments will not change in the future.
The fairness of specific terms of all Affiliate Investment Instruments will
be passed upon by an independent financial advisor which will be a nationally
recognized accounting firm, bank or investment banking firm that does not, and
whose directors, officers, employees and affiliates do not, have a direct or
indirect material equity interest in ML&Co. or any of its subsidiaries.
ML Partnership may reinvest in additional Affiliate Investment Instruments
only if certain procedures and criteria are satisfied with respect to each
Affiliate Investment Instrument, including the satisfaction of the following
conditions:
(1) ML Partnership did not hold debt securities of the issuer of the
proposed Affiliate Investment Instrument within the three-year period
ending on the date of proposed investment;
(2) there was never a default on any debt obligation of, or arrearages of
dividends on preferred stock issued by, the issuer of the proposed
Affiliate Investment Instrument that was previously or is currently
owned by ML Partnership;
(3) the applicable terms and provisions with respect to the proposed
Affiliate Investment Instrument have been determined by the
independent financial advisor to be at least as favorable as terms
which could be obtained by ML Partnership in a public offering or
private placement under Rule 144A of the Securities Act of a
comparable security issued by the relevant Investment Affiliate and
guarantees, if any; and
(4) the requesting Investment Affiliate shall not be deemed to be an
investment company by reason of Section 3(a) or 3(b) of the Investment
Company Act or is otherwise an eligible recipient of funds directly or
indirectly from ML Trust pursuant to an order issued by the SEC.
The term "Investment Affiliate" means ML&Co. or any corporation,
partnership, limited liability company or other entity that is controlled by
ML&Co., other than ML Partnership or ML Trust. If ML Partnership is unable to
reinvest payments and proceeds from Affiliate Investment Instruments in
additional Affiliate Investment Instruments meeting the above criteria, ML
Partnership may only invest those funds in eligible debt securities, subject to
restrictions of applicable law, including the Investment Company Act.
INVESTMENT GUARANTEES
ML&Co. will agree to execute and deliver an Investment Guarantee, on a
subordinated basis, for the benefit of the holders of partnership preferred
securities with respect to each debenture issued by an Investment Affiliate,
other than the ML&Co. Debenture, to the extent set forth below. The Investment
Guarantees shall be enforceable regardless of any defense, right of set-off or
counterclaim that ML&Co. may have or assert. The Investment Guarantees will be
full and unconditional guarantees, to the extent set forth in this prospectus,
with respect to the applicable Debentures from the time of issuance. To the
extent that, as described above, ML Partnership invests in additional Affiliate
Investment Instruments, the determination as to whether the Affiliate Investment
Instrument will contain an Investment Guarantee will be made at the date of its
issuance and will be based, among other things, upon its approval by the
independent financial advisor in accordance with the reinvestment criteria
described above.
The Investment Guarantees will constitute guarantees of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the applicable Investment
Guarantee without instituting a legal proceeding against any other person or
entity. If no special representative has been appointed to enforce any
Investment Guarantee, ML&Co. as general partner has the right to enforce the
Investment Guarantee on behalf of the holders of the partnership preferred
securities. The holders of not less than a majority in aggregate liquidation
preference of the partnership preferred securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available in
respect of any Investment Guarantee, including the giving of directions to
ML&Co. as general partner or the special representative, as the case may be. If
ML&Co. or the special representative fails to enforce any Investment Guarantee
as above provided, any holder of the TOPrS may institute its own legal
proceeding to enforce that Investment Guarantee. No Investment Guarantee will be
discharged except by payment in full of all amounts guaranteed by such
Investment Guarantee, without duplication of amounts previously paid by the
relevant Investment Affiliate.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of partnership preferred securities, in which case no consent will be
required, the Investment Guarantees may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding partnership preferred securities, provided that for so long as the
property trustee of ML Trust is the holder of the partnership preferred
securities, no amendment will be effective without the prior written approval of
a majority in liquidation amount of the outstanding TOPrS. All guarantees and
agreements contained in the Investment Guarantees shall bind the successors,
assigns, receivers, trustees and representatives of ML&Co. and shall inure to
the benefit of the holders of partnership preferred securities. Except in
connection with any permitted merger or consolidation of ML&Co. with or into
another entity or any permitted sale, transfer or lease of ML&Co.'s assets to
another entity in which the surviving corporation, if other than ML&Co., assumes
ML&Co.'s obligations under the Investment Guarantees, ML&Co. may not assign its
rights or delegate its obligations under the Investment Guarantees without the
prior approval of the holders of at least a majority of the aggregate stated
liquidation preference of the partnership preferred securities then outstanding.
STATUS OF THE INVESTMENT GUARANTEES
ML&Co.'s obligations under the Investment Guarantees will constitute
unsecured obligations of ML&Co. and will rank subordinate and junior in right of
payment to all other liabilities of ML&Co. and will rank equally with the most
senior preferred stock, if any, issued from time to time by ML&Co., with similar
guarantees issued by ML&Co. in connection with:
o the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
o the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
o the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
o the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
o the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V and
o with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
Accordingly, the rights of the holders of the debentures to receive
payments under the Investment Guarantees will be subject to the rights of the
holders of any obligations that are senior in priority to the obligations under
the Investment Guarantees. Furthermore, the holders of obligations of ML&Co.
that are senior to the obligations under the Investment Guarantees, including,
but not limited to, obligations constituting Senior Indebtedness, will be
entitled to the same rights upon payment default or dissolution, liquidation and
reorganization in respect of the Investment Guarantees that inure to the holders
of senior indebtedness as against the holders of the ML&Co. Debenture. The terms
of the debentures provide that each holder of debentures, by acceptance thereof,
agrees to the subordination provisions and other terms of the Investment
Guarantees.
GOVERNING LAW
The Investment Guarantees will be governed by and construed in accordance
with the internal laws of the State of New York.
OPTIONAL REDEMPTION
The partnership preferred securities are redeemable, at the option of
ML&Co., as general partner, in whole or in part, from time to time, on or after
, , upon not less than 30 nor more than
60 days notice, at an amount per partnership preferred security equal to $25
plus accumulated and unpaid distributions. If ML Partnership redeems
partnership preferred securities in accordance with their terms, ML Trust will
redeem the Trust Securities at the redemption price. If:
o a partial redemption would result in the delisting of the TOPrS,
o ML Trust is liquidated in connection with a Trust Special Event, or
o a partial redemption would result in the delisting of the partnership
preferred securities,
then, in each case, ML Partnership may only redeem the partnership preferred
securities in whole.
PARTNERSHIP SPECIAL EVENT REDEMPTION
If, at any time, a Partnership Tax Event or a Partnership Investment
Company Event (each as defined below, and each a "Partnership Special Event")
occurs and is continuing, ML&Co. shall, within 90 days following the occurrence
of such Partnership Special Event, elect to either:
o redeem the partnership preferred securities in whole, but not in part,
upon not less than 30 or more than 60 days notice at the redemption
price, provided that, if at the time there is available to ML
Partnership the opportunity to eliminate, within the 90-day period,
the Partnership Special Event by taking some ministerial action, such
as filing a form or making an election, or pursuing some other similar
reasonable measure that in the sole judgment of ML&Co. has or will
cause no adverse effect on ML Partnership, ML Trust or ML&Co., ML&Co.
will pursue that measure in lieu of redemption; or
o cause the partnership preferred securities to remain outstanding,
provided that in the case of this clause, the ML&Co. shall pay any and
all costs and expenses incurred by or payable by ML Partnership
attributable to the Partnership Special Event.
"Partnership Tax Event" means that ML&Co. shall have requested and received
an opinion of nationally recognized independent tax counsel experienced in these
matters to the effect that there has been a Tax Action which affects any of the
events described in (1) through (3) below and that there is more than an
insubstantial risk that:
(1) ML Partnership is, or will be, subject to United States Federal income
tax with respect to income accrued or received on the Affiliate
Investment Instruments or the eligible debt securities,
(2) ML Partnership is, or will be, subject to more than a minimal amount
of other taxes, duties or other governmental charges or
(3) interest payable by an Investment Affiliate with respect to the
Affiliate Investment Instrument issued by that Investment Affiliate to
ML Partnership is not, or will not be, deductible by the Investment
Affiliate for United States Federal income tax purposes.
Recently, the IRS asserted that the interest payable on a security issued
in similar circumstances as the issuance of the debentures by the Investment
Affiliates to ML Partnership was not deductible for United States Federal income
tax purposes. The taxpayer in that case has filed a petition in the United
States Tax Court challenging the IRS's position on this matter. If this matter
were to be litigated and the Tax Court were to sustain the IRS's position on
this matter, the judicial decision could constitute a Partnership Tax Event,
which could result in an early redemption of the partnership preferred
securities.
"Partnership Investment Company Event" means that ML&Co. shall have
requested and received an opinion of nationally recognized independent legal
counsel experienced in these matters to the effect that as a result of the
occurrence on or after the date of this prospectus of a Change in Investment
Company Act Law, ML Partnership is or will be considered an investment company
which is required to be registered under the Investment Company Act.
REDEMPTION PROCEDURES
ML Partnership may not redeem fewer than all the outstanding partnership
preferred securities unless all accumulated and unpaid distributions have been
paid on all partnership preferred securities for all quarterly distribution
periods terminating on or before the date of redemption.
If ML Partnership gives a notice of redemption in respect of partnership
preferred securities, which notice will be irrevocable, then, by 12:00 noon, New
York City time, on the redemption date, ML Partnership:
o if the partnership preferred securities are in book entry form with
DTC, will deposit irrevocably with DTC funds sufficient to pay the
applicable redemption price and will give DTC irrevocable instructions
and authority to pay the redemption price in respect of the
partnership preferred securities held through DTC in global form, or
o if the partnership preferred securities are held in certificated form,
will deposit with the paying agent for the partnership preferred
securities funds sufficient to pay any amount in respect of any
partnership preferred securities in certificated form and will give
the paying agent irrevocable instructions and authority to pay these
amounts to the holders of partnership preferred securities upon
surrender of their certificates.
See "Description of the TOPrS--Book-Entry Only Issuance--The Depository Trust
Company".
If notice of redemption shall have been given and funds deposited as
required, then upon the date of the deposit, all rights of holders of such
partnership preferred securities so called for redemption will cease, except the
right of the holders of such partnership preferred securities to receive the
redemption price, but without interest on that redemption price. In the event
that any date fixed for redemption of partnership preferred securities is not a
Business Day, then payment of the redemption price payable on that date will be
made on the next succeeding day that is a Business Day, and without any interest
or other payment in respect of any delay, except that, if that Business Day
falls in the next calendar year, the payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date fixed for redemption. In the event that payment of the redemption
price in respect of partnership preferred securities is improperly withheld or
refused and not paid either by ML Partnership or by ML&Co. under the Partnership
Guarantee described under "Description of the Partnership Guarantee,"
distributions on the partnership preferred securities will continue to
accumulate, from the original redemption date to the date of payment.
Subject to the foregoing and applicable law, including, without limitation,
United States Federal securities laws, ML&Co. or any of its subsidiaries may at
any time and from time to time purchase outstanding partnership preferred
securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of ML Partnership, the holders of the partnership preferred
securities at the time will be entitled to receive out of the assets of ML
Partnership available for distribution to partners after satisfaction of
liabilities of creditors as required by the Delaware Partnership Act, before any
distribution of assets is made to ML&Co. as General Partner, an amount equal to,
in the case of holders of partnership preferred securities, the aggregate of the
stated liquidation preference of $25 per partnership preferred security plus
accumulated and unpaid distributions on the partnership preferred securities to
the date of payment.
Under the Limited Partnership Agreement, ML Partnership shall be dissolved
and its affairs shall be wound up:
o upon the bankruptcy of ML&Co.,
o upon the assignment by ML&Co. of its entire interest in ML Partnership
when the assignee is not admitted to ML Partnership as a general
partner of ML Partnership in accordance with the limited partnership
agreement, or the filing of a certificate of dissolution or its
equivalent with respect to ML&Co., or the revocation of ML&Co.'s
charter and the expiration of 90 days after the date of notice to
ML&Co. of revocation without a reinstatement of its charter, or if any
other event occurs that causes the General Partner to cease to be a
general partner of ML Partnership under the Delaware Limited
Partnership Act, unless the business of ML Partnership is continued in
accordance with the Delaware Limited Partnership Act,
o if ML Partnership has redeemed or otherwise purchased all the
partnership preferred securities,
o upon the entry of a decree of judicial dissolution or
o upon the written consent of all partners of ML Partnership.
VOTING RIGHTS
Except as provided below and under "Description of the Partnership
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Limited Partnership Agreement, the holders of the partnership preferred
securities will have no voting rights.
Not later than 30 days after any Partnership Enforcement Event occurs,
ML&Co. will convene a meeting for the purpose of appointing a special
representative. If ML&Co. fails to convene a meeting within the 30-day period,
the holders of 10% in liquidation preference of the outstanding partnership
preferred securities will be entitled to convene a meeting. The provisions of
the limited partnership agreement relating to the convening and conduct of the
meetings of the partners will apply with respect to any meeting. In the event
that, at any meeting, holders of less than a majority in aggregate liquidation
preference of partnership preferred securities entitled to vote for the
appointment of a special representative vote for the appointment, no special
representative shall be appointed. Any special representative appointed shall
cease to be a special representative of ML Partnership and the limited partners
if:
o ML Partnership, or ML&Co. pursuant to the Partnership Guarantee, shall
have paid in full all accumulated and unpaid distributions on the
partnership preferred securities,
o any event of default under any Affiliate Investment Instruments shall
have been cured, and
o ML&Co. is in compliance with all its obligations under the Partnership
Guarantee and ML&Co., in its capacity as the general partner, shall
continue the business of ML Partnership without dissolution.
o Notwithstanding the appointment of the special representative, ML&Co.
shall continue as General Partner and shall retain all rights under
the limited partnership agreement, including the right to declare, in
its sole discretion, the payment of distributions on the partnership
preferred securities for which the failure to declare distributions
would not constitute a default under the limited partnership
agreement.
If any proposed amendment to the limited partnership agreement provides
for, or ML&Co. otherwise proposes to effect,
o any action that would adversely affect the powers, preferences or
special rights of the partnership preferred securities, whether by way
of amendment to the limited partnership agreement or otherwise,
including, without limitation, the authorization or issuance of any
limited partner interests in ML Partnership ranking, as to
participation in the profits or distributions or in the assets of ML
Partnership, senior to the partnership preferred securities, or
o the dissolution, winding-up or termination of ML Partnership, other
than:
(A) in connection with the occurrence of a Partnership Special Event
or
(B) as described under "Merger, Consolidation or Amalgamation of the
Partnership" below,
then the holders of outstanding partnership preferred securities will be
entitled to vote on any amendment or proposal of ML&Co., but not on any other
amendment or proposal, as a class, and no amendment or proposal shall be
effective without the approval of the holders of a majority in liquidation
preference of the outstanding partnership preferred securities having a right to
vote on the matter; provided, however, that if the property trustee on behalf of
ML Trust is the holder of the partnership preferred securities, any amendment or
proposal not excepted by clauses (A) and (B) above shall not be effective
without the prior or concurrent approval of the holders of a majority in
liquidation amount of the outstanding TOPrS having a right to vote on the
matters.
The ML&Co. shall not
o direct the time, method and place of conducting any proceeding for any
remedy available,
o waive any event of default that is waivable under the Affiliate
Investment Instruments,
o exercise any right to rescind or annul a declaration that the
principal of any Affiliate Investment Instruments shall be due and
payable,
o waive the breach of the obligation by ML&Co. to restrict certain
payments by ML&Co., or
o consent to any amendment, modification or termination of any Affiliate
Investment Instrument, where such consent shall be required from the
investor,
without, in each case, obtaining the prior approval of the holders of at least a
majority in liquidation preference of the partnership preferred securities;
provided, however, that if the property trustee on behalf of ML Trust is the
holder of the partnership preferred securities, any waiver, consent or amendment
or other action shall not be effective without the prior or concurrent approval
of at least a majority in liquidation amount of the outstanding TOPrS having a
right to vote on these matters. ML&Co. shall not revoke any action previously
authorized or approved by a vote of the holders of the partnership preferred
securities without the approval of the revocation by a majority in liquidation
preference of the outstanding partnership preferred securities. ML&Co. shall
notify all holders of the partnership preferred securities of any notice of an
event of default received with respect to any Affiliate Investment Instrument.
Any required approval of holders of partnership preferred securities may be
given at a separate meeting of holders of partnership preferred securities
convened for that purpose, at a meeting of all of the partners in ML Partnership
or pursuant to written consent. ML Partnership will cause a notice of any
meeting at which holders of partnership preferred securities are entitled to
vote, or of any matter upon which action by written consent of the holders is to
be taken, to be mailed to each holder of record of partnership preferred
securities. Each notice will include a statement setting forth
o the date of the meeting or the date by which action is to be taken,
o a description of any resolution proposed for adoption at the meeting
on which holders are entitled to vote or of the matters upon which
written consent is sought and
o instruction for the delivery of proxies or consents.
No vote or consent of the holders of partnership preferred securities will
be required for ML Partnership to redeem and cancel partnership preferred
securities in accordance with the limited partnership agreement.
Notwithstanding that holders of partnership preferred securities are
entitled to vote or consent under any of the circumstances described above, any
of the partnership preferred securities at such time that are beneficially owned
by ML&Co. or by any entity directly or indirectly controlled by, or under direct
or indirect common control with, ML&Co., except for partnership preferred
securities purchased or acquired by ML&Co. or its affiliates in connection with
transactions effected by or for the account of customers of ML&Co. or any of its
subsidiaries or in connection with the distribution or trading of such
partnership preferred securities; shall not be entitled to vote or consent and
shall, for purposes of any vote or consent, be treated as if they were not
outstanding, provided, however, that persons, other than affiliates of ML&Co.,
to whom ML&Co. or any of its subsidiaries have pledged partnership preferred
securities may vote or consent with respect to the pledged partnership preferred
securities under the terms of the pledge.
Holders of the partnership preferred securities will have no rights to
remove or replace ML&Co. as general partner.
MERGER, CONSOLIDATION OR AMALGAMATION OF ML PARTNERSHIP
ML Partnership may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. ML Partnership may, without the consent of the holders of the
partnership preferred securities, consolidate, amalgamate, merge with or into,
or be replaced by a limited partnership, limited liability company or trust
organized as such under the laws of any state of the United States of America,
provided that:
o the successor entity either:
(A) expressly assumes all of the obligations of ML Partnership under
the partnership preferred securities or
(B) substitutes for the partnership preferred securities other
securities having substantially the same terms as the partnership
preferred securities so long as the partnership successor
securities are not junior to any other equity securities of the
successor entity, with respect to participation in the profits
and distributions, and in the assets, of the successor entity,
o the Investment Affiliates expressly acknowledge the successor entity
as the holder of the Affiliate Investment Instruments,
o the partnership preferred securities or any partnership successor
securities are listed, or any partnership successor securities will be
listed upon notification of issuance, on any national securities
exchange or other organization on which the partnership preferred
securities, if so listed, are then listed,
o the merger, consolidation, amalgamation or replacement does not cause
the TOPrS or, in the event that ML Trust is liquidated in connection
with a Trust Special Event, the partnership preferred securities or
any partnership successor securities, to be downgraded by any
nationally recognized statistical rating organization,
o the merger, consolidation, amalgamation or replacement does not
adversely affect the powers, preferences and other special rights of
the holders of the TOPrS or partnership preferred securities,
including any partnership successor securities, in any material
respect, other than, in the case of the partnership preferred
securities, with respect to any dilution of the holders' interest in
the new resulting entity,
o the successor entity has a purpose substantially identical to that of
ML Partnership,
o before the merger, consolidation, amalgamation or replacement, ML&Co.
has received an opinion of nationally recognized independent counsel
to ML Partnership experienced in these matters to the effect that:
(A) the successor entity will be treated as a partnership for United
States Federal income tax purposes,
(B) the merger, consolidation, amalgamation or replacement would not
cause ML Trust to be classified as an association taxable as a
corporation for United States Federal income tax purposes,
(C) following the merger, consolidation, amalgamation or replacement,
ML&Co. and such successor entity will be in compliance with the
Investment Company Act without registering as an investment
company, and
(D) the merger, consolidation, amalgamation or replacement will not
adversely affect the limited liability of the holders of the
partnership preferred securities and
o ML&Co. guarantees the obligations of the successor entity under the
partnership successor securities at least to the extent provided by
the Partnership Guarantee.
BOOK-ENTRY AND SETTLEMENT
If the partnership preferred securities are distributed to holders of the
TOPrS in connection with the involuntary or voluntary dissolution, winding-up or
liquidation of ML Trust as a result of the occurrence of a Trust Special Event,
the partnership preferred securities will be issued in the form of one or more
global partnership securities registered in the name of DTC as the depository or
its nominee. For a description of DTC and the specific terms of the Depository
arrangements, see "Description of the TOPrS--Book-Entry Only Issuance--The
Depository Trust Company". As of the date of this prospectus, the description
therein of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments with respect to the TOPrS apply in
all material respects to any partnership preferred securities represented by one
or more global partnership securities.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
ML&Co. will act as registrar, transfer agent and paying agent for the
partnership preferred securities for so long as the partnership preferred
securities are held by ML Trust or, if ML Trust is liquidated in connection with
a Trust Special Event, for so long as the partnership preferred securities
remain in book-entry only form. In the event the partnership preferred
securities are distributed in connection with a Trust Special Event and the
book-entry system for the partnership preferred securities is discontinued, it
is anticipated that The Chase Manhattan Bank or one of its affiliates will act
as registrar, transfer agent and paying agent for the partnership preferred
securities.
Registration of transfers of partnership preferred securities will be
effected without charge by or on behalf of ML Partnership, but upon payment,
with the giving of such indemnity as ML Partnership or ML&Co. may require, in
respect of any tax or other governmental charges that may be imposed in relation
to it.
ML Partnership will not be required to register or cause to be registered
the transfer of partnership preferred securities after such partnership
preferred securities have been called for redemption.
MISCELLANEOUS
ML&Co. is authorized and directed to conduct its affairs and to operate ML
Partnership in such a way that:
o ML Partnership will not be deemed to be an investment company required
to be registered under the Investment Company Act or characterized as
an association taxable as a corporation for United States Federal
income tax purposes,
o the Affiliate Investment Instruments will be treated as indebtedness
of their respective issuers for United States Federal income tax
purposes and
o ML Partnership will not be treated as an association or as a publicly
traded partnership, within the meaning of Section 7704 of the Code,
taxable as a corporation.
In this connection, ML&Co. as general partner is authorized to take any action,
not inconsistent with applicable law, the certificate of limited partnership of
ML Partnership or the limited partnership agreement, that it determines in its
discretion to be necessary or desirable for the foregoing purposes as long as
any action does not adversely affect the interests of the holders of the
partnership preferred securities.
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Set forth below is a summary of the material information concerning the
Partnership Guarantee (the "Partnership Guarantee") that will be executed and
delivered by ML&Co. for the benefit of the holders from time to time of
partnership preferred securities. The summary is not complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Partnership Guarantee, which is filed as an exhibit to the registration
statement of which this prospectus is a part. ML&Co. will hold the Partnership
Guarantee for the benefit of the holders of the partnership preferred
securities.
TERMS OF THE PARTNERSHIP GUARANTEE
Under the Partnership Guarantee, ML&Co. will irrevocably agree, on a
subordinated basis to the extent set forth in this prospectus, to pay in full to
the holders of the partnership preferred securities, without duplication of
amounts previously paid by ML Partnership, as and when due, regardless of any
defense, right of set-off or counterclaim that ML Partnership may have or
assert, the following payments (the "Partnership Guarantee Payments"):
o any accumulated and unpaid distributions that previously have been
declared on ML Partnership preferred securities out of funds legally
available for distribution,
o the redemption price with respect to any partnership preferred
securities called for redemption by ML Partnership out of funds
legally available for that purpose, and
o upon a liquidation of ML Partnership, the lesser of:
(A) the aggregate of the liquidation preference and all accumulated
and unpaid distributions on the partnership preferred securities
to the date of payment and
(B) the amount of assets of ML Partnership, after satisfaction of all
liabilities, remaining available for distribution to holders of
partnership preferred securities in liquidation of ML
Partnership.
ML&Co.'s obligation to make a Partnership Guarantee Payment may be satisfied by
direct payment of the required amounts by ML&Co. to the holders of partnership
preferred securities or by causing ML Partnership to pay these amounts to
holders.
The Partnership Guarantee will be a guarantee on a subordinated basis with
respect to the partnership preferred securities from the time of issuance of the
partnership preferred securities but will not apply to any payment of
distributions or the redemption price, or to payments upon the dissolution,
winding-up or termination of ML Trust, except to the extent ML Partnership shall
have funds available for these purposes. If Investment Affiliates, including,
where applicable, ML&Co., as guarantor, of the Affiliate Investment Instruments
in which ML Partnership invests fail to make any payment in respect of the
securities or, if applicable, guarantees, ML Partnership may not declare or pay
dividends on the partnership preferred securities. In such event, holders of the
partnership preferred securities would not be able to rely upon the Partnership
Guarantee for payment of these amounts. Instead, holders of the partnership
preferred securities will have the remedies described in this prospectus under
"Description of the Partnership Preferred Securities--Partnership Enforcement
Events", including the right to direct ML&Co. or the special representative, as
the case may be, to enforce the covenant restricting certain payments by ML&Co.
and Finance Subsidiaries. See "--Covenants of ML&Co." below.
The Guarantees, when taken together with ML&Co. Debenture and ML&Co.'s
obligations to pay all fees and expenses of ML Trust and ML Partnership,
constitute a guarantee to the extent set forth in this prospectus by ML&Co. of
the distribution, redemption and liquidation payments payable to the holders of
the TOPrS. The Guarantees do not apply, however, to current distributions by ML
Partnership unless and until distributions are declared by ML Partnership out of
funds legally available for payment or to liquidating distributions unless there
are assets available for payment in ML Partnership.
OBLIGATIONS OF ML&CO.
Under the Partnership Guarantee, ML&Co. will agree that if:
o for any distribution period, full distributions on a cumulative basis
on any partnership preferred securities have not been paid or declared
and set apart for payment,
o an event of default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing, or
o ML&Co. is in default of its obligations under any Guarantee,
then, during that period,
o ML&Co. may not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock or comparable equity
interest, except for:
o dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, its capital stock,
and conversions or exchanges of common stock of one class into
common stock of another class,
o redemptions or purchases of any rights under the Rights Agreement
and the issuance of preferred stock pursuant to those rights and
o purchases or acquisitions by ML&Co. or its affiliates in
connection with transactions effected by or for the account of
customers of ML&Co. or any of its subsidiaries or in connection
with the distribution or trading of such capital stock or
comparable equity interest and
o ML&Co. may not make, permit any Finance Subsidiary to make, or make
any payments that would enable any Finance Subsidiary to make, any
payment of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation
payment with respect to, any preferred security or comparable equity
interest of any Finance Subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE
An event of default under the Partnership Guarantee will occur upon the
failure of ML&Co. to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the partnership
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the special representative
in respect of the Partnership Guarantee or to direct the exercise of any trust
or power conferred upon the special representative under the Partnership
Guarantee. If the special representative fails to enforce its rights under the
Partnership Guarantee, after a holder of partnership preferred securities has
made a written request, such holder of partnership preferred securities may
institute a legal proceeding directly against ML&Co. to enforce the special
representative's rights under the Partnership Guarantee without first
instituting a legal proceeding against ML Partnership, the special
representative or any other person or entity. Notwithstanding the foregoing, if
ML&Co. has failed to make a guarantee payment, a holder of partnership preferred
securities may directly institute a proceeding against ML&Co. for enforcement of
the Partnership Guarantee for the payment.
STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION
The Partnership Guarantee will constitute an unsecured obligation of ML&Co.
and will rank subordinate and junior in right of payment to all other
liabilities of ML&Co. and will rank equally with the most senior preferred stock
issued from time to time by ML&Co., with similar guarantees issued by ML&Co. in
connection with
o the $275,000,000 aggregate liquidation amount of 7 3/4% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust I,
o the $300,000,000 aggregate liquidation amount of 8% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
II,
o the $750,000,000 aggregate liquidation amount of 7% Trust Originated
Preferred Securities issued by Merrill Lynch Preferred Capital Trust
III,
o the $400,000,000 aggregate liquidation amount of 7.12% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust IV,
o the $850,000,000 aggregate liquidation amount of 7.28% Trust
Originated Preferred Securities issued by Merrill Lynch Preferred
Capital Trust V and
o with any guarantee now or hereafter entered into by ML&Co. in respect
of any preferred stock of any other Finance Subsidiary.
Accordingly, the rights of the holders of partnership preferred securities
to receive payments under the Partnership Guarantee will be subject to the
rights of the holders of any obligations of ML&Co. that are senior in priority
to the obligations under the Partnership Guarantee. Furthermore, the holders of
obligations of ML&Co. that are senior to the obligations under the Partnership
Guarantee, including, but not limited to, obligations constituting senior
indebtedness, will be entitled to the same rights upon payment default or
dissolution, liquidation and reorganization in respect of the Partnership
Guarantee that inure to the holders of senior indebtedness as against the
holders of the ML&Co. Debenture. The limited partnership agreement provides that
each holder of partnership preferred securities, by their acceptance, agrees to
the subordination provisions and other terms of the Partnership Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not of
collection. That is, the guaranteed party may directly institute a legal
proceeding against ML&Co. to enforce its rights under the Partnership Guarantee
without instituting a legal proceeding against any other person or entity.
The Partnership Guarantee will be deposited with ML&Co. to be held for the
benefit of the holders of the partnership preferred securities. In the event of
the appointment of a special representative to, among other things, enforce the
Partnership Guarantee, the special representative may take possession of the
Partnership Guarantee for that purpose. If no special representative has been
appointed to enforce the Partnership Guarantee, ML&Co. has the right to enforce
the Partnership Guarantee on behalf of the holders of the partnership preferred
securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of partnership preferred securities, in which case no consent will be
required, the Partnership Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding partnership preferred securities. All guarantees and agreements
contained in the Partnership Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of ML&Co. and shall inure to the benefit
of the holders of the partnership preferred securities then outstanding. Except
in connection with any permitted merger or consolidation of ML&Co. with or into
another entity or any permitted sale, transfer or lease of ML&Co.'s assets to
another entity in which the surviving corporation, if other than ML&Co., assumes
ML&Co.'s obligations under the Partnership Guarantee, ML&Co. may not assign its
rights or delegate its obligations under the Partnership Guarantee without the
prior approval of the holders of at least a majority of the aggregate stated
liquidation preference of the partnership preferred securities then outstanding.
TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the partnership preferred securities upon:
o full payment of the redemption price of all partnership preferred
securities, or
o full payment of the amounts payable in accordance with the Limited
Partnership Agreement upon liquidation of ML Partnership.
The Partnership Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of partnership preferred
securities must in accordance with the Delaware Limited Partnership Act restore
payment of any sums paid under the partnership preferred securities or the
Partnership Guarantee. The Delaware Limited Partnership Act provides that a
limited partner of a limited partnership who wrongfully receives a distribution
may be liable to the limited partnership for the amount of such distribution.
GOVERNING LAW
The Partnership Guarantee will be governed by and construed in accordance
with the internal laws of the State of New York.
UNITED STATES FEDERAL INCOME TAXATION
In the opinion of Brown & Wood LLP, tax counsel to ML&Co., ML Trust and ML
Partnership ("Tax Counsel"), the following summary accurately describes the
material United States Federal income tax consequences that may be relevant to
the purchase, ownership and disposition of the TOPrS. Unless otherwise stated,
this summary deals only with the TOPrS held as capital assets by United States
Persons who purchase the TOPrS upon original issuance. As used in this
prospectus, a "United States Person" means a person that is a (1) citizen or
resident of the United States, (2) a corporation or a partnership (including an
entity treated as a corporation or partnership for United States Federal income
tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia (unless, in the case of a
partnership, Treasury regulations are adopted that provide otherwise), (3) an
estate whose income is subject to United States federal income tax regardless of
its source, or (4) 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. Notwithstanding clause (4) of the previous sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be a United
States Person. The tax treatment of a holder may vary depending on its
particular situation.
This summary does not address all the tax consequences that may be relevant
to holders who may be subject to special tax treatment, such as banks, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or foreign investors.
This summary does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the TOPrS. This summary is based on the
Internal Revenue Code of 1986 as amended (the "Code"), the Treasury regulations
promulgated under the Code and administrative and judicial interpretations of
the Code, as of the date of this prospectus, all of which are subject to change,
possibly on a retroactive basis.
The TOPrS are not being marketed to persons that are not United States
Persons ("non-United States Persons") and, consequently, the following
discussion does not discuss the tax consequences that might be relevant to
non-United States Persons. Moreover, in order to protect ML Trust and ML
Partnership from potential adverse consequences, non-United States Persons will
be subject to withholding on distributions on the TOPrS at a rate of 30%. In
determining a holder's status, the United States entity otherwise required to
withhold taxes may rely on an IRS form W-8, an IRS form W-9, or a holder's
certification of its non-foreign status signed under penalty of perjury.
Non-United States Persons should consult their tax advisors as to the specific
United States Federal income tax consequences of the purchase, ownership, and
disposition of TOPrS.
Tax Counsel has advised that there is no authority directly on point
dealing with securities similar to the TOPrS or transactions of the type
described in this prospectus and that the opinions of Tax Counsel are not
binding on the IRS or the courts, either of which could take a contrary
position. No rulings have been or will be sought from the IRS. Accordingly,
there can be no assurance that the IRS will not challenge the opinions expressed
in this tax section or that a court would not sustain a challenge to these
opinions. Nevertheless, Tax Counsel has advised that it is of the view that, if
challenged, the opinions expressed in this tax section would be sustained by a
court with jurisdiction in a properly presented case.
Holders should consult their tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the TOPrS,
including the tax consequences under state, local, foreign, and other tax laws
and the possible effects of changes in United States federal or other tax laws.
For a discussion of the possible redemption of the TOPrS or redemption of the
partnership preferred securities upon the occurrence of certain tax events see
"Description of the TOPrS--Trust Special Event Redemption or Distribution" and
"Description of the Partnership Preferred Securities--Partnership Special Event
Redemption" respectively.
CLASSIFICATION OF ML TRUST
Tax Counsel is of the opinion that, under current law, and based on certain
representations made by ML Trust as well as certain facts and assumptions with
respect to the transaction described in this prospectus, ML Trust will be
classified for United States Federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. Accordingly, for United States
Federal income tax purposes, each holder of the TOPrS will be considered the
owner of an undivided interest in the partnership preferred securities held by
ML Trust. As a result of this treatment, each holder of the TOPrS will be
required to include in its gross income its distributive share of income
attributable to ML Partnership. This amount will generally be equal to a
holder's allocable share of amounts accrued on the partnership preferred
securities. No amount included in income with respect to the TOPrS will be
eligible for the corporate dividends-received deduction.
CLASSIFICATION OF THE PARTNERSHIP
Tax Counsel is of the opinion that, under current law, and based on certain
representations made by the ML Trust as well as certain facts and assumptions
with respect to the transaction described in this prospectus, ML Partnership
will be classified for United States Federal income tax purposes as a
partnership and not as an association or publicly traded partnership taxable as
a corporation.
Tax Counsel's opinion is based on certain factual assumptions relating to
the organization and operation of ML Partnership and is conditioned upon certain
representations made by ML&Co. as General Partner and ML Partnership as to
factual matters, including the organization and the operation of ML Partnership
and the type and frequency of investments made by ML Partnership.
ML&Co. as general partner has represented that it intends to operate ML
Partnership in a manner that will enable ML Partnership to be classified as a
partnership for all future taxable periods in which any partnership preferred
securities remain outstanding. In particular, under the limited partnership
agreement, the general partner cannot take any action that would cause ML
Partnership to constitute a "publicly traded partnership" taxable as a
corporation. Accordingly, it is expected that ML Partnership will continue to
qualify as a partnership and, therefore, will not constitute a publicly traded
partnership taxable as a corporation for all taxable years in which any
partnership preferred securities remain outstanding.
CLASSIFICATION OF THE DEBENTURES
ML Partnership, ML&Co., the relevant Investment Affiliates and the holders
of the Trust Securities (by acceptance of a beneficial interest in a Trust
Security) will agree to treat the Debentures as indebtedness of the relevant
issuer for all United States tax purposes. In connection with the issuance of
the Debentures, Tax Counsel will issue its opinion that, under current law, and
based on certain representations, facts and assumptions to be set forth in such
opinion, the Debentures will be classified as indebtedness of the relevant
issuer for United States Federal income tax purposes.
INCOME AND DEDUCTIONS
Because ML Trust will be classified as a grantor trust for United States
federal income tax purposes, holders of TOPrS will be considered to own an
undivided interest in the partnership preferred securities held by ML Trust. As
a result of this treatment, a holder of TOPrS will be required to take into
income their proportionate share of income attributable to ML Partnership. A
holder's distributive share of income attributable to ML Partnership generally
will be substantially equal to the amount of the cash distributions that
accumulate with respect to the TOPrS. Accordingly, if quarterly distributions on
the TOPrS are paid currently, the amount of income recognized by a holder during
a taxable year generally will be substantially equal to the cash distributions
received by the holder of the TOPrS.
The nature and timing of the income that is allocated to holders of the
TOPrS will, however, depend on the United States Federal income tax
characterization of the investments held by ML Partnership during the relevant
period. Because ML Partnership will be an accrual basis taxpayer for United
States Federal income tax purposes, income will accrue on the TOPrS and will be
allocated to holders of the TOPrS on a daily accrual basis, generally at a rate
that is expected to be equal to (and that will not be greater than) the
distribution rate on the TOPrS, regardless of the holders' method of accounting.
Actual cash distributions on the TOPrS will not, however, be separately reported
as taxable income to the holders at the time they are received.
If distributions on the partnership preferred securities are not made
currently, the corresponding distributions on the TOPrS will not be made
currently. Because ML Partnership is an accrual basis taxpayer it can be
expected that during a period in which interest payments on the Debentures or
distributions on ML Partnership preferred securities are deferred (for whatever
reason), holders will generally recognize income in advance of their receipt of
any cash distributions with respect to their TOPrS. The amount of income that
will be allocated to holders of TOPrS during any such deferral period will equal
their pro rata share of the amount of distributions accruing on the partnership
preferred securities during the deferral period.
ML Partnership does not presently intend to make a Section 754 election.
Accordingly, a subsequent purchaser of the TOPrS who does not purchase the TOPrS
at initial issuance will not be permitted to adjust the tax basis in his
allocable share of ML Partnership's assets so as to reflect any difference
between his purchase price for the TOPrS and his share of ML Partnership's
underlying tax basis in its assets. As a result, a holder of the TOPrS may be
required to report a larger or smaller amount of income from holding the TOPrS
than would otherwise be appropriate based upon the holder's purchase price for
the TOPrS.
RECEIPT OF PARTNERSHIP PREFERRED SECURITIES UPON LIQUIDATION OF ML TRUST
Under certain circumstances, as described under the caption "Description of
the TOPrS--Trust Special Event Redemption or Distribution", partnership
preferred securities may be distributed to holders of The TOPrS in exchange for
their TOPrS and in liquidation of ML Trust. Unless the liquidation of ML Trust
occurs as a result of ML Trust being subject to United States Federal income tax
with respect to income accrued or received on the partnership preferred
securities, a distribution to holders under these circumstances would, for
United States Federal income tax purposes, be treated as a nontaxable event to
each holder. Each holder would receives an aggregate tax basis in the
partnership preferred securities equal to the holder's aggregate tax basis in
its TOPrS with a holding period in the partnership preferred securities so
received in liquidation of ML Trust that would include the period during which
the TOPrS were held. If, however, the liquidation of ML Trust were to occur
because ML Trust is subject to United States Federal income tax with respect to
income accrued or received on the partnership preferred securities, the
distribution of partnership preferred securities to holders by ML Trust would
likely be a taxable event to each holder, and a holder would recognize gain or
loss as if the holder had exchanged its TOPrS for the partnership preferred
securities it received upon the liquidation of ML Trust. Gain or loss to each
holder would be equal to the difference between the holder's aggregate tax basis
in its TOPrS surrendered in the exchange and the aggregate fair market value of
the partnership preferred securities received in the exchange.
REDEMPTION OF TOPrS FOR CASH
Under certain circumstances, as described under the caption "Description of
the TOPrS--Mandatory Redemption", "Description of the TOPrS--Trust Special Event
Redemption or Distribution" and "Description of the Partnership Preferred
Securities--Partnership Special Event Redemption", the General Partner may cause
ML Partnership to redeem the partnership preferred securities for cash, in which
event ML Trust shall simultaneously apply the cash received to redeem the TOPrS.
Under current law, this redemption of the TOPrS would constitute, for United
States Federal income tax purposes, a taxable disposition, and a holder would
recognize gain or loss as if it sold the holder's proportionate interest in the
redeemed partnership preferred securities for an amount of cash equal to the
proceeds received upon redemption. See "--Disposition of TOPrS".
DISPOSITION OF TOPrS
A holder that sells TOPrS will recognize gain or loss equal to the
difference between the amount realized on the sale of the TOPrS and the holder's
adjusted tax basis in the TOPrS sold. Gain or loss to the seller will be a
capital gain or loss and will be a long-term capital gain or loss if the TOPrS
have been held for more than one year at the time of the sale. A holder will be
required to include accumulated but unpaid distributions on the partnership
preferred securities through the date of disposition in income as ordinary
income, and to add this amount to the adjusted tax basis of its TOPrS.
A holder's tax basis in its TOPrS generally will equal
o the amount paid by the holder for its TOPrS,
o increased by the amount includible in income by the holder with
respect to its TOPrS, and
o reduced by the amount of cash or other property distributed to the
holder with respect to its TOPrS.
A holder who acquires TOPrS at different prices may be required to maintain a
single aggregate adjusted tax basis in all of his TOPrS and, upon sale or other
disposition of some of his TOPrS, to allocate a pro rata portion of such
aggregate tax basis to the TOPrS sold, rather than maintaining a separate tax
basis in each TOPrS for purposes of computing gain or loss on a sale of that
TOPrS.
OTHER PARTNERSHIP PROVISIONS
SECTION 708. Under Section 708 of the Code, ML Partnership will be deemed
to terminate for United States Federal income tax purposes if 50% or more of the
capital and profits interests in ML Trust are sold or exchanged within a
12-month period. Pursuant to final Treasury regulations issued on May 9, 1997,
if a deemed termination under Section 708 were to occur, ML Partnership would be
considered to have contributed its assets to a new partnership in return for
partnership interests therein and then to have distributed those new partnership
interests to the partners of the old partnership in liquidation thereof.
SECTION 701. The Department of Treasury has promulgated regulations under
Section 701 of the Code that generally permit it to recast a transaction or
disregard a partnership if a partnership is formed or availed of in connection
with a transaction a principal purpose of which is to reduce substantially the
present value of the partners' aggregate federal tax liability in a manner that
is inconsistent with the intent of the partnership provisions of the Code or to
treat a partnership as an aggregate of its partners as appropriate to carry out
the purpose of any provision of the Code or the Treasury regulations thereunder.
ML Partnership has been formed for, and will engage in, activities typical for
partnerships. Although there is no precedent that applies to the transactions
contemplated herein, Tax Counsel believes that ML Partnership is not of the type
intended to fall within the scope of these regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the TOPrS will be reported to holders on an IRS Form 1099, which
form should be mailed to holders of TOPrS by January 31 following each calendar
year. Payments made on and proceeds from the sale of TOPrS may be subject to a
"back-up" withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amount generally will be allowed as a
credit against the holder's United States Federal income tax, provided the
required information is timely filed with the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the back-up withholding
and information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement, ML
Trust has agreed to sell to each of the underwriters named below, and each of
the underwriters, for whom MLPF&S and are acting as representatives, has
severally agreed to purchase the number of TOPrS set forth opposite its name
below. In the purchase agreement, the several underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the TOPrS offered
by this prospectus if any of the TOPrS are purchased. In the event of default by
an underwriter, the purchase agreement provides that, in certain circumstances,
the purchase commitments of the non-defaulting underwriters may be increased or
the purchase agreement may be terminated.
Number of Trust
Underwriters Preferred Securities
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................ ______________
Total ==============
COMMISSION AND DISCOUNTS
The underwriters propose to offer the TOPrS to the public at the public
offering price set forth on the cover page of this prospectus, and, to certain
dealers at that price less a concession not in excess of $ per TOPrS; provided,
that the concession for sales of 10,000 or more TOPrS to any single purchaser
will be $ per TOPrS. The underwriters may allow, and such dealers may reallow, a
discount not in excess of $ per TOPrS to certain brokers and dealers. After the
TOPrS are released for sale to the public, the offering price, concession and
discount may be changed. Proceeds to be received by ML&Co. will be net of the
underwriting discount and expenses payable by ML&Co.
In view of the fact that the proceeds of the sale of the TOPrS will
ultimately be used to purchase the investment instruments of ML&Co. and its
subsidiaries, the purchase agreement provides that ML&Co. will pay as
compensation to the underwriters, an amount in immediately available funds of $
per TOPrS (or $ in the aggregate) for the accounts of the several underwriters;
provided that, such compensation for sales of 10,000 or more TOPrS to any single
purchaser will be $ per TOPrS. Therefore, to the extent of any sales, the actual
amount of underwriters' compensation will be less than the aggregate amount
specified in the preceding sentence.
LISTING
Application will be made to list the TOPrS on the NYSE. Trading of the
TOPrS on the NYSE is expected to commence within a 30-day period after the
initial delivery of the TOPrS. The representatives have advised ML Trust that
they intend to make a market in the TOPrS prior to the commencement of trading
on the NYSE. The representatives will have no obligation to make a market in the
TOPrS, however, and may cease market making activities, if commenced, at any
time.
Before this offering there has been no public market for the TOPrS. In
order to meet one of the requirements for listing the TOPrS on the NYSE, the
underwriters will undertake to sell lots of 100 or more TOPrS to a minimum of
400 beneficial holders, that there will be at least one million units of TOPrS
outstanding and that the TOPrS will have a minimum market value of $4,000,000.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
In connection with the offering, the underwriters are permitted to engage
in certain transactions that stabilize the market price of the TOPrS. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the market price of the TOPrS. If an underwriter creates a short
position in the TOPrS in connection with the offering, i.e., if it sells more
TOPrS than are set forth on the cover page of this prospectus, the underwriter
may reduce that short position by purchasing TOPrS in the open market. In
general, purchases of a security for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it might
be in the absence of such purchases.
The underwriters may also impose a penalty bid on certain underwriters and
selling group members. This means that if an underwriter purchases TOPrS in the
open market to reduce the underwriter's short position or to stabilize the price
of the TOPrS, they may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those TOPrS as part of the
offering. The imposition of a penalty bid might have an effect on the price of a
security to the extent that it were to discourage resales of the security.
Neither ML&Co. nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the TOPrS. In addition, neither ML&Co.
nor any of the underwriters makes any representation that the underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
MISCELLANEOUS
ML Trust, ML&Co., and ML Partnership have agreed to indemnify the
underwriters against, or contribute to payments that the underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act.
Because MLPF&S, one of the underwriters in the offering, is an affiliate of
ML&Co. and a member of the National Association of Securities Dealers, Inc., the
offering of TOPrS will be conducted pursuant to the applicable sections of Rule
2810 of the Conduct Rules of the NASD. The underwriters may not confirm sales to
any discretionary account without the prior specific written approval of the
customer.
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, ML&Co. in the ordinary course of business and
have engaged, and may in the future engage, in commercial banking and investment
banking transactions with ML&Co. MLPF&S may use this prospectus for offers and
sales related to market-making transactions in the TOPrS. MLPF&S may act as
principal or agent in these transactions, and the sales will be made at prices
related to prevailing market prices at the time of sale.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms. You may also inspect our SEC reports and other
information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
We have filed a registration statement on Form S-3 with the SEC covering
the TOPrS and other securities. For further information on ML&Co. and the TOPrS,
you should refer to our registration statement and its exhibits. This prospectus
summarizes material provisions of contracts and other documents that we refer
you to. Because the prospectus may not contain all the information that you may
find important, you should review the full text of these documents. We have
included copies of these documents as exhibits to our registration statement.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not, and MLPF&S has not, authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and MLPF&S
is not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
LEGAL MATTERS
Certain matters of Delaware law relating to the legality of the TOPrS, the
validity of ML Trust Agreement, the formation of ML Trust and ML Partnership and
the legality under state law of the TOPrS and the partnership preferred
securities are being passed upon by Skadden, Arps, Slate, Meagher & Flom
(Delaware), special Delaware counsel to ML Trust, the Partnership and ML&Co..
The legality under state law of The Trust Guarantee, the Partnership Guarantee,
the ML&Co. Debenture and the Investment Guarantees with respect to the Affiliate
Debentures will be passed upon on behalf of ML Trust, ML Partnership and ML&Co.
by Brown & Wood LLP, New York, New York. The validity of the TOPrS, the
partnership preferred securities and the Trust Guarantee and the Partnership
Guarantee will be passed upon on behalf of the underwriters by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York, counsel to the underwriters.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report on
Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports (which
express an unqualified opinion and which report on the consolidated financial
statements includes an explanatory paragraph for the change in accounting method
for certain internal-use software development costs), 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.
The balance sheets of Merrill Lynch Preferred Funding VI, L.P. and Merrill Lynch
Preferred Capital Trust VI as of December 25, 1998 included in this prospectus
have also been audited by Deloitte & Touche LLP and have been included in
reliance upon such reports of Deloitte & Touche LLP given upon their authority
as experts in accounting and auditing.
INDEX OF DEFINED TERMS
DEFINED TERMS PAGE NO.
- ------------- --------
Affiliate Debentures...................................................
Affiliate Investment Instruments.......................................
Business Day...........................................................
Change in Investment Company Act Law...................................
Code...................................................................
Eligible Institution...................................................
Finance Subsidiary.....................................................
Investment Affiliate...................................................
Investment Company Act.................................................
Investment Guarantee...................................................
ML&Co................................................................
ML&Co. Debenture.......................................................
ML Partnership.........................................................
MLPF&S.................................................................
Moody's................................................................
Partnership Enforcement Event..........................................
Partnership Guarantee..................................................
Partnership Guarantee Payments.........................................
Partnership Investment Company Event...................................
Partnership Special Event..............................................
Partnership Tax Event..................................................
Rights Agreement.......................................................
S&P....................................................................
Special Event..........................................................
Tax Action.............................................................
Tax Counsel............................................................
TOPrS..................................................................
Trust Enforcement Event................................................
Trust Guarantee........................................................
Trust Guarantee Payments...............................................
Trust Investment Company Event.........................................
Trust Securities.......................................................
Trust Special Event....................................................
Trust Tax Event........................................................
United States Person...................................................
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Independent Auditors' Report....................................... F-2
Balance Sheet...................................................... F-3
Note to Balance Sheet.............................................. F-3
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Independent Auditors' Report....................................... F-4
Balance Sheet...................................................... F-5
Note to Balance Sheet.............................................. F-5
INDEPENDENT AUDITORS' REPORT
To the General Partner and Initial Limited Partner of
Merrill Lynch Preferred Funding VI, L.P.
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Funding VI, L.P. (the "Partnership") as of December 25, 1998. This balance sheet
is the responsibility of the Partnership's management. Our responsibility is to
express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Partnership as of December 25,
1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
January 28, 1999
BALANCE SHEET
OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
December 25, 1998
Assets.................................................................$ --
=========
Partnership Securities
Limited partner interest............................................ $ 85
General partner interest............................................ 15
100
Less: Receivables from partners for subscribed partnership interests... (100)
=========
$ --
=========
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED FUNDING VI, L.P.
Merrill Lynch Preferred Funding VI, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on December 7, 1998 for the exclusive purposes of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. ("ML&Co.") and
wholly owned subsidiaries of ML&Co. (the "Affiliate Investment Instruments")
with the proceeds from the sale of Partnership Preferred Securities (the
"Partnership Preferred Securities") to Merrill Lynch Preferred Capital Trust VI
(the "Trust") and a capital contribution from ML&Co. in exchange for the general
partnership interest in the Partnership (collectively, the "Partnership
Proceeds").
The Partnership Preferred Securities will be redeemable for cash, at the
option of the Partnership, in whole or in part, from time to time, after a
certain date to be determined. Except as provided in the Limited Partnership
Agreement and Partnership Preferred Securities Guarantee Agreement, and as
otherwise provided by law, the holders of the Partnership Preferred Securities
will have no voting rights.
The Partnership Proceeds will be used initially to purchase debt
instruments from ML&Co. and certain domestic wholly owned subsidiaries of
ML&Co., retaining 1% in unaffiliated debt securities. The Partnership shall have
a perpetual existence subject to certain termination events. ML&Co. serves as
the sole general partner of the Partnership. ML&Co., in its capacity as General
Partner of the Partnership, has agreed to pay all fees and expenses related to
the organization and operations of the Partnership (including any taxes, duties,
assessments or government charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Partnership) and the offering of the Partnership Preferred Securities and be
responsible for all debts and other obligations of the Partnership (other than
with respect to the Partnership Preferred Securities). The General Partner has
agreed to indemnify certain officers and agents of the Partnership.
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Merrill Lynch Preferred Capital Trust VI
We have audited the accompanying balance sheet of Merrill Lynch Preferred
Capital Trust VI (the "Trust") as of December 25, 1998. This balance sheet is
the responsibility of the Trust's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Trust as of December 25, 1998,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
January 28, 1999
BALANCE SHEET OF
MERRILL LYNCH PREFERRED CAPITAL TRUST VI
December 25, 1998
Assets.................................................................. $ 0
----
Trust securities........................................................ $ 0
----
NOTE TO BALANCE SHEET OF MERRILL LYNCH PREFERRED CAPITAL TRUST VI
Merrill Lynch Preferred Capital Trust VI (the "Trust") is a statutory
business trust formed on December 7, 1998 under the laws of the State of
Delaware for the exclusive purposes of (i) issuing the Trust Originated
Preferred Securities (the "TOPrS") and the common securities (together with the
TOPrS, the "Trust Securities") representing undivided beneficial ownership
interests in the assets of the Trust, (ii) purchasing Partnership Preferred
Securities (the "Partnership Preferred Securities") representing the limited
partnership interests of Merrill Lynch Preferred Funding VI, L.P. (the
"Partnership") with the proceeds from the sale of the Trust Securities, and
(iii) engaging in only those other activities necessary or incidental thereto.
The Trust has a perpetual existence, subject to certain termination events as
provided in the Declaration of Trust under which it was formed. Subsequent to
December 25, 1998, the Trust intends to issue and sell its TOPrS in a public
offering and to issue and sell its common securities to Merrill Lynch & Co.,
Inc. ("ML&Co"). No TOPrS have been issued as of December 25, 1998.
The proceeds from the Trust's sale of the Trust Securities will be used to
purchase the Partnership Preferred Securities from the Partnership. The
Partnership Preferred Securities will be redeemable for cash, at the option of
the Partnership, in whole or in part, from time to time, after a certain date to
be determined. Upon any redemption of the Partnership Preferred Securities, the
TOPrS will be redeemed, in whole or in part, as applicable. Holders of the TOPrS
will have limited voting rights and will not be entitled to vote to appoint,
remove or replace, or to increase or decrease the number of, trustees, which
voting rights are vested exclusively in the holder of the common securities.
ML&Co. will be obligated to pay compensation to the underwriters of the
offering of the TOPrS. ML&Co. will pay all fees and expenses related to the
organization and operations of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Trust) and the offering of the TOPrS and be responsible for all debts and
other obligations of the Trust (other than the Trust Securities). ML&Co. has
also agreed to indemnify the Trustees and certain other persons.
================================================================================
[LOGO]
Merrill Lynch Preferred Capital Trust VI
% Trust Originated Preferred Securities
"TOPrS"
Liquidation Amount $25 per TOPrS
guaranteed to the extent described in this prospectus by
Merrill Lynch & Co., Inc.
----------------
PROSPECTUS
----------------
Merrill Lynch & Co.
, 199
================================================================================
Information contained in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus
supplement and the accompanying prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus Supplement dated March 29, 1999
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED , 1999)
$
[LOGO]
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-------------------------------
THE NOTES:
o We will offer notes from time to o The notes may bear interest at
time and specify the terms and fixed or floating rates or may
conditions of each issue of notes not bear any interest. If the
in a pricing supplement. notes bear interest at a
floating rate, the floating
o The notes will be senior unsecured rate may be based on one or
debt securities of ML&Co. more indices or formulas plus
or minus a fixed amount or
o The notes will have stated maturities multiplied by a factor.
of nine months or more from the date
they are originally issued. o We will specify whether the
notes can be redeemed or repaid
o We will pay amounts due on the notes before their maturity and
in U.S. dollars or any other whether they are subject to
consideration described in the mandatory redemption,
applicable pricing supplement. redemption at the option of
ML&Co. or repayment at the
option of the holder of the
notes.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE S-3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement, the accompanying prospectus or any pricing supplement is
truthful or complete. Any representation to the contrary is a criminal offense.
Agent's Discounts Proceeds, before expenses, to
Public Offering Price And Commissions Merrill Lynch & Co., Inc.
--------------------- ----------------- -----------------------------
Per note................... 100% .05%-.60% 99.95%-99.40%
Total(1)................... $_00,000,000 $ -$ $ -$
(1) Or the equivalent in one or more foreign or composite currencies.
We may sell notes to the agent referred to below as principal for resale at
varying or fixed offering prices or through the agent as agent using its
reasonable efforts on our behalf. We may also sell notes without the assistance
of the agent, whether acting as principal or as agent.
If we sell other securities referred to in the accompanying prospectus, the
amount of notes that we may offer and sell under this prospectus supplement may
be reduced.
-------------------------------
Merrill Lynch & Co.
-------------------------------
The date of this prospectus supplement is , 1999.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Risk Factors............................................................ S-3
Description of the Notes................................................ S-5
United States Federal Income Taxation................................... S-25
Plan of Distribution.................................................... S-32
Validity of the Notes................................................... S-33
PROSPECTUS
PAGE
----
Merrill Lynch & Co., Inc................................................
Use of Proceeds.........................................................
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.........................................
The Securities..........................................................
Description of Debt Securities..........................................
Description of Debt Warrants............................................
Description of Currency Warrants........................................
Description of Index Warrants...........................................
Description of Preferred Stock..........................................
Description of Depositary Shares........................................
Description of Preferred Stock Warrants.................................
Description of Common Stock.............................................
Description of Common Stock Warrants....................................
Plan of Distribution....................................................
Where You Can Find More Information.....................................
Incorporation of Information We File With the SEC.......................
Experts.................................................................
References in this prospectus supplement to "ML&Co.", "we", "us" and "our"
are to Merrill Lynch & Co., Inc.
References in this prospectus supplement to "MLPF&S" are to the agent,
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
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 before deciding whether an
investment in the notes is suitable for you. The notes are not an appropriate
investment for you if you are unsophisticated with respect to the significant
components of their relationships.
STRUCTURE RISKS OF NOTES INDEXED TO INTEREST RATE, CURRENCY OR OTHER INDICES OR
FORMULAS
If you invest in notes indexed to one or more interest rate, currency or
other indices or formulas, there will be significant risks not associated with a
conventional fixed rate or floating rate debt security. These risks include
fluctuation of the indices or formulas and the possibility that you will receive
a lower, or no, amount of principal, premium or interest and at different times
than you expected. 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 these risks and their results. In
addition, if an index or formula used to determine any amounts payable in
respect of the notes contains a multiplier or leverage factor, the effect of any
change in that index or formula will be magnified. In recent years, values of
certain indices and formulas have been volatile and volatility in those and
other indices and formulas may be expected in the future. However, past
experience is not necessarily indicative of what may occur in the future.
REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES
If your notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may, in the case of optional redemption, or must, in
the case of mandatory redemption, choose to redeem your notes at times when
prevailing interest rates may be relatively low. Accordingly, you generally will
not be able to reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as that of the notes.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR YOUR NOTES; MANY FACTORS AFFECT THE
TRADING VALUE OF YOUR NOTES
We cannot assure you a trading market for your notes will ever develop or
be maintained. Many factors independent of our creditworthiness may affect the
trading market of your notes. These factors include:
o the complexity and volatility of the index or formula applicable to
the notes,
o the method of calculating the principal, premium and interest in
respect of the notes,
o the time remaining to the maturity of the notes,
o the outstanding amount of the notes,
o the redemption features of the notes,
o the amount of other securities linked to the index or formula
applicable to the notes, and
o the level, direction and volatility of market interest rates
generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market
and experience more price volatility. There may be a limited number of buyers
for these notes. This may affect the price you receive for these notes or your
ability to sell these notes at all. You should not purchase notes unless you
understand and know you can bear the related investment risks.
OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES
Our credit ratings are an assessment of our ability to pay our obligations.
Consequently, real or anticipated changes in our credit ratings will generally
affect the market value of your notes. Our credit ratings, however, may not
reflect the potential impact of risks related to structure, market or other
factors discussed above on the value of your notes.
DESCRIPTION OF THE NOTES
The notes will be issued as a series of debt securities under a senior
indenture, dated as of October 1, 1993, as amended (the "1993 Indenture"),
between ML&Co. and The Chase Manhattan Bank, as trustee. The term "senior debt
securities," as used in this prospectus supplement, refers to all securities
issued and issuable from time to time under ML&Co.'s senior indentures and
includes the notes. The senior debt securities and ML&Co.'s senior indentures
are more fully described in the accompanying prospectus. The following summary
of the material provisions of the notes and of the 1993 Indenture is not
complete and is qualified in its entirety by reference to the 1993 Indenture, a
copy of which has been filed as an exhibit to the registration statement of
which this prospectus supplement and the accompanying prospectus are a part.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor MLPF&S has authorized any other person to
provide you with different or additional information. If anyone provides you
with different or additional information, you should not rely on it. Neither we
nor MLPF&S is making an offer to sell these securities in any jurisdiction where
the offer or sale is not permitted. You should assume that the information
contained or incorporated by reference in this prospectus supplement, the
accompanying prospectus and any pricing supplement is accurate only as of the
date on the front cover of the applicable pricing supplement.
The following description of notes will apply unless otherwise specified in
an applicable pricing supplement.
TERMS OF THE NOTES
All senior debt securities, including the notes, issued and to be issued
under ML&Co.'s senior indentures will be unsecured general obligations of ML&Co.
and will rank equally with all other unsecured and unsubordinated indebtedness
of ML&Co. from time to time outstanding. Because ML&Co. is a holding company,
the right of ML&Co. and its creditors, including the holders of the notes, to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of that subsidiary, except to the extent that a bankruptcy
court may recognize the claims of ML&Co. itself as a creditor of that
subsidiary. In addition, dividends, loans and advances to ML&Co. from certain
subsidiaries, including MLPF&S, are restricted by net capital requirements under
the Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
ML&Co.'s senior indentures do not limit the aggregate principal amount of
senior debt securities which ML&Co. may issue. ML&Co. may issue its senior debt
securities from time to time as a single series or in two or more separate
series up to the aggregate principal amount from time to time authorized by
ML&Co. for each series. ML&Co. may, from time to time, without the consent of
the holders of the notes, provide for the issuance of notes or other senior debt
securities under its senior indentures in addition to the $ aggregate principal
amount of notes offered by this prospectus supplement. As of December 25, 1998,
ML&Co. had $ billion aggregate principal amount of notes issued and outstanding.
The aggregate principal amount of notes which may be offered and sold by this
prospectus supplement may be reduced by the sale by ML&Co. of other securities
under the registration statement of which this prospectus supplement and the
accompanying prospectus are a part.
The notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by ML&Co. Interest-bearing notes will bear interest at either fixed or
floating rates as specified in the applicable pricing supplement. Notes may be
issued at significant discounts from their principal amount payable at stated
maturity, or on any date before the stated maturity date on which the principal
or an installment of principal of a note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of ML&Co.,
repayment at the option of the holder or otherwise (the stated maturity date or
such prior date, as the case may be, is referred to as, a "Maturity"). Some
notes may not bear interest.
Unless otherwise indicated in a note and in the applicable pricing
supplement, the notes will be denominated in United States dollars and ML&Co.
will make payments of principal of, and premium, if any, and interest on, the
notes in United States dollars.
Interest rates, interest rate formulae and other variable terms of the
notes are subject to change by ML&Co. from time to time, but no change will
affect any note already issued or as to which ML&Co. has accepted an offer to
purchase.
Each note will be issued in fully registered book-entry form or
certificated form, in denominations of $1,000 and integral multiples of
$1,000, unless otherwise specified in the applicable pricing supplement. Notes
in book-entry form may be transferred or exchanged only through a
participating member of The Depository Trust Company, also known as DTC, or
any other depository as is identified in an applicable pricing supplement. See
"-Book-Entry Notes". Registration of transfer of notes in certificated form
will be made at the corporate trust office of the trustee. There will be no
service charge for any registration of transfer or exchange of notes, but
ML&Co. may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with any transfer or exchange, other
than exchanges pursuant to the 1993 Indenture not involving any transfer.
ML&Co. will make payments of principal of, and premium and interest, if
any, on notes in book-entry form through the trustee to the depository or its
nominee. See "Notes in Book-Entry Form". Unless otherwise specified in the
applicable pricing supplement, a beneficial owner of notes in book-entry form
that are denominated in a currency other than United States dollars (a
"Specified Currency") electing to receive payments of principal or any premium
or interest in that Specified Currency must notify the participant of DTC
through which its interest is held on or before the applicable regular record
date, in the case of a payment of interest, and on or before the sixteenth day,
whether or not a Business Day, as defined below, before its stated maturity, in
the case of principal or premium, of the beneficial owner's election to receive
all or a portion of any payment in a Specified Currency. The participant must
notify the depository of any election on or before the third Business Day after
the regular record date. The depository will notify the paying agent of the
election on or before the fifth Business Day after the regular record date. If
complete instructions are received by the participant and forwarded to the
depository, and forwarded by the depository to the paying agent, on or before
the relevant dates, the beneficial owner of the notes in book-entry form will
receive payments in the Specified Currency.
In the case of notes in certificated form, ML&Co. will make payment of
principal or premium, if any, at the Maturity of each note in immediately
available funds upon presentation of the note and, in the case of any repayment
on an optional repayment date, upon submission of a duly completed election form
if and as required by the provisions described below, at the corporate trust
office of the trustee in the Borough of Manhattan, The City of New York, or at
any other place as ML&Co. may designate. Payment of interest due at Maturity
will be made to the person to whom payment of the principal of the note in
certificated form will be made. Payment of interest due on notes in certificated
form other than at Maturity will be made at the corporate trust office of the
trustee or, at the option of ML&Co., may be made by check mailed to the address
of the person entitled to receive payment as the address shall appear in the
security register. Notwithstanding the immediately preceding sentence, a holder
of $1,000,000 or more in aggregate principal amount of notes in certificated
form, whether having identical or different terms and provisions, having the
same interest payment dates will, at the option of ML&Co., be entitled to
receive interest payments, other than at Maturity, by wire transfer of
immediately available funds if appropriate wire transfer instructions have been
received in writing by the trustee not less than 15 days prior to the applicable
interest payment date. Any wire instructions received by the trustee shall
remain in effect until revoked by the holder.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York;
provided, however, that, with respect to non-United States dollar-denominated
notes, the day is also not a day on which commercial banks are authorized or
required by law, regulation or executive order to close in the Principal
Financial Center, as defined below, of the country issuing the Specified
Currency or, if the Specified Currency is Euro, the day is also a day on which
the Trans-European Automated Real-time Gross Settlement Express Transfer
(TARGET) System is open; provided, further, that, with respect to notes as to
which LIBOR is an applicable Interest Rate Basis, the day is also a London
Business Day. "London Business Day" means a day on which commercial banks are
open for business, including dealings in the Index Currency, as defined below,
in London.
"Principal Financial Center" means, unless otherwise specified in the
applicable pricing supplement,
(1) the capital city of the country issuing the Specified Currency, except
that with respect to United States dollars, Australian dollars,
Canadian dollars, Deutsche marks, Dutch guilders, South African rand
and Swiss francs, the "Principal Financial Center" will be The City of
New York, Sydney and Melbourne, Toronto, Frankfurt, Amsterdam,
Johannesburg and Zurich, respectively, or
(2) the capital city of the country to which the LIBOR Currency relates,
except that with respect to United States dollars, Canadian dollars,
Deutsche marks, Dutch guilders, Portuguese escudos, South African rand
and Swiss francs, the "Principal Financial Center" will be The City of
New York, Toronto, Frankfurt, Amsterdam, London, Johannesburg and
Zurich, respectively.
TRANSACTION AMOUNT
Interest rates offered by ML&Co. with respect to the notes may differ
depending upon, among other things, the aggregate principal amount of notes
purchased in any transaction. ML&Co. may offer notes with similar variable terms
but different interest rates concurrently at any time. ML&Co. may also
concurrently offer notes having different variable terms to different investors.
REDEMPTION AT THE OPTION OF ML&CO.
The notes will not be subject to any sinking fund. ML&Co. may redeem the
notes at its option prior to their stated maturity only if an initial redemption
date is specified in the applicable notes and in the applicable pricing
supplement. If so indicated in the applicable pricing supplement, ML&Co. may
redeem the notes at its option on any date on and after the applicable initial
redemption date specified in the applicable pricing supplement. On and after the
initial redemption date, if any, ML&Co. may redeem the related note at any time
in whole or from time to time in part at its option at the applicable redemption
price referred to below together with interest on the principal of the
applicable note payable to the redemption date, on notice given, unless
otherwise specified in the applicable pricing supplement, not more than 60 nor
less than 30 days before the redemption date. ML&Co. will redeem the notes in
increments of $1,000, provided that any remaining principal amount will be an
authorized denomination of the applicable note. Unless otherwise specified in
the applicable pricing supplement, the redemption price with respect to a note
will initially mean a percentage, the initial redemption percentage, of the
principal amount of the note to be redeemed specified in the applicable pricing
supplement and shall decline at each anniversary of the initial redemption date
by a percentage specified in the applicable pricing supplement, of the principal
amount to be redeemed until the redemption price is 100% of the principal
amount.
REPAYMENT AT THE OPTION OF THE HOLDER
If so indicated in an applicable pricing supplement, ML&Co. will repay the
notes in whole or in part at the option of the holders of the notes on any
optional repayment date specified in the applicable pricing supplement. If no
optional repayment date is indicated with respect to a note, it will not be
repayable at the option of the holder before its stated maturity. Any repayment
in part will be in an amount equal to $1,000 or integral multiples of $1,000,
provided that any remaining principal amount will be an authorized denomination
of the applicable note. The repurchase price for any note so repurchased will be
100% of the principal amount to be repaid, together with interest on the
principal of the applicable note payable to the date of repayment. For any note
to be repaid, the trustee must receive, at its office maintained for such
purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the trustee, not more than 60 nor less than 30 days
before the optional repayment date:
o in the case of a note in certificated form, the note and the form
entitled "Option to Elect Repayment" duly completed, or
o in the case of a note in book-entry form, instructions to that effect
from the applicable beneficial owner of the notes to the depository
and forwarded by the depository.
Notices of elections from a holder to exercise the repayment option must be
received by the trustee by 5:00 p.m., New York City time, on the last day for
giving such notice. Exercise of the repayment option by the holder of a note
will be irrevocable.
Only the depository may exercise the repayment option in respect of global
securities representing notes in book-entry form. Accordingly, beneficial owners
of global securities that desire to have all or any portion of the notes in
book-entry form represented by global securities repaid must instruct the
participant through which they own their interest to direct the depository to
exercise the repayment option on their behalf by forwarding the repayment
instructions to the trustee as discussed above. In order to ensure that the
instructions are received by the trustee on a particular day, the applicable
beneficial owner must so instruct the participant through which it owns its
interest before that participant's deadline for accepting instructions for that
day. Different firms may have different deadlines for accepting instructions
from their customers. Accordingly, beneficial owners of notes in book-entry form
should consult the participants through which they own their interest for the
respective deadlines. All instructions given to participants from beneficial
owners of notes in book-entry form relating to the option to elect repayment
will be irrevocable. In addition, at the time instructions are given, each
beneficial owner will cause the participant through which it owns its interest
to transfer its interest in the global security or securities representing the
related notes in book-entry form, on the depository's records, to the trustee.
See "-Book-Entry Notes".
If applicable, ML&Co. will comply with the requirements of Section 14(e) of
the Exchange Act and the rules promulgated thereunder and any other securities
laws or regulations in connection with any repayment at the option of the
holder.
ML&Co. may at any time purchase notes at any price or prices in the open
market or otherwise. Notes so purchased by ML&Co. may, at the discretion of
ML&Co., be held, resold or surrendered to the trustee for cancellation.
INTEREST
Each note will bear interest from the date of issue at the rate per annum
or, in the case of a floating rate note, pursuant to the interest rate formula
stated in the applicable note and in the applicable pricing supplement until the
principal of the note is paid or made available for payment. Interest will be
payable in arrears on each interest payment date specified in the applicable
pricing supplement on which an installment of interest is due and payable and at
Maturity. The first payment of interest on any note originally issued between a
regular record date and the related interest payment date will be made on the
interest payment date immediately following the next succeeding regular record
date to the registered holder on the next succeeding regular record date. The
regular record date will be the fifteenth calendar day, whether or not a
Business Day, immediately preceding the related interest payment date.
FIXED RATE NOTES
Unless otherwise specified in an applicable pricing supplement, each fixed
rate note will bear interest from, and including, the date of issue, at the rate
per annum stated on the face of the note until the principal amount of the note
is paid or made available for payment. Interest payments on fixed rate notes
will equal the amount of interest accrued from and including the immediately
preceding interest payment date in respect of which interest has been paid or
from and including the date of issue, if no interest has been paid with respect
to the applicable fixed rate notes, to, but excluding, the related interest
payment date or Maturity, as the case may be. Unless otherwise specified in the
applicable pricing supplement, interest on fixed rate notes will be computed on
the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable pricing supplement, interest
on fixed rate notes will be payable semiannually on May 15 and November 15 of
each year and at Maturity. If any interest payment date or the Maturity of a
fixed rate note falls on a day that is not a Business Day, the related payment
of principal, premium, if any, or interest will be made on the next succeeding
Business Day as if made on the date the applicable payment was due, and no
interest will accrue on the amount payable for the period from and after the
interest payment date or Maturity, as the case may be.
FLOATING RATE NOTES
Interest on floating rate notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may be one or more
of:
o the CD Rate,
o the CMT Rate,
o the Commercial Paper Rate,
o the Eleventh District Cost of Funds Rate,
o the Federal Funds Rate,
o LIBOR,
o the Prime Rate,
o the Treasury Rate, or
o any other Interest Rate Basis or interest rate formula that is
specified in the applicable pricing supplement.
A floating rate note may bear interest with respect to two or more Interest
Rate Bases.
TERMS. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including:
o whether the floating rate note is
o a "Regular Floating Rate Note",
o a "Inverse Floating Rate Note" or
o a "Floating Rate/Fixed Rate Note",
o the Interest Rate Basis or Bases,
o the Initial Interest Rate,
o the Interest Reset Dates,
o the interest payment dates,
o the period to maturity of the instrument or obligation with respect to
which the Interest Rate Basis or Bases will be calculated (the "Index
Maturity"),
o the Maximum Interest Rate and Minimum Interest Rate, if any,
o the number of basis points to be added to or subtracted from the
related Interest Rate Basis or Bases (the "Spread"),
o the percentage of the related Interest Rate Basis or Bases by which
the Interest Rate Basis or Bases will be multiplied to determine the
applicable interest rate (the "Spread Multiplier"),
o if one or more of the specified Interest Rate Bases is LIBOR, the
LIBOR Currency, the Index Maturity and the Designated LIBOR Page, and
o if one or more of the specified Interest Rate Bases is the CMT Rate,
the Designated CMT Telerate Page and Designated CMT Maturity Index.
The interest rate borne by the floating rate Notes will be determined as
follows:
Regular Floating Rate Notes. Unless a floating rate note is designated as a
Floating Rate/Fixed Rate Note, an Inverse Floating Rate Note or as having an
Addendum attached or as having "Other Provisions" apply relating to a different
interest rate formula, it will be a "Regular Floating Rate Note" and, except as
described below or in an applicable pricing supplement, will bear interest at
the rate determined by reference to the applicable Interest Rate Basis or Bases:
o plus or minus the applicable Spread, if any, and/or
o multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on the
Regular Floating Rate Note will be payable will be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the period
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.
Floating Rate/Fixed Rate Notes. If a floating rate note is designated as a
"Floating Rate/Fixed Rate Note", it will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases:
o plus or minus the applicable Spread, if any, and/or
o multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest on the
applicable Floating Rate/Fixed Rate Note will be payable will be reset as of
each Interest Reset Date; provided, however, that:
o the interest rate in effect for the period from the date of issue
to the first Interest Reset Date will be the Initial Interest
Rate, and
o the interest rate in effect commencing on, and including, the
date on which interest begins to accrue on a fixed rate basis to
Maturity will be the Fixed Interest Rate, if the rate is
specified in the applicable pricing supplement, or if no Fixed
Interest Rate is specified, the interest rate in effect on the
Floating Rate/Fixed Rate Note on the day immediately preceding
the date on which interest begins to accrue on a fixed rate
basis.
Inverse Floating Rate Notes. If a floating rate note is designated as
an "Inverse Floating Rate Note", except as described below, it will bear
interest equal to the Fixed Interest Rate specified in the related pricing
supplement minus the rate determined by reference to the applicable Interest
Rate Basis or Bases:
o plus or minus the applicable Spread, if any, and/or
o multiplied by the applicable Spread Multiplier, if any;
provided, however, that unless otherwise specified in the applicable pricing
supplement, the interest rate on the applicable Inverse Floating Rate Note will
not be less than zero percent. Commencing on the first Interest Reset Date, the
rate at which interest on the applicable Inverse Floating Rate Note is payable
will be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
Each Interest Rate Basis shall be the rate determined in accordance with
the applicable provisions below. Except as set forth above, the interest rate in
effect on each day will be:
o if the day is an Interest Reset Date, the interest rate determined as
of the Interest Determination Date (as defined below) immediately
preceding the applicable Interest Reset Date or
o if the day is not an Interest Reset Date, the interest rate determined
as of the Interest Determination Date immediately preceding the
applicable Interest Reset Date.
Interest Reset Dates. The applicable pricing supplement will specify the
dates on which the interest rate on the related floating rate note will be reset
(each, an "Interest Reset Date"). Unless otherwise specified in the applicable
pricing supplement, the Interest Reset Date will be, in the case of floating
rate notes which reset:
o daily - each Business Day;
o weekly - the Wednesday of each week, with the exception of weekly
reset Floating Rate Notes as to which the Treasury Rate is an
applicable Interest Rate Basis, which will reset the Tuesday of each
week, except as described below;
o monthly - the third Wednesday of each month, with the exception of
monthly reset Floating Rate Notes as to which the Eleventh District
Cost of Funds Rate is an applicable Interest Rate Basis, which will
reset on the first calendar day of the month;
o quarterly - the third Wednesday of March, June, September and December
of each year;
o semiannually - the third Wednesday of the two months specified in the
applicable pricing supplement; and
o annually - the third Wednesday of the month specified in the
applicable pricing supplement;
provided, however, that with respect to Floating Rate/Fixed Rate Notes, the rate
of interest will not reset after the applicable date on which interest on a
fixed rate basis begins to accrue.
If any Interest Reset Date for any floating rate note would otherwise be a
day that is not a Business Day, the applicable Interest Reset Date will be
postponed to the next succeeding day that is a Business Day, except that in the
case of a floating rate note as to which LIBOR is an applicable Interest Rate
Basis, if the Business Day falls in the next succeeding calendar month, then the
Interest Reset Date will be the immediately preceding Business Day. In addition,
in the case of a floating rate note for which the Treasury Rate is an applicable
Interest Rate Basis if the Interest Determination Date would otherwise fall on
an Interest Reset Date, then the applicable Interest Reset Date will be
postponed to the next succeeding Business Day.
Maximum and Minimum Interest Rates. A floating rate note may also have
either or both of the following:
o a maximum numerical limitation, or ceiling, on the rate at which
interest may accrue during any interest period (a "Maximum Interest
Rate"), and
o a minimum numerical limitation, or floor, on the rate at which
interest may accrue during any period (a "Minimum Interest Rate").
The 1993 Indenture is, and any notes issued under the 1993 Indenture will
be, governed by and construed in accordance with the laws of the State of New
York. 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 securities in which
$2,500,000 or more has been invested. While ML&Co. believes that New York law
would be given effect by a state or federal court sitting outside of New York,
state laws frequently regulate the amount of interest that may be charged to and
paid by a borrower, including, in some cases, corporate borrowers. It is
suggested that prospective investors consult their personal advisors with
respect to the applicability of these laws. ML&Co. has agreed for the benefit of
the beneficial owners of the notes, to the extent permitted by law, not to claim
voluntarily the benefits of any laws concerning usurious rates of interest
against a beneficial owner of the notes.
Interest Payments. Each applicable pricing supplement will specify the
dates on which interest will be payable. Each floating rate note will bear
interest from the date of issue at the rates specified in the applicable
floating rate note until the principal of the applicable note is paid or
otherwise made available for payment. Except as provided below or in the
applicable pricing supplement, the interest payment dates with respect to
floating rate notes will be, in the case of floating rate notes which reset:
o daily, weekly or monthly - the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year,
as specified in the applicable pricing supplement;
o quarterly - the third Wednesday of March, June, September and December
of each year;
o semiannually - the third Wednesday of the two months of each year
specified in the applicable pricing supplement;
o annually - the third Wednesday of the month of each year specified in
the applicable pricing supplement; and
o at Maturity.
If any interest payment date for any floating rate note, other than an
interest payment date at Maturity, would otherwise be a day that is not a
Business Day, the interest payment date will be postponed to the next succeeding
day that is a Business Day except that in the case of a floating rate note as to
which LIBOR is an applicable Interest Rate Basis, if the Business Day falls in
the next succeeding calendar month, the applicable interest payment date will be
the immediately preceding Business Day. If the Maturity of a floating rate note
falls on a day that is not a Business Day, the payment of principal, premium, if
any, and interest will be made on the next succeeding Business Day, and no
interest on such payment will accrue for the period from and after the Maturity.
All percentages resulting from any calculation on floating rate notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All dollar
amounts used in or resulting from any calculation on floating rate notes will be
rounded to the nearest cent with one-half cent being rounded upward.
Interest payments on floating rate notes will equal the amount of interest
accrued from and including the immediately preceding interest payment date in
respect of which interest has been paid or from and including the date of issue,
if no interest has been paid, to but excluding the related interest payment date
or Maturity.
With respect to each floating rate note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. The accrued interest
factor is computed by adding the interest factor calculated for each day in the
period for which accrued interest is being calculated.
o In the case of notes for which the Interest Rate Basis is the CD Rate,
the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, the interest factor
for each day will be computed by dividing the interest rate applicable
to each day by 360.
o In the case of notes for which the Interest Rate Basis is the CMT Rate
or the Treasury Rate, 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.
o The interest factor for notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be
calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied.
Interest Determination Dates. The interest rate applicable to each interest
reset period commencing on the Interest Reset Date with respect to that interest
reset period will be the rate determined as of the applicable "Interest
Determination Date."
o The Interest Determination Date with respect to the CD Rate, the CMT
Rate and the Commercial Paper Rate will be the second Business Day
preceding each Interest Reset Date for the related note.
o The Interest Determination Date with respect to the Federal Funds Rate
and the Prime Rate, will be the Business Day immediately preceding
each Interest Reset Date.
o The Interest Determination Date with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month
immediately preceding each Interest Reset Date on which the Federal
Home Loan Bank of San Francisco publishes the Index, as defined below.
o The Interest Determination Date with respect to LIBOR will be the
second London Business Day preceding each Interest Reset Date.
o The Interest Determination Date with respect to the Treasury Rate will
be the day in the week in which the related Interest Reset Date falls
on which day Treasury Bills, as defined below, are normally auctioned.
Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that the auction may be
held on the preceding Friday; provided, however, that if an auction is
held on the Friday of the week preceding the related Interest Reset
Date, the related Interest Determination Date will be the preceding
Friday; and provided, further, that if an auction falls on any
Interest Reset Date, then the related Interest Reset Date will instead
be the first Business Day following the auction.
o The Interest Determination Date pertaining to a floating rate note the
interest rate of which is determined with reference to two or more
Interest Rate Bases will be the latest Business Day which is at least
two Business Days before the applicable Interest Reset Date for the
applicable floating rate note on which each Interest Reset Basis is
determinable. Each Interest Rate Basis will be determined on the
Interest Determination Date, and the applicable interest rate will
take effect on the related Interest Reset Date.
Calculation Date. Unless otherwise provided in the applicable pricing
supplement, MLPF&S will be the calculation agent. Upon the request of the holder
of any floating rate note, the calculation agent will provide the interest rate
then in effect and, if determined, the interest rate that will become effective
as a result of a determination made for the next Interest Reset Date with
respect to that floating rate note. Unless otherwise specified in the applicable
pricing supplement, the calculation date, if applicable, pertaining to any
Interest Determination Date will be the earlier of:
o the tenth calendar day after the applicable Interest Determination
Date, or, if the tenth calendar day is not a Business Day, the next
succeeding Business Day or
o the Business Day preceding the applicable Interest Payment Date or
Maturity, as the case may be.
CD RATE. CD Rate Notes will bear interest at the rates, calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable CD Rate Notes and in any applicable pricing
supplement.
"CD Rate" means:
(1) the rate on the applicable Interest Determination Date for negotiable
United States dollar certificates of deposit having the Index Maturity
specified in the applicable pricing supplement published in H.15(519)
under the heading "CDs (secondary market)", or
(2) if the rate referred to in clause (1) above is not so published by
3:00 P.M., New York City time, on the related calculation date, the
rate on the applicable Interest Determination Date for negotiable
United States dollar certificates of deposit of the Index Maturity
specified in the applicable pricing supplement as published in H.15
Daily Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "CDs
(secondary market)", or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on the applicable
Interest Determination Date, of three leading non-bank dealers in
negotiable United States dollar certificates of deposit in The City of
New York selected by the calculation agent for negotiable United
States dollar certificates of deposit of major United States money
center banks for negotiable certificates of deposit with a remaining
maturity closest to the Index Maturity specified in the applicable
pricing supplement in an amount that is representative for a single
transaction in that market at that time, or
(4) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (3) above, the CD rate in effect on the applicable
Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
CMT Rate. CMT Rate Notes will bear interest at the rates, calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable CMT Rate Notes and in any applicable pricing
supplement.
"CMT Rate" means:
(1) the rate displayed on the Designated CMT Telerate Page under the
caption "...Treasury Constant Maturities... Federal Reserve Board
Release H.15... Mondays Approximately 3:45 P.M.", under the column for
the Designated CMT Maturity Index for:
(a) if the Designated CMT Telerate Page is 7051, the rate on the
applicable Interest Determination Date, and
(b) if the Designated CMT Telerate Page is 7052, the weekly or the
monthly average, as specified in the applicable pricing
supplement, for the week or the month, as applicable, ended
immediately preceding the week or the month, as applicable, in
which the related Interest Determination Date falls, or
(2) if the rate referred to in clause (1) is no longer displayed on the
relevant page or is not so displayed by 3:00 P.M., New York City time,
on the related calculation date, the treasury constant maturity rate
for the Designated CMT Maturity Index published in H.15(519), or
(3) if the rate referred to in clause (2) is no longer published or is not
published by 3:00 P.M., New York City time, on the related calculation
date, the treasury constant maturity rate for the Designated CMT
Maturity Index, or other United States Treasury rate for the
Designated CMT Maturity Index, for the applicable Interest
Determination Date with respect to the applicable Interest Reset Date
as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury
that the calculation agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published
in H.15(519), or
(4) if the rate referred to in clause (4) applicable information is not
so published by 3:00 P.M., New York City time, on the applicable
calculation date, the rate on the applicable Interest Determination
Date calculated by the calculation agent as a yield to maturity,
based on the arithmetic mean of the secondary market offered rates
as of approximately 3:30 P.M., New York City time, on the applicable
Interest Determination Date reported, according to their written
records, by three leading primary United States government
securities dealers in The City of New York, which may include the
agent or its affiliates (each, a "Reference Dealer"), selected by
the calculation agent from five Reference Dealers selected by the
calculation agent after eliminating the highest quotation, or, in
the event of equality, one of the highest, and the lowest quotation
or, in the event of equality, one of the lowest, for the most
recently issued direct noncallable fixed rate obligations of the
United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index
minus one year, or
(5) if the calculation agent is unable to obtain three applicable Treasury
Note quotations as referred to in clause (4), the rate on the
applicable Interest Determination Date calculated by the calculation
agent as a yield to maturity based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M., New York
City time, on the applicable Interest Determination Date of three
Reference Dealers in The City of New York selected by the calculation
agent from five Reference Dealers selected by the calculation agent
after eliminating the highest quotation or, in the event of equality,
one of the highest and the lowest quotation or, in the event of
equality, one of the lowest, for Treasury Notes with an original
maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest
to the Designated CMT Maturity Index and in an amount of at least $100
million, or
(6) if three or four and not five of Reference Dealers are quoting as
referred to in clause (5) above, the rate will be calculated by the
calculation agent as the arithmetic mean of the offered rates obtained
and neither the highest nor the lowest of quotes will be eliminated,
or
(7) if fewer than three Reference Dealers selected by the calculation
agent are quoting as mentioned in clause (6), the rate in effect on
the applicable Interest Determination Date.
If two Treasury Notes with an original maturity as described in
clause (6) have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the calculation agent will obtain from
five Reference Dealers quotations for the Treasury Notes with the
shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.
or any successor service on the page specified in the applicable pricing
supplement or any other page as may replace the specified page on that service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519), or, if no page is specified in the applicable pricing supplement,
page 7052.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities, either 1, 2, 3, 5, 7, 10, 20 or 30 years,
specified in the applicable pricing supplement with respect to which the CMT
Rate will be calculated or, if no maturity is specified in the applicable
pricing supplement, 2 years.
COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest at
the rates, calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any, specified in the applicable Commercial Paper
Rate Notes and in any applicable pricing supplement.
"Commercial Paper Rate" means:
(1) the Money Market Yield on the applicable Interest Determination Date
of the rate for commercial paper having the Index Maturity specified
in the applicable pricing supplement published in H.15(519) under the
caption "Commercial Paper-Nonfinancial", or
(2) if the rate described in clause (1) is not so published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date for commercial paper having the
Index Maturity specified in the applicable pricing supplement
published in H.15 Daily Update, or other recognized electronic source
used for the purpose of displaying the applicable rate, under the
caption "Commercial Paper-Nonfinancial", or
(3) if the rate is referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on
the applicable Interest Determination Date of three leading dealers of
United States dollar commercial paper in The City of New York, which
may include the agent and its affiliates, selected by the calculation
agent for commercial paper having the Index Maturity specified in the
applicable pricing supplement placed for industrial issuers whose bond
rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization, or
(4) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (3), the rate in effect on the applicable Interest
Determination Date.
"Money Market Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
D x 360
Money Market Yield = ---------------------- x 100
360 - ( D x M )
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
ELEVENTH DISTRICT COST OF FUNDS RATE. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates, calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable Eleventh District Cost of Funds Rate Notes and in
any applicable pricing supplement.
"Eleventh District Cost of Funds Rate" means:
(1) the rate equal to the monthly weighted average cost of funds for the
calendar month immediately preceding the month in which the applicable
Interest Determination Date falls as set forth under the caption "11th
District" on the display on Bridge Telerate, Inc. or any successor
service on page 7058 or any other page as may replace the specified
page on that service ("Telerate Page 7058") as of 11:00 A.M., San
Francisco time, on the applicable Interest Determination Date, or
(2) if the rate referred to in clause (1) does not appear on Telerate Page
7058 on the related Interest Determination Date, the monthly weighted
average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District that was most recently announced (the
"Index") by the Federal Home Loan Bank of San Francisco as the cost of
funds for the calendar month immediately preceding the applicable
Interest Determination Date, or
(3) if the Federal Home Loan Bank of San Francisco fails to announce the
Index on or before the applicable Interest Determination Date for the
calendar month immediately preceding the applicable Interest
Determination Date, the rate in effect on the applicable Interest
Determination Date.
FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the
rates, calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, specified in the applicable Federal Funds Rate Notes
and in any applicable pricing supplement.
"Federal Funds Rate" means:
(1) the rate on the applicable Interest Determination Date for United
States dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)", as displayed on Bridge Telerate,
Inc. or any successor service on page 120 or any other page as may
replace the applicable page on that service ("Telerate Page 120"), or
(2) if the rate referred to in clause (1) does not appear on Telerate Page
120 or is not so published by 3:00 P.M., New York City time, on the
related calculation date, the rate on the applicable Interest
Determination Date for United States dollar federal funds published in
H.15 Daily Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "Federal
Funds/Effective Rate", or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged
by three leading brokers of United States dollar federal funds
transactions in The City of New York, which may include the agent or
its affiliates, selected by the calculation agent before 9:00 A.M.,
New York City time, on the applicable Interest Determination Date, or
(4) if the brokers selected by the calculation agent are not quoting as
mentioned in clause (3), the rate in effect on the applicable Interest
Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates, calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, specified in
the applicable LIBOR Notes and in any applicable pricing supplement.
"LIBOR" means:
(1) if "LIBOR Telerate" is specified in the applicable pricing supplement
or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR,
LIBOR will be the rate for deposits in the LIBOR Currency, as defined
below, having the Index Maturity specified in the applicable pricing
supplement, commencing on the second London Business Day immediately
following that Interest Determination Date that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on the applicable
Interest Determination Date, or
(2) if "LIBOR Reuters" is specified in the applicable pricing supplement,
LIBOR will be the arithmetic mean of the offered rates for deposits in
the LIBOR Currency having the Index Maturity specified in the
applicable pricing supplement, commencing on the second London
Business Day immediately following that Interest Determination Date,
that appear, on the Designated LIBOR Page specified in the applicable
pricing supplement as of 11:00 A.M., London time, on the applicable
Interest Determination Date. If the Designated LIBOR Page by its terms
provides only for a single rate, then the single rate will be used, or
(3) with respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may
be, on the designated LIBOR Page as specified in clauses (1) and
(2), respectively, the rate calculated by the calculation agent as
the arithmetic mean of at least two quotations obtained by the
calculation agent after requesting the principal London offices of
each of four major reference banks, which may include affiliates of
the agent, in the London interbank market to provide the calculation
agent with its offered quotation for deposits in the LIBOR Currency
for the period of the Index Maturity specified in the applicable
pricing supplement, commencing on the second London Business Day
immediately following the applicable Interest Determination Date, to
prime banks in the London interbank market at approximately 11:00
A.M., London time, on the applicable Interest Determination Date and
in a principal amount that is representative for a single
transaction in the applicable LIBOR Currency in that market at that
time, or
(4) if fewer than two quotations referred to in clause (3) are so
provided, the rate on the applicable Interest Determination Date
calculated by the calculation agent as the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in the applicable Principal
Financial Center(s), on the applicable Interest Determination Date by
three major banks, which may include affiliates of the agent, in the
applicable Principal Financial Center selected by the calculation
agent for loans in the LIBOR Currency to leading European banks,
having the Index Maturity specified designated in the applicable
pricing supplement and in a principal amount that is representative
for a single transaction in the applicable LIBOR Currency in that
market at that time, or
(5) if the banks so selected by the calculation agent are not quoting as
mentioned in clause (4), the rate in effect on the applicable Interest
Determination Date.
"LIBOR Currency" means the currency specified in the
applicable pricing supplement as to which LIBOR will be
calculated or, if no currency is specified in the applicable
pricing supplement, United States dollars.
"Designated LIBOR Page" means either:
o if "LIBOR Telerate" is designated in the applicable pricing supplement
or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. or any successor service on the page
specified in such pricing supplement or any page as may replace the
specified page on that service for the purpose of displaying the
London interbank rates of major banks for the applicable LIBOR
Currency, or
o if "LIBOR Reuters" is specified in the applicable pricing supplement,
the display on the Reuter Monitor Money Rates Service or any successor
service on the page specified in the applicable pricing supplement or
any other page as may replace the specified page on that service for
the purpose of displaying the London interbank rates of major banks
for the applicable LIBOR Currency.
PRIME RATE. Prime Rate Notes will bear interest at the rates, calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any, specified in the applicable Prime Rate Notes and any applicable pricing
supplement.
"Prime Rate" means:
(1) the rate on the applicable Interest Determination Date as published in
H.15(519) under the heading "Bank Prime Loan", or
(2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date published in H.15 Daily
Update, or such other recognized electronic source used for the
purpose of displaying the applicable rate under the caption "Bank
Prime Loan", or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate
calculated by the calculation agent as the arithmetic mean of the
rates of interest publicly announced by at least four banks that
appear on the Reuters Screen US PRIME 1 Page as the particular bank's
prime rate or base lending rate as of 11:00 A.M., New York City time,
on the applicable Interest Determination Date, or
(4) if fewer than four rates described in clause (3) by 3:00 P.M., New
York City time, on the related calculation date as shown on Reuters
Screen vs Prime 1, the rate on the applicable Interest Determination
Date calculated by the calculation agent as the arithmetic mean of
the prime rates or base lending rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of
the close of business on the applicable Interest Determination Date
by three major banks, which may include affiliates of the agent, in
The City of New York selected by the calculation agent, or
(5) if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), the rate in effect on the applicable Interest
Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service or any successor service on the "US PRIME 1" Page or other
page as may replace the US PRIME 1 Page on such service for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Treasury Rate Notes will bear interest at the rates,
calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any, specified in the applicable Treasury Rate Notes and in any
applicable pricing supplement.
"Treasury Rate" means:
(1) the rate from the auction held on the applicable Interest
Determination Date (the "Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified in the
applicable pricing supplement under the caption "INVESTMENT RATE" on
the display on Bridge Telerate, Inc. or any successor service on page
56 or any other page as may replace page 56 on that service ("Telerate
Page 56") or page 57 or any other page as may replace page 57 on that
service ("Telerate Page 57"), or
(2) if the rate described in clause (1) is not so published by 3:00 P.M.,
New York City time, on the related calculation date, the Bond
Equivalent Yield of the rate for the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic source
used for the purpose of displaying the applicable rate, under the
caption "U.S. Government Securities/Treasury Bills/Auction High", or
(3) if the rate described in clause (2) is not so published by 3:00 P.M.,
New York City time, on the related calculation date, the Bond
Equivalent Yield of the auction rate of the applicable Treasury Bills
announced by the United States Department of the Treasury, or
(4) in the event that the rate referred to in clause (3) is not announced
by the United States Department of the Treasury, or if the Auction is
not held, the Bond Equivalent Yield of the rate on the applicable
Interest Determination Date of Treasury Bills having the Index
Maturity specified in the applicable Pricing Supplement published in
H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market", or
(5) if the rate referred to in clause (4) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on
the applicable Interest Determination Date of the applicable Treasury
Bills as published in H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying the applicable
rate, under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market", or
(6) if the rate referred to in clause (5) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on
the applicable Interest Determination Date calculated by the
calculation agent as the Bond Equivalent Yield of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New
York City time, on the applicable Interest Determination Date, of
three primary United States government securities dealers, which may
include the agent or its affiliates, selected by the calculation
agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable pricing
supplement, or
(7) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (6), the rate in effect on the applicable Interest
Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
D x N
Bond Equivalent Yield = -------------------- x 100
360 - ( D x M )
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to an issue of notes, including the
determination of one or more Interest Rate Bases, the specification of one or
more Interest Rate Bases, the calculation of the interest rate applicable to a
floating rate note, the applicable interest payment dates, the stated maturity
date, any redemption or repayment provisions or any other matter relating to the
applicable notes may be modified by the terms as specified under "Other
Provisions" on the face of the applicable notes or in an Addendum relating to
the applicable notes, if so specified on the face of the applicable notes and in
the applicable pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
ML&Co. may from time to time offer notes at a price less than their
redemption price at Maturity, resulting in the applicable notes being treated as
if they were issued with original issue discount for federal income tax purposes
("Original Issue Discount Notes"). Original Issue Discount Notes may currently
pay no interest or interest at a rate which at the time of issuance is below
market rates. Additional considerations relating to any Original Issue Discount
Notes will be described in the applicable pricing supplement.
AMORTIZING NOTES
ML&Co. may from time to time offer notes ("Amortizing Notes"), with amounts
of principal and interest payable in installments over the term of the notes.
Unless otherwise specified in the applicable pricing supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable on the Amortizing Notes and then to the reduction of
the unpaid principal amount of the Amortizing Notes. Further information
concerning additional terms and conditions of any issue of Amortizing Notes will
be provided in the applicable pricing supplement. A table setting forth
repayment information in respect of each Amortizing Note will be included in the
applicable note and the applicable pricing supplement.
LINKED NOTES
ML&Co. may from time to time offer notes ("Linked Notes") the principal
value of which at Maturity will be determined by reference to:
(a) one or more equity or debt securities, including, but not limited to,
the price or yield of such securities,
(b) any statistical measure of economic or financial performance,
including, but not limited to, any currency, consumer price or
mortgage index, or
(c) the price or value of any commodity or any other item or index or any
combination,
(collectively, the "Linked Securities"). The payment or delivery of any
consideration on any Linked Note at Maturity will be determined by the decrease
or increase, as applicable, in the price or value of the applicable Linked
Securities. The terms of and any additional considerations, including any
material tax consequences, relating to any Linked Notes will be described in the
applicable pricing supplement.
BOOK-ENTRY NOTES
DESCRIPTION OF THE GLOBAL SECURITIES
Upon issuance, all notes in book-entry form having the same date of issue,
Maturity and otherwise having identical terms and provisions will be represented
by one or more fully registered global notes (the "Global Notes"). Each Global
Note will be deposited with, or on behalf of, The Depository Trust Company as
depository registered in the name of the depository or a nominee of the
depository. Unless and until it is exchanged in whole or in part for notes in
certificated form, no Global Note may be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor of the depository or a nominee of the successor.
DTC PROCEDURES
The following is based on information furnished by the depository:
The depository will act as securities depository for the notes in
book-entry form. The notes in book-entry form will be issued as fully registered
securities registered in the name of Cede & Co., the depository's partnership
nominee. One fully registered Global Note will be issued for each issue of notes
in book-entry form, each in the aggregate principal amount of the issue, and
will be deposited with the depository. If, however, the aggregate principal
amount of any issue exceeds $200,000,000, one Global Note will be issued with
respect to each $200,000,000 of principal amount and an additional Global Note
will be issued with respect to any remaining principal amount of the issue.
The depository is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The depository holds securities that its participants deposit with the
depository. The depository also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of the depository include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
The depository is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the depository's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to the
depository and its participants are on file with the SEC.
Purchasers of notes in book-entry form under the depository's system must
be made by or through direct participants, which will receive a credit for those
notes in book-entry form on the depository's records. The ownership interest of
each actual purchaser of each note in book-entry form represented by a Global
Note is, in turn, to be recorded on the records of direct participants and
indirect participants. Beneficial owners in book-entry form will not receive
written confirmation from the depository of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which the beneficial owner entered
into the transaction. Transfers of ownership interests in a Global Note
representing notes in book-entry form are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners. Beneficial
owners of a Global Note representing notes in book-entry form will not receive
notes in certificated form representing their ownership interests therein,
except in the event that use of the book-entry system for such notes in
book-entry form is discontinued.
To facilitate subsequent transfers, all Global Notes representing notes in
book-entry form which are deposited with, or on behalf of, the depository are
registered in the name of the depository's nominee, Cede & Co. The deposit of
Global Notes with, or on behalf of, the depository and their registration in the
name of Cede & Co. effect no change in beneficial ownership. The depository has
no knowledge of the actual beneficial owners of the Global Notes representing
the notes in book-entry form; the depository's records reflect only the identity
of the direct participants to whose accounts such notes in book-entry form are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the depository to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the depository nor Cede & Co. will consent or vote with respect to
the Global Notes representing the notes in book-entry form. Under its usual
procedures, the depository mails an omnibus proxy to ML&Co. as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in book-entry
form are credited on the applicable record date.
ML&Co. will make principal, premium, if any, and/or interest, if any,
payments on the Global Notes representing the notes in book-entry form in
immediately available funds to the depository. The depository's practice is to
credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the depository's records
unless the depository has reason to believe that it will not receive payment on
the applicable payment date. Payments by participants to beneficial owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of the applicable participant
and not of the depository, the trustee or ML&Co., subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to the depository is the
responsibility of ML&Co. and the trustee, disbursement of payments to direct
participants will be the responsibility of the depository, and disbursement of
payments to the beneficial owners will be the responsibility of direct
participants and indirect participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the notes in book-entry form of like tenor and terms are being redeemed,
the depository's practice is to determine by lot the amount of the interest of
each direct participant in the issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its
notes in book-entry form repaid by ML&Co., through its participant, to the
trustee, and will effect delivery of the applicable notes in book-entry form by
causing the direct participant to transfer the participant's interest in the
Global Note notes in book-entry form, on the depository's records, to the
trustee.
The depository may discontinue providing its services as securities
depository with respect to the notes in book-entry form at any time by giving
reasonable notice to ML&Co. or the trustee. In the event that a successor
securities depository is not obtained, notes in certificated form are required
to be printed and delivered.
ML&Co. may decide to discontinue use of the system of book-entry transfers
through the depository or a successor securities depository. In that event,
notes in certificated form will be printed and delivered.
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in
Global Notes.
So long as the depository, or its nominee, is the registered owner of a
Global Note, the depository or its nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by such Global Note
for all purposes under the 1993 Indenture. Except as provided below, beneficial
owners of a Global Note will not be entitled to have the notes represented by a
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of the notes in definitive form and will not be
considered the owners or holders thereof under the 1993 Indenture. Accordingly,
each person owning a beneficial interest in a Global Note must rely on the
procedures of the depository and, if that person is not a participant, on the
procedures of the participant through which that person owns its interest, to
exercise any rights of a holder under the 1993 Indenture. ML&Co. understands
that under existing industry practices, in the event that ML&Co. requests any
action of holders or that an owner of a beneficial interest in a Global Note
desires to give or take any action which a holder is entitled to give or take
under the 1993 Indenture, the depository would authorize the participants
holding the relevant beneficial interests to give or take the desired action,
and the participants would authorize beneficial owners owning through the
participants to give or take the desired action or would otherwise act upon the
instructions of beneficial owners.
Exchange for Notes in Certificated Form
If:
(a) the depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by ML&Co.
within 60 days,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the Global Notes shall be exchangeable, or
(c) an Event of Default has occurred and is continuing with respect to the
notes,
the Global Note or Global Notes will be exchangeable for notes in certificated
form of like tenor and of an equal aggregate principal amount, in denominations
of $1,000 and integral multiples of $1,000. The certificated notes will be
registered in the name or names as the depository instructs the trustee. It is
expected that instructions may be based upon directions received by the
depository from participants with respect to ownership of beneficial interests
in Global Notes.
The information in this section concerning the depository and the
depository's system has been obtained from sources that ML&Co. believes to be
reliable, but ML&Co. takes no responsibility for the accuracy of the
information.
UNITED STATES FEDERAL INCOME TAXATION
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change, including changes in effective dates, or possible differing
interpretations. It deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding notes as a hedge against currency
risks or as a position in a "straddle" 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. Persons considering the purchase of the notes should consult their own
tax advisors concerning the application of 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 prospectus, the term "U.S. Holder" means a beneficial owner
of a note that is for United States Federal income tax purposes:
(1) a citizen or resident of the United States,
(2) a corporation or a partnership (including an entity treated as a
corporation or a partnership for United States Federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia (unless, in the
case of a partnership, Treasury regulations are adopted that provide
otherwise),
(3) an estate whose income is subject to United States Federal income tax
regardless of its source,
(4) 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
(5) 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.
Certain trusts not described in clause (4) above in existence on August 20, 1996
that elect to be treated as a United States person will also be a U.S. Holder
for purposes of the following discussion. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. 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).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service on
January 27, 1994, as amended on June 11, 1996, under the original issue discount
provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
the note). The issue price of each note of an issue of notes equals the first
price at which a substantial amount of the notes has been sold (ignoring sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a note is the sum of all payments provided by
the note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. In addition, under the OID Regulations, if a
note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of the note (e.g., notes with teaser rates or
interest holidays), and if the greater of either the resulting foregone interest
on the note or any "true" discount on the note (i.e., the excess of the note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then the stated interest on the note would be treated as
original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a note are 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). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of the U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to the
Discount Note for each day during the taxable year (or portion of the taxable
year) on which the U.S. Holder held the Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between
o the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined
on the basis of compounding at the close of each accrual period and
appropriately adjusted to take into account the length of the
particular accrual period) and
o the amount of any qualified stated interest payments allocable to such
accrual period.
The "adjusted issue price" of a Discount Note at the beginning of any accrual
period is the sum of the issue price of the Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Discount Note that were not qualified stated
interest payments. Under these rules, U.S. Holders generally will have to
include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium". Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed 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.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations unless such cap or floor is fixed
throughout the term of the note. 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).
A "qualified inverse floating rate" is any objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate. The OID Regulations also provide that
if a Variable Note provides for stated interest at a fixed rate for an initial
period of one year or less followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, and if
the interest on a 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. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations 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. The amount of qualified stated interest and
the amount of original issue discount, if any, that accrues during an accrual
period on such 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.
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.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. 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. In
general, the CPDI Regulations would cause the timing and character of income,
gain or loss reported on a contingent payment debt instrument to substantially
differ from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current United
States Federal income tax law. 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 such 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 will be 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 apply to
debt instruments issued on or after August 13, 1996. The proper United States
Federal income tax treatment of Variable Notes that are treated as contingent
payment debt obligations will be more fully described in the applicable pricing
supplement. Furthermore, any other special United States Federal income tax
considerations, not otherwise discussed herein, which are applicable to any
particular issue of notes will be discussed in the applicable pricing
supplement.
ML&Co. may issue notes which;
o may be redeemable at the option of ML&Co. prior to their stated
maturity (a "call option") and/or
o may be repayable at the option of the holder prior to their stated
maturity (a "put option").
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors intending to purchase notes with such
features should consult their own tax advisors, since the original issue
discount consequences will depend, in part, on the particular terms and features
of the purchased notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
FOREIGN-CURRENCY NOTES. The United States Federal income tax consequences
of the purchase, ownership and disposition of notes providing for payments
denominated in a currency other than U.S. dollars will be more fully described
in the applicable pricing supplement.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased the
note at a "market discount", unless such market discount is less than a
specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a note as ordinary
income to the extent of the lesser of:
o the amount of such payment or realized gain or
o the market discount which has not previously been included in income
and is treated as having accrued on the note at the time of such
payment or disposition.
Market discount will be considered to accrue ratably during the period from the
date of acquisition to the maturity date of the note, unless the U.S. Holder
elects to accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
PREMIUM. If a U.S. Holder purchases a note for an amount that is greater
than the sum of all amounts payable on the note after the purchase date other
than payments of qualified stated interest, the U.S. Holder will be considered
to have purchased the note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the note and may offset interest
otherwise required to be included in respect of the note during any taxable year
by the amortized amount of such excess for the taxable year. However, if the
note may be optionally redeemed after the U.S. Holder acquires it at a price in
excess of its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond premium until
later in the term of the note. Any election to amortize bond premium applies to
all taxable debt obligations then owned and thereafter acquired by the U.S.
Holder and may be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
the U.S. Holder's adjusted tax basis in the note. 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 original issue discount included in income (and accrued
market discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
the note. Such gain or loss generally will be long-term capital gain or loss if
the note were held for more than one year. Long-term capital gains of
individuals are subject to reduced capital gain rates while short-term capital
gains are subject to ordinary income rates. The deductibility of capital losses
is subject to certain limitations. Prospective investors should consult their
own tax advisors concerning these tax law provisions.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of ML&Co., a controlled foreign corporation related
to ML&Co. or a bank receiving interest described in section 881(c)(3)(A) of the
Code. To qualify for the exemption from taxation, the last United States payor
in the chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (1) is signed by the beneficial owner of the note under penalties of
perjury, (2) certifies that such owner is not a U.S. Holder and (3) provides the
name and address of the beneficial owner. The statement may be made on an IRS
Form W-8 or a substantially similar form, and the beneficial owner must inform
the Withholding Agent of any change in the information on the statement within
30 days of such change. If a 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. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
On October 6, 1997, the Treasury issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should consult
its tax advisor in this regard.
The notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of ML&Co. or,
at the time of such individual's death, payments in respect of the notes would
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the 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 31% of the entire purchase price, unless either:
o the broker determines that the seller is a corporation or other exempt
recipient or
o the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such
seller is a non-U.S. Holder (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either:
o the broker determines that the seller is an exempt recipient or
o the seller certifies its non-U.S. status (and certain other conditions
are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence. In addition, prospective U.S.
Holders are strongly urged to consult their own tax advisors with respect to the
New Withholding Regulations. See "United States Federal Income Taxation-Non-U.S.
Holders".
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
ML&Co. is offering the notes for sale on a continuing basis through the
agent, MLPF&S, who will purchase the notes, as principal, from ML&Co., for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the agent, or,
if so specified in an applicable pricing supplement, for resale at a fixed
public offering price. Unless otherwise specified in an applicable pricing
supplement, any note sold to the agent as principal will be purchased by the
agent at a price equal to 100% of the principal amount of the note less a
percentage of the principal amount equal to the commission applicable to an
agency sale as described below of a note of identical maturity. If agreed to by
ML&Co. and the agent, the agent may utilize its reasonable efforts on an agency
basis to solicit offers to purchase the notes at 100% of the principal amount of
the notes, unless otherwise specified in an applicable pricing supplement.
ML&Co. will pay a commission to the agent, ranging from .050% to .600% of the
principal amount of a note, depending upon its stated maturity or, with respect
to a note for which the stated maturity is in excess of 30 years, a commission
as agreed upon by ML&Co. and the agent at the time of sale, sold through the
agent.
The agent may sell notes it has purchased from ML&Co. as principal to other
dealers for resale to investors, and may allow any portion of the discount
received in connection with such purchases from ML&Co. to such dealers. After
the initial public offering of notes, the public offering price, in the case of
notes to be resold at a fixed public offering price, the concession and the
discount allowed to dealers may be changed.
ML&Co. reserves the right to withdraw, cancel or modify the offer made by
this prospectus supplement without notice and may reject orders, in whole or in
part, whether placed directly with ML&Co. or through the agent. The agent will
have the right, in its discretion reasonably exercised, to reject in whole or in
part any offer to purchase notes received by the agent.
Unless otherwise specified in an applicable pricing supplement, payment of
the purchase price of the notes will be required to be made in immediately
available funds in U.S. dollars or the Specified Currency, as the case may be,
in New York City on the date of settlement.
No Note will have an established trading market when issued. Unless
specified in the applicable pricing supplement, ML&Co. will not list the notes
on any securities exchange. The agent may from time to time purchase and sell
notes in the secondary market, but the agent is not obligated to do so, and
there can be no assurance that there will be a secondary market for the notes or
liquidity in the secondary market if one develops. From time to time, the agent
may make a market in the notes.
The agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended. ML&Co. has agreed to indemnify the agent
against or to make contributions relating to certain civil liabilities,
including liabilities under the Securities Act, or to contribute to payments the
agent may be required to make in respect thereof. ML&Co. has agreed to reimburse
the agent for certain expenses.
From time to time, ML&Co. may issue and sell other securities described in
the accompanying prospectus, and the amount of notes that ML&Co. may offer and
sell under this prospectus supplement may be reduced as a result of such sales.
In connection with the offering of notes purchased by the agent as
principal on a fixed price basis, the agent is permitted to engage in certain
transactions that stabilize the price of the notes. These transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the agent creates a short position in the notes in
connection with the offering, i.e., if it sells notes in an aggregate principal
amount exceeding that set forth in the applicable pricing supplement, then the
agent may reduce that short position by purchasing notes in the open market. In
general, purchases of notes for the purpose of stabilization or to reduce a
short position could cause the price of the notes to be higher than in the
absence of these purchases.
Neither ML&Co. nor the agent make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither ML&Co. nor the agent
makes any representation that the agent will engage in any such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The distribution of the notes will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the NASD.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for ML&Co. and the agent by
Brown & Wood LLP, New York, New York.
- --------------------------------------------------------------------------------
[LOGO]
$
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES,
SERIES B
--------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------
Merrill Lynch & Co.
, 199
- --------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
SENIOR DEBT SECURITIES
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in our outstanding senior
debt securities listed below and the senior debt securities that we will issue
in the future.
Redeemable Notes
$1,650,000,000 of 6% Notes due February 12, 2003; $125,000,000 of 6 3/8% Notes due September 8, 2006;
$150,000,000 of 7.05% Notes due April 15, 2003; $700,000,000 6 1/2% Notes due July 15, 2018;
$750,000,000 Floating Rate Notes due June 24, 2003; $1,000,000,000 6 7/8% Notes due November 15, 2018; and
$500,000,000 6% Notes due November 15, 2004; $33,015,000 of 8.40% Notes due November 1, 2019.
$500,000,000 6% Notes due July 15, 2005;
Non-Redeemable Notes
$200,000,000 of 6 3/8% Notes due March 30, 1999; $500,000,000 of 6.55% Notes due August 1, 2004;
$300,000,000 of 8 1/4% Notes due November 15, 1999; $200,000,000 of 6 1/4% Notes due January 15, 2006;
$150,000,000 of 8 3/8% Notes due February 9, 2000; $200,000,000 of 7% Notes due March 15, 2006;
$150,000,000 of 6.70% Notes due August 1, 2000; $350,000,000 of 7 3/8% Notes due May 15, 2006;
$500,000,000 of 6% Notes due January 15, 2001; $500,000,000 of 7% Notes due January 15, 2007;
$250,000,000 of 6% Notes due March 1, 2001; $150,000,000 of 8% Notes due June 1, 2007;
$300,000,000 of 6 1/2% Notes due April 1, 2001; $250,000,000 of 6.56% Notes due December 16, 2007;
$225,000,000 of 8% Notes due February 1, 2002; $250,000,000 of 7% Notes due April 27, 2008;
$150,000,000 of 7 3/8% Notes due August 17, 2002; $150,000,000 of 6 1/4% Notes due October 15, 2008;
$250,000,000 of 6.64% Notes due September 19, 2002; $500,000,000 of 6 3/8% Notes due October 15, 2008;
$300,000,000 of Floating Rate Notes due February 4, 2003; $250,000,000 of 6 3/4% Notes due June 1, 2028; and
$200,000,000 of 6 7/8% Notes due March 1, 2003; $2,000,000,000 of 6% Notes due February 17, 2009.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------------
Merrill Lynch & Co.
--------------------
The date of this prospectus is , 199 .
TABLE OF CONTENTS
MERRILL LYNCH & CO., INC.....................................................3
RATIO OF EARNINGS TO FIXED CHARGES...........................................4
DESCRIPTION OF SENIOR DEBT SECURITIES........................................4
Redeemable Notes.........................................................11
Non-Redeemable Notes.....................................................16
Non-Redeemable Fixed Rate Notes..........................................16
OTHER TERMS.................................................................18
Limitations Upon Liens...................................................18
Limitation on Disposition of Voting Stock of, and
Merger and Sale of Assets by, MLPF&S...................................18
Merger and Consolidation.................................................18
Modification and Waiver..................................................19
Events of Default........................................................19
WHERE YOU CAN FIND MORE INFORMATION.........................................21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................22
PLAN OF DISTRIBUTION........................................................22
EXPERTS.....................................................................23
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S. subsidiaries
and affiliates such as Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Merrill Lynch Government Securities Inc., Merrill Lynch Capital Services, Inc.,
Merrill Lynch International, Merrill Lynch Capital Markets Bank Ltd., Merrill
Lynch Asset Management L.P. and Merrill Lynch Mercury Asset Management, provides
investment, financing, advisory, insurance, and related products on a global
basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients,
including individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281; our telephone number is (212)
449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically to
Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
senior debt securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc., in
a transaction accounted for as a pooling-of-interests. The following information
for the fiscal years 1994 through 1997 has been restated as if the two entities
had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
YEAR ENDED LAST FRIDAY IN DECEMBER
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)...... 1.2 1.2 1.2 1.2 1.1
______________
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF SENIOR DEBT SECURITIES
The senior debt securities were issued as a series of senior debt
securities under the 1983 Indenture, dated as of April 1, 1983, as amended and
restated, between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of the
1983 Indenture is filed as an exhibit to the registration statement relating to
the senior debt securities of which this prospectus is a part. The following
summaries of certain provisions of the 1983 Indenture are not complete and are
subject to, and qualified in their entirety by reference to, all provisions of
the 1983 Indenture, including the definitions of terms in the 1983 Indenture.
Series of senior debt securities may from time to time be issued under the
1983 Indenture, without limitation as to aggregate principal amount, in one or
more series and upon terms as ML&Co. may establish under the provisions of the
1983 Indenture.
The 1983 Indenture and each series of the senior debt securities are
governed by and construed in accordance with the laws of the State of New York.
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 senior debt securities in
which $2,500,000 or more has been invested. While ML&Co. believes that New York
law would be given effect by a state or Federal court sitting outside of New
York, state laws frequently regulate the amount of interest that may be charged
to and paid by a borrower, including, in some cases, corporate borrowers. ML&Co.
agrees for the benefit of the holders of its senior debt securities, to the
extent permitted by law, not to claim voluntarily the benefits of any laws
concerning usurious rates of interest against a holder of senior debt
securities.
Outstanding senior debt securities are issuable only in fully registered
form without coupons, in denominations of $1,000 and integral multiples of
$1,000, unless otherwise indicated. No service charge will be made for any
registration of transfer or exchange of senior debt securities, but ML&Co. may
require payment of a sum sufficient to cover any tax or other governmental
charges that may be imposed in connection with any registration, transfer or
exchange.
ML&Co. may issue senior debt securities with terms different from those of
senior debt securities previously issued, and issue additional senior debt
securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all other
unsecured and unsubordinated indebtedness of ML&Co. However, because ML&Co. is a
holding company, the rights of ML&Co. and its creditors, including the holders
of senior debt securities, to participate in any distribution of the assets of
any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of ML&Co. itself as a creditor of the subsidiary may
be recognized. In addition, dividends, loans and advances from certain
subsidiaries, including MLPF&S, to ML&Co. are restricted by net capital
requirements under the Exchange Act, and under rules of exchanges and other
regulatory bodies.
Principal, premium and interest on the senior debt securities will be
payable at the office of the trustee in New York City so designated, provided
that, unless otherwise set forth below, payment of interest may be made at the
option of ML&Co. by check mailed to the address of the person entitled to that
payment as shown on the security register. In addition, the transfer of the
senior debt securities is and will be registrable, and senior debt securities
are and will be exchangeable at the trustee's designated office.
Unless otherwise specified with respect to a particular series of senior
debt securities, the senior debt securities are not subject to any sinking fund
and are not redeemable before maturity.
BOOK-ENTRY SECURITIES
Specified series of the senior debt securities have been issued in global
form and are considered book-entry securities. Beneficial owners of these senior
debt securities will not receive physical delivery of these securities nor may
they be entitled to have these securities registered in their name. These
book-entry securities are represented by one or more fully registered global
securities. Each global security has been deposited with, or on behalf of, The
Depository Trust Company, also known as DTC, as depositary, registered in the
name of DTC or its nominee. Unless and until it is exchanged in whole or in
part for senior debt securities in definitive form, no global security may be
transferred except as a whole by the depositary to a nominee of the depositary
or by a nominee of the depositary to the depositary or another nominee of the
depositary or by the depositary or any nominee to a successor of the depositary
or a nominee of that successor.
In some cases, investors of outstanding senior debt securities have elected
to hold interests in the global notes through either the depositary in the
United States or Cedelbank, societe anonyme, and Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear System, if they are
participants in these systems, or indirectly through organizations which are
participants in these systems. Cedelbank and Euroclear hold interests on behalf
of their participants through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositaries, which in turn
will hold these interests in customers' securities accounts in the depositaries'
names on the books of the depositary. Citibank, N.A. acts as depositary for
Cedelbank and The Chase Manhattan Bank acts as depositary for Euroclear.
DTC PROCEDURES
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct participants of DTC include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange Inc. and the National Association of Securities Dealers, Inc. Access to
DTC's system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly. The rules
applicable to DTC and its participants are on file with the SEC.
Purchases of securities under DTC's system must be made by or through
direct participants, which will receive a credit for the securities on DTC's
records. The ownership interest of each beneficial owner is in turn to be
recorded on the records of direct and indirect participants. Beneficial owners
will not receive written confirmation from DTC of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which the beneficial owner entered
into the transaction. Transfers of ownership interests in the securities are to
be accomplished by entries made on the books of participants acting on behalf of
beneficial owners.
To facilitate subsequent transfers, all securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the securities; DTC's records reflect only the identity of the direct
participants to whose accounts the securities are credited, which may or may not
be the beneficial owners. The participants are responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct and
indirect participants to beneficial owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
securities. Under its usual procedures, DTC mails an omnibus proxy to ML&Co. as
soon as possible after the applicable record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants identified
in a listing attached to the omnibus proxy to whose accounts the securities are
credited on the record date.
Principal, premium, if any, and/or interest, if any, payments on the senior
debt securities will be made in immediately available funds to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the Depositary's
records unless DTC has reason to believe that it will not receive payment on
that date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of that participant and not of DTC, the
trustee or ML&Co., subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to DTC is the responsibility of ML&Co. or the trustee,
disbursement of these payments to direct participants is the responsibility of
DTC, and disbursement of these payments to the beneficial owners is the
responsibility of direct and indirect participants.
EXCHANGE FOR CERTIFICATED SECURITIES
If the depositary is at any time unwilling or unable to continue as
depositary and
(a) a successor depositary is not appointed by ML&Co. within 60 days,
(b) ML&Co. executes and delivers to the trustee a company order to the
effect that the global notes shall be exchangeable, and
(c) an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the senior debt securities,
the global notes will be exchangeable for senior debt securities in definitive
form of like tenor and of an equal aggregate principal amount, in denominations
of $1,000 and integral multiples of $1,000. The definitive securities will be
registered in the name or names as the depositary shall instruct the trustee. It
is expected that these instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global notes.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, senior debt
securities in definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that ML&Co. believes to be reliable, but ML&Co. takes no
responsibility for its accuracy.
CEDELBANK
Cedelbank has advised ML&Co. that it is incorporated under the laws of
Luxembourg as a professional depositary. Cedelbank holds securities for its
participating organizations and facilities the clearance and settlement of
securities transactions between Cedelbank participants through electronic
book-entry changes in accounts of Cedelbank participants, thereby eliminating
the need for physical movement of certificates. Cedelbank provides to its
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedelbank interfaces with domestic markets in several
countries. As a professional depositary, Cedelbank is subject to regulation by
the Luxembourg Monetary Institute. Cedelbank participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Cedelbank is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Cedelbank participant either directly
or indirectly.
Distributions with respect to the book-entry securities held beneficially
through Cedelbank are credited to cash accounts of Cedelbank participants in
accordance with its rules and procedures, to the extent received by the U.S.
depositary for Cedelbank.
EUROCLEAR
Euroclear has advised ML&Co. that it was created in 1968 to hold securities
for participants of Euroclear and to clear and settle transactions between
Euroclear participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries.
Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust
Company of New York (the "Euroclear Operator"), under contract with Euro-clear
Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear participants. Euroclear participants include
banks, central banks, securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
Distributions with respect to book-entry securities held beneficially
through Euroclear are credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent received by the U.S.
depositary for Euroclear.
CLEARANCE AND SETTLEMENT PROCEDURES
Secondary market trading between DTC participants will occur in the
ordinary way in accordance with the depositary's rules and will be settled in
immediately available funds using the depositary's Same-Day Funds Settlement
System. Secondary market trading between Cedelbank participants and/or Euroclear
participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Cedelbank and Euroclear and will be settled
using the procedures applicable to conventional eurobonds in immediately
available funds.
Cross-market transfers between persons holding directly or indirectly
through the depositary on the one hand, and directly or indirectly through
Cedelbank or Euroclear participants, on the other, will be effected in the
depositary in accordance with the depositary's rules on behalf of the relevant
European international clearing system by its U.S. depositary; however, any
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines.
The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions to its U.S. depositary
to take action to effect final settlement on its behalf by delivering or
receiving book-entry securities in the depositary, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to the depositary. Cedelbank and Euroclear participants may not
deliver instructions directly to the depositary.
Because of time-zone differences, credits of book-entry securities received
in Cedelbank or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and will be
credited on the business day following the depositary settlement date. Any
credits or transactions in book-entry securities settled during processing will
be reported to the relevant Euroclear or Cedelbank participants on that business
day. Cash received in Cedelbank or Euroclear as a result of sales of securities
by or through a Cedelbank participant or a Euroclear participant to a DTC
participant will be received with value on the depositary settlement date but
will be available in the relevant Cedelbank or Euroclear cash account only as of
the business day following settlement in the depositary.
Although the depositary, Cedelbank and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of book-entry securities
among participants of the depositary, Cedelbank and Euroclear, they are under no
obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
NOTICES
Notices to holders of outstanding senior debt securities will be sent by
mail to the registered holders and will be published, whether the securities are
in global or definitive form, and so long as the securities are listed on the
Luxembourg Stock Exchange, in a daily newspaper of general circulation in
Luxembourg. It is expected that publication will be made in Luxembourg in the
Luxembourg Wort. Any notice shall be deemed to have been given on the date of
publication or, if published more than once, on the date of the first
publication. So long as senior debt securities are listed on the Luxembourg
Stock Exchange, any change in the Luxembourg Paying Agent and Transfer Agent
will be published in Luxembourg in the manner set forth above.
FURTHER ISSUES
ML&Co. may from time to time, without notice to or the consent of the
registered holders of any series of outstanding senior debt securities, create
and issue additional senior debt securities ranking equally with the original
series of senior debt securities in all respects other than the payment of
interest accruing before the originally issue date of the additional senior debt
securities. The new issue of senior debt securities may be consolidated and form
a single series with the original issue of the securities of that series and
have the same terms as to status, redemption or otherwise as the senior debt
securities of the original series.
PAYMENT OF ADDITIONAL AMOUNTS
Unless otherwise stated, ML&Co. will, subject to the exceptions and
limitations set forth below, pay as additional interest on the senior debt
securities, additional amounts in order for the net payment of the principal of
and interest on the senior debt securities to a holder who is a non-United
States person, after deduction for any present or future tax, assessment or
other governmental charge of the United States of a political subdivision or
taxing authority in or of any United States political subdivision, imposed by
withholding with respect to the payment, will not be less than the amount
provided in the senior debt securities to be then due and payable; provided,
however, that the foregoing obligation to pay additional amounts shall not
apply:
(1) to any tax, assessment, or other governmental charge that is imposed
or withheld solely by reason of the holder, or a fiduciary, settlor,
beneficiary, member or shareholder of the holder if the holder is an
estate, trust, partnership or corporation, or a person holding a power
over an estate or trust administered by a fiduciary holder, being
considered as:
(a) being or having been present or engaged in a trade or business in
the United States or having had a permanent establishment in the
United States;
(b) having a current or former relationship with the Untied States,
including a relationship as a citizen or resident of the United
States;
(c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled
foreign corporation with respect to the United States or a
corporation that has accumulated earnings to avoid United States
federal income tax;
(d) being or having been present a "10-percent shareholder" of ML&Co.
as defined in section 871 (h)(3) of the United States Internal
Revenue Code or any successor provisions; or
(e) being a bank receiving payments on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course
of its trade or business.
(2) to any holder that is not the sole beneficial owner of the securities,
or any portion of the securities, or that is a fiduciary or
partnership, but only to the extent that a beneficiary or settlor with
respect to the fiduciary, a beneficial owner or member of the
partnership would not have been entitled to the payment of an
additional amount had the beneficiary, settlor, beneficial owner or
member received directly its beneficial or distributive share of the
payment;
(3) to any tax, assessment, or other governmental charge that is imposed
or withheld solely by reason of the failure of the holder or any other
person to comply with certification, identification or information
reporting requirements concerning the nationality, residence, identity
or connection with the United States of the holder or beneficial owner
of the security, if compliance is required by statute, by regulation
of the United States Treasury Department or by an applicable income
tax treaty to which the United States is a party as a precondition to
exemption from tax, assessment or other governmental charge;
(4) to any tax, assessment or other governmental charge that is imposed
otherwise than by withholding by ML&Co. or a paying agent from the
payment;
(5) to any tax, assessment or other governmental charge that is imposed or
withheld solely by reason of a change in law, regulation, or
administrative or judicial interpretation that becomes effective more
than 15 days after the payment becomes due or is duly provided for,
whichever occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or similar tax, assessment or other governmental
charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any payment agent from any payment of principal of or
interest on any senior debt security, if that payment can be made
without any withholding by any other payment agent; or
(8) in the case of any combination of items (1), (2), (3), (4), (5), (6)
and (7).
Some of the outstanding senior debt securities are subject in all cases to
any tax, fiscal or other law or regulation or administrative or judicial
interpretation applicable to the payments due and payable. Except as
specifically provided under this heading "--Payment of Additional Amounts" and
under the heading "--Redemption for Tax Reasons", ML&Co. will not be required to
make any payment with respect to any tax, assessment or other governmental
charge imposed by any government or a political subdivision or taxing authority.
As used under this heading "--Payment of Additional Amounts" and
"--Redemption for Tax Reasons", the term "United States" means the United States
of America, including the States and the District of Columbia, and its
territories, its possessions and other areas subject to its jurisdiction.
"United States person" means any individual who is a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States, any state of the United
States or the District of Columbia, other than a partnership that is not treated
as a United States person under any applicable Treasury regulations, any estate
the income of which is subject to United States federal income taxation
regardless of its source, or any 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
decision of the trust. Notwithstanding the preceding sentence, to the extent
provided in the Treasury regulations, certain trusts in existence on August 20,
1996, and treated as United States persons before that date that elect to
continue to be treated as United States persons will also be a United States
person.
"Non-United States person" means a person who is not a United States
person.
REDEMPTION FOR TAX REASONS
As designated, some of the outstanding senior debt securities provide that,
if, as a result of any change in, or amendment to, the laws, or any regulations
or rulings promulgated under those laws, of the United States or any political
subdivision or taxing authority in or of the United States, or any change in, or
amendments to, an official position regarding the applicable or interpretation
of those laws, regulations or rulings, which change or amendment is announced or
becomes effective on or after the date the applicable series of senior debt
securities were initially issued, ML&Co. becomes or, based upon a written
opinion of independent counsel selected by ML&Co., will become obligated to pay
additional amounts as described in this prospectus under the heading "--Payment
of Additional Amounts" with respect to those securities, then ML&Co. may, at its
option redeem, as a whole, but not in part, the securities on not less than 30
nor more than 60 days prior notice, at a redemption price equal to 100% of their
principal amount, together with interest accrued but unpaid to the date fixed
for redemption.
TAX CONSIDERATIONS
It is suggested that you should reach an investment decision regarding the
senior debt securities only after carefully considering the suitability of the
senior debt securities in the light of your particular circumstances.
You should also consider the tax consequences, if any, of investing in the
Securities and should consult your tax advisor.
REDEEMABLE NOTES
TERMS AND PROVISIONS APPLICABLE TO EACH SERIES OF REDEEMABLE NOTES
The specific terms and provisions applicable to each series of redeemable
notes of ML&Co. are described below. The title of each series of the redeemable
notes designates the interest rate and maturity date of that series of notes.
Each series of redeemable notes bears interest at a specified rate payable
through their stated maturity date to the persons in whose names the notes are
registered on the record date preceding each interest payment date as indicated
below. If any interest payment date or the stated maturity date falls on a day
that is not a Business Day, as defined below, the related payment of principal
or interest will be made on the next succeeding Business Day as if made on the
date the payment was due, and no interest will accrue on the amount so payable
for the period from and after that interest payment date or stated maturity
date, as the case may be. Unless otherwise stated below, "Business Day" with
respect to any place of payment means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in that place of
payment are authorized or obligated by law to close.
The redeemable notes are subject to redemption by ML&Co. or repayment at
the option of their holders before their stated maturity dates as indicated
below. Beneficial interests in any redeemable notes that are book-entry
securities may be acquired, or subsequently transferred, only in denominations
of $1,000 and integral multiples of $1,000.
TERMS AND PROVISIONS OF 6% NOTES DUE FEBRUARY 12, 2003
The stated maturity date for the 6% Notes due February 12, 2003 is February
12, 2003.
These notes of this series bear interest from February 12, 1998 and are
payable semiannually on February 12 and August 12 of each year and at maturity,
to the persons in whose names the notes are registered on the preceding July 29
and January 29, respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described under the section entitled "--Redemption
for Tax Reasons" occur.
In the event definitive notes are issued, the holders of these notes will
be able to receive payments on the notes and effect transfers of the notes at
the offices of Chase Manhattan Bank Luxembourg S.A. or its successor as paying
agent in Luxembourg.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to this series of notes, and as long as these notes
are listed on the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent
in Luxembourg and any change in the Luxembourg paying agent and transfer agent
will be published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 7.05% NOTES DUE APRIL 15, 2003
The 7.05% Notes due April 15, 2003 will mature on April 15, 2003 unless
redeemed earlier as provided below.
The note of this series bear interest and are payable semiannually on each
October 15 and April 15 to the persons in whose names the notes are registered
on the next preceding October 1 and April 1, respectively.
The notes are subject to redemption at the option of ML&Co. on or after
April 15, 1998, in whole or in part in increments of $1,000, at a redemption
price of 100% of the principal amount of the notes to be redeemed plus accrued
interest to but excluding the date of redemption. Notice of redemption will be
given not less than 30 or more than 60 days before the date of redemption to
each holder of notes to be redeemed.
TERMS AND PROVISIONS OF FLOATING RATE NOTES DUE JUNE 24, 2003
The Floating Rate Notes due June 24, 2003 will mature on June 24, 2003.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders of these notes will
be able to receive payments on the notes and effect transfers of the notes at
the offices of Chase Manhattan Bank Luxembourg S.A. or its successor as paying
agent in Luxembourg.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to notes, and as long as the notes are listed on the
Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg and
any change in the Luxembourg paying agent and transfer agent will be published
in Luxembourg. See "--Notices".
This series of notes bear interest from June 24, 1998 until their maturity,
payable in arrears on March 24, June 24, September 24 and December 24 of each
year and at maturity, to the persons in whose names the Notes are registered on
the preceding March 9, June 9, September 9 and December 9, respectively;
provided, however, that interest payable at maturity will be payable to the
person to whom principal shall be payable. Interest payable on each interest
payment date will include interest accrued from and including the first day of
the interest period relating to that interest payment date to and including the
last day of that interest period. Each interest period comprises the period
beginning on and including June 24, 1998 and ending on and including the day
preceding the first interest payment date, and, thereafter, each successive
period beginning on and including each interest payment date and ending on and
including the day preceding the next succeeding interest payment date.
With respect to this series of notes, "Business Day", with respect to any
place of payment, means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in that place of
payment are authorized or required by law, regulation or executive order to
close, and which day is also a London Business Day.
"London Business Day" means any day, other than a Saturday or a Sunday, on
which commercial banks and foreign exchange markets settle payments in London,
England.
The per annum rate of interest with respect to this series of notes will be
reset on each interest reset date and will be LIBOR plus 0.15%. Each interest
payment date will be an interest reset date.
The interest rate applicable to each interest period will be the rate
determined on the interest determination date applicable to that interest
period. The interest determination date applicable to any interest reset date
will be the second London Business Day preceding that interest reset date.
With respect to each interest reset date, "LIBOR" will be determined by
MLPF&S as the calculation agent for an interest determination date and will be
the rate for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date that appears on Telerate Page 3750 as of 11:00 A.M., London
time, on that interest determination date.
If fewer than two offered rates appear, or no rate appears, as applicable,
the calculation agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
calculation agent, to provide the Calculation Agent with its offered quotation
for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on that interest determination date and
in a principal amount that is representative for a single transaction in United
States dollars in that market at that time. If at least two quotations are
provided, LIBOR determined on that interest determination date will be the
arithmetic mean of those quotations. If fewer than two quotations are provided,
LIBOR determined on that interest determination date will be the arithmetic mean
of the rates quoted at approximately 11:00 A.M., in The City of New York, on
that interest determination date by three major banks in The City of New York
selected by the calculation agent for loans in United States dollars to leading
European banks, having a maturity of three months and in a principal amount that
is representative for a single transaction in United States dollars in that
market at that time; provided, however, that if the banks so selected by the
calculation agent are not quoting as mentioned in this sentence, LIBOR
determined on that interest determination date will be LIBOR in effect on that
interest determination date.
"Telerate Page 3750" means page 3750 on the Bridge Telerate, or any other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for United States
dollars, for the purpose of displaying the London interbank rates of major banks
for United States dollars.
Interest on this series of notes will be computed and paid on the basis of
the actual number of days for which interest accrues in each interest period
divided by 360.
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), and all dollar amounts
used in or resulting from any calculation on the notes will be rounded to the
nearest cent, with one-half cent being rounded upward.
ML&Co. will notify the Luxembourg Stock Exchange or will cause the
Luxembourg Stock Exchange to be notified of the interest rate, the interest
amount that will accrue, and commencement and ending dates for each interest
period as soon as practicable after the determination is made.
TERMS AND PROVISIONS OF 6% NOTES DUE NOVEMBER 15, 2004
The 6% Notes due November 15, 2004 will mature on November 15, 2004.
The notes of this series bear interest and are payable semiannually on May
15 and November 15 of each year and at maturity, to the persons in whose names
the notes are registered on the preceding May 1 and November 1, respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 6% NOTES DUE JULY 15, 2005
The 6% Notes due July 15, 2005 will mature at par on July 15, 2005.
The notes of this series bear interest and are payable semiannually on
January 15 and July 15 of each year and at maturity, to the persons in whose
names the notes are registered on the preceding December 31 and June 30,
respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 6 3/8% NOTES DUE SEPTEMBER 8, 2006
The 6 3/8% Notes due September 8, 2006 will mature on September 8, 2006
unless redeemed earlier as provided below.
The notes of this series bear interest and are payable semiannually on each
March 8 and September 8 to the persons in whose names the notes are registered
on the preceding February 23 and August 23, respectively.
The notes are subject to redemption at the option of ML&Co. on or after
September 8, 2003, in whole or in part in increments of $1,000, at a redemption
price of 100% of the principal amount of the notes to be redeemed plus accrued
interest to but excluding the date of redemption. Notice of redemption of the
notes shall be given not less than 30 or more than 60 days before the date of
redemption to each holder of the notes to be redeemed.
TERMS AND PROVISIONS OF 6 1/2% NOTES DUE JULY 15, 2018
The 6 1/2% Notes due July 15, 2018 will mature on July 15, 2018.
The notes of this series bear interest and are payable semiannually on
January 15 and July 15 of each year and at maturity, to the persons in whose
names the notes are registered on the preceding December 31 and June 30,
respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 6 7/8% NOTES DUE NOVEMBER 15, 2018
The 6 7/8% Notes due November 15, 2018 will mature on November 15, 2018.
The notes of this series bear interest and are payable semiannually on May
15 and November 15 of each year and at maturity, to the persons in whose names
the notes are registered on the preceding May 1 and November 1, respectively.
The notes of this series are not subject to redemption by ML&Co. before
maturity unless the events described in the section entitled "--Redemption for
Tax Reasons" occur.
In the event definitive notes are issued, the holders will be able to
receive payments on the notes and effect transfers of the notes at the offices
of Chase Manhattan Bank Luxembourg S.A. or its successor as paying agent in
Luxembourg with respect to the notes.
ML&Co. has appointed Chase Manhattan Bank Luxembourg S.A. as a paying agent
in Luxembourg with respect to the notes, and as long as the notes are listed on
the Luxembourg Stock Exchange, ML&Co. will maintain a paying agent in Luxembourg
and any change in the Luxembourg paying agent and transfer agent will be
published in Luxembourg. See "--Notices".
TERMS AND PROVISIONS OF 8.40% NOTES DUE NOVEMBER 1, 2019
The 8.40% Notes due November 1, 2019 will mature on November 1, 2019.
The notes of this series bear interest and are payable semiannually on each
May 1 and November 1 to the persons in whose names the notes are registered on
the preceding April 15 and October 15, respectively.
The notes are not redeemable by ML&Co. before maturity unless $20,000,000
or less of aggregate principal amount of the notes are outstanding, in which
case the notes are redeemable at any time on or after November 1, 1994, in whole
but not in part, on at least 15 days and not more than 60 days prior notice at a
redemption price of 100% of principal amount of the notes plus accrued interest
to the date of redemption.
NON-REDEEMABLE NOTES
Each series of Non-Redeemable Notes bears interest at a specified rate
payable semiannually through maturity to the persons in whose names the notes
are registered on the regular record date preceding each interest payment date.
The Non-Redeemable Notes are not subject to redemption by ML&Co. or repayment at
the option of their holders before their stated maturity dates, and are issuable
and transferable in denominations of $1,000 and any integral multiple of $1,000.
Beneficial interests in Non-Redeemable Notes that are book-entry securities may
be acquired, or subsequently transferred, only in denominations of $1,000 and
integral multiples of $1,000. The title of each series of Non-Redeemable Notes
designates the interest rate or interest rate basis and maturity date of that
series of notes.
NON-REDEEMABLE FIXED RATE NOTES
Series Interest Payment Dates Regular Record Dates
-------- ---------------------- --------------------
6 3/8% Notes due March 30, 1999* March 30 and September 30 March 15 and September 15
8 1/4% Notes due November 15, 1999 May 15 and November 15 May 1 and November 1
8 3/8% Notes due February 9, 2000* February 9 and August 9 January 25 and July 25
6.70% Notes due August 1, 2000* February 1 and August 1 January 15 and July 15
6% Notes due January 15, 2001* January 15 and July 15 January 1 and July 1
6% Notes due March 1, 2001* March 1 and September 1 February 15 and August 15
6 1/2% Notes due April 1, 2001* April 1 and October 1 March 15 and September 15
8% Notes due February 1, 2002 February 1 and August 1 January 15 and July 15
7 3/8% Notes due August 17, 2002* February 17 and August 17 February 2 and August 2
6.64% Notes due September 19, 2002* March 19 and September 19 March 4 and September 4
8.30% Notes due November 1, 2002 May 1 and November 1 April 15 and October 15
6% Notes due February 12, 2003* February 12 and August 12 January 29 and July 29
6 7/8% Notes due March 1, 2003* March 1 and September 1 February 15 and August 15
6.55% Notes due August 1, 2004* February 1 and August 1 January 15 and July 15
6 1/4% Notes due January 15, 2006* January 15 and July 15 January 1 and July 1
7% Notes due March 15, 2006* March 15 and September 15 March 1 and September 1
7 3/8% Notes due May 15, 2006* May 15 and November 15 May 1 and November 1
7% Notes due January 15, 2007* January 15 and July 15 January 1 and July 1
8% Notes due June 1, 2007 June 1 and December 1 May 15 and November 15
6.56% Notes due December 16, 2007* June 16 and December 16 June 1 and December 1
7% Notes due April 27, 2008* April 27 and October 27 April 12 and October 12
6 1/4% Notes due October 15, 2008* April 15 and October 15 March 31 and September 30
6 3/8% Notes due October 15, 2008* April 15 and October 15 April 1 and October 1
6 3/4% Notes due June 1, 2028* June 1 and December 1 May 15 and November 15
6% Notes due February 17, 2009* February 1 and August 1 February 17 and August 17
______________
*Book-Entry Securities
NON-REDEEMABLE FLOATING RATE NOTES DUE FEBRUARY 4, 2003
The Floating Rate Notes due February 4, 2003 will mature on February 4,
2003.
The notes of this series are not subject to redemption by ML&Co. before
their maturity.
The notes bear interest payable in arrears on February 4, May 4, August 4
and November 4 of each year until maturity. Interest payable on each interest
payment date will include interest accrued from and including the first day of
the interest period relating to that interest payment date to and including the
last day of that interest period. Each interest period comprises the period
beginning on and including the original issue date of the notes and ending on
and including the day preceding the first interest payment date, and,
thereafter, each successive period beginning on and including each interest
payment date and ending on and including the day preceding the next succeeding
interest payment date.
With respect to this series of notes, "Business Day", with respect to any
place of payment, means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in that place of
payment are authorized or required by law, regulation or executive order to
close, and which day is also a London Business Day.
"London Business Day" means any day, other than a Saturday or a Sunday, on
which commercial banks and foreign exchange markets settle payments in London,
England.
The per annum rate of interest with respect to this series of notes will be
reset on each interest reset date and will be LIBOR plus 0.2%. Each interest
payment date will be an interest reset date.
The interest rate applicable to each interest period will be the rate
determined on the interest determination date applicable to that interest
period. The interest determination date applicable to any interest reset date
will be the second London Business Day preceding that interest reset date.
With respect to each interest reset date, "LIBOR" will be determined by
MLPF&S as the calculation agent for an interest determination date and will be
the rate for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date that appears on Telerate Page 3750 as of 11:00 A.M., London
time, on that interest determination date.
If fewer than two offered rates appear, or no rate appears, as applicable,
the calculation agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
calculation agent, to provide the Calculation Agent with its offered quotation
for deposits in United States dollars having a maturity of three months
beginning on the second London Business Day immediately following that interest
determination date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on that interest determination date and
in a principal amount that is representative for a single transaction in United
States dollars in that market at that time. If at least two quotations are
provided, LIBOR determined on that interest determination date will be the
arithmetic mean of those quotations. If fewer than two quotations are provided,
LIBOR determined on that interest determination date will be the arithmetic mean
of the rates quoted at approximately 11:00 A.M., in The City of New York, on
that interest determination date by three major banks in The City of New York
selected by the calculation agent for loans in United States dollars to leading
European banks, having a maturity of three months and in a principal amount that
is representative for a single transaction in United States dollars in that
market at that time; provided, however, that if the banks so selected by the
calculation agent are not quoting as mentioned in this sentence, LIBOR
determined on that interest determination date will be LIBOR in effect on that
interest determination date.
"Telerate Page 3750" means page 3750 on the Bridge Telerate, or any other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for United States
dollars, for the purpose of displaying the London interbank rates of major banks
for United States dollars.
Interest on this series of notes will be computed and paid on the basis of
the actual number of days for which interest accrues in each interest period
divided by the actual number of days in the relevant year.
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), and all dollar amounts
used in or resulting from any calculation on the notes will be rounded to the
nearest cent, with one-half cent being rounded upward.
OTHER TERMS
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned directly
or indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of the incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the class
or classes having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS BY,
MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock of
MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its Voting
Stock, unless, after giving effect to any transaction, MLPF&S remains a
Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which are
owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay any amounts due and payable or deliverable with respect to
all the senior debt securities; and
o perform and observe of all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
1983 Indenture.
MODIFICATION AND WAIVER
ML&Co. and the trustee may modify and amend the 1983 Indenture with the
consent of holders of at least 66 2/3% in principal amount of each outstanding
series of senior debt securities affected. However, without the consent of each
holder of any outstanding senior debt security affected, no amendment or
modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any senior
debt security or any premium payable on redemption, or change the
redemption price;
o reduce the principal amount of, or the interest or Additional Amounts
payable on, any senior debt security or reduce the amount of principal
which could be declared due and payable before the stated maturity
date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior debt
security;
o impair the right to institute suit for the enforcement of any payment
on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding senior
debt securities of any series, the consent of whose holders is
required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past default
to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of each
holder affected. The holders of at least a majority in principal amount of
outstanding senior debt securities of any series may, with respect to that
series, waive past defaults under the 1983 Indenture and waive compliance by
ML&Co. with provisions in the 1983 Indenture, except as described under
"--Events of Default".
EVENTS OF DEFAULT
Each of the following will be Events of Default with respect to senior debt
securities of any series:
o default in the payment of any interest or Additional Amounts payable
when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co. contained
in the 1983 Indenture for the benefit of that series or in the senior
debt securities of that series, continuing for 60 days after written
notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the 1983
Indenture.
If an Event of Default occurs and is continuing for any series of senior
debt securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt securities
of any series but before the trustee has obtained a judgment or decree for
payment of money, the holders of a majority in principal amount of the
outstanding senior debt securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due, other than those due as
a result of acceleration, have been made and all Events of Default have been
remedied or waived.
Any Event of Default with respect to any series of debt securities may be
waived by the holders of a majority in principal amount or aggregate issue price
of the outstanding senior debt securities of that series, except a default:
o in the payment of any amounts due and payable or deliverable under the
debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each outstanding security of each series of
senior debt securities affected.
The holders of a majority in principal amount of the outstanding senior
debt securities of a series may direct the time, method and place of conducting
any proceeding for any remedy available to the trustee or exercising any trust
or power conferred on the trustee with respect to those senior debt securities,
provided that any direction shall not be in conflict with any rule of law or the
1983 Indenture. Before proceeding to exercise any right or power under the 1983
Indenture at the direction of the holders, the trustee shall be entitled to
receive from the holders reasonable security or indemnification against the
costs, expenses and liabilities which might be incurred by it in complying with
any direction.
The senior debt securities issued under the 1983 Indenture do not have the
benefit of any cross-default provisions with other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as to the
fulfillment by ML&Co. of all of its obligations under the 1983 Indenture.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Our
SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms. You may also inspect our SEC reports and other
information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
We have filed a registration statement on Form S-3 with the SEC covering
the senior debt securities. For further information on ML&Co. and the senior
debt securities, you should refer to our registration statement and its
exhibits. This prospectus summarizes material provisions of contracts and other
documents that we refer you to. Because the prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. We have included copies of these documents as exhibits to our
registration statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed
with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not, and MLPF&S has not, authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and MLPF&S
is not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales of the
senior debt securities and is to be used by MLPF&S when making offers and sales
related to market-making transactions in the senior debt securities.
MLPF&S may act as principal or agent in these market-making transactions.
The distribution of the senior debt securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Annual Report
on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
(which express an unqualified opinion and which report on the consolidated
financial statements includes an explanatory paragraph for the change in
accounting method for certain internal-use software development costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, our wholly-owned subsidiary, will use this prospectus when making
offers and sales related to market-making transactions in the following
securities.
o The final terms and conditions o The notes bear interest at
of each issue of notes are fixed or floating rates or may
specified in the applicable not bear any interest. If the
pricing supplement. notes bear interest at a
floating rate, the floating
o The notes are senior unsecured rate is based on one or more
debt securities of ML&Co. indices or formulas plus or
minus a fixed amount or
o The notes have stated multiplied by a factor.
maturities of nine months or
more from the date they were o Whether the notes are
originally issued. redeemable or repayable before
their maturity and whether
o We will pay amounts due on the they are subject to mandatory
notes in U.S. dollars or any redemption, redemption at the
other consideration described option of ML&Co. or repayment
in the applicable pricing at the option of the holder of
supplement. the notes is specified in the
applicable pricing supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the notes will be the prevailing market price at the
time of sale.
-------------------
MERRILL LYNCH & CO.
-------------------
The date of this prospectus is , 1999.
TABLE OF CONTENTS
RISK FACTORS................................................................. 3
MERRILL LYNCH & CO., INC..................................................... 4
RATIO OF EARNINGS TO FIXED CHARGES........................................... 5
DESCRIPTION OF NOTES......................................................... 5
OTHER TERMS.................................................................. 13
WHERE YOU CAN FIND MORE INFORMATION.......................................... 17
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................ 17
PLAN OF DISTRIBUTION......................................................... 18
EXPERTS...................................................................... 18
RISK FACTORS
Your investment in the notes will include certain risks. In
consultation with your own financial and legal advisers, you should carefully
consider, among other matters, the following discussion of risks before
deciding whether an investment in the notes is suitable for you. The notes are
not an appropriate investment for you if you are unsophisticated with respect
to the significant components of their relationship.
Structure Risks of Notes Indexed to Interest Rate, Currency or Other Indices
or Formulas
If you invest in notes indexed to one or more interest rate, currency
or other indices or formulas, there will be significant risks not associated
with a conventional fixed rate or floating rate debt security. These risks
include fluctuation of the indices or formulas and the possibility that you
will receive a lower, or no, amount of principal, premium or interest and at
different times than you expected. 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 these risks and their
results. In addition, if an index or formula used to determine any amounts
payable in respect of the notes contains a multiplier or leverage factor, the
effect of any change in that index or formula will be magnified. In recent
years, values of certain indices and formulas have been volatile and volatility
in those and other indices and formulas may be expected in the future. However,
past experience is not necessarily indicative of what may occur in the future.
Redemption May Adversely Affect Your Return on the Notes
If your notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may, in the case of optional redemption, or must, in
the case of mandatory redemption, choose to redeem your notes at times when
prevailing interest rates may be relatively low. Accordingly, you generally
will not be able to reinvest the redemption proceeds in a comparable security
at an effective interest rate as high as that of the notes.
There May Be an Uncertain Trading Market for Your Notes; Many Factors Affect
the Trading Value of Your Notes
We cannot assure you a trading market for your notes will continue to
exist. Many factors independent of our creditworthiness may affect the trading
market of your notes. These factors include:
o the complexity and volatility of the index or formula applicable to
the notes,
o the method of calculating the principal, premium and interest in
respect of the notes,
o the time remaining to the maturity of the notes,
o the outstanding amount of the notes,
o the redemption features of the notes,
o the amount of other securities linked to the index or formula
applicable to the notes, and
o the level, direction and volatility of market interest rates
generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market
and experience more price volatility. There may be a limited number of buyers
for these notes. This may affect the price you receive for these notes or your
ability to sell these notes at all. You should not purchase notes unless you
understand and know you can bear the related investment risks.
Our Credit Ratings May Not Reflect All Risks of an Investment in the Notes
Our credit ratings are an assessment of our ability to pay our
obligations. Consequently, real or anticipated changes in our credit ratings
will generally affect the market value of your notes. Our credit ratings,
however, may not reflect the potential impact of risks related to structure,
market or other factors discussed above on the value of your notes.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets Bank
Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services ; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients,
including individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
notes described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)..... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios
reported for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF NOTES
Terms of the Notes
"Pricing supplement", as used herein, means a prospectus supplement
relating to an individual issue of the notes, as filed with the SEC
The terms and conditions described below apply to each note unless
otherwise specified in the applicable pricing supplement.
Except as provided in the applicable pricing supplement, the notes are
denominated in U.S. dollars. If provided in the applicable pricing supplement,
notes may be denominated in a foreign currency or in units of two or more
currencies ("Multi-Currency Notes").
Except as provided in the applicable pricing supplement:
o the notes were issued only in fully registered form without coupons;
o floating rate notes and Zero Coupon Notes, as defined, were issued in
denominations of $25,000 or any amount in excess of $25,000 which is
an integral multiple of $1,000; and
o fixed rate notes were issued in denominations of $1,000 or any
integral multiple in excess of $1,000.
Unless otherwise specified in the applicable pricing supplement:
o principal and interest, if any, is payable;
o the transfer of the notes is registrable, and
o the notes are exchangeable for notes bearing identical terms and
provisions,
at the office of the trustee in The City of New York designated for such
purpose, provided that ML&Co., at its option, may pay interest, other than
interest payable at maturity or on any date of redemption or repayment, by
check mailed to the address of the person entitled to receive payment as shown
on the security register. ML&Co. will pay the principal and interest payable at
maturity or the date of redemption or repayment on each note upon maturity,
redemption or repayment, as the case may be, in immediately available funds
against presentation of the note at the office of the trustee maintained for
that purpose.
Notwithstanding the preceding two sentences, ML&Co. may pay interest
on a note which bears interest at a floating rate at maturity or earlier
redemption or repayment by wire transfer of immediately available funds to a
designated account maintained in the United States upon:
(1) receipt of written notice by the trustee from the holder of
the applicable note not less than one Business Day before the
due date of the relevant principal payment; and
(2) presentation of the note at the corporate trust office of the
trustee in the Borough of Manhattan, The City of New York, or
at any other place as ML&Co. may designate.
A holder of not less than $1,000,000 aggregate principal amount of floating
rate notes may by written notice to the trustee at the corporate trust office
or at such other address as ML&Co. will give notice in writing not less than 15
days before an interest payment date, arrange to have the interest payable on
all notes held by that holder on the relevant interest payment date, and all
subsequent interest payment dates until written notice to the contrary is given
to the trustee, made by wire transfer of immediately available funds to a
designated account maintained in the United States.
Except as provided in the applicable pricing supplement, "Business
Day" means any day that is not a Saturday or Sunday and that, in The City of
New York, is neither a legal holiday nor a day on which banking institutions
are authorized or obligated by law or regulation to close.
REPAYMENT AT OPTION OF HOLDER
If so indicated in an applicable pricing supplement, notes are
repayable by ML&Co. in whole or in part at the option of the holders of the
notes on their respective optional repayment dates specified in the applicable
pricing supplement. If no optional repayment date is indicated with respect to
a note, that note is not repayable at the option of the holder before maturity.
Any repayment in part will be in increments of $1,000 provided that any
remaining principal amount of the applicable note will be an authorized
denomination of the applicable note. The repurchase price for any note
repurchased is 100% of the principal amount to be repaid, together with
interest payable to the date of repayment.
Notwithstanding anything to the contrary in this prospectus, if
repayable at the option of the holder, a note is repayable only on an interest
payment date. If any optional repayment date specified with respect to a note
is not an interest payment date, whether because the payment date is not a
Business Day or otherwise, the applicable repayment date will, instead of being
the date specified, be the interest payment date nearest the specified optional
repayment date whether the applicable interest payment date precedes or
succeeds the specified optional repayment date. In the event that an equal
number of days separates a specified optional repayment date and the preceding
interest payment date, on the one hand, and the succeeding interest payment
date, on the other hand, the optional repayment date will be the succeeding
interest payment date.
In order for a note which is by its terms repayable at the option of
the holder to be repaid before maturity, ML&Co. must receive at the corporate
trust office of the trustee, or at any other address of which ML&Co. will from
time to time notify the holders of the notes, during the period from and
including the 20th Business Day preceding the applicable optional repayment
date up to and including the close of business on the 16th Business Day
preceding the applicable optional repayment date:
(1) the applicable note with the information under the caption
"option to elect repayment" duly completed, or
(2) a telegram, telex, facsimile transmission or letter from a member
of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or a trust company in
the United States of America dated no later than the 16th Business Day
preceding the applicable optional repayment date and setting forth the
name of the holder of the note, the principal amount of the note, the
amount of the note to be repaid, a statement that the option to elect
repayment is being exercised and a guarantee that the note with the
information required under the caption "option to elect repayment"
duly completed will be received at the above-mentioned office of the
trustee, not later than the 5th Business Day after the date of the
telegram, telex, facsimile transmission or letter and note, duly
completed, is received at the office of the trustee by the 5th
Business Day.
A holder's effective exercise of the repayment option will be
irrevocable. A holder of a note will not be permitted to transfer or exchange
that note or, in the event that a note is to be repaid in part, that portion of
the note to be repaid, after exercise of the repayment option. ML&Co. will make
all determinations with respect to all questions as to the validity,
eligibility, including time of receipt and acceptance of any note for repayment
. All such determinations will be final, binding and non-appealable. ML&Co. has
the right to offer for resale any note acquired by it pursuant to the foregoing
arrangements. Accordingly, ML&Co. may not satisfy the indebtedness evidenced by
any note repurchased by it by such repurchase.
REDEMPTION AT OPTION OF ML&CO.
The notes do not have a sinking fund but are redeemable at the option
of ML&Co. if a redemption date is specified in the applicable notes and in the
applicable pricing supplement. If indicated in an applicable pricing
supplement, the notes are subject to redemption by ML&Co. on and after their
respective redemption dates specified in the applicable pricing supplement. On
and after the redemption date, if any, the related note is redeemable in whole
or in part at the option of ML&Co. on notice given not more than 60 nor less
than 30 days before the date of redemption in the case of fixed rate notes, or
on notice given not more than 30 nor less than 15 days before the date of
redemption in the case of floating rate notes. Any redemption in part will be
in increments of $1,000 provided that any remaining principal amount of the
applicable note will be an authorized denomination of the applicable note. The
redemption price is equal to 100% of the principal amount to be redeemed,
together with interest payable to the date of redemption. Notwithstanding the
above, however, floating rate notes, if redeemable at the option of ML&Co., are
redeemable only on interest payment dates occurring on or after the applicable
redemption dates.
INTEREST RATE
Each note bears interest at the rate per annum, or pursuant to the
interest rate formula, stated in the applicable note and in the applicable
pricing supplement until the principal of the note is paid or made available
for payment. Interest is payable on each interest payment date and at maturity
or, if applicable, upon redemption or repayment. Interest is payable to the
person in whose name a note is registered at the close of business on the
regular record date next preceding each interest payment date; provided,
however, interest payable at maturity or, if applicable, upon redemption or
repayment will be payable to the person to whom principal will be payable.
Except as provided in the applicable pricing supplement, Merrill Lynch, Pierce,
Fenner & Smith Incorporated , referred to in this prospectus as MLPF&S, is the
calculation agent with respect to floating rate notes.
Each floating rate note bears interest at rates determined by
reference to an interest rate formula, which may be adjusted by a Spread or
Spread Multiplier , each as defined below, unless otherwise specified in the
applicable note. A floating rate note may also have either or both of the
following:
o a maximum limitation, or ceiling, on the rate at which interest which
may accrue during any interest period; and
o a minimum limitation, or floor, on the rate at which interest which
may accrue during any interest period.
The applicable pricing supplement designates either a fixed rate of
interest per annum payable on the applicable note, in which case the note is a
fixed rate note, or one of the following base rates, as applicable to the
relevant floating rate note:
o the commercial paper index rate, in which case the note is a
Commercial Paper Index Rate Note,
o the federal funds rate, in which case the note is a Federal Funds Rate
Note,
o the prime rate, in which case the note is a Prime Rate Note,
o the treasury index rate, in which case the note is a Treasury Index
Rate Note,
o LIBOR, in which case the note is a LIBOR Note, or
o such other interest rate formula as is set forth in the applicable
pricing supplement.
Except as specified in the applicable pricing supplement, floating
rate notes have daily, weekly, monthly, quarterly, semiannual or annual resets
of the rate of interest.
FIXED RATE NOTES
Each fixed rate note bears interest at the rate per annum stated on the
face of the applicable note until the principal of the note is paid or made
available for payment. Except as provided in the applicable pricing supplement,
interest is payable semi-annually on May 15 and November 15 of each year and at
maturity, or on the date of redemption or repayment if a fixed rate note is
redeemed by ML&Co. or repaid at the holder's option prior to maturity. Interest
is computed on the basis of a 360-day year of twelve 30-day months. Interest is
payable to the person in whose name a fixed rate note is registered at the close
of business on the May 1 or November 1 regular record date next preceding the
May 15 or November 15 interest payment date. Interest rates are subject to
change by ML&Co. from time to time, but no change will affect any fixed rate
note previously issued or as to which ML&Co. has accepted an offer to purchase.
Any payment of principal or interest required to be made on an
interest payment date, at maturity or earlier redemption or repayment of a
fixed rate note which is not a Business Day need not be made on that day, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the interest payment date, maturity date or date of redemption or
repayment, as the case may be. No interest will accrue with respect to the
payment for the period from and after the applicable interest payment date,
maturity date or date of redemption or repayment.
FLOATING RATE NOTES
The applicable pricing supplement specifies:
o the base rate or other interest rate formula ,
o the Spread, or Spread Multiplier, if any, and
o the maximum or minimum interest rate limitation, if any, applicable to
each floating rate note.
In addition, the pricing supplement specifies for each floating rate note the
following terms, if applicable: the initial interest rate, the interest payment
dates, the Index Maturity, Interest Reset Dates, optional repayment dates,
redemption date and any other variable term applicable to the note.
The interest rate on each floating rate note is calculated by
reference to the specified interest rate formula:
(1) plus or minus the number of basis points specified in the applicable
pricing supplement as being applicable to the interest rate for the
relevant floating rate note (the "Spread"), if any, or
(2) multiplied by the percentage of the base rate applicable to the
interest rate for the applicable floating rate note (the "Spread
Multiplier"), if any.
"Index Maturity" means, the period to maturity of the instrument or
obligation on which the interest rate formula is based, as specified in the
applicable pricing supplement.
"Regular record date" with respect to floating rate notes means the
15th day, whether or not a Business Day, before the applicable interest payment
date.
The "calculation date", if applicable, with respect to any Interest
Determination Date as specified with respect to each base rate is the earlier
of:
o the tenth calendar day after the Interest Determination Date or, if
the tenth calendar day is not a Business Day, the next succeeding
Business Day, or
o the Business Day before the interest payment date on which the accrued
interest will be payable.
Except as otherwise provided herein with respect to LIBOR Notes or in
the applicable pricing supplement, if any Interest Reset Date for any floating
rate note would otherwise be a day that is not a Business Day, that Interest
Reset Date will be postponed to the next succeeding day that is a Business Day.
Each floating rate note bears interest from the date of issue at the
rates determined as described below until the principal of the note is paid or
otherwise made available for payment. The rate of interest on a floating rate
note is reset each Interest Reset Date applicable to the note; provided,
however, that except in the case of floating rate notes which reset daily, the
interest rate in effect for the ten days immediately before maturity,
redemption or repayment, as the case may be, will be the interest rate in
effect on the tenth day preceding such maturity, redemption or repayment, as
the case may be. Except as otherwise provided herein or in the applicable
pricing supplement, the rate of interest determined on an Interest Reset Date
with respect to a floating rate note will be applicable on and after the
applicable Interest Reset Date to, but not including, the next succeeding
Interest Reset Date, or until the date of maturity or date of redemption or
repayment, as the case may be.
If an interest payment date with respect to any floating rate note
falls on a day that is not a Business Day with respect to the note, that
interest payment date will be the following day that is a Business Day, except
that in the case of a LIBOR Note, if such day falls in the next calendar month,
the interest payment date will be the preceding day that is a Business Day. If
the maturity date or date of redemption or repayment of any floating rate note
falls on a day that is not a Business Day, the payment of interest and
principal may be made on the next succeeding Business Day, and no interest on
that payment will accrue for the period from and after the maturity date or the
date of redemption or repayment.
Except as provided in the applicable pricing supplement, interest
payments on floating rate notes will be the amount of interest accrued from,
and including, the next preceding interest payment date in respect of which
interest has been paid to, but excluding, the interest payment date. With
respect to a floating rate note, accrued interest from the last date to which
interest has been paid is calculated by multiplying the principal amount of the
applicable floating rate note by an accrued interest factor. The accrued
interest factor is computed by adding the interest factors, calculated for each
day, from the last date to which interest has been paid, to the date for which
accrued interest is being calculated. The interest factor for each day is
computed by dividing the interest rate applicable to each day by 360, in the
case of Commercial Paper Index Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes and LIBOR Notes, or by the actual number of days in the year, in the case
of Treasury Index Rate Notes.
All percentages resulting from any calculation on floating rate notes
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one- millionths of a percentage point rounded
upward. For example, 9.876545% or .09876545 would be rounded to 9.87655% or
.0987655. All dollar amounts used in or resulting from calculations on floating
rate notes will be rounded to the nearest cent with one-half cent being rounded
upward.
Upon the request of the holder of any floating rate note, the
calculation agent will provide the interest rate then in effect and, if
determined, the interest rate which will become effective as a result of a
determination made with respect to the most recent Interest Determination Date
with respect to the applicable note.
COMMERCIAL PAPER INDEX RATE NOTES
Commercial Paper Index Rate Notes bear interest at the interest rates,
calculated with reference to the Commercial Paper Index Rate and the Spread or
Spread Multiplier, if any, specified in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
"Commercial Paper Index Rate" means, with respect to any Interest Determination
Date relating to a Commercial Paper Index Rate Note, the Money Market Yield
calculated as described below of the rate on that date for commercial paper
having the Index Maturity specified in the applicable pricing supplement as
such rate is published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"), under the heading "Commercial Paper". In the event that such
rate is not published by 9:00 A.M. New York City time on the calculation date
pertaining to the applicable Interest Determination Date, then the Commercial
Paper Index Rate will be the Money Market Yield of the rate on that Interest
Determination Date for commercial paper having the Index Maturity as published
by the Federal Reserve Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government Securities" ("Composite
Quotations") under the heading "Commercial Paper". If by 3:00 P.M., New York
City time, on the applicable calculation date such rate is not yet published in
either H.15(519) or Composite Quotations, the Commercial Paper Index Rate for
that Interest Determination Date will be calculated by the calculation agent
and will be the Money Market Yield of the arithmetic mean of the offered rates
of three leading dealers of commercial paper in The City of New York selected
by the calculation agent as of 11:00 A.M., New York City time, on that Interest
Determination Date for commercial paper having the specified Index Maturity
placed for an industrial issuer whose bond rating is "AA" or the equivalent
from a nationally recognized rating agency. If the dealers selected by the
calculation agent are not quoting as mentioned in the preceding sentence, the
Commercial Paper Index Rate will be the Commercial Paper Index Rate in effect
on such Interest Determination Date.
"Money Market Yield" means the yield calculated in accordance with the
following formula and expressed as a percentage:
Money Market Yield = D X 360 X 100
--------------
360-- (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
The Interest Determination Date pertaining to an Interest Reset Date
on a Commercial Paper Index Rate Note is the Business Day before the Interest
Reset Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes bear interest at the interest rates,
calculated with reference to the Federal Funds Rate and the Spread, or Spread
Multiplier, if any, specified in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note, the rate on that date for Federal Funds
as published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" ("H.15(519)") or any
successor publication under the heading "Federal Funds (Effective)" or, if not
so published by 9:00 A.M., New York City time, on the calculation date
pertaining to the applicable Interest Determination Date, the Federal Funds
Rate will be the interest rate on the Interest Determination Date as published
by the Federal Reserve Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government Securities" ("Composite
Quotations") under the heading "Federal Funds/Effective Rate". If such rate is
not yet published by 9:00 A.M. on the calculation date pertaining to the
applicable Interest Determination Date, the Federal Funds Rate for the
applicable Interest Determination Date will be the rate on the applicable
Interest Determination Date made publicly available by the Federal Reserve Bank
of New York which is equivalent to the rate which appears in H.15(519) under
the heading "Federal Funds (Effective)". If the rate described in the preceding
sentence is not made publicly available by the Federal Reserve Bank of New York
by 9:00 A.M. on the calculation date, the Federal Funds Rate will be the last
Federal Funds Rate in effect before the applicable Interest Determination Date.
The rate of interest on a Federal Funds Rate Note is reset on each
Interest Reset Date applicable to the note. Unless otherwise specified in the
applicable pricing supplement, with respect to Federal Funds Rate Notes, each
Business Day is an Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date on a Federal Funds Rate Note is the
Business Day before the applicable Interest Reset Date.
PRIME RATE NOTES
Prime Rate Notes bear interest at the interest rates, calculated with
reference to the Prime Rate and the Spread, or Spread Multiplier, if any,
specified in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Prime Rate Note, the arithmetic mean of the prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on the Interest Determination Date by three major money
center banks in The City of New York selected by the calculation agent. If
fewer than three quotations are provided, the Prime Rate will be calculated by
the calculation agent and will be determined as the arithmetic mean on the
basis of the prime rates quoted in The City of New York on the calculation date
by three substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, and unaffiliated with
ML&Co., having total equity capital of at least $500 million and being subject
to supervision or examination by a Federal or State authority, selected by the
calculation agent. If the substitute banks or trust companies selected by the
calculation agent are not quoting as mentioned in the preceding sentence, the
Prime Rate will be the Prime Rate in effect on such Interest Determination Date
relating to a Prime Rate Note.
The Interest Determination Date pertaining to an Interest Reset Date
on a Prime Rate Note is the Business Day before the applicable Interest Reset
Date.
LIBOR NOTES
LIBOR Notes bear interest at the interest rates calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any, specified in
the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement,
LIBOR, with respect to any Interest Determination Date relating to a LIBOR Note
will equal the arithmetic mean as determined by the calculation agent of the
offered rates which appear as of 11:00 A.M., London time, on the Reuters Screen
LIBOR Page on the Reuter Monitor Money Rates Service for deposits in United
States dollars for the period of the Index Maturity specified in the applicable
pricing supplement commencing on the second day on which dealings in deposits
in United States dollars are transacted in the London interbank market (a
"London Banking Day") immediately following the applicable Interest
Determination Date; provided, however, that if fewer than two quotations
appear, the calculation agent will request the principal London office of four
major banks in the London interbank market selected by the calculation agent to
provide the calculation agent with a quotation of their offered rates at
approximately 11:00 A.M., London time, on the applicable Interest Determination
Date for deposits in United States dollars for the period of the applicable
Index Maturity and in a principal amount equal to an amount that is
representative for a single transaction in such market at such time commencing
on the second London Banking Day immediately following the applicable Interest
Determination Date. If at least two quotations are provided, LIBOR for the
applicable Interest Determination Date will equal the arithmetic mean of the
quotations. If fewer than two quotations are provided, LIBOR for the applicable
Interest Determination Date will equal the arithmetic mean of the rates quoted
by three major banks in The City of New York, as selected by the calculation
agent, at approximately 11:00 A.M., New York City time, on the applicable
Interest Determination Date for loans to leading European banks in United
States dollars for the period of the applicable Index Maturity and in a
principal amount equal to an amount that is representative for a single
transaction in such market at such time commencing on the second London Banking
Day following the Interest Determination Date. If the banks selected by the
calculation agent are not quoting as mentioned in the preceding sentence, LIBOR
for the applicable Interest Determination Date will be LIBOR in effect on such
Interest Determination Date.
The Interest Determination Date pertaining to an Interest Reset Date
on a LIBOR Note is the second London Banking Day next preceding the applicable
Interest Reset Date.
TREASURY INDEX RATE NOTES
Treasury Index Rate Notes bear interest at the interest rates,
calculated with reference to the Treasury Index Rate and the Spread or Spread
Multiplier, if any, specified in the applicable pricing supplement.
Unless otherwise indicated in the pricing supplement, "Treasury Index
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Index Rate Note, the per annum discount rate for direct obligations of
the United States with a maturity of thirteen weeks ("91-day Treasury bills"),
expressed as a bond equivalent on the basis of a year of 365 or 366 days, at
the 91-day Treasury bill auction occurring on the applicable Interest
Determination Date as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15(519), Selected Interest Rates", or
any successor publication, under the heading "Treasury bills--auction average
(investment)" or if not published by 9:00 A.M. New York City time on the
calculation date as reported by the United States Department of the Treasury.
Treasury bills are usually sold at auction on Monday of each week unless that
day is a legal holiday in which case the auction is usually held on the
following Tuesday, except that the auction may be held on the preceding Friday.
The day of each auction of 91-day Treasury bills, unless otherwise
specified in the pricing supplement, is an Interest Determination Date provided
that the results of the auction are published or reported, and each Business
Day following such an Interest Determination Date is a Treasury Index Rate Note
Interest Reset Date. The rate of interest applicable to Treasury Index Rate
Notes will therefore not be reset during any period in which auctions are not
held or the results of auctions are not so published or reported.
ZERO COUPON NOTES
Notes which do not bear interest ("Zero Coupon Notes") were initially
offered at a substantial discount from their principal amount at maturity.
There are no periodic payments of interest. The calculation of the accrual of
Original Issue Discount, as defined below, in the period during which a Zero
Coupon Note remains outstanding, is on a semiannual bond equivalent basis using
a year composed of twelve 30-day months. Upon maturity, Original Issue Discount
will cease to accrue on a Zero Coupon Note.
Limitation of Claims in Bankruptcy: If a bankruptcy proceeding is
commenced in respect of ML&Co., the claim of the holder of a Zero Coupon Note
with respect to the principal amount thereof may, under Section 502(b)(2) of
Title 11 of the United States Code, be limited to the issue price of the Zero
Coupon Note plus that portion of the Original Issue Discount that is amortized
from the date of issue to the commencement of the proceeding.
OTHER TERMS
ML&Co. issued the notes as a series of securities under an Indenture,
dated as of April 1, 1983, as amended and restated (the "1983 Indenture"),
between ML&Co. and The Chase Manhattan Bank, as trustee. All of the securities
issued under the 1983 Indenture are referred to in this prospectus as the
"senior debt securities". A copy of the 1983 Indenture is filed as an exhibit
to the registration statement relating to the notes of which this prospectus is
a part. The following summaries of the material provisions of the 1983
Indenture are not complete and are subject to, and qualified in their entirety
by reference to, all provisions of the 1983 Indenture, including the definition
of terms in the 1983 Indenture .
ML&Co. may issue series of senior debt securities from time to time
under the 1983 Indenture, without limitation as to aggregate principal amount,
in one or more series and upon such terms as ML&Co. may establish under to the
provisions of the 1983 Indenture .
The 1983 Indenture and the notes are governed by and construed in
accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from
those of senior debt securities previously issued, and reopen a previously
issued series of senior debt securities and issue additional senior debt
securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co.. However, since
ML&Co. is a holding company, the right of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise are necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that a bankruptcy court may recognize claims
of ML&Co. itself as a creditor of the subsidiary . In addition, dividends,
loans and advances from certain subsidiaries, including MLPF&S, to ML&Co. are
restricted by net capital requirements under the Securities Exchange Act of
1934, as amended, and under rules of certain exchanges and other regulatory
bodies.
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned
directly or indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of the incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock
of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to any such transaction, MLPF&S
remains a Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay any amounts due and payable or deliverable with respect to all the
senior debt securities; and
o perform and observe of all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
1983 Indenture.
MODIFICATION AND WAIVER
ML&Co. and the trustee may modify and amend the 1983 Indenture with
the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of senior debt securities affected. However, without the
consent of each holder of any outstanding senior debt security affected, no
amendment or modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any senior
debt security or any premium payable on redemption , or change the
redemption price;
o reduce the principal amount of, or the interest or Additional Amounts
payable on, any senior debt security or reduce the amount of principal
which could be declared due and payable before the stated maturity
date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior debt
security;
o impair the right to institute suit for the enforcement of any payment
on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding senior
debt securities of any series, the consent of whose holders is
required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past default
to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of
each holder affected. The holders of at least a majority in principal amount of
outstanding senior debt securities of any series may, with respect to that
series, waive past defaults under the 1983 Indenture and waive compliance by
ML&Co. with provisions in the 1983 Indenture, except as described under
"--Events of Default".
EVENTS OF DEFAULT
Each of the following will be Events of Default with respect to senior
debt securities of any series:
o default in the payment of any interest or Additional Amounts payable
when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co. contained
in the 1983 Indenture for the benefit of that series or in the senior
debt securities of that series, continuing for 60 days after written
notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the 1983
Indenture.
If an Event of Default occurs and is continuing for any series of
senior debt securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt
securities of any series but before the trustee has obtained a judgment or
decree for payment of money , the holders of a majority in principal amount of
the outstanding senior debt securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due, other
than those due as a result of acceleration, have been made and all Events of
Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue price
of the outstanding debt securities of that series may waive any Event of
Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable under the
debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture which
cannot be modified under the terms of the 1983 Indenture without the
consent of each holder of each outstanding security of each series of
debt securities affected.
The holders of a majority in principal amount of the outstanding
senior debt securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee with respect to those senior debt
securities, provided that any direction shall not be in conflict with any rule
of law or the 1983 Indenture. Before proceeding to exercise any right or power
under the 1983 Indenture at the direction of the holders, the trustee shall be
entitled to receive from the holders reasonable security or indemnification
against the costs, expenses and liabilities which might be incurred by it in
complying with any direction.
The notes and other series of senior debt securities issued under the
1983 Indenture do not have the benefit of any cross-default provisions with
other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the 1983
Indenture.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information
on the public reference rooms and their copy charges. You may also inspect our
SEC reports and other information at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the notes. For further information on ML&Co. and the notes, you should
refer to our registration statement and its exhibits. This prospectus
summarizes material provisions of contracts and other documents that we refer
you to. Because the prospectus may not contain all the information that you may
find important, you should review the full text of these documents. We have
included copies of these documents as exhibits to our registration statement of
which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were
filed with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this offering
is completed or after the date of the initial registration statement and prior
to effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these notes in any jurisdiction
where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the notes and is to be used by MLPF&S when making offers and sales related
to market-making transactions in the notes.
MLPF&S may act as principal or agent in these market-making
transactions.
The distribution of the notes will conform to the requirements set
forth in the applicable sections of Rule 2720 of the Conduct Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the Annual
Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
MAJOR 11 INTERNATIONAL MARKET INDEX TARGET-TERM MITTS SECURITIES(R) DUE
DECEMBER 6, 2002
"MITTS(R) SECURITIES"
$10 PRINCIPAL AMOUNT PER UNIT
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary when making
offers and sales related to market-making transactions in the MITTS Securities.
The MITTS Securities: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities
o No payments before maturity you own, we will pay you an
date amount equal to the sum of the
o Senior unsecured debt principal amount of each unit
securities of Merrill Lynch & and an additional amount based
Co., Inc. on the percentage increase, if
o Linked to the value of the any, in the value of the Major
Major 11 International Index 11 International Index as
o The MITTS Securities are listed described in this prospectus.
on the American Stock Exchange
under the symbol "EEM". o You will receive no less than
the principal amount of your
MITTS Securities.
INVESTING IN THE MITTS SECURITIES INVOLVE RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the MITTS Securities will be the prevailing market
price at the time of sale.
----------------
MERRILL LYNCH & CO.
----------------
The date of this prospectus is , 199 .
"MITTS" and "Market Index Target-Term Securities" are registered service marks
of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
RISK FACTORS..................................................................3
MERRILL LYNCH & CO., INC......................................................7
RATIO OF EARNINGS TO FIXED CHARGES............................................8
DESCRIPTION OF MITTS SECURITIES...............................................9
THE INDEX....................................................................17
OTHER TERMS..................................................................23
PROJECTED PAYMENT SCHEDULE...................................................27
WHERE YOU CAN FIND MORE INFORMATION..........................................28
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................28
PLAN OF DISTRIBUTION.........................................................29
EXPERTS......................................................................29
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT
You should be aware that if the average value of the index over five
trading days shortly before the maturity date is less than 100, the value of
the index on the date the MITTS Securities were priced, we will pay you only
$10 for each unit of the MITTS Securities you own. This will be true even if ,
at some time during the life of the MITTS Securities, the value of the index
was higher than 100 but later falls below 100 .
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. 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 WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX
The AMEX calculates the index by reference to the sub-indices
comprising eleven major international market indices that reflect the prices of
the common stocks included in those sub-indices without taking into
consideration the value of dividends paid on those stocks, except in the case
of the Deutscher Aktienindex Sub-Index which reflects dividends paid on its
underlying common stocks. Your return on your MITTS Securities will not reflect
the return you would realize if you actually owned all of the stocks underlying
the index and received the dividends paid on those stocks because, except as
noted above, the value of the index is calculated by reference to the prices of
the stocks included in the index without taking into consideration the value of
dividends paid on those stocks.
YOUR RETURN MAY BE AFFECTED BY CURRENCY EXCHANGE RATES
Although the stocks comprising the sub-indices are traded in
currencies other than U.S. dollars and the MITTS Securities are denominated in
U.S. dollars, we will not adjust the amount payable at maturity for currency
exchange rates in effect at the maturity of the MITTS Securities. Any amount in
addition to the principal amount of each unit payable to you at maturity is
based solely upon the percentage increase in the index. Changes in exchange
rates, however, may reflect changes in the relevant European, Australian and
Asian economies which in turn may affect the value of the sub-indices and the
MITTS Securities.
YOUR RETURN MAY BE AFFECTED BY FACTORS AFFECTING INTERNATIONAL SECURITIES
MARKETS.
The underlying stocks that constitute the sub-indices have been issued
by companies listed on European, Australian and Asian exchanges. You should be
aware that investments in securities indexed to the value of European,
Australian and Asian securities involve risks. The European, Australian and
Asian securities markets may be more volatile than U.S. or other securities
markets and may be affected by market developments in different ways than U.S.
or other securities markets. Direct or indirect government intervention to
stabilize a particular non-U.S. securities market and cross-shareholdings in
European, Australian and Asian companies on these markets may affect prices and
volume of trading on those markets. Also, there is generally less publicly
available information about non-U.S. companies than about U.S. companies that
are subject to the reporting requirements of the SEC and non-U.S. companies are
subject to accounting, auditing and financial reporting standards and
requirements that differ from those applicable to U.S. reporting companies.
Securities prices in Europe, Australia and Asia may be affected by
political, economic, financial and social factors in those regions. In
addition, recent or future changes in a country's government, economic and
fiscal policies, the possible imposition of, or changes in, currency exchange
laws or other laws or restrictions applicable to non-U.S. companies or
investments in non-U.S. equity securities, and possible fluctuations in the
rate of exchange between currencies are factors that could negatively affect
the international securities markets. Moreover, the relevant European,
Australian and Asian economies may differ favorably or unfavorably from the
U.S. economy in economic factors such as growth of gross national product, rate
of inflation, capital reinvestment, resources and self-sufficiency. Because
some sub-indices have a greater weighting than others in calculating the value
of the index, fluctuations in the securities markets relating to those
sub-indices will have a greater effect on the value of the index than
fluctuations in securities markets relating to sub-indices with a lesser
weighting.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE FUTURE
Although the MITTS Securities are listed on the AMEX under the symbol
"EEM", you cannot assume that a trading market will continue to exist for the
MITTS Securities. If a trading market in the MITTS Securities continues to
exist, there can be no assurance that there will be liquidity in the trading
market. The continued existence of a trading market for the MITTS Securities
will depend on our financial performance and other factors such as the
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited, there may
be a limited number of buyers for your MITTS Securities if you do not wish to
hold your investment until maturity. This may affect the price you receive.
There are many factors affecting the trading value of the MITTS Securities
We believe that the trading value of the MITTS Securities will be
affected by the value of the index and by a number of other factors. Some of
these factors are interrelated in complex ways; as a result, the effect of any
one factor may be offset or magnified by the effect of another factor. The
following paragraphs describe the expected impact on the market value of the
MITTS Securities given a change in a specific factor, assuming all other
conditions remain constant.
o The value of the index. The trading value of the MITTS Securities will
depend substantially on the amount by which the index exceeds or does not
exceed 100, the value of the index on the date the MITTS Securities were
priced for sale to the public. If you choose to sell your MITTS Securities
at a time when the value of the index exceeds 100, you may receive
substantially less than the amount that would be payable at maturity based
on that index value because of the expectation that the index will continue
to fluctuate until shortly before the maturity date when the average value
of the index over five trading days is determined. If you choose to sell
your MITTS Securities when the value of the index is below , or not
sufficiently above, 100, you may receive less than $10 per unit of your
MITTS Securities. In general, rising dividend rates or dividends per share
in the respective home countries related to the common stocks underlying
the sub-indices may increase the value of the index while falling dividend
rates in these countries may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying the index
may also affect the value of the index and the value of the MITTS
Securities.
o Interest rates. Because the MITTS Securities repay, at a minimum, the
principal amount at maturity, we expect that the trading value of the MITTS
Securities will be affected by changes in interest rates. In general, if
U.S. interest rates increase, we expect that the trading value of the MITTS
Securities will decrease. If U.S. interest rates decrease, we expect the
trading value of the MITTS Securities will increase. In general, if
interest rates in the applicable home countries increase, we expect that
the trading value of the MITTS Securities will increase. If interest rates
in the applicable home countries decrease, we expect the trading value of
the MITTS Securities will decrease. However, interest rates in the
applicable home countries may also affect the relevant economies and, in
turn, the value of the sub-indices. Rising interest rates in the applicable
home countries may lower the value of the sub-indices and the MITTS
Securities. Falling interest rates in the applicable home countries may
increase the value of the index and the value of the MITTS Securities.
o Volatility of the Index. Volatility is the term used to describe the size
and frequency of market fluctuations. If the volatility of the index
increases, we expect that the trading value of the MITTS Securities will
increase. If the volatility of the index decreases, we expect that the
trading value of the MITTS Securities will decrease.
o Time Remaining to Maturity. We anticipate that before their maturity the
MITTS Securities may trade at a value above that which would be expected
based on the level of interest rates and the index. This difference will
reflect a "time premium" due to expectations concerning the value of the
index during the period before their maturity of the MITTS Securities.
However, as the time remaining to maturity of the MITTS Securities
decreases, we expect that this time premium will decrease, lowering the
trading value of the MITTS Securities.
o Dividend Yields. If dividend yields on the stocks comprising the
sub-indices increase, we expect that the value of the MITTS Securities will
decrease, and conversely, if dividend yields on the underlying stock
comprising the sub-indices decrease, we expect that the value of the MITTS
Securities will increase.
o Changes in our credit ratings. Our credit ratings are an assessment of our
ability to pay our obligations. Consequently, real or anticipated changes
in our credit ratings may affect the trading value of the MITTS Securities.
However, because your return on your MITTS Securities is dependent upon
other factors in addition to our ability to pay our obligations under the
MITTS Securities, an improvement in our credit ratings will not reduce
other investment risks related to an investment in the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset some
or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the value of the index.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most of the factors listed above will be less if it occurs later in the term
of the MITTS Securities than if it occurs earlier in the term of the MITTS
Securities except that we expect that the effect on the trading value of the
MITTS Securities of a given increase in the value of the index will be greater
if it occurs later in the term of the MITTS Securities than if it occurs
earlier in the term of the MITTS Securities.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW.
New York State laws govern the 1983 Indenture under which the MITTS
Securities were issued. New York has certain usury laws that limit the amount
of interest that can be charged and paid on loans, which includes debt
securities like the MITTS Securities. Under present New York law, the maximum
rate of interest is 25% per annum on a simple interest basis. This limit may
not apply to debt securities in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the MITTS Securities holders, to
the extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We and our affiliates may from time to time buy or sell the stocks
underlying the index for their own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
POTENTIAL CONFLICTS OF INTERESTS.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index and
the amount payable to you at maturity . Under certain circumstances, MLPF&S's
role as our subsidiary and its responsibilities as calculation agent for the
MITTS Securities could give rise to conflicts of interests. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. MLPF&S is required to carry
out its duties as calculation agent in good faith and using its reasonable
judgment. However, you should be aware that because we control MLPF&S,
potential conflicts of interest could arise.
We have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with such arrangement. We did not seek competitive bids for such an
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax advisor.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets Bank
Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global
basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients,
including individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
MITTS Securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)..... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported for the fiscal years 1994
through 1997.
For the purpose of calculating the ratio of earnings to fixed
charges, "earnings" consist of earnings from continuing operations before
income taxes and fixed charges, excluding capitalized interest and preferred
security dividend requirements. "Fixed charges" consist of interest costs, the
interest factor in rentals, amortization of debt issuance costs, preferred
security dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF MITTS SECURITIES
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture, which is more fully described in this prospectus.
The MITTS Securities will mature on December 6, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of that MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "--Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner prior to maturity. Upon the occurrence of an
Event of Default with respect to the MITTS Securities, beneficial owners of the
MITTS Securities may accelerate the maturity of the MITTS Securities, as
described under "Events of Default and Acceleration" and "Other
Terms Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
PAYMENT AT MATURITY
At maturity, a beneficial owner of a MITTS Security will be entitled
to receive the principal amount of that MITTS Security plus a Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
principal amount per MITTS Security ($10 per unit) x Ending Index Value - Starting Index Value
-----------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Index Value" equals 100.
The "Participation Rate" equals 115%.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the
index in New York determined on each of the first five Calculation Days during
the Calculation Period. If there are fewer than five Calculation Days, then the
Ending Index Value will equal the average or arithmetic mean of the closing
values of the index on those Calculation Days, and if there is only one
Calculation Day, then the Ending Index Value will equal the closing value of
the index on that Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
The "Calculation Day" means any Index Business Day during the
Calculation Period on which a Market Disruption Event has not occurred.
The "Index Business Day" is a day on which the New York Stock Exchange
and the AMEX are open for trading and the index or any successor index is
calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the MITTS Securities.
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the total amount payable at maturity for each $10 principal amount of
MITTS Securities,
o the total rate of return to beneficial owners of the MITTS Securities,
o the pretax annualized rate of return to beneficial owners of MITTS
Securities, and
o the pretax annualized rate of return of an investment in the stocks
underlying the index, which includes an assumed aggregate dividend
yield of 2.36% per annum, as more fully described below.
Total Amount Pretax
Payable at Total Rate Annualized Pretax Annualized
Maturity per $10 of Rate Rate of Return of
Percentage Change Principal Return on of Return on Stocks Underlying
Hypothetical Ending Over the Starting Amount of Securities Securities(1) the
Index Value Index Value Securities Index(1)(2)
----------- ----------------- ---------- ---------- ------------- ----------
40 -60% $10.00 0.00% 0.00% -15.48%
50 -50% $10.00 0.00% 0.00% -11.24%
60 -40% $10.00 0.00% 0.00% -7.73%
70 -30% $10.00 0.00% 0.00% -4.72%
80 -20% $10.00 0.00% 0.00% -2.09%
90 -10% $10.00 0.00% 0.00% 0.25%
100(3) 0% $10.00 0.00% 0.00% 2.36%
110 10% $11.15 11.50% 2.18% 4.28%
120 20% $12.30 23.00% 4.16% 6.04%
130 30% $13.45 34.50% 5.98% 7.68%
140 40% $14.60 46.00% 7.67% 9.20%
150 50% $15.75 57.50% 9.24% 10.62%
160 60% $16.90 69.00% 10.71% 11.96%
170 70% $18.05 80.50% 12.09% 13.22%
180 80% $19.20 92.00% 13.40% 14.41%
190 90% $20.35 103.50% 14.64% 15.55%
200 100% $21.50 115.00% 15.81% 16.63%
210 110% $22.65 126.50% 16.93% 17.66%
220 120% $23.80 138.00% 18.00% 18.64%
230 130% $24.95 149.50% 19.03% 19.59%
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the
sub-indices with the allocation of this amount reflecting the current
relative weights of these stocks in the sub-indices;
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the index from the Starting Index Value to
the relevant hypothetical Ending Index Value;
(c) a constant dividend yield of 2.36% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the index at the end of each quarter assuming this value increases or
decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value;
(d) no transaction fees or expenses;
(e) a term for the MITTS Securities from November 26, 1997 to December 6,
2002; and
(f) a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Sub-Indices as of the close
of business on November 20, 1997 was approximately 2.36%.
(3) The Starting Index Value equals 100.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this prospectus.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the index, or its value , is
changed in any material respect, or if the index is in any other way modified
so that such index does not, in the opinion of the calculation agent, fairly
represent the value of the index had any changes or modifications not been
made, then, from and after such time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Index Value is to be calculated, make any adjustments as,
in the good faith judgment of the calculation agent, may be necessary in order
to arrive at a calculation of a value of a stock index comparable to the index
as if no changes or modifications had been made, and calculate the closing
value with reference to the index, as adjusted. Accordingly, if the method of
calculating the index is modified so that the value of the index is a fraction
or a multiple of what it would have been if it had not been modified, e.g., due
to a split in the index, then the calculation agent shall adjust the index in
order to arrive at a value of the index as if it had not been modified, e.g.,
as if a split had not occurred.
"MARKET DISRUPTION EVENT" means the occurrence or existence on any
Overseas Index Business Day with respect to a sub-index during the one-half
hour period that ends at the regular official weekday time at which trading on
the Index Exchange related to that sub-index occurs of any suspension of, or
limitation imposed on, trading (by reason of movements in price exceeding
limits permitted by the relevant exchange or otherwise) on (1) the Index
Exchange in securities that comprise 20% or more of the value of such sub-index
or (2) any exchanges on which futures or options on such sub-index are traded
in such options or futures if, in the determination of the calculation agent,
such suspension or limitation is material.
For the purpose of the foregoing definition, (1) a limitation on the
hours and number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular hours of the
relevant exchange and (2) a limitation on trading imposed during the course of
a day by reason of movements in price otherwise exceeding levels permitted by
the relevant exchange will constitute a Market Disruption Event.
"OVERSEAS INDEX BUSINESS DAY" means, with respect to any sub-index,
any day that is, or, but for the occurrence of a Market Disruption Event, would
have been, a trading day on the relevant Index Exchange or on any exchanges on
which futures or options on the sub-index are traded, other than a day on which
trading on any exchange is scheduled to close before its regular weekday
closing time.
"INDEX EXCHANGE" means, with respect to any sub-index, the principal
exchange on which the shares comprising that sub-index are traded.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the index and the AMEX or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the index (a
"Successor Index"), then, upon the calculation agent's notification of any
determination to the Trustee and ML&Co., the calculation agent will substitute
the Successor Index as calculated by the AMEX or any other entity for the index
and calculate the Ending Index Value as described above under "Payment at
Maturity". Upon any selection by the calculation agent of a Successor Index,
ML&Co. shall cause notice to be given to holders of the MITTS Securities.
If the AMEX discontinues publication of the index and a Successor
Index is not selected by the calculation agent or is no longer published on any
of the Calculation Days, the value to be substituted for the index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each Calculation
Day in accordance with the procedures last used to calculate the index before
any discontinuance. If a Successor Index is selected or the calculation agent
calculates a value as a substitute for the Index as described below, the
Successor Index or value shall be substituted for the index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the index before the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at such time,
then on each Business Day until the earlier to occur of
o the determination of the Ending Index Value and
o a determination by the Calculation Agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in computing
the Supplemental Redemption Amount as described in the preceding paragraph as
if that day were a Calculation Day. The calculation agent will cause notice of
each value to be published not less often than once each month in The Wall
Street Journal or another newspaper of general circulation, and arrange for
information with respect to these values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the index may adversely affect trading in the MITTS Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any MITTS Securities shall
have occurred and be continuing, the amount payable to a beneficial owner of a
MITTS Security upon any acceleration permitted by the MITTS Securities, with
respect to each $10 principal amount of each unit, will be equal to the
principal amount and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "Description of MITTS Securities-Payment at Maturity" in this
prospectus. If a bankruptcy proceeding is commenced in respect of ML&Co., the
claim of the beneficial owner of a MITTS Security may be limited, under Section
502(b)(2) of Title 11 of the United States Code, to the principal amount of the
MITTS Security plus an additional amount of contingent interest calculated as
though the date of the commencement of the proceeding were the maturity date of
the MITTS Securities.
In case of default in payment at the maturity date of the MITTS
Securities, whether at their stated maturity or upon acceleration, from and
after the maturity date the MITTS Securities shall bear interest, payable upon
demand of the beneficial owners thereof, at the rate of 6.25% per annum to the
extent that payment of any interest shall be legally enforceable on the unpaid
amount due and payable on that date in accordance with the terms of the MITTS
Securities to the date payment of that amount has been made or duly provided
for.
GLOBAL SECURITIES
DESCRIPTION OF THE GLOBAL SECURITIES
Beneficial owners of the MITTS Securities may not receive physical
delivery of the MITTS Securities nor may they be entitled to have the MITTS
Securities registered in their names. The MITTS Securities currently are
represented by one or more fully registered global securities. Each global
security was deposited with, or on behalf of, The Depository Trust Company or
DTC (DTC, together with any successor thereto, being a "depositary"), as
Depositary, registered in the name of Cede & Co. (DTC's partnership nominee).
Unless and until it is exchanged in whole or in part for MITTS Securities in
definitive form, no global security may be transferred except as a whole by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or by the depositary or any
such nominee to a successor of the depositary or a nominee of that successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the MITTS Securities represented by a global security for
all purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the MITTS Securities represented by a global security will not be
entitled to have the MITTS Securities represented by the global security
registered in their names, will not receive or be entitled to receive physical
delivery of the MITTS Securities in definitive form and will not be considered
the owners or Holders under the 1983 Indenture, including for purposes of
receiving any reports delivered by ML&Co. or the Trustee under the 1983
Indenture. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of DTC and, if that person is not a
participant of DTC on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the 1983
Indenture. ML&Co. understands that under existing industry practices, in the
event that ML&Co. requests any action of holders or that an owner of a
beneficial interest in a global security desires to give or take any action
which a holder is entitled to give or take under the 1983 Indenture, DTC would
authorize the participants holding the relevant beneficial interests to give or
take any action, and the participants would authorize beneficial owners owning
through those participants to give or take action or would otherwise act upon
the instructions of beneficial owners. Conveyance of notices and other
communications by DTC to participants, by participants to indirect participants
and by participants and indirect participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
DTC PROCEDURES
The following is based on information furnished by DTC:
DTC is the securities depositary for the MITTS Securities. The MITTS
Securities were issued as fully registered securities registered in the name of
Cede & Co., DTC's partnership nominee. One or more fully registered global
securities were issued for the MITTS Securities in the aggregate principal
amount of the MITTS Securities, and were deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under to the provisions of Section 17A of the Securities and
Exchange Act of 1934, as amended. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations. DTC is owned by a
number of its direct participants and by the NYSE, the AMEX and the National
Association of Securities Dealers, Inc. Access to the DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the SEC.
Purchases of MITTS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the MITTS
Securities on DTC's records. The ownership interest of each beneficial owner is
in turn to be recorded on the records of direct and indirect participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which
the beneficial owner entered into the transaction. Transfers of ownership
interests in the MITTS Securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all MITTS Securities deposited
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of MITTS Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the MITTS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the MITTS
Securities are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
MITTS Securities. Under its usual procedures, DTC mails an omnibus proxy to
ML&Co. as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
identified in a listing attached to the omnibus proxy to whose accounts the
MITTS Securities are credited on the record date identified in a listing
attached to the omnibus proxy.
Principal, premium, if any, and/or interest, if any, payments on the
MITTS Securities will be made in immediately available funds to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the depositary's
records unless DTC has reason to believe that it will not receive payment on
that date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of the participant and not of DTC, the
trustee or ML&Co., subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to DTC is the responsibility of ML&Co. or the trustee,
disbursement of payments to direct participants is the responsibility of DTC,
and disbursement of payments to the beneficial owners is the responsibility of
direct and indirect participants.
Exchange for Certificated Securities
If:
o the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by ML&Co.
within 60 days,
o ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, or
o an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the MITTS Securities,
the global securities will be exchangeable for MITTS Securities in definitive
form of like tenor and of an equal aggregate principal amount, in denominations
of $10 and integral multiples of $10. The definitive MITTS Securities will be
registered in the name or names as the depositary shall instruct the trustee.
It is expected that instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global securities.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, MITTS Securities in
definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has
been obtained from sources that ML&Co. believes to be reliable, but ML&Co. takes
no responsibility for its accuracy .
SAME-DAY SETTLEMENT AND PAYMENT
All payments of principal and the Supplemental Redemption Amount, if
any, will be made by ML&Co. in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
The value of the Major 11 International Index on any Index Business Day
is calculated and disseminated by the AMEX. The AMEX generally calculates and
disseminates the value of the index based on the most recently reported values
of the sub-indices, at approximately 15-second intervals during the AMEX's
business hours and the end of each Index Business Day via the Consolidated Tape
Association's Network B. The index is reported on the AMEX and Bloomberg under
the symbol "EUX" and on Reuters under the symbol ".EUX". The Starting Index
Value was set to 100 on the date the MITTS Securities were priced for initial
sale to the public (the "Pricing Date").
DETERMINATION OF INDEX MULTIPLIER FOR EACH SUB-INDEX
The initial weighting of each sub-index was determined at the close of
business on the Pricing Date based on its relative market capitalization. The
market capitalization of a stock equals the product of the total number of
shares outstanding and the price per share of that stock. The total market
capitalization of the stocks comprising each sub-index was determined using the
most recently available information concerning the number of shares outstanding
for each stock contained in a sub-index and the most recently available price
for each share of that stock. Current exchange rates were used to translate this
market capitalization information into U.S. dollars. The market capitalizations
expressed in U.S. dollars of each sub-index were totaled (the "Total Market
Capitalization"). The weighting of each sub-index was then determined and equals
the percentage of the market capitalization for such sub-index relative to the
Total Market Capitalization. The Index Multiplier for each sub-index was then
calculated and equals:
o the weighting for such sub-index multiplied by 100, divided by
o the most recently available value of such sub-index.
The Index Multipliers were calculated in this way so that the index would equal
100.00 on the Pricing Date.
The Index Multiplier for each sub-index will remain fixed, except that
the AMEX may adjust the Index Multiplier in the event of a significant change
in how a sub-index is calculated. There will be no periodic rebalancing of the
index to reflect changes in the relative market capitalizations of the
sub-indices.
COMPUTATION OF THE INDEX
The index is calculated by totaling the products of the most recently
available value of each sub-index and the Index Multiplier applicable to each
sub-index. Because the sub-indices are based on stocks traded on stock
exchanges in Europe, Asia and Australia, once the applicable stock exchanges
close and the values of the sub-indices become fixed until the stock exchanges
reopen, the value of the index will be fixed.
SUB-INDICES
The following is a list of the sub-indices and certain information
concerning each sub-index. All disclosure contained in this prospectus
regarding the sub-indices is derived from publicly available information.
NIKKEI STOCK AVERAGE, "NIKKEI 225"
Description of Nikkei 225: The Nikkei 225 is intended to provide an
indication of the pattern of common stock price movement of the 225
most actively traded common stocks on the Tokyo Stock Exchange. The
Nikkei 225 is a modified price-weighted index which means that an
underlying stock's weight in the Nikkei 225 is based on its price per
share rather than the total market capitalization of the issuer.
PUBLISHER: Nihon Keizai Shimbun, Inc. or also known as NKS
Required Disclosure: NKS is under no obligation to continue the
calculation and dissemination of the Nikkei 225. The MITTS Securities
are not sponsored, endorsed, sold or promoted by NKS. No inference
should be drawn from the information contained in this prospectus that
NKS makes any representation or warranty, implied or express, to ML &
Co., the holders of the MITTS Securities or any member of the public
regarding the advisability of investing in securities generally or in
the MITTS Securities in particular or the ability of the Nikkei 225 to
track general stock market performance. NKS has no obligation to take
the needs of ML & Co. or the holders of the MITTS Securities into
consideration in determining, composing or calculating the Nikkei 225.
NKS is not responsible for, and has not participated in the
determination of the timing of, prices for, or quantities of, the
MITTS Securities to be issued or in the determination or calculation
of the equation by which the MITTS Securities are to be settled in
cash. NKS has no obligation or liability in connection with the
administration, marketing or trading of the MITTS Securities.
NKS has consented to the use of and reference to the Nikkei 225 in
connection with the MITTS Securities.
FINANCIAL TIMES SE 100 INDEX "FTSE 100"
DESCRIPTION OF FTSE 100: The FTSE 100 is intended to provide an
indication of the pattern of common stock price movement of the 100
common stocks with the largest market capitalization on the London
Stock Exchange.
PUBLISHER: The Financial Times and London Stock Exchange
REQUIRED DISCLOSURE: The FTSE 100 is calculated by FTSE International
Limited in conjunction with the Institute of Actuaries and the Faculty
of Actuaries. ML&Co. has obtained full license from FTSE International
Limited to use its trademark and copyright in the creation of this
MITTS Security. FTSE International Limited does not sponsor, endorse
or promote this MITTS Security.
DEUTSCHER AKTIENINDEX, "DAX(R)"
DESCRIPTION OF DAX: The DAX is a total rate of return index measuring
the performance of 30 common stocks on the Frankfurt Stock Exchange
selected on the basis of their market capitalization and trading
volume. A total rate of return index reflects both the price
performance of the relevant common stocks as well as the dividends
paid on such common stocks.
PUBLISHER: Deutsche Borse AG
"DAX" is a registered trademark of Deutsche Borse AG.
COMPAGNIE DES AGENTS DE CHANGE 40 INDEX, "CAC 40"
DESCRIPTION OF CAC 40: The CAC 40 is intended to provide an indication
of the pattern of common stock price movement of the 40 common stocks
with the largest market capitalization on the Paris Bourse.
PUBLISHER: SBF-Paris Bourse
REQUIRED DISCLOSURE: "CAC-40" is a registered trademark of the Societe
des Bourses Francaises-Paris Bourse, which designates the index that
the SBF-Paris Bourse calculates and publishes. Authorization to use
the index and the "CAC-40" trademark in connection with the MITTS
Securities has been granted by license.
The SBF-Paris Bourse, owner of the trademark and of the CAC-40, does
not sponsor, endorse or participate in the marketing of the MITTS
Securities. The SBF-Paris Bourse makes no warranty or representation
to any person, express or implied, as to the figure at which the
CAC-40 stands at any particular time, nor as to the results or
performance of the MITTS Securities. Neither shall the SBF-Paris
Bourse be under any obligation to advise any person of any error in
the published CAC-40.
SWISS MARKET INDEX, "SMI(R)"
DESCRIPTION OF SMI: The SMI is intended to provide an indication of
the pattern of common stock price movement of common stocks with the
largest market capitalization and greatest liquidity on the Geneva,
Zurich and Basle Stock Exchanges.
PUBLISHER: Swiss Exchange
REQUIRED DISCLOSURE: "SMI" is a registered trademark of the Swiss
Exchange. The MITTS Securities are not in any way sponsored, endorsed,
sold or promoted by the Swiss Exchange and the Swiss Exchange makes no
warranty or representation whatsoever, express or implied, either as
to the results to be obtained from the use of the SMI and/or the
figure at which the SMI stands at any particular time on any
particular day or otherwise. The SMI is compiled and calculated solely
by the Swiss Exchange. However, the Swiss Exchange shall not be liable
whether in negligence or otherwise to any person for any error in the
SMI and the Swiss Exchange shall have no obligation to advise any
person of any error in SMI.
AMSTERDAM EXCHANGES-INDEX(R), "AEX-INDEX(R)"
DESCRIPTION OF AEX: The AEX is intended to provide an indication of
the pattern of common stock price movement of the 25 common stocks
with the largest market capitalization on the Amsterdam Stock
Exchange.
PUBLISHER: AEX-Optiebeurs nv
REQUIRED DISCLOSURE: "AEX-index" is a registered trademark of the
AEX-Optiebeurs nv. The AEX-Optiebeurs nv has all proprietary rights
with relation to the AEX. The AEX-Optiebeurs nv in no way sponsors,
endorses or is otherwise involved in the issue and offering of the
MITTS Securities. The AEX-Optiebeurs nv disclaims any liability to any
party for any inaccuracy in the data on which the AEX is based, for
any mistakes, errors, or omissions in the calculation or dissemination
of the AEX or for the manner in which the AEX is used in connection
with the issue and offering of the MITTS Securities.
AMEX HONG KONG 30 INDEX-, "HK30"
DESCRIPTION OF HK30: The HK30 is intended to provide an indication of
the pattern of common stock price movement of 30 common stocks listed
on the Hong Kong Stock Exchange and selected on the basis of market
weight, trading liquidity and representation of business industry.
PUBLISHER: The American Stock Exchange
REQUIRED DISCLOSURE: The "AMEX Hong Kong 30 Index" is a service mark
of the AMEX. The AMEX in no way sponsors, endorses or is otherwise
involved in the issuance of the MITTS Securities, other than the fact
that the MITTS Securities will be listed and traded on the AMEX and
the AMEX will calculate and disseminate the Major 11 Index, and the
AMEX disclaims any liability to any party for any inaccuracy in the
data on which the HK30 is based, for any mistakes, errors or omissions
in the calculation, and/or dissemination of the HK30, or for the
manner in which it is applied in connection with the issuance of the
MITTS Securities.
AMEX has consented to the use and reference to the term "AMEX Hong
Kong 30 Index".
AUSTRALIA ALL ORDINARIES INDEX, "XAO"
DESCRIPTION OF XAO: The XAO is a capitalization-weighted index of 338
common stocks listed on the Australian Stock Exchange.
PUBLISHER: ASX Operations Pty Limited
REQUIRED DISCLOSURE: The XAO is a registered trade mark of ASX
Operations Pty Limited or ASXO, a wholly-owned subsidiary of the
Australian Stock Exchange Limited or ASX. ASXO has granted a license
for the use of the XAO on the basis that ASXO does not expressly or
impliedly approve, endorse, make any judgment or express any opinion
in respect of the M&L & Co. or the MITTS Securities. ASX and its
related corporations, shall have no liability for any claim whatsoever
where the claim arises wholly or substantially out of accident or
negligence of ASX, its related corporations and their servants and
agents as the case may be or acts of third parties; and without in any
way limiting the generality of the foregoing, arising out of
unavailability of the All Ordinaries Index or non-supply of the All
Ordinaries Index.
MILANO ITALIA BORSA 30 INDEX, "MIB 30"
DESCRIPTION OF MIB 30: The MIB 30 is intended to provide an indication
of the pattern of common stock price movement of common stocks with
the largest market capitalization and greatest liquidity on the
Italian Stock Exchange.
PUBLISHER: Consiglio di Borsa
STOCKHOLM OPTIONS MARKET INDEX, "OMX index"
DESCRIPTION OF OMX INDEX: The OMX index is intended to provide an
indication of the pattern of common stock price movement of the 30
common stocks with the largest volume of trading on the Stockholm
Stock Exchange.
PUBLISHER: OM Gruppen AB
REQUIRED DISCLOSURE: The MITTS Securities are not in any way
sponsored, endorsed, sold or promoted by OM Gruppen AB or OM and OM
makes no warranty or representation whatsoever, express or implied,
either as to the results to be obtained from the use of the OMX index
and/or the figure at which the said OMX index stands at any particular
time on any particular day or otherwise. The OMX index is compiled and
calculated solely by an indexer on behalf of OM. However, OM shall not
be liable whether in negligence or otherwise to any person for any
error in the OMX index and OM shall not be under any obligation to
advise any person of any error therein.
All rights to the trademark OMX, OMX INDEX are vested in OM Gruppen AB
and are used under a license agreement with OM.
IBEX 35 INDEX, "IBEX 35"
DESCRIPTION OF IBEX 35: The IBEX 35 is intended to provide an
indication of the pattern of common stock price movement of the 35
common stocks with the greatest liquidity continuously traded and
quoted on the Joint Stock Exchange System made up of the Barcelona,
Bilbao, Madrid and Valencia stock exchanges.
PUBLISHER: Sociedad de Bolsas, S.A.
REQUIRED DISCLOSURE: Sociedad de Bolsas, S.A. does not warrant in any
case nor for any reason whatsoever:
(a) the continuity of the composition of the IBEX 35 exactly as it is
today;
(b) the continuity of the method for calculating the IBEX 35 exactly
as it is calculated today;
(c) the continuity of the calculation, formula and publication of the
IBEX 35;
(d) the precision, integrity or freedom from errors or mistakes in
the composition and calculation of the IBEX 35; and
(e) the adequacy of the IBEX 35 for the purposes expected in the
issue of the MITTS Securities nor for dealing in the same.
The publisher of each sub-index will add or delete stocks due to
events such as the bankruptcy or merger of the issuer of a stock. The publisher
of a sub-index may reevaluate the composition of the stocks underlying the
sub-index at specified intervals to assure that they still meet the selection
criteria or any ongoing eligibility criteria.
The publisher of a sub-index is under no obligation to continue the
calculation and dissemination of such sub-index and such publisher may change
the method by which such sub-index is calculated. The publishers of the
sub-indices are under no obligation to take the needs of ML&Co. or the holders
of the MITTS into consideration in determining, composing or calculating the
sub-indices.
OTHER TERMS
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture, dated as of April 1, 1983, as amended and restated,
between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of the 1983
Indenture is filed as an exhibit to the registration statement relating to the
MITTS Securities of which this prospectus is a part. The following summaries of
the material provisions of the 1983 Indenture are not complete and are subject
to, and qualified in their entirety by reference to, all provisions of the 1983
Indenture, including the definitions of terms in the 1983 Indenture.
Series of senior debt securities may from time to time be issued under
the 1983 Indenture, without limitation as to aggregate principal amount, in one
or more series and upon terms as ML&Co. may establish under the provisions of
the 1983 Indenture.
The 1983 Indenture and the MITTS Securities are governed by and
construed in accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from
those of senior debt securities previously issued, and issue additional senior
debt securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. However, because
ML&Co. is a holding company, the rights of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise are necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of ML&Co. itself as a creditor of
the subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to ML&Co. are restricted by net
capital requirements under the Exchange Act, and under rules of exchanges and
other regulatory bodies.
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned
directly or indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of the incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF
ASSETS BY, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock
of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to any such transaction, MLPF&S
remains a Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay any amounts due and payable or deliverable with respect to
all the Senior Debt Securities ; and
o perform and observe of all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
1983 Indenture.
MODIFICATION AND WAIVER
ML&Co. and the trustee may modify and amend the 1983 Indenture with
the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of debt securities affected. However, without the consent of
each holder of any outstanding debt security affected, no amendment or
modification to any Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any senior
debt security or any premium payable on redemption , or change the
redemption price;
o reduce the principal amount of, or the interest or Additional Amounts
payable on, any senior debt security or reduce the amount of principal
which could be declared due and payable before the stated maturity
date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior debt
security;
o impair the right to institute suit for the enforcement of any payment
on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding senior
debt securities of any series, the consent of whose holders is
required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past default
to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of
each holder affected. The Holders of at least a majority in principal amount of
outstanding senior debt securities of any series may, with respect to that
series, waive past defaults under the Indenture and waive compliance by ML&Co.
with provisions in the 1983 Indenture, except as described under "--Events of
Default".
EVENTS OF DEFAULT
Each of the following will be Events of Default with respect to senior
debt securities of any series:
o default in the payment of any interest or Additional Amounts
payable when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co.
contained in the Indenture for the benefit of that series or in
the senior debt securities of that series, continuing for 60 days
after written notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the
1983 Indenture.
If an Event of Default occurs and is continuing for any series of senior debt
securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt
securities of any series but before the trustee has obtained a judgment or
decree for payment of money , the holders of a majority in principal amount of
the outstanding senior debt securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due, other
than those due as a result of acceleration, have been made and all Events of
Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue price
of the outstanding debt securities of any series of debt securities may waive
any Event of Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable
under the debt securities of that series; or
o in respect of an obligation or provision of any Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each series of debt securities
affected.
The holders of a majority in principal amount of the outstanding
senior debt securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee with respect to those senior debt
securities, provided that any direction shall not be in conflict with any rule
of law or the 1983 Indenture. Before proceeding to exercise any right or power
under the 1983 Indenture at the direction of the holders, the trustee shall be
entitled to receive from the Holders reasonable security or indemnification
against the costs, expenses and liabilities which might be incurred by it in
complying with any direction.
The MITTS Securities and other series of senior debt securities issued
under the 1983 Indenture do not have the benefit of any cross-default
provisions with other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the 1983
Indenture.
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying the final Treasury Department
Regulations (the "Final Regulations") concerning the United States Federal
income tax treatment of contingent payment debt instruments to the MITTS
Securities, we have determined that the projected payment schedule for the
MITTS Securities will consist of payment on the maturity date of the principal
amount thereof and a projected Supplemental Redemption Amount equal to $3.6261
per unit. This represents an estimated yield on the MITTS Securities equal to
6.25% per annum (compounded semiannually).
The projected payment schedule, including both projected Supplemental
Redemption Amount and the estimated yield on the MITTS Securities, has been
determined solely for United States Federal income tax purposes i.e., for
purposes of applying the Final Regulations to the MITTS Securities, and is
neither a prediction nor a guarantee of what the actual Supplemental Redemption
Amount will be, or that the actual Supplemental Redemption Amount will even
exceed zero.
The following table sets forth the amount of interest that will be
deemed to have accrued with respect to each unit of the MITTS Securities during
each accrual period over a term of five years and ten days for the MITTS
Securities based upon the projected payment schedule for the MITTS Securities,
including both the projected Supplemental Redemption Amount and the estimated
yield equal to 6.25% per annum, compounded semiannually, as determined by
ML&Co. for purposes of illustrating the application of the Final Regulations to
the MITTS Securities:
TOTAL INTEREST
INTEREST DEEMED DEEMED TO HAVE
TO ACCRUED ON
ACCRUE DURING SECURITIES AS OF
ACCRUAL PERIOD END OF
(PER UNIT) ACCRUAL PERIOD
ACCRUAL PERIOD (PER UNIT)
-------------- ------------- -----------
November 26, 1997 through December 6, 1997......... $0.0169 $0.0169
December 7, 1997 through June 6, 1998.............. $0.3130 $0.3299
June 7, 1998 through December 6, 1998.............. $0.3228 $0.6527
December 7, 1998 through June 6, 1999.............. $0.3329 $0.9856
June 7, 1999 through December 6, 1999.............. $0.3433 $1.3289
December 7, 1999 through June 6, 2000.............. $0.3540 $1.6829
June 7, 2000 through December 6, 2000.............. $0.3651 $2.0480
December 7, 2000 through June 6, 2001.............. $0.3765 $2.4245
June 7, 2001 through December 6, 2001.............. $0.3883 $2.8128
December 7, 2001 through June 6, 2002.............. $0.4004 $3.2132
June 7, 2002 through December 6, 2002.............. $0.4129 $3.6261
Projected Supplemental Redemption Amount = $3.6261 per unit.
All prospective investors in the MITTS Securities should consult their
own tax advisors concerning the application of the Final Regulations to their
investment in the MITTS Securities. Investors in the MITTS Securities may also
obtain the projected payment schedule, as determined by ML&Co. for purposes of
the application of the Final Regulations to the MITTS Securities, by submitting
a written request for such information to Merrill Lynch & Co., Inc., Attn:
Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street, 12th
Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the MITTS Securities and other securities. For further information on
ML&Co. and the MITTS Securities, you should refer to our registration statement
and its exhibits. This prospectus summarizes material provisions of contracts
and other documents that we refer you to. Because the prospectus may not
contain all the information that you may find important, you should review the
full text of these documents. We have included copies of these documents as
exhibits to our registration statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were
filed with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this offering
is completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the MITTS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the MITTS Securities.
MLPF&S may act as principal or agent in these market-making
transactions.
The MITTS Securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the MITTS Securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the
Annual Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
S&P 500 INFLATION ADJUSTED MARKET INDEX TARGET-TERM SECURITIES(R) DUE
SEPTEMBER 24, 2007
"MITTS(R) SECURITIES"
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in the MITTS Securities.
The MITTS Securities: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities you
o No payments before the maturity own, we will pay you an amount
date equal to the sum of
o Senior unsecured debt securities o the principal amount of each
of Merrill Lynch & Co., Inc. unit, adjusted by the CPI, and
o Linked to the value of the S&P o an additional amount based on the
500 Index percentage increase, if any, in
o The MITTS Securities are listed the value of the S&P 500 Index,
on the New York Stock Exchange adjusted as described in this
under the symbol "IEM". prospectus.
o You will receive no less than the
principal amount of your MITTS
Securities and the additional
amount you receive, if any, will
not exceed $10.
INVESTING IN THE MITTS SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the MITTS Securities will be the prevailing market
price at the time of sale.
----------------
MERRILL LYNCH & CO.
----------------
The date of this prospectus is , 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc. "Standard & Poor's(R)", "Standard & Poor's
500", "S&P 500(R)", "S&P(R)" and "500", are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Merrill Lynch Capital
Services, Inc. and ML&Co. is an
authorized sublicensee.
Table of Contents
Page
RISK FACTORS.................................................................3
MERRILL LYNCH & CO., INC.....................................................6
RATIO OF EARNINGS TO FIXED CHARGES...........................................7
DESCRIPTION OF THE MITTS SECURITIES..........................................8
THE INDEX...................................................................15
CONSUMER PRICE INDEX........................................................18
OTHER TERMS.................................................................18
PROJECTED PAYMENT SCHEDULE..................................................22
WHERE YOU CAN FIND MORE INFORMATION.........................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........................23
PLAN OF DISTRIBUTION........................................................24
EXPERTS.....................................................................24
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT
You should be aware that at maturity we will pay you no more than the
principal amount, as adjusted, for each unit of the MITTS Securities you own if
the average value of the S&P 500 Index over five trading days shortly before
the maturity date is less than 1089.38. This will be true even if the value of
the S&P 500 Index was higher than 1089.38 at some time during the life of the
MITTS Securities but later falls below 1089.38.
You will not receive an amount in addition to the principal amount, as
adjusted, that exceeds $10 per unit regardless of how much the S&P 500 Index
increases. If the S&P 500 Index reaches a value of 2178.76, you will receive an
additional amount of $10. Since $10 is the maximum additional amount we will
pay, you will not receive any incremental benefit from increases beyond that
value. If we pay you the maximum additional amount of $10 per unit, this will
represent a maximum annualized rate of return of 7.05% compounded semi-annually
over a term of ten years. This limitation does not apply to the principal
amount, as adjusted, which is dependent on changes in the Consumer Price Index
or CPI.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of ML&Co.
with the same maturity date. Your investment may not reflect the full
opportunity cost to you when you consider the effect of factors that affect the
time value of money.
YOUR RETURN WILL NOT REFLECT THE PAYMENT OF DIVIDENDS ON THE STOCKS INCLUDED
IN THE S&P 500 INDEX
S&P calculates the S&P 500 Index by reference to the prices of the
common stocks comprising the S&P 500 Index without taking into consideration
the value of dividends paid on those stocks. Therefore, the return you earn on
the MITTS Securities, if any, will not be the same as the return that you would
earn if you actually owned each of the common stocks in the S&P 500 Index and
received the dividends paid on those stocks.
MANY FACTORS MAY AFFECT THE VALUE OF THE CONSUMER PRICE INDEX
Changes in the CPI will affect the principal amount, as adjusted, that
we will pay you at maturity. The changes may be significant. Changes in the CPI
are a function of the changes in specified consumer prices over time, which
result from the interaction of many factors over which ML&Co. has no control.
In the past, the CPI has experienced periods of volatility and this
volatility may occur in the future. Fluctuations and trends in the CPI that
have occurred in the past are not necessarily indicative, however, of
fluctuations that may occur in the future.
As a result of any change of calculating the CPI, the principal
amount, as adjusted, payable on the MITTS Securities, and therefore the value
of the MITTS Securities could be significantly reduced. If the CPI is
substantially altered, the calculation agent may employ a substitute index to
calculate the principal amount, as adjusted, as described under "Description of
MITTS Securities--Payment at Maturity".
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE FUTURE
Although the MITTS Securities are listed on the NYSE under the symbol
"IEM," you cannot assume that a trading market will continue to exist for the
MITTS Securities. If a trading market in the MITTS Securities continues to
exist, you cannot assume that there will be liquidity in the trading market.
The continued existence of a trading market for the MITTS Securities will
depend on our financial performance and other factors such as the appreciation,
if any, of the value of the S&P 500 Index.
If the trading market for the MITTS Securities is limited and you do
not wish to hold your investment until maturity, there may be a limited number
of buyers for your MITTS Securities. This may affect the price you receive if
you sell before maturity.
FACTORS AFFECTING TRADING VALUE OF THE MITTS SECURITIES
We believe that the value of the S&P 500 Index and the CPI and by a
number of other factors will affect the market value of the MITTS Securities.
Some of these factors are interrelated in complex ways; as a result, the effect
of any one factor may be offset or magnified by the effect of another factor.
The following paragraphs describe the expected impact on the market value of
the MITTS Securities given a change in a specific factor, assuming all other
conditions remain constant.
o S&P 500 Index Value We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the S&P
500 Index exceeds 1089.38. If you choose to sell your MITTS Securities
when the value of the S&P 500 Index exceeds 1089.38, you may receive
substantially less than the amount that would be payable at maturity
based on that S&P 500 Index value because of the expectation that the
S&P 500 Index will continue to fluctuate until the maturity of the
MITTS Securities. If you choose to sell your MITTS Securities when the
value of the S&P 500 Index is below 1089.38, you may receive less than
the $10 principal amount per unit of MITTS Securities. In general,
rising U.S. dividend rates may increase the value of the S&P 500 Index
while falling U.S. dividend rates may decrease the value of the S&P
500 Index. Political, economic and other developments that affect the
stocks included in the S&P 500 Index may also affect the value of the
S&P 500 Index and the value of the MITTS Securities.
o Interest Rates Because the MITTS Securities repay, at a minimum, the
principal amount at maturity, we expect that changes in interest rates
will affect the trading value of the MITTS Securities. In general, if
U.S. interest rates increase, we expect that the trading value of the
MITTS Securities will decrease. Conversely, if U.S. interest rates
decrease, we expect the trading value of the MITTS Securities will
increase. Interest rates may also affect the U.S. economy and, in
turn, the value of the S&P 500 Index. Rising interest rates may lower
the value of the S&P 500 Index and, thus, the MITTS Securities.
Falling rates may increase the value of the S&P 500 Index and, thus,
may increase the value of the MITTS Securities.
o Value of the CPI The principal amount of the MITTS Securities, as
adjusted, will generally be higher in direct proportion to the
percentage increase, if any, in the value of the CPI from when the
initial CPI is fixed to when the final CPI is determined. However,
interim increases in the CPI may or may not result in increases in the
trading value of the MITTS Securities because of other economic
factors. For example, an increase in the CPI may be accompanied by
higher interest rates. Higher interest rates could offset any positive
impact of increases in the CPI on the trading value of the MITTS
Securities.
o Volatility of the S&P 500 Index or of the CPI Volatility is the term
used to describe the size and frequency of market fluctuations. If the
volatility of the S&P 500 Index or of the CPI increases, we expect
that the trading value of the MITTS Securities will increase.
Conversely, if the volatility of the S&P 500 Index or of the CPI
decreases, we expect that the trading value of the MITTS Securities
will decrease.
o Time Remaining to Maturity We anticipate that prior to the maturity of
the MITTS Securities, the MITTS Securities may trade at a value above
that which would be expected based on the level of interest rates and
the S&P 500 Index. This difference will reflect a "time premium" due
to expectations concerning the value of the S&P 500 Index during the
period prior to maturity of the MITTS Securities. However, as the time
remaining to maturity of the MITTS Securities decreases, we expect
that this time premium will decrease, lowering the trading value of
the MITTS Securities.
o Dividend Yields If dividend yields on the stocks included in the S&P
500 Index increase, we expect that the value of the MITTS Securities
will decrease. Conversely, if dividend yields on the stocks included
in the S&P 500 Index decrease, we expect that the value of the MITTS
Securities will increase.
o Changes in our credit ratings. Our credit ratings are an assessment of
our ability to pay our obligations. Consequently, real or anticipated
changes in our credit ratings may affect the trading value of the
MITTS Securities. However, because your return on your MITTS
Securities is dependent upon factors in addition to our ability to pay
our obligations under the MITTS Securities, such as the percentage
increase in the value of the S&P 500 Index at maturity, an improvement
in our credit ratings will not reduce investment risks related to the
MITTS Securities.
We want you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any increase in the trading value of the MITTS Securities attributable to
another factor, such as an increase in the S&P 500 Index value.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most of the factors listed above will be less if it occurs later in the term
of the MITTS Securities than if it occurs earlier in the term of the MITTS
Securities. However, we expect that the effect on the trading value of the
MITTS Securities of a given increase in the value of the S&P 500 Index or the
CPI will be greater if it occurs later in the term of the MITTS Securities than
if it occurs earlier in the term of the MITTS Securities.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW
New York State laws govern the indenture under which the MITTS
Securities were 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 MITTS Securities. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not apply
to debt securities in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the MITTS Securities holders, to
the extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
PURCHASES AND SALES BY MERRILL LYNCH
We and our other affiliates may from time to time buy or sell the
stocks underlying the S&P 500 Index for their own accounts for business reasons
or in connection with hedging ML&Co.'s obligations under the MITTS Securities.
These transactions could affect the price of those stocks and the value of the
S&P 500 Index.
POTENTIAL CONFLICTS OF INTERESTS
The calculation agent is a subsidiary of ML&Co., the issuer of the
MITTS Securities. In come circumstances, MLPF&S' roles as a subsidiary of
ML&Co. and its responsibilities as calculation agent for the MITTS Securities
could give rise to conflicts of interests. You should be aware that because the
calculation agent is controlled by ML&Co., potential conflicts of interest
could arise; however, the calculation agent is subject to limits and has
certain duties. For example, in the case of the CPI, the calculation agent
could only adjust a value of the CPI to undo a change to how the CPI is
calculated or select a successor measure for inflation to maintain the intended
economic benefits of the MITTS Securities to you if the CPI is discontinued.
The calculation agent could not otherwise adjust a value of the CPI or replace
the CPI with another measure of inflation.
OTHER CONSIDERATIONS
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax advisor.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets Bank
Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients,
including individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
MITTS Securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios
reported for the fiscal years 1994
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF THE MITTS SECURITIES
On September 24, 1997, ML&Co. issued $16,500,000 aggregate principal
amount of S&P 500 MITTS Securities due September 24, 2007. The MITTS Securities
were issued as a series of senior debt securities under the 1983 Indenture
which is more fully described in this prospectus.
The MITTS Securities will mature on September 24, 2007.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security, as adjusted, plus the Supplemental
Redemption Amount described below, if any, there will be no other payment of
interest, periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner before maturity. Upon the occurrence of an Event
of Default with respect to the MITTS Securities, beneficial owners of the MITTS
Securities may accelerate the maturity of the MITTS Securities, as described
under "- Events of Default and Acceleration" and "Other Terms - Events of
Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
PAYMENT AT MATURITY
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the Adjusted Principal Amount of each unit plus the
Supplemental Redemption Amount, if any, all as provided below. If the Ending
Index Value does not exceed the Benchmark Index Value, a beneficial owner of a
MITTS Security will be entitled to receive only the principal amount of its
MITTS Securities.
Determination of the Adjusted Principal Amount
The "Adjusted Principal Amount" for a MITTS Security will be
determined by the calculation agent, and will equal the greater of:
(a) the principal amount of the MITTS Security ($10 for each unit); and
(b) the principal amount of the MITTS Security X Final CPI
-----------
Initial CPI
"Initial CPI" equals 160.3, the value of the CPI for the third
calendar month prior to the month containing the Pricing Date.
"Final CPI" shall be determined by the calculation agent and will
equal the value of the CPI for the third calendar month prior to September 24,
2007 as reported on the seventh calendar day prior to the maturity date.
"CPI" means the non-seasonally adjusted U.S. City Average All Items
Consumer Price Index for All Urban Consumers, published monthly by the Bureau
of Labor Statistics of the Department of Labor (the "BLS").
If a previously reported CPI value is revised by the BLS after the
Final CPI is determined, the calculation agent will continue to use the
previously reported CPI value in calculating the Adjusted Principal Amount.
If the CPI is rebased to a different year, the calculation agent will
continue to use the CPI based on the base reference period in effect on the
Pricing Date for those purposes, as long as the CPI continues to be published.
DETERMINATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount of the MITTS Security ($10 per unit) X Ending Index Value--Benchmark Index Value
-----------------------------------------
Benchmark Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero or more than $10 per unit. As indicated in the formula above,
the calculation agent will calculate the Supplemental Redemption Amount for the
MITTS Securities using the principal amount of the MITTS Securities, not the
Adjusted Principal Amount which may be greater if the CPI has increased over
the term of the MITTS Securities.
The "Benchmark Index Value" equals 1089.38. The Benchmark Index Value
was determined on the Pricing Date by multiplying the Starting Index Value by a
factor equal to 115%.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the S&P
500 Index (the "Index") determined on each of the first five Calculation Days
during the Calculation Period. If there are fewer than five Calculation Days,
then the Ending Index Value will equal the average or arithmetic mean of the
closing values of the Index on these Calculation Days. If there is only one
Calculation Day, then the Ending Index Value will equal the closing value of
the Index on that Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
For purposes of determining the Ending Index Value, an "Index Business
Day" is a day on which the NYSE and the American Stock Exchange are open for
trading and the Index or any Successor Index, as defined below on page 12, is
calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes and
binding on ML&Co. and beneficial owners of the MITTS Securities.
HYPOTHETICAL RETURNS
The following table provides the amount payable to beneficial owners
of MITTS Securities related to the pretax annualized rates of return given in
the table on the following page for a range of hypothetical annualized rates of
change in the CPI and percentage changes in the Index from the Starting Index
Value to the Ending Index Value.
ANNUALIZED RATE OF CHANGE IN CPI
PERCENTAGE CHANGE IN INDEX ----------------------------------------------------------
FROM STARTING INDEX VALUE -3.00% -1.00% 0.00% 1.00% 3.00% 5.00% 7.00% 9.00%
-------------------------- ------ ------ ----- ----- ----- ----- - -----
-50.00%.....................$ 10.00 $ 10.00$ 10.00 $ 11.05 $ 13.44 $ 16.29$ $ 23.67
19.67
-30.00%..................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
-10.00%..................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
0.00%....................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
10.00%...................... 10.00 10.00 10.00 11.05 13.44 16.29 19.67 23.67
30.00%...................... 11.30 11.30 11.30 12.35 14.74 17.59 20.98 24.98
50.00%...................... 13.04 13.04 13.04 14.09 16.48 19.33 22.71 26.72
70.00%...................... 14.78 14.78 14.78 15.83 18.22 21.07 24.45 28.46
90.00%...................... 16.52 16.52 16.52 17.57 19.96 22.81 26.19 30.20
110.00%..................... 18.26 18.26 18.26 19.31 21.70 24.55 27.93 31.93
130.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
150.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
170.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
190.00%..................... 20.00 20.00 20.00 21.05 23.44 26.29 29.67 33.67
The following table provides the pretax annualized rate of return to
beneficial owners of the MITTS Securities for a range of hypothetical
annualized rates of change in the CPI and percentage changes in the Index from
the Starting Index Value to the Ending Index Value. The far right column of the
table provides the pretax annualized rate of return of an investment in the
stocks underlying the Index, which includes an assumed aggregate dividend yield
of 1.60% per annum, as more fully described below.
ANNUALIZED RATE OF CHANGE IN CPI (1)
PERCENTAGE CHANGE -------------------------------------------------------------------- PRETAX ANNUALIZED
IN INDEX RATE OF RETURN OF
FROM STARTING STOCKS UNDERLYING
INDEX VALUE -3.00% -1.00% 0.00% 1.00% 3.00% 5.00% 7.00% 9.00% THE INDEX (2)
----------- ------ ------ ----- ----- ----- ----- ----- -------------
-50.00%.......... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% -5.24%
-30.00%.......... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% -1.95%
-10.00%.......... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% 0.55%
0.00%............ 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% 1.60%
10.00%........... 0.00% 0.00% 0.00% 1.00% 2.98% 4.94% 6.88% 8.81% 2.56%
30.00%........... 1.23% 1.23% 1.23% 2.12% 3.92% 5.73% 7.55% 9.37% 4.25%
50.00%........... 2.67% 2.67% 2.67% 3.46% 5.06% 6.70% 8.38% 10.07% 5.71%
70.00%........... 3.95% 3.95% 3.95% 4.65% 6.09% 7.59% 9.15% 10.74% 7.00%
90.00%........... 5.08% 5.08% 5.08% 5.72% 7.03% 8.42% 9.86% 11.36% 8.15%
110.00%.......... 6.11% 6.11% 6.11% 6.69% 7.90% 9.19% 10.54% 11.95% 9.20%
130.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 10.15%
150.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 11.02%
170.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 11.84%
190.00%.......... 7.05% 7.05% 7.05% 7.58% 8.70% 9.90% 11.18% 12.52% 12.60%
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the Index
with the allocation of that amount reflecting the current relative
weights of the stocks in the Index;
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the Starting Index Value to
the relevant hypothetical Ending Index Value;
(c) a constant dividend yield of 1.60% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter assuming the value increases or
decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value;
(d) no transaction fees or expenses;
(e) a term for the MITTS Securities from September 24, 1997 to September
24, 2007; and
(f) a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks included in the Index as of September 18,
1997 was approximately 1.60%.
As you can see from the tables, if you assume a 3% per annum change in
the CPI during the term of the MITTS Securities and a 70% increase in the Index
from the Starting Index Value to the Ending Index Value, $18.22 would be
payable at the maturity of the MITTS Securities and the pretax annualized rate
of return to beneficial owners of the MITTS Securities calculated on a
semi-annual bond equivalent basis would be 6.09%. Given a fixed annual
percentage change in the CPI, any increase in the value of the Index above 230%
of the Starting Index Value, a percentage increase in the Index from the
Starting Index Value of 130%, will not increase the pretax annualized rate of
return on the MITTS Securities.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as described in this
prospectus.
ADJUSTMENTS TO THE CPI
If at any time the method of calculating the CPI, or its value , is
changed in any material respect, or if the CPI is in any other way modified so
that the CPI does not, in the opinion of the calculation agent, fairly
represent the value of the CPI had the changes or modifications not been made,
then the calculation agent shall make any adjustments for purposes of
determining the Final CPI as, in the good faith judgment of the calculation
agent, may be necessary in order to arrive at a calculation of a value of an
inflation index comparable to the CPI as if changes or modifications had not
been made.
If the CPI is discontinued while the MITTS Securities are outstanding,
the calculation agent shall determine an alternative index that in the
calculation agent's sole discretion is comparable to the CPI (the "Successor
CPI"). Upon the calculation agent's notification of this determination to the
trustee and ML&Co., the calculation agent will substitute the Successor CPI for
the CPI. The calculation agent may make any adjustments to the values of the
Successor CPI in order to maintain the intended economic benefits to ML&Co. and
the holders of the MITTS Securities. Upon any selection by the calculation
agent of a Successor CPI, ML&Co. shall cause notice to be given to the Holders
of the MITTS Securities.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had those changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Index Value is to be calculated, make any adjustments as,
in the good faith judgment of the calculation agent, may be necessary in order
to arrive at a calculation of a value of a stock index comparable to the Index
as if the changes or modifications had not been made, and calculate the closing
value with reference to the Index, as adjusted. Accordingly, if the method of
calculating the Index is modified so that the value of the Index is a fraction
or a multiple of what it would have been if it had not been modified, for
example, due to a split in the Index, then the calculation agent shall adjust
the Index in order to arrive at a value of the Index as if it had not been
modified, for example, as if the split had not occurred.
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more
than two hours of trading in 100 or more of the securities included in the S&P
500 Index, or
(b) the suspension or material limitation, in each case, for more
than two hours of trading, whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise, in
(1) futures contracts related to the Index which are traded on the
Chicago Mercantile Exchange or
(2) option contracts related to the Index which are traded on the
Chicago Board Options Exchange, Inc.
A limitation on the hours in a trading day and/or number of days of
trading will not constitute a Market Disruption Event if it results from an
announced change in the regular business hours of the relevant exchange.
For the purposes of clause (a) above, any limitations on trading
during significant market fluctuations under New York Stock Exchange Rule 80A,
or any applicable rule or regulation enacted or promulgated by the NYSE or any
other self regulatory organization or the SEC of similar scope as determined by
the calculation agent, will be considered "material".
DISCONTINUANCE OF THE INDEX
If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of the determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by S&P or any other entity for the Index . Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If S&P discontinues publication of the Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any Calculation
Day used to calculate the Supplemental Redemption Amount at maturity will be a
value computed by the calculation agent for each Calculation Day in accordance
with the procedures last used to calculate the Index before the discontinuance.
If a Successor Index is selected or the calculation agent calculates a value as
a substitute for the Index as described below, the Successor Index or value
shall be substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If S&P discontinues publication of the Index before the period during
which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that time,
then on each Business Day until the earlier to occur of:
o the determination of the Ending Index Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in computing
the Supplemental Redemption Amount as described in the preceding paragraph as
if that day were a Calculation Day. The calculation agent will cause notice of
each value to be published not less often than once each month in The Wall
Street Journal, or another newspaper of general circulation, and arrange for
information with respect to the values to be made available by telephone.
Despite these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the MITTS Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any MITTS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a MITTS
Security upon any acceleration permitted by the MITTS Securities, with respect
to each $10 principal amount per unit, will be equal to the Adjusted Principal
Amount and the Supplemental Redemption Amount, if any, calculated as though the
date of early repayment were the stated maturity date of the MITTS Securities.
See "- Payment at Maturity" in this prospectus. If a bankruptcy proceeding is
commenced in respect of ML&Co., the claim of the beneficial owner of a MITTS
Security may be limited, under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount per unit of the MITTS Security plus an
additional amount of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the MITTS Securities.
In case of default in payment of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners thereof, at the rate of 6.58% per annum, to the extent that payment of
any interest shall be legally enforceable, on the unpaid amount due and payable
on that date in accordance with the terms of the MITTS Securities to the date
payment of any amount has been made or duly provided for.
GLOBAL SECURITIES
DESCRIPTION OF THE GLOBAL SECURITIES
Beneficial owners of the MITTS Securities may not receive physical
delivery of the MITTS Securities nor may they be entitled to have the MITTS
Securities registered in their names. The MITTS Securities currently are
represented by one or more fully registered global securities. Each global
security was deposited with, or on behalf of, The Depository Trust Company or
DTC (DTC, together with any successor thereto, being a "depositary"), as
depositary, registered in the name of Cede & Co. (DTC's partnership nominee).
Unless and until it is exchanged in whole or in part for MITTS Securities in
definitive form, no global security may be transferred except as a whole by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or by the depositary or any
nominee to a successor of the depositary or a nominee of that successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or Holder of the MITTS Securities represented by a global security for
all purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the MITTS Securities represented by a global security will not be
entitled to have the MITTS Securities represented by the global security
registered in their names, will not receive or be entitled to receive physical
delivery of the MITTS Securities in definitive form and will not be considered
the owners or Holders under the 1983 Indenture, including for purposes of
receiving any reports delivered by ML&Co. or the trustee under the 1983
Indenture. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of DTC and, if that person is not a
participant of DTC on the procedures of the participant through which that
person owns its interest, to exercise any rights of a Holder under the 1983
Indenture. ML&Co. understands that under existing industry practices, in the
event that ML&Co. requests any action of Holders or that an owner of a
beneficial interest in a global security desires to give or take any action
which a Holder is entitled to give or take under the 1983 Indenture, DTC would
authorize the participants holding the relevant beneficial interests to give or
take any action, and the participants would authorize beneficial owners owning
through those participants to give or take action or would otherwise act upon
the instructions of beneficial owners. Conveyance of notices and other
communications by DTC to participants, by participants to indirect participants
and by participants and indirect participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
DTC PROCEDURES
The following is based on information furnished by DTC:
DTC is the securities depositary for the MITTS Securities. The MITTS
Securities were issued as fully registered securities registered in the name of
Cede & Co., DTC's partnership nominee. One or more fully registered global
securities were issued for the MITTS Securities in the aggregate principal
amount of the MITTS Securities, and were deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under to the provisions of Section 17A of the Securities and
Exchange Act of 1934, as amended. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations. DTC is owned by a
number of its direct participants and by the NYSE, the AMEX and the National
Association of Securities Dealers, Inc. Access to the DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the SEC.
Purchases of MITTS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the MITTS
Securities on DTC's records. The ownership interest of each beneficial owner is
in turn to be recorded on the records of direct and indirect participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which
the beneficial owner entered into the transaction. Transfers of ownership
interests in the MITTS Securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all MITTS Securities deposited
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of MITTS Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the MITTS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the MITTS
Securities are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
MITTS Securities. Under its usual procedures, DTC mails an omnibus proxy to
ML&Co. as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
identified in a listing attached to the omnibus proxy to whose accounts the
MITTS Securities are credited on the record date identified in a listing
attached to the omnibus proxy.
Principal, premium, if any, and/or interest, if any, payments on the
MITTS Securities will be made in immediately available funds to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the depositary's
records unless DTC has reason to believe that it will not receive payment on
that date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of the participant and not of DTC, the
trustee or ML&Co., subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to DTC is the responsibility of ML&Co. or the trustee,
disbursement of payments to direct participants is the responsibility of DTC,
and disbursement of payments to the beneficial owners is the responsibility of
direct and indirect participants.
EXCHANGE FOR CERTIFICATED SECURITIES
If:
o the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by ML&Co.
within 60 days,
o ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, or
o an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the MITTS Securities,
the global securities will be exchangeable for MITTS Securities in definitive
form of like tenor and of an equal aggregate principal amount, in denominations
of $10 and integral multiples of $10. The definitive MITTS Securities will be
registered in the name or names as the depositary shall instruct the trustee.
It is expected that instructions may be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global securities.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, MITTS Securities in
definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has
been obtained from sources that ML&Co. believes to be reliable, but ML&Co.
takes no responsibility for its accuracy .
SAME-DAY SETTLEMENT AND PAYMENT
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
All disclosures contained in this prospectus regarding the Index,
including its make-up, method of calculation and changes in its components, are
derived from publicly available information prepared by S&P as of March 22,
1999. ML&Co. and MLPF&S do not assume any responsibility for the accuracy or
completeness of this information.
The Index is published by S&P, and is intended to provide an
indication of the pattern of common stock price movement. The calculation of
the value of the Index, discussed below in further detail, is based on the
relative value of the aggregate Market Value of the common stocks of 500
companies as of a particular time compared to the aggregate average Market
Value of the common stocks of 500 similar companies during the base period of
the years 1941 through 1943. As of March 22, 1999 the 500 companies included in
the Index represented approximately 78% of the aggregate Market Value of
common stocks traded on the NYSE; however, these 500 companies are not the 500
largest companies listed on the NYSE and not all of these 500 companies are
listed on the exchange. As of March 22, 1999, the aggregate Market Value of
the 500 companies included in the Index represented approximately 79% of the
aggregate Market Value of United States domestic, public companies. S&P chooses
companies for inclusion in the Index with the aim of achieving a distribution
by broad industry groupings that approximates the distribution of these
groupings in the common stock population of the NYSE, which S&P uses as an
assumed model for the composition of the total market. Relevant criteria
employed by S&P include:
o the viability of the particular company,
o the extent to which that company represents the industry group to
which it is assigned,
o the extent to which the market price of that company's common stock is
generally responsive to changes in the affairs of the respective
industry, and
o the Market Value and trading activity of the common stock of that
company.
Four main groups of companies comprise the Index, with the number of
companies currently included in each group indicated in parentheses:
Industrials (380), Utilities (39), Transportation (10) and Financial (71). S&P
may from time to time, in its sole discretion, add companies to, or delete
companies from, the Index to achieve the objectives stated above.
The Index does not reflect the payment of dividends on the stocks
underlying it. The return based on the MITTS Securities will not be the same
return you would receive if you were to purchase these underlying stocks and
hold them for a period equal to the maturity of the MITTS Securities.
COMPUTATION OF THE INDEX
S&P currently computes the Index as of a particular time as follows:
(a) the product of the market price per share and the number
of then outstanding shares of each component stock is determined at a
particular time (the "Market Value" of the stock);
(b) the Market Value of all component stock as of that time
are aggregated;
(c) the mean average of the Market Values as of each week in
the base period of the years 1941 through 1943 of the common stock of
each company in a group of 500 substantially similar companies is
determined;
(d) the mean average Market Values of all these common stocks
over the base period are aggregated (the aggregate amount being the
"Base Value");
(e) the current aggregate Market Value of all component
stocks is divided by the Base Value; and
(f) the resulting quotient, expressed in decimals, is
multiplied by ten.
While S&P currently employs the above methodology to calculate the
Index, no assurance can be given that S&P will not modify or change this
methodology in a manner that may affect the Supplemental Redemption Amount, if
any, payable to beneficial owners of MITTS Securities upon maturity or
otherwise.
S&P adjusts the foregoing formula to negate the effects of changes in
the Market Value of component stocks that are determined by S&P to be arbitrary
or not due to true market fluctuations. Changes may result from such causes as
o the issuance of stock dividends,
o the granting to shareholders of rights to purchase additional shares
of stock,
o the purchase of shares by employees pursuant to employee benefit
plans,
o consolidations and acquisitions,
o the granting to shareholders of rights to purchase other securities of
ML&Co.,
o the substitution by S&P of particular component stocks in the Index,
and
o other reasons.
In these cases, S&P first recalculates the aggregate Market Value of all
component stocks, after taking account of the new market price per share of the
particular component stock or the new number of outstanding shares thereof or
both, and then determines the New Base Value in accordance with the following
formula:
Old Base Value X New Market Value = New Base Value
-----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any
change in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of these
causes upon the Index.
HISTORICAL DATA ON THE INDEX
The following table sets forth the value of the Index at the end of
each month, in the period from January 1990 through February 1999. These
historical data on the Index are not necessarily indicative of the future
performance of the Index or what the value of the MITTS Securities may be. Any
historical upward or downward trend in the value of the Index during any period
set forth below is not any indication that the Index is more or less likely to
increase or decrease at any time during the term of the MITTS Securities.
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
January....... 329.08 343.93 408.78 438.78 481.61 470.42 636.02 786.16 980.28 1,279.64
February...... 331.89 367.07 412.70 443.38 467.14 487.39 640.43 790.82 1,049.34 1,238.33
March......... 339.94 375.22 403.69 451.67 445.77 500.71 645.50 757.12 1,101.75
April......... 330.80 375.34 414.95 440.19 450.91 514.71 654.17 801.34 1,111.75
May........... 361.23 389.83 415.35 450.19 456.51 533.40 669.12 848.28 1,090.82
June.......... 358.02 371.16 408.14 450.53 444.27 544.75 670.63 885.14 1,133.84
July.......... 356.15 387.81 424.22 448.13 458.26 562.06 639.95 954.29 1,120.67
August........ 322.56 395.43 414.03 463.56 475.50 561.88 651.99 899.47 957.28
September..... 306.05 387.86 417.80 458.93 462.71 584.41 687.31 947.28 1,017.01
October....... 304.00 392.45 418.68 467.83 472.35 581.50 705.27 914.62 1,098.67
November...... 322.22 375.22 431.35 461.79 453.69 605.37 757.02 955.40 1,163.63
December...... 330.22 417.09 435.71 466.45 459.27 615.93 740.74 970.43 1,229.23
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a
non-exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with particular securities, including
the Securities, and ML&Co. is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this prospectus:
"The MITTS Securities are not sponsored, endorsed, sold or
promoted by S&P. S&P makes no representation or warranty, express or
implied, to the Holders of the MITTS Securities or any member of the
public regarding the advisability of investing in securities generally
or in the MITTS Securities particularly or the ability of the Index to
track general stock market performance. S&P's only relationship to
Merrill Lynch Capital Services, Inc. and ML&Co. (other than
transactions entered into in the ordinary course of business) is the
licensing of certain servicemarks and trade names of S&P and of the
Index which is determined, composed and calculated by S&P without
regard to ML&Co. or the MITTS Securities. S&P has no obligation to
take the needs of ML&Co. or the Holders of the MITTS Securities into
consideration in determining, composing or calculating the Index. S&P
is not responsible for and has not participated in the determination
of the timing of the sale of the MITTS Securities, prices at which the
MITTS Securities are to initially be sold, or quantities of the MITTS
Securities to be issued or in the determination or calculation of the
equation by which the MITTS Securities are to be converted into cash.
S&P has no obligation or liability in connection with the
administration, marketing or trading of the MITTS Securities."
CONSUMER PRICE INDEX
The Consumer Price Index or CPI, 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 CPI, 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 BLS to take into account
changes in consumer expenditure patterns.
All disclosure contained in this prospectus regarding the CPI,
including, without limitation, its composition, method of calculation and
changes in its components, is derived from publicly available information
prepared by the United States Government. Neither ML&Co. nor the underwriter
takes any responsibility for the accuracy or completeness of this information.
The CPI is expressed in relative terms in relation to a time base
reference period for which the level is set at 100. For example, if the CPI for
the 1982-1984 reference period is 100, an increase of 16.5 percent from that
period would result in a CPI value equal to 116.5. The CPI for a particular
month is released and published during the following month. From time to time,
the CPI is rebased to a more recent base reference period. The base reference
period for these Notes is the 1982-1984 average which is equal to 100.
Historical data on the CPI is available from the U.S. Department of
Labor's Bureau of Labor Statistics, Washington, D.C. 20212 or accessing the
Bureau of Labor Statistics' web site located at http://www.bls.gov.
OTHER TERMS
ML&Co. issued the MITTS Securities as a series of senior debt
securities under the 1983 Indenture, dated as of April 1, 1983, as amended and
restated, between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of
the 1983 Indenture is filed as an exhibit to the registration statement
relating to the MITTS Securities of which this prospectus is a part. The
following summaries of the material provisions of the 1983 Indenture are not
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the 1983 Indenture, including the definitions of terms in the
1983 Indenture.
ML&Co. may issue series of senior debt securities from time to time
under the 1983 Indenture, without limitation as to aggregate principal amount,
in one or more series and upon terms as ML&Co. may establish under the
provisions of the 1983 Indenture.
The 1983 Indenture and the MITTS Securities are governed by and
construed in accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from
those of senior debt securities previously issued, and issue additional senior
debt securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. However, because
ML&Co. is a holding company, the rights of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise are necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that a bankruptcy court may recognize claims
of ML&Co. itself as a creditor of the subsidiary . In addition, dividends,
loans and advances from certain subsidiaries, including MLPF&S, to ML&Co. are
restricted by net capital requirements under the Exchange Act, and under rules
of exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned
directly or indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of the incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock
of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to any such transaction, MLPF&S
remains a Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay any amounts due and payable or deliverable with respect to
all the senior debt securities; and
o perform and observe all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
1983 Indenture.
MODIFICATION AND WAIVER
ML&Co. and the trustee may modify and amend the 1983 Indenture with
the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of senior debt securities affected. However, without the
consent of each holder of any outstanding senior debt security affected, no
amendment or modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any senior
debt security or any premium payable on redemption , or change the
redemption price;
o reduce the principal amount of, or the interest or Additional Amounts
payable on, any senior debt security or reduce the amount of principal
which could be declared due and payable before the stated maturity
date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior debt
security;
o impair the right to institute suit for the enforcement of any payment
on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding senior
debt securities of any series, the consent of whose holders is
required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past default
to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of
each holder affected. The holders of at least a majority in principal amount of
outstanding senior debt securities of any series may, with respect to that
series, waive past defaults under the 1983 Indenture and waive compliance by
ML&Co. with provisions in the 1983 Indenture, except as described under
"--Events of Default".
EVENTS OF DEFAULT
Each of the following will be Events of Default with respect to senior
debt securities of any series:
o default in the payment of any interest or Additional Amounts payable
when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co. contained
in the 1983 Indenture for the benefit of that series or in the senior
debt securities of that series, continuing for 60 days after written
notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the 1983
Indenture.
If an Event of Default occurs and is continuing for any series of
senior debt securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt
securities of any series but before the trustee has obtained a judgment or
decree for payment of money , the holders of a majority in principal amount of
the outstanding senior debt securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due, other
than those due as a result of acceleration, have been made and all Events of
Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue price
of the outstanding senior debt securities of that series may waive any Event of
Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable under the
debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each outstanding security of each series of
senior debt securities affected.
The holders of a majority in principal amount of the outstanding
senior debt securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee with respect to those senior debt
securities, provided that any direction shall not be in conflict with any rule
of law or the 1983 Indenture. Before proceeding to exercise any right or power
under the 1983 Indenture at the direction of the holders, the trustee shall be
entitled to receive from the holders reasonable security or indemnification
against the costs, expenses and liabilities which might be incurred by it in
complying with any direction.
The MITTS Securities and other series of senior debt securities issued
under the 1983 Indenture do not have the benefit of any cross-default
provisions with other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the 1983
Indenture.
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying the final Treasury Department
Regulations (the "Final Regulations") concerning the United States Federal
income tax treatment of contingent payment debt instruments to the MITTS
Securities, ML&Co. has determined that the projected payment schedule for the
MITTS Securities will consist of payment on the maturity date of a projected
amount equal to $19.0973 per unit. This represents an estimated yield on the
MITTS Securities equal to 6.58% per annum (compounded semiannually).
The projected payment schedule (including both the projected
Redemption Amount and the estimated yield on the MITTS Securities) has been
determined solely for United States Federal income tax purposes (i.e., for
purposes of applying the Final Regulations to the MITTS Securities), and is
neither a prediction nor a guarantee of what either the actual Adjusted
Principal Amount or the actual Supplemental Redemption Amount will be, or that
either the actual Adjusted Principal Amount will exceed $10 or that the actual
Supplemental Redemption Amount will even exceed zero.
The following table sets forth the amount of interest that will be
deemed to have accrued with respect to each unit of the MITTS Securities during
each accrual period over a term of ten years for the MITTS Securities based
upon a projected payment schedule for the MITTS Securities (including both the
projected Supplemental Redemption Amount and the estimated yield equal to 6.58%
per annum (compounded semiannually)) as determined by ML&Co. for purposes of
application of the Final Regulations to the MITTS Securities:
TOTAL INTEREST
INTEREST DEEMED DEEMED TO
TO HAVE ACCRUED ON
ACCRUE DURING SECURITIES AS OF
ACCRUAL END
PERIOD (PER F ACCRUAL PERIOD
ACCRUAL PERIOD UNIT) O (PER UNIT)
September 24, 1997 through March 23, 1998................ $ 0.3244 $ 0.3244
March 24, 1998 through September 23, 1998................ $ 0.3415 $ 0.6659
September 24, 1998 through March 23, 1999................ $ 0.3490 $ 1.0149
March 24, 1999 through September 23, 1999................ $ 0.3624 $ 1.3773
September 24, 1999 through March 23, 2000................ $ 0.3743 $ 1.7516
March 24, 2000 through September 23, 2000................ $ 0.3867 $ 2.1383
September 24, 2000 through March 23, 2001................ $ 0.3993 $ 2.5376
March 24, 2001 through September 23, 2001................ $ 0.4125 $ 2.9501
September 24, 2001 through March 23, 2002................ $ 0.4261 $ 3.3762
March 24, 2002 through September 23, 2002................ $ 0.4401 $ 3.8163
September 24, 2002 through March 23, 2003................ $ 0.4545 $ 4.2708
March 24, 2003 through September 23, 2003................ $ 0.4695 $ 4.7403
September 24, 2003 through March 23, 2004................ $ 0.4850 $ 5.2253
March 24, 2004 through September 23, 2004................ $ 0.5009 $ 5.7262
September 24, 2004 through March 23, 2005................ $ 0.5174 $ 6.2436
March 24, 2005 through September 23, 2005................ $ 0.5344 $ 6.7780
September 24, 2005 through March 23, 2006................ $ 0.5520 $ 7.3300
March 24, 2006 through September 23, 2006................ $ 0.5701 $ 7.9001
September 24, 2006 through March 23, 2007................ $ 0.5890 $ 8.4891
March 24, 2007 through September 24, 2007................ $ 0.6082 $ 9.0973
- -------------
Projected Redemption Amount = $19.0973 per unit.
All prospective investors in the MITTS Securities should consult their
own tax advisors concerning the application of the Final Regulations to their
investment in the MITTS Securities. Investors in the MITTS Securities may also
obtain the projected payment schedule, as determined by ML&Co. for purposes of
the application of the Final Regulations to the MITTS Securities, by submitting
a written request for the information to Merrill Lynch & Co., Inc., Attn:
Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street, 12th
Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the MITTS Securities and other securities. For further information on
ML&Co. and the MITTS Securities, you should refer to our registration statement
and its exhibits. This prospectus summarizes material provisions of contracts
and other documents that we refer you to. Because the prospectus may not
contain all the information that you may find important, you should review the
full text of these documents. We have included copies of these documents as
exhibits to our registration statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were
filed with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this offering
is completed or after the date of this initial registration statement and
before the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the MITTS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the MITTS Securities.
MLPF&S may act as principal or agent in these market-making
transactions.
The MITTS Securities may be offered on the NYSE or off the exchange in
negotiated transactions or otherwise.
The distribution of the MITTS Securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the Annual
Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
MERRILL LYNCH & CO., INC.
MAJOR 8 EUROPEAN INDEX MARKET INDEX TARGET-TERM SECURITIES DUE AUGUST 30, 2002
"MITTS(R) SECURITIES"
$10 PRINCIPAL AMOUNT PER UNIT
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in the MITTS Securities.
The MITTS Securities: Payment at Maturity:
o 100% principal protection at o On the maturity date, for each
maturity unit of the MITTS Securities you
o No payments before maturity own, we will pay you an amount
o Linked to the value of the Major equal to the sum of the principal
8 European Index o Senior amount of each unit and an
unsecured debt securities of additional amount based on the
Merrill Lynch & Co., Inc. product of the percentage
o The MITTS Securities are listed increase, if any, in the value of
on the American Stock Exchange the Major 8 European Index and
under the trading symbol "MEM" 115% as described in this
prospectus
o You will receive no less than the
principal amount of your MITTS
Securities
INVESTING IN THE MITTS SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the MITTS Securities will be the prevailing market
price at the time of sale.
MERRILL LYNCH & CO.
The date of this prospectus is , 199.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
RISK FACTORS..................................................................3
MERRILL LYNCH & CO., INC......................................................7
RATIO OF EARNINGS TO FIXED CHARGES............................................8
DESCRIPTION OF THE MITTS SECURITIES...........................................9
THE INDEX....................................................................16
OTHER TERMS..................................................................19
PROJECTED PAYMENT SCHEDULE...................................................22
WHERE YOU CAN FIND MORE INFORMATION..........................................24
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................24
PLAN OF DISTRIBUTION.........................................................25
EXPERTS......................................................................25
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT.
You should be aware that we will pay you no more than $10 per unit of
the MITTS Securities you own if the average value of the index over five
trading days shortly before the maturity is less than 100. This will be true
even if at some time during the life of the MITTS Securities, the value of the
index, as adjusted, was higher than 100 but later falls below 100 .
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY.
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you consider the effect of
factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX.
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks. This is because, except as described below in the immediately
succeeding paragraph, the value of the index is calculated by reference to the
prices of the common stocks included in the index without taking into
consideration the value of dividends paid on those stocks.
Your return will not reflect the payment of dividends.
The index is calculated with reference to the sub-indices which
reflect the prices of the common stocks comprising the sub-indices without
taking into consideration the value of dividends paid on those stocks, except
in the case of the Deutscher Aktienindex sub-index which reflects dividends
paid on its underlying common stocks. Therefore, the return you earn on the
MITTS Securities, if any, will not be the same as the return that you would
earn if you actually owned each of the common stocks underlying each sub-index
and received the dividends paid on those stocks.
YOUR RETURN WILL BE AFFECTED BY CHANGES IN CURRENCY EXCHANGE RATES.
Although the stocks included in the sub-indices are traded in
currencies other than U.S. dollars and the MITTS Securities are denominated in
U.S. dollars, we will not adjust any amounts payable on the MITTS Securities
for currency exchange rates in effect at the maturity of the MITTS Securities.
Any amount in addition to the principal amount of each unit payable to you at
maturity is based solely upon the percentage increase in the index. Changes in
exchange rates, however, may reflect changes in the relevant European economies
that may affect the value of the sub-indices, and the MITTS Securities.
CHANGES IN EUROPEAN SECURITIES MARKETS WILL AFFECT YOUR RETURN.
Companies listed on European exchanges issued the underlying stocks
that constitute the sub-indices. You should be aware that investments in
securities indexed to the value of the European equity securities involve
certain risks. The European securities markets may be more volatile than U.S.
or other securities markets and market developments may affect these markets in
different ways than U.S. or other securities markets. Direct or indirect
government intervention to stabilize a particular European securities market
and cross-shareholdings in European companies on these markets may affect
prices and volume of trading on those markets. Also, there is generally less
publicly available information about European companies than about those U.S.
companies that are subject to the reporting requirements of the SEC and
European companies are subject to accounting, auditing and financial reporting
standards and requirements that differ from those applicable to U.S. reporting
companies.
Political, economic, financial and social factors in Europe may affect
securities prices in Europe. These factors, including the possibility that
recent or future changes in a European country's government, economic and
fiscal policies, the possible imposition of, or changes in, currency exchange
laws or other laws or restrictions applicable to European companies or
investments in European equity securities and the possibility of fluctuations
in the rate of exchange between currencies, could negatively affect the
European securities markets. Moreover, the relevant European economies may
differ favorably or unfavorably from the U.S. economy in areas of growth of
gross national product, rate of inflation, capital reinvestment, resources and
self-sufficiency.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE
FUTURE.
Although the MITTS Securities are listed on the NYSE under the symbol
"MEM," you cannot assume that a trading market will continue to exist for the
MITTS Securities. If a trading market in the MITTS Securities continues to
exist, you cannot assume that there will be liquidity in the trading market.
The continued existence of a trading market for the MITTS Securities will
depend on our financial performance and other factors such as the appreciation,
if any, of the value of the index.
If a limited trading market for the MITTS Securities exists, and you
do not wish to hold your investment until maturity, fewer buyers may want to
purchase your MITTS Securities. This may affect the price you receive if you
sell before maturity.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES.
We believe that by the value of the index and a number of other
factors will affect the trading value of the MITTS Securities. Some of these
factors interrelate in complex ways; as a result, the effect of any one factor
may offset or magnify the effect of another factor. The following bullets
describe the expected impact on the trading value of the MITTS Securities given
a change in a specific factor, assuming all other conditions remain constant.
o The value of the index. We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the value
of the index exceeds 100. If you choose to sell your MITTS Securities
when the value of the index exceeds 100 you may receive substantially
less than the amount that would be payable at maturity based on that
index value because of the expectation that the index will continue to
fluctuate until the ending index value is determined. If you choose to
sell your MITTS Securities when the value of the index is below 100,
you may receive less than the $10 principal amount per unit of MITTS
Securities. In general, rising dividend rates, or dividends per share
in the European countries related to the common stocks underlying the
sub-indices, each an "applicable European country", may increase the
value of the index while falling dividend rates in the applicable
European countries may decrease the value of the index. Political,
economic and other developments that affect the stocks underlying the
index may also affect the value of the index and the value of the
MITTS Securities.
o Interest rates. Because we will pay, at a minimum, the principal
amount per unit of the MITTS Securities at maturity, we expect that
changes in interest rates will affect the trading value of the MITTS
Securities. In general, if U.S. interest rates increase, we expect
that the trading value of the MITTS Securities will decrease and,
conversely, if U.S. interest rates decrease, we expect the trading
value of the MITTS Securities will increase. In general, if interest
rates in the applicable European countries increase, we expect that
the trading value of the MITTS Securities will increase. If interest
rates in the applicable European countries decrease, we expect the
trading value of the MITTS Securities will decrease. However, interest
rates in the applicable European countries may also affect the
relevant economies and, in turn, the value of the index. Rising
interest rates in the applicable European countries may lower the
value of the index and the MITTS Securities. Falling interest rates in
the applicable European countries may increase the value of the index
and the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. If the volatility of the
index increases, we expect that the trading value of the MITTS
Securities will increase. If the volatility of the index decreases, we
expect that the trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that prior to the maturity
of the MITTS Securities, the MITTS Securities may trade at a value
above that which would be expected based on the level of interest
rates and the index. This difference will reflect a "time premium" due
to expectations concerning the value of the index during the period
prior to maturity of the MITTS Securities. However, as the time
remaining to maturity of the MITTS Securities decreases, we expect
that this time premium will decrease, lowering the trading value of
the MITTS Securities.
o Dividend yields. If dividend yields on the stocks comprising the index
increase, we expect that the value of the MITTS Securities will
decrease. Conversely, if dividend yields on the stocks comprising the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in our credit ratings. Our credit ratings are an assessment of
our ability to pay our obligations. Consequently, real or anticipated
changes in our credit ratings may affect the trading value of the
MITTS Securities. However, because your return on your MITTS
Securities is dependent upon factors in addition to our ability to pay
our obligations under the MITTS Securities, such as the percentage
increase in the value of the index at maturity, an improvement in our
credit ratings will not reduce investment risks related to the MITTS
Securities.
We want you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any change in the trading value of the MITTS Securities attributable to
another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we expect
that the effect on the trading value of the MITTS Securities of a given change
in most of the factors listed above will be less if it occurs later in the term
of the MITTS Securities than if it occurs earlier in the term of the MITTS
Securities except that we expect that the effect on the trading value of the
MITTS Securities of a given increase in the value of the index will be greater
if it occurs later in the term of the MITTS Securities than if it occurs
earlier in the term of the MITTS Securities.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW
New York State laws govern the indenture under which the MITTS
Securities are 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 MITTS Securities. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not apply
to debt securities in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest chargeable to and payable by a borrower.
We will promise, for the benefit of the MITTS Securities holders, to the extent
permitted by law, not to voluntarily claim the benefits of any laws concerning
usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We and our affiliates may from time to time buy or sell the stocks
underlying the index for our own accounts for business reasons or in connection
with hedging our obligations under the MITTS Securities. These transactions
could affect the price of these stocks and the value of the index in a manner
that would be adverse to your investment in the MITTS Securities.
POTENTIAL CONFLICTS OF INTEREST.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index and
the amount payable to you at maturity. In some circumstances, MLPF&S's role as
our subsidiary and its responsibilities as calculation agent for the MITTS
Securities could give rise to conflicts of interests. These conflicts could
occur, for instance, in connection with its determination as to whether the
value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. 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 a subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
It is suggested that you should reach an investment decision with
regard to the MITTS Securities only after carefully considering the suitability
of the MITTS Securities in the light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax adviser.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets Bank
Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global
basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments, governmental
agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
MITTS Securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF THE MITTS SECURITIES
On July 28, 1997, ML&Co. issued an aggregate principal amount of
$72,000,000 or 7,200,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt securities
under the 1983 Indenture which is more fully described below.
The MITTS Securities will mature on August 30, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, we will make no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at the
option of any beneficial owner prior to maturity. Upon the occurrence of an
Event of Default with respect to the MITTS Securities, beneficial owners of the
MITTS Securities may accelerate the maturity of the MITTS Securities, as
described under "- Events of Default and Acceleration" and "Other Terms -
Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
PAYMENT AT MATURITY
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount of each Security ($10 per unit) X Ending Index Value--Starting Index Value x Participation Rate
-------------------------------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Participation Rate" equals 110%.
The "Starting Index Value" equals 100.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average, or the arithmetic mean, of the closing values of
the Index determined on each of the first five Calculation Days during the
Calculation Period. If there are fewer than five Calculation Days, then the
Ending Index Value will equal the average, or the arithmetic mean, of the
closing values of the Index on the Calculation Days, and if there is only one
Calculation Day, then the Ending Index Value will equal the closing value of
the Index on that Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which The New York Stock Exchange
and the AMEX are open for trading and the Index or any Successor Index, as
defined below, is calculated and published. All determinations made by the
calculation agent shall be at the sole discretion of the calculation agent and,
absent a determination by the calculation agent of a manifest error, shall be
conclusive for all purposes and binding on ML&Co. and beneficial owners of the
MITTS Securities.
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the percentage change from the Starting Index Value to the Ending
Index Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks underlying the
Index, which includes an assumed aggregate dividend yield of 2.33% per
annum, as more fully described below.
PRETAX
TOTAL AMOUNT ANNUALIZED
PAYABLE AT MATURITY TOTAL RATE RATE PRETAX ANNUALIZED
PERCENTAGE CHANGE PER $10 PRINCIPAL OF RETURN ON OF RETURN ON RATE OF RETURN OF
HYPOTHETICAL ENDING OVER THE STARTING AMOUNT OF MITTS THE MITTS THE MITTS STOCKS UNDERLYING THE
INDEX VALUE INDEX VALUE SECURITIES SECURITIES SECURITIES(1) INDEX(1)(2)
----------- ------------------ ---------- ---------- ------------- ----------
40 -60% $10.00 0.00% 0.00% -15.28%
50 -50% $10.00 0.00% 0.00% -11.10%
60 -40% $10.00 0.00% 0.00% -7.64%
70 -30% $10.00 0.00% 0.00% -4.68%
80 -20% $10.00 0.00% 0.00% -2.09%
90 -10% $10.00 0.00% 0.00% 0.21%
100(3) 0% $10.00 0.00% 0.00% 2.29%
110 10% $11.10 11.00% 2.06% 4.18%
120 20% $12.20 22.00% 3.95% 5.92%
130 30% $13.30 33.00% 5.69% 7.53%
140 40% $14.40 44.00% 7.31% 9.03%
150 50% $15.50 55.00% 8.81% 10.43%
160 60% $16.60 66.00% 10.23% 11.75%
170 70% $17.70 77.00% 11.56% 12.99%
180 80% $18.80 88.00% 12.82% 14.17%
190 90% $19.90 99.00% 14.01% 15.28%
200 100% $21.00 110.00% 15.14% 16.35%
210 110% $22.10 121.00% 16.23% 17.36%
220 120% $23.20 132.00% 17.26% 18.34%
230 130% $24.30 143.00% 18.26% 19.27%
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the
Sub-Indices with the allocation of that amount reflecting the current
relative weights of the stocks in the Sub-Indices
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the Starting Index Value to
the relevant hypothetical Ending Index Value
(c) a constant dividend yield of 2.33% per annum, paid quarterly from the
date of initial delivery of MITTS Securities, applied to the value of
the Index at the end of each quarter, assuming that value increases or
decreases linearly from the Starting Value to the hypothetical Ending
Value;
(d) no transaction fees or expenses;
(e) the term of the MITTS Securities is from August 1, 1997 to August 30,
2002; and
(f) a final Index Value equal to the hypothetical Ending Index Value. A
final Index Value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Sub-Indices as of July 28,
1997 was approximately 2.33%
(3) The Starting Index Value of the Index.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
annualized rate of return resulting therefrom will depend entirely on the
actual Ending Index Value determined by the calculation agent as provided
herein.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Ending Value is to be calculated, make any adjustments as, in
the good faith judgment of the calculation agent, may be necessary in order to
arrive at a calculation of a value of a stock index comparable to the Index as
if the changes or modifications had not been made, and calculate the closing
value with reference to the Index, as adjusted. Accordingly, if the method of
calculating the Index is modified so that the value of the Index is a fraction
or a multiple of what it would have been if it had not been modified for
example, due to a split in the Index, then the calculation agent shall adjust
the Index in order to arrive at a value of the Index as if it had not been
modified for example, as if the split had not occurred.
"Market Disruption Event" means the occurrence or existence on any
Overseas Index Business Day with respect to a Sub-Index during the one-half
hour period that ends at the regular official weekday time at which trading on
the Index Exchange related to that Sub-Index occurs of any suspension of, or
limitation imposed on, trading, by reason of movements in price exceeding
limits permitted by the relevant exchange or otherwise, on
o the Index Exchange in securities that comprise 20% or more of the
value of that Sub-Index or
o any exchanges on which futures or options on that Sub-Index are traded
in options or futures if, in the determination of the calculation
agent, the suspension or limitation is material. For the purpose of
the foregoing definition:
o a limitation on the hours and number of days of trading will not
constitute a Market Disruption Event if it results from an announced
change in the regular hours of the relevant exchange and
o a limitation on trading imposed during the course of a day by reason
of movements in price otherwise exceeding levels permitted by the
relevant exchange will constitute a Market Disruption Event.
"Overseas Index Business Day" means, with respect to any sub-index,
any day that is, or, but for the occurrence of a Market Disruption Event, would
have been, a trading day on the relevant Index Exchange or on any exchanges on
which futures or options on that Sub-Index are traded, other than a day on
which trading on any relevant exchange is scheduled to close prior to its
regular weekday closing time.
"Index Exchange" means, with respect to any Sub-Index, the principal
exchange on which the shares comprising that Sub-Index are traded.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the Index and the AMEX or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the Index,
referred to in this prospectus as a "Successor Index", then, upon the
calculation agent's notification of that determination to the Trustee and
ML&Co., the calculation agent will substitute the Successor Index as calculated
by AMEX or another entity for the Index and calculate the Ending Value as
described above under "-Payment at Maturity". Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice to be given
to holders of the MITTS Securities.
If the AMEX discontinues publication of the Index and a Successor
Index is not selected by the calculation agent or is no longer published on any
of the Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each Calculation
Day in accordance with the procedures last used to calculate the Index before
any discontinuance. If a Successor Index is selected or the calculation agent
calculates a value as a substitute for the Index as described below, that
Successor Index or value shall be substituted for the Index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
If the calculation agent calculates a value as a substitute for the Index,
"Calculation Day" shall mean any day on which the calculation agent is able to
calculate a substitute value.
If the AMEX discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that time,
then on each Business Day until the earlier to occur of
o the determination of the Ending Index Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. The calculation agent will
cause notice of each value to be published not less often than once each
month in The Wall Street Journal, or another newspaper of general
circulation, and arrange for the values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any MITTS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a MITTS
Security upon any acceleration permitted by the MITTS Securities, with respect
to each $10 principal amount per unit, will be equal to the principal amount
per unit and the Supplemental Redemption Amount, if any, calculated as though
the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment at Maturity" in this prospectus. A bankruptcy
proceeding commenced in respect of ML&Co. may limit the claim of the beneficial
owner of a MITTS Security , under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount per unit of the MITTS Security plus an
additional amount of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the MITTS Securities.
In case of default in payment of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners thereof, at the rate of 6.01% per annum, to the extent that payment of
any interest shall be legally enforceable, on the unpaid amount due and payable
on that date in accordance with the terms of the MITTS Securities to the date
payment of any amount has been made or duly provided for.
GLOBAL SECURITIES
DESCRIPTION OF THE GLOBAL SECURITIES
Beneficial owners of the MITTS Securities may not receive physical
delivery of the MITTS Securities nor may they be entitled to have the MITTS
Securities registered in their names. The MITTS Securities currently are
represented by one or more fully registered global securities. Each global
security was deposited with, or on behalf of, The Depository Trust Company or
DTC, (DTC, together with any successor thereto, being a "depositary"), as
depositary, registered in the name of Cede & Co., DTC's partnership nominee .
Unless and until it is exchanged in whole or in part for MITTS Securities in
definitive form, the depositary cannot transfer any global security except as a
whole to a nominee of the depositary or by a nominee of the depositary to the
depositary or another nominee of the depositary or by the depositary or any
nominee to a successor of the depositary or a nominee of that successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as appropriate, will be considered the sole owner
or holder of the MITTS Securities represented by a global security for all
purposes under the 1983 Indenture. Except as provided below, the beneficial
owners of the MITTS Securities represented by a global security will not be
entitled to have the MITTS Securities represented by the global security
registered in their names, will not receive or be entitled to receive physical
delivery of the MITTS Securities in definitive form and will not be considered
the owners or Holders under the 1983 Indenture, including for purposes of
receiving any reports delivered by ML&Co. or the trustee under the 1983
Indenture. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of DTC and, if that person is not a
participant of DTC on the procedures of the participant through which that
person owns its interest, to exercise any rights of a holder under the 1983
Indenture. ML&Co. understands that under existing industry practices, in the
event that ML&Co. requests any action of holders or that an owner of a
beneficial interest in a global security desires to give or take any action
which a holder is entitled to give or take under the 1983 Indenture, DTC would
authorize the participants holding the relevant beneficial interests to give or
take any action, and the participants would authorize beneficial owners owning
through those participants to give or take action or would otherwise act upon
the instructions of beneficial owners. Arrangements among participants,
indirect participants and beneficial owners will govern conveyance of notices
and other communications by DTC to participants, by participants to indirect
participants and by participants and indirect participants to beneficial
owners, subject to any statutory or regulatory requirements as may be in effect
from time to time.
DTC PROCEDURES
The following is based on information furnished by DTC:
DTC is the securities depositary for the MITTS Securities. The MITTS
Securities were issued as fully registered securities registered in the name of
Cede & Co., DTC's partnership nominee. One or more fully registered global
securities were issued for the MITTS Securities in the aggregate principal
amount of the MITTS Securities, and were deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under to the provisions of Section 17A of the Securities and
Exchange Act of 1934, as amended. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations. DTC is owned by a
number of its direct participants and by the NYSE, the AMEX and the National
Association of Securities Dealers, Inc. Access to the DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to DTC and its
participants are on file with the SEC.
Purchases of MITTS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the MITTS
Securities on DTC's records. The ownership interest of each beneficial owner is
in turn to be recorded on the records of direct and indirect participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which
the beneficial owner entered into the transaction. Transfers of ownership
interests in the MITTS Securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all MITTS Securities deposited
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of MITTS Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the MITTS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the MITTS
Securities are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Arrangements among participants, indirect participants and beneficial
owners will govern conveyance of notices and other communications by DTC to
participants, by participants to indirect participants and by participants and
indirect participants to beneficial owners, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
MITTS Securities. Under its usual procedures, DTC mails an omnibus proxy to
ML&Co. as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
identified in a listing attached to the omnibus proxy to whose accounts the
MITTS Securities are credited on the record date identified in a listing
attached to the omnibus proxy.
DTC will make principal, premium, if any, and/or interest, if any,
payments on the MITTS Securities in funds immediately available to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the depositary's
records unless DTC has reason to believe that it will not receive payment on
that date. Standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name", will govern payments by participants to beneficial owners, and
will be the responsibility of the participant and not of DTC, the trustee or
ML&Co., subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and/or interest, if
any, to DTC is the responsibility of ML&Co. or the trustee, disbursement of
payments to direct participants is the responsibility of DTC, and disbursement
of payments to the beneficial owners is the responsibility of direct and
indirect participants.
EXCHANGE FOR CERTIFICATED SECURITIES
If:
o the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by ML&Co.
within 60 days,
o ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, or
o an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the MITTS Securities,
DTC will exchange the global securities for MITTS Securities in definitive form
of like tenor and of an equal aggregate principal amount, in denominations of
$10 and integral multiples of $10. The depositary shall instruct the Trustee as
to the names in which it is to register the definitive MITTS Securities. DTC
expects that these instructions to be based upon directions received by the
depositary from participants with respect to ownership of beneficial interests
in the global securities.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, MITTS Securities in
definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has
been obtained from sources that ML&Co. believes to be reliable, but ML&Co.
takes no responsibility for its accuracy.
SAME-DAY SETTLEMENT AND PAYMENT
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
The value of the Index on any Index Business Day is calculated and
disseminated by the AMEX. The AMEX generally calculates and disseminates the
value of the Index based on the most recently reported values of the
Sub-Indices, at approximately 15-second intervals during the AMEX's business
hours and the end of each Index Business Day via the Consolidated Tape
Association's Network B. The value of the Index is reported on the AMEX and
Bloomberg under the symbol "EMX" and on Reuters under the symmbol ".EMX".
DETERMINATION OF INDEX MULTIPLIER FOR EACH SUB-INDEX
The initial weighting of each Sub-Index was determined at the close of
business on the date the MITTS Securities were priced for initial sale to the
public, or the "Pricing Date", based on its relative market capitalization. The
market capitalization of a stock equals the product of the total number of
shares of stock outstanding and the price of a share of stock. The total market
capitalization of the stocks comprising each Sub-Index was determined using the
most recently available information concerning the number of shares outstanding
for each stock contained in a Sub-Index and the most recently available price
for each share. Current exchange rates were used to translate market
capitalization information into U.S. dollars. The market capitalizations
expressed in U.S. dollars of each Sub-Index were totaled, or the "Total Market
Capitalization". The weighting of each Sub-Index was then determined and equals
the percentage of the market capitalization for each Sub-Index relative to the
Total Market Capitalization. The Index Multiplier for each Sub-Index was then
calculated and equals
o the weighting for that Sub-Index multiplied by 100, divided by
o the most recently available value of that Sub-Index. The Index
Multipliers were calculated in this way so that the Index would equal
100.00 on the Pricing Date.
The Index Multiplier for each Sub-Index will remain fixed, except that
the AMEX may adjust the Index Multiplier in the event of a significant change
in how a Sub-Index is calculated. The Index will not be rebalanced periodically
to reflect changes in the relative market capitalizations of the Sub-Indices.
COMPUTATION OF THE INDEX
The Index is calculated by totaling the products of the most recently
available value of each Sub-Index and the Index Multiplier applicable to that
Sub-Index. Since the Sub-Indices are based on stocks traded on stock exchanges
in Europe, once these stock exchanges close and the values of the Sub-Indices
become fixed until these stock exchanges reopen, the value of the Index will be
fixed.
SUB-INDICES
The following is a list of the Sub-Indices and certain information
concerning each Sub-Index. All disclosure contained in this prospectus
regarding the Sub-Indices is derived from publicly available information.
FINANCIAL TIMES SE 100 INDEX--"FTSE 100"
DESCRIPTION OF FTSE 100: The FTSE 100 is intended to provide an
indication of the pattern of common stock price movement of the 100
common stocks with the largest market capitalization on the London
Stock Exchange.
PUBLISHER: The Financial Times and London Stock Exchange
REQUIRED DISCLOSURE: The FTSE 100 is calculated by FTSE International
Limited in conjunction with the Institute of Actuaries and the Faculty
of Actuaries. Merrill Lynch & Co., Inc. has obtained full license from
FTSE International Limited to use its trademark and copyright in the
creation of this MITTS Security. FTSE International Limited does not
sponsor, endorse or promote this MITTS Security.
DEUTSCHER AKTIENINDEX--"DAX(R)"
DESCRIPTION OF DAX: The DAX is total rate of return index measuring
the performance of 30 common stocks on the Frankfurt Stock Exchange
selected based on their market capitalization and trading volume. A
total rate of return index reflects both the price performance of the
relevant common stocks as well as the dividends paid on common stocks.
PUBLISHER: Deutsche Borse AG
"DAX" is a registered trademark of Deutsche Borse AG.
COMPAGNIE DES AGENTS DE CHANGE 40 INDEX--"CAC 40"
DESCRIPTION OF CAC 40: The CAC 40 is intended to provide an indication
of the pattern of common stock price movement of the 40 common stocks
with the largest market capitalization on the Paris Bourse.
PUBLISHER: SBF--Paris Bourse
REQUIRED DISCLOSURE: "CAC-40" is a registered trademark of the Societe
des Bourses Francaises-Paris Bourse, which designates the index that
the SBF-Paris Bourse calculates and publishes. Authorization to use
the index and the "CAC-40" trademark in connection with the Securities
has been granted by license.
The SBF-Paris Bourse, owner of the trademark and of the CAC-40, does
not sponsor, endorse or participate in the marketing of the
Securities. The SBF-Paris Bourse makes no warranty or representation
to any person, express or implied, as to the figure at which the
CAC-40 stands at any particular time, nor as to the results or
performance of the Securities. Neither shall the SBF-Paris Bourse be
under any obligation to advise any person of any error in the
published level of the CAC-40.
SWISS MARKET INDEX--"SMI(R)"
DESCRIPTION OF SMI: The SMI is intended to provide an indication of
the pattern of common stock price movement of common stocks with the
largest market capitalization and greatest liquidity on the Geneva,
Zurich and Basle Stock Exchanges.
PUBLISHER: Swiss Exchange
REQUIRED DISCLOSURE: The Securities are not in any way sponsored,
endorsed, sold or promoted by the Swiss Exchange and the Swiss
Exchange makes no warranty or representation whatsoever, express or
implied, either as to the results to be obtained from the use of the
SMI index and/or the figure at which the SMI index stands at any
particular time on any particular day or otherwise. The SMI index is
compiled and calculated solely by the Swiss Exchange. However, the
Swiss Exchange shall not be liable, whether in negligence or
otherwise, to any person for any error in the SMI index and the Swiss
Exchange shall not be under any obligation to advise any person of any
error therein.
"SMI" is a registered trademark of the Swiss Exchange.
AMSTERDAM EUROPEAN OPTIONS EXCHANGE INDEX--"AEX"
DESCRIPTION OF AEX: The AEX is intended to provide an indication of
the pattern of common stock price movement of the 25 common stocks
with the largest market capitalization on the Amsterdam Stock
Exchange.
PUBLISHER: AEX--Optiebeurs nv
REQUIRED DISCLOSURE: The AEX-Optiebeurs nv has all proprietary rights
with relation to the AEX index. The AEX-Optiebeurs nv in no way
sponsors, endorses or is otherwise involved in the issue and offering
of the Securities. The AEX-Optiebeurs nv disclaims any liability to
any party for any inaccuracy in the data on which the AEX Index is
based, for any mistakes, errors, or omissions in the calculation or
dissemination of the AEX Index or for the manner in which the AEX
Index is used in connection with the issue and offering of the
Securities.
MILANO ITALIA BORSA 30 INDEX--"MIB 30"
DESCRIPTION OF MIB 30: The MIB 30 is intended to provide an indication
of the pattern of common stock price movement of common stocks with
the largest market capitalization and greatest liquidity on the
Italian Stock Exchange.
PUBLISHER: Consiglio di Borsa
STOCKHOLM OPTIONS MARKET INDEX--"OMX index"
DESCRIPTION OF OMX INDEX: The OMX index is intended to provide an
indication of the pattern of common stock price movement of the 30
common stocks with the largest volume of trading on the Stockholm
Stock Exchange.
PUBLISHER: OM Gruppen AB
REQUIRED DISCLOSURE: The Securities are not in any way sponsored,
endorsed, sold or promoted by OM Gruppen AB ("OM") and OM makes no
warranty or representation whatsoever, express or implied, either as
to the results to be obtained from the use of the OMX index and/or the
figure at which the said OMX index stands at any particular time on
any particular day or otherwise. The OMX index is compiled and
calculated solely by an indexer on behalf of OM. However, OM shall not
be liable, whether in negligence or otherwise, to any person for any
error in the OMX index and OM shall not be under any obligation to
advise any person of any error therein.
All rights to the trademark OMX, OMX INDEX are vested in OM Gruppen AB
("OM") and are used under a license agreement with OM.
IBEX 35 Index
DESCRIPTION OF IBEX 35: The IBEX 35 is intended to provide an
indication of the pattern of common stock price movement of the 35
common stocks with the greatest liquidity continuously traded and
quoted on the Joint Stock Exchange System made up of the Barcelona,
Bilbao, Madrid and Valencia stock exchanges.
PUBLISHER: Sociedad de Bolsas, S.A.
REQUIRED DISCLOSURE: Sociedad de Bolsas, S.A. does not warrant in any
case nor for any reason whatsoever: (a) The continuity of the
composition of the IBEX 35 Index exactly as it is today; (b) the
continuity of the method for calculating the IBEX 35 Index exactly as
it is calculated today; (c) the continuity of the calculation, formula
and publication of the IBEX 35 Index; (d) the precision, integrity or
freedom from errors or mistakes in the composition and calculation of
the IBEX 35 Index; (e) the adequacy of the IBEX 35 Index for the
purposes expected in the issue of the Securities nor for dealing in
the same.
The publisher of each Sub-Index will add or delete stocks due to events
such as the bankruptcy or merger of the issuer of a stock. The publisher of a
Sub-Index may reevaluate the composition of the stocks underlying the Sub-Index
at specified intervals to assure that they still meet the selection criteria or
any ongoing eligibility criteria.
The publisher of a Sub-Index is under no obligation to continue the
calculation and dissemination of that Sub-Index and the publisher may change
the method by which that Sub-Index is calculated. The publishers of the
Sub-Indices are under no obligation to take the needs of ML&Co. or the holders
of the MITTS into consideration in determining, composing or calculating the
Sub-Indices.
OTHER TERMS
ML&Co. issued the MITTS Securities as a series of senior debt
securities under the 1983 Indenture, dated as of April 1, 1983, as amended and
restated, between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of
the 1983 Indenture is filed as an exhibit to the registration statement
relating to the MITTS Securities of which this prospectus is a part. The
following summaries of the material provisions of the 1983 Indenture are not
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the 1983 Indenture, including the definitions of terms in the
1983 Indenture.
ML&Co. may issue series of senior debt securities from time to time
under the 1983 Indenture, without limitation as to aggregate principal amount,
in one or more series and upon terms as ML&Co. may establish under the
provisions of the 1983 Indenture.
The 1983 Indenture and the MITTS Securities are governed by and
construed in accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from
those of senior debt securities previously issued, and issue additional senior
debt securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. However, because
ML&Co. is a holding company, the rights of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise are necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that a bankruptcy court may recognize claims
of ML&Co. itself as a creditor of the subsidiary . In addition, dividends,
loans and advances from certain subsidiaries, including MLPF&S, to ML&Co. are
restricted by net capital requirements under the Exchange Act, and under rules
of exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned
directly or indirectly by ML&Co. of any majority-owned subsidiary, other than a
majority-owned subsidiary which, at the time of the incurrence of the secured
indebtedness, has a net worth of less than $3,000,000, unless the outstanding
senior debt securities are secured equally and ratably with the secured
indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF
ASSETS BY, MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting Stock
of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of its
Voting Stock, unless, after giving effect to any transaction, MLPF&S remains a
Controlled Subsidiary.
"CONTROLLED SUBSIDIARY" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
MERGER AND CONSOLIDATION
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of America
or any U.S. state and assumes all of ML&Co.'s obligations to:
o pay any amounts due and payable or deliverable with respect to all the
senior debt securities; and
o perform and observe all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under the
1983 Indenture.
MODIFICATION AND WAIVER
ML&Co. and the trustee may modify and amend the 1983 Indenture with
the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of senior debt securities affected. However, without the
consent of each holder of any outstanding senior debt security affected, no
amendment or modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any senior
debt security or any premium payable on redemption , or change the
redemption price;
o reduce the principal amount of, or the interest or Additional Amounts
payable on, any senior debt security or reduce the amount of principal
which could be declared due and payable before the stated maturity
date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior debt
security;
o impair the right to institute suit for the enforcement of any payment
on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding senior
debt securities of any series, the consent of whose holders is
required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past default
to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or any
Subsequent Indenture for subordinated debt securities may adversely affect the
rights of any holder of ML&Co.'s senior indebtedness without the consent of
each holder affected. The holders of at least a majority in principal amount of
outstanding senior debt securities of any series may, with respect to that
series, waive past defaults under the 1983 Indenture and waive compliance by
ML&Co. with provisions in the 1983 Indenture, except as described under
"--Events of Default".
EVENTS OF DEFAULT
Each of the following will be Events of Default with respect to senior
debt securities of any series:
o default in the payment of any interest or Additional Amounts payable
when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co. contained
in the 1983 Indenture for the benefit of that series or in the senior
debt securities of that series, continuing for 60 days after written
notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the 1983
Indenture.
If an Event of Default occurs and is continuing for any series of senior debt
securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt
securities of any series but before the trustee has obtained a judgment or
decree for payment of money , the holders of a majority in principal amount of
the outstanding senior debt securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due, other
than those due as a result of acceleration, have been made and all Events of
Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue price
of the outstanding senior debt securities of that series may waive any Event of
Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable under the
debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture which
cannot be modified under the terms of that Indenture without the
consent of each holder of each outstanding security of each series of
senior debt securities affected.
The holders of a majority in principal amount of the outstanding
senior debt securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust or power conferred on the trustee with respect to those senior debt
securities, provided that any direction shall not be in conflict with any rule
of law or the 1983 Indenture. Before proceeding to exercise any right or power
under the 1983 Indenture at the direction of the holders, the trustee shall be
entitled to receive from the holders reasonable security or indemnification
against the costs, expenses and liabilities which might be incurred by it in
complying with any direction.
The MITTS Securities and other series of senior debt securities issued
under the 1983 Indenture do not have the benefit of any cross-default
provisions with other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the 1983
Indenture.
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying the final Treasury Department
Regulations (the "Final Regulations") concerning the United States Federal
income tax treatment of contingent payment debt instruments to the MITTS
Securities, ML&Co. has determined that the projected payment schedule for the
MITTS Securities will consist of payment on the maturity date of the principal
amount a projected Supplemental Redemption Amount equal to $3.7137 per unit.
This represents an estimated yield on the MITTS Securities equal to 6.32% per
annum, compounded semiannually.
The projected payment schedule, including both the projected
Supplemental Redemption Amount and the estimated yield on the MITTS Securities,
has been determined solely for United States Federal income tax purposes, i.e.,
for purposes of applying the Final Regulations to the Securities, and is
neither a prediction nor a guarantee of what the actual Supplemental Redemption
Amount will be, or that the actual Supplemental Redemption Amount will even
exceed zero.
The following table sets forth the amount of interest that will be
deemed to have accrued with respect to each unit of the MITTS Securities during
each accrual period over an assumed term of five years and one month for the
MITTS Securities based upon the projected payment schedule for the MITTS
Securities, including both the projected Supplemental Redemption Amount and the
estimated yield equal to 6.32% per annum, compounded semiannually, as
determined by ML&Co. for purposes of application of the Final Regulations to
the MITTS Securities:
INTEREST DEEMED TOTAL INTEREST
TO DEEMED TO HAVE
ACCRUE DURING ACCRUED ON
ACCRUAL PERIOD SECURITIES AS OF END
(PER UNIT) OF ACCRUAL PERIOD
(PER UNIT)
ACCRUAL PERIOD
August 1, 1997 through August 30, 1997........................... $0.0495 $0.0495
August 31, 1997 through February 28, 1998........................ $0.3173 $0.3668
March 1, 1998 through August 30, 1998............................ $0.3274 $0.6942
August 31, 1998 through February 28, 1999........................ $0.3376 $1.0318
March 1, 1999 through August 30, 1999............................ $0.3484 $1.3802
August 31, 1999 through February 29, 2000........................ $0.3593 $1.7395
March 1, 2000 through August 30, 2000............................ $0.3707 $2.1102
August 31, 2000 through February 28, 2001........................ $0.3823 $2.4925
March 1, 2001 through August 30, 2001............................ $0.3945 $2.8870
August 31, 2001 through February 28, 2002........................ $0.4069 $3.2939
March 1, 2002 through August 30, 2002............................ $0.4198 $3.7137
PROJECTED SUPPLEMENTAL REDEMPTION AMOUNT = $3.7137 PER UNIT.
All prospective investors in the MITTS Securities should consult their
own tax advisors concerning the application of the Final Regulations to their
investment in the MITTS Securities. Investors in the MITTS Securities may also
obtain the projected payment schedule, as determined by ML&Co. for purposes of
the application of the Final Regulations to the MITTS Securities, by submitting
a written request for such information to Merrill Lynch & Co., Inc., Attn:
Darryl W. Colletti, Corporate Secretary's Office, 100 Church Street, 12th
Floor, New York, New York 10080- 6512.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by visiting
the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the MITTS Securities and other securities. For further information on
ML&Co. and the MITTS Securities, you should refer to our registration statement
and its exhibits. This prospectus summarizes material provisions of contracts
and other documents that we refer you to. Because the prospectus may not
contain all the information that you may find important, you should review the
full text of these documents. We have included copies of these documents as
exhibits to our registration statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were
filed with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this offering
is completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the MITTS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the MITTS Securities.
MLPF&S may act as principal or agent in these market-making
transactions.
The MITTS Securities may be offered on the AMEX or off the exchange in
negotiated transactions or otherwise.
The distribution of the MITTS Securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the Annual
Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Market Index Target-Term Securities(R)
based upon the Dow Jones Industrial AverageSM
due January 14, 2003
"MITTS(R) Securities"
$10 principal amount per unit
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in the MITTS
Securities.
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before the maturity date MITTS Securities you own, we will pay you an
o Senior unsecured debt securities of Merrill Lynch & amount equal to the sum of the principal amount
Co., Inc. of each unit and an additional amount based on
o Linked to the value of the index measuring the Dow the percentage increase, if any, in the value
Jones Industrial Average SM of the index, above a benchmark value
of 8,594, as described in this prospectus
o The MITTS Securities are listed on the New o You will receive no less than the principal amount
York Stock Exchange under the symbol "DJM" of your MITTS Securities
Securities
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the MITTS Securities will be the prevailing market
price at the time of sale.
------------------------------------------
Merrill Lynch & Co.
-------------------------------------------
The date of this prospectus is , 199 .
- -----------------
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
"Dow Jones", "Dow Jones Industrial Average SM", and "DJIASM" are
service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been
licensed for use for certain purposes by Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
TABLE OF CONTENTS
Page
RISK FACTORS..............................................................3
MERRILL LYNCH & CO., INC..................................................7
RATIO OF EARNINGS TO FIXED CHARGES........................................8
DESCRIPTION OF THE MITTS SECURITIES.......................................9
THE INDEX................................................................16
OTHER TERMS..............................................................17
PROJECTED PAYMENT SCHEDULE...............................................20
WHERE YOU CAN FIND MORE INFORMATION......................................21
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........................22
PLAN OF DISTRIBUTION.....................................................23
EXPERTS..................................................................23
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You
should carefully consider the following discussion of risks before deciding
whether an investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT.
You should be aware that at maturity we will pay you no more than $10
for each unit of the MITTS Securities you own if the average value of the
index over five trading days shortly before the maturity date is less than
8,594. This will be true even if at some time during the life of the MITTS
Securities, the value of the index, as adjusted, was higher than 8,594 but
later falls below 8,594.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY.
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you take into account inflation
and other factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX.
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks. This is because the value of the index is calculated by
reference to the prices of the common stocks included in the index without
taking into consideration the value of dividends paid on those stocks.
YOUR RETURN WILL NOT REFLECT THE PAYMENT OF DIVIDENDS.
The index is calculated with reference to the prices of the common
stocks comprising the index without taking into consideration the value of
dividends paid on those stocks. Therefore, the return you earn on your MITTS
Securities, if any, will not be the same as the return that you would earn if
you actually owned each of the common stocks underlying the index and received
the dividends paid on those stocks.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE
FUTURE.
Although the MITTS Securities are listed on the NYSE under the symbol
"DJM," you cannot assume that a trading market will continue to exist for the
MITTS Securities. If a trading market in the MITTS Securities continues to
exist, you cannot assume that there will be liquidity in the trading market.
The continued existence of a trading market for the MITTS Securities will
depend on our financial performance and other factors such as the
appreciation, if any, of the value of the index.
If the trading market for the MITTS Securities is limited and you do
not wish to hold your investment until maturity, there may be a limited number
of buyers for your MITTS Securities. This may affect the price you receive if
you sell before maturity.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES.
We believe that the value of the index and a number of other factors
will affect the trading value of the MITTS Securities. Some of these factors
interrelate in complex ways; as a result, the effect of any one factor may
offset or magnify the effect of another factor. The following paragraphs
describe the expected impact on the trading value of the MITTS Securities
given a change in a specific factor, assuming all other conditions remain
constant.
o The value of the index We expect that the market value of the
MITTS Securities will depend substantially on the amount by which
the index does or does not exceed 8,594. If you choose to sell your
MITTS Securities when the value of the index exceeds 8,594, you may
receive substantially less than the amount that would be payable at
maturity based on that index value because of the expectation that
the index will continue to fluctuate until shortly before the
maturity date when the average value of the index is determined. If
you choose to sell your MITTS Securities when the value of the
index is below 8,594, you may receive less than the $10 principal
amount per unit of MITTS Securities. In general, rising U.S.
dividend rates, or dividends per share, may increase the value of
the index while falling U.S. dividend rates may decrease the value
of the index. Political, economic and other developments that
affect the stocks underlying the index may also affect the value of
the index and the value of the MITTS Securities.
o Interest rates. Because we will pay, at a minimum, the principal
amount per unit of MITTS Securities at maturity, we expect that
changes in interest rates will affect the trading value of the
MITTS Securities. In general, if U.S. interest rates increase, we
expect that the trading value of the MITTS Securities will decrease
and, conversely, if U.S. interest rates decrease, we expect the
trading value of the MITTS Securities will increase. Interest rates
may also affect the U.S. economy and, in turn, the value of the
index. Rising interest rates may lower the value of the index and,
thus, may lower the value of the MITTS Securities. Falling interest
rates may increase the value of the index and, thus, may increase
the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe
the size and frequency of market fluctuations. Generally, if the
volatility of the index increases, we expect that the trading value
of the MITTS Securities will increase. If the volatility of the
index decreases, we expect that the trading value of the MITTS
Securities will decrease.
o Time remaining to maturity. We anticipate that prior to the
maturity of the MITTS Securities, the MITTS Securities may trade at
a value above that which would be expected based on the level of
interest rates and the index. This difference will reflect a "time
premium" due to expectations concerning the value of the index
during the period prior to January 14, 2003, the stated maturity of
the MITTS Securities. However, as the time remaining to maturity of
the MITTS Securities decreases, we expect that this time premium
will decrease, lowering the trading value of the MITTS Securities.
o Dividend yields. If dividend yields on the stocks comprising the
index increase, we expect that the value of the MITTS Securities
will decrease. Conversely, if dividend yields on the stock
comprising the index decrease, we expect that the value of the
MITTS Securities will increase.
o Changes in our credit ratings. Our credit ratings are an
assessment of our ability to pay our obligations. Consequently,
real or anticipated changes in our credit ratings may affect the
trading value of the MITTS Securities. However, because your return
on your MITTS Securities is dependent upon factors in addition to
our ability to pay our obligations under the MITTS Securities, such
as the percentage increase in the value of the index at maturity,
an improvement in our credit ratings will not reduce investment
risks related to the MITTS Securities.
It is important for you to understand that the impact of one of the
factors specified above, such as an increase in interest rates, may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most of the factors listed above will be less if it occurs later in
the term of the MITTS Securities than if it occurs earlier in the term of the
MITTS Securities except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the index will be
greater if it occurs later in the term of the MITTS Securities than if it
occurs earlier in the term of the MITTS Securities.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW.
New York State laws govern the indenture under which the MITTS
Securities are 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 MITTS Securities. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not apply
to debt securities in which $2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state
or Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for the benefit of the holders of the MITTS
Securities, to the extent permitted by law, not to voluntarily claim the
benefits of any laws concerning usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We and our affiliates may from time to time buy or sell the stocks
underlying the Index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment.
POTENTIAL CONFLICTS OF INTEREST.
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. In some circumstances, MLPF&S's
role as our subsidiary and its responsibilities as calculation agent for the
MITTS Securities could give rise to conflicts of interests. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. MLPF&S is required to
carry out its duties as calculation agent in good faith and using its
reasonable judgment. However, you should be aware that because we control
MLPF&S, potential conflicts of interest could arise.
We have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
You should reach an investment decision with regard to the MITTS
Securities only after carefully considering the suitability of the MITTS
Securities in light of your particular circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult with your tax adviser.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets
Bank Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and related
services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the
sections entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
MITTS Securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
-----------------------------------------
Ratio of earnings to fixed
charges(a)................ 1.2 1.2 1.2 1.2 1.1
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges, excluding capitalized interest and preferred security
dividend requirements. "Fixed charges" consist of interest costs, the interest
factor in rentals, amortization of debt issuance costs, preferred security
dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF THE MITTS SECURITIES
On December 23, 1997, ML&Co. issued an aggregate principal amount of
$90,000,000 or 9,000,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt
securities under the 1983 Indenture which is more fully described in this
prospectus.
The MITTS Securities will mature on January 14, 2003.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, ML&Co. will make no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
The MITTS Securities are not subject to redemption by ML&Co. or at
the option of any beneficial owner before maturity. Upon the occurrence of an
Event of Default with respect to the MITTS Securities, beneficial owners of
the MITTS Securities may accelerate the maturity of the MITTS Securities, as
described under "- Events of Default and Acceleration" and "Other Terms Events
of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount of each MITTS Security ($10 per unit) X Ending Index Value - Benchmark Index Value
-------------------------------------------
Benchmark Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Benchmark Index Value" equals 8,594, which was determined on the
pricing date by multiplying 7,957.41, the value of the index on the pricing
date by 108%.
The "Ending Value" will be determined by the calculation agent and
will equal the average or arithmetic mean of the closing values of the Dow
Jones Industrial Average Index (the "Index") determined on each of the first
five Calculation Days during the Calculation Period. If there are fewer than
five Calculation Days, then the Ending Value will equal the average or
arithmetic mean of the closing values of the Index on these Calculation Days,
and if there is only one Calculation Day, then the Ending Value will equal the
closing value of the Index on that Calculation Day. If no Calculation Days
occur during the Calculation Period, then the Ending Value will equal the
closing value of the Index determined on the last scheduled Index Business Day
in the Calculation Period, regardless of the occurrence of a Market Disruption
Event on that day.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day before the maturity date to and including
the second scheduled Index Business Day before the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are
open for trading and the Index or any Successor Index, as defined on page 10
below, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the percentage change from the starting index value to the Ending
Index Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks
underlying the Index, which includes an assumed aggregate
dividend yield of 1.72% per annum, as more fully described
below.
Total Amount Pretax
Payable at Total Rate Annualized
Percentage Maturity per $10 of Rate Pretax Annualized
Hypothetical Change Principal Return on of Return on Rate of Return of
Ending Over the Starting Amount of MITTS the MITTS the MITTS Stocks Underlying the
Index Value Index Value Securities Securities Securities(1) Index(1)(2)
----------- ----------------- ---------------- ---------- -------------- -----------------
3,182.96 -60.00% $10.00 0.00% 0.00% - 14.21%
3,978.71 -50.00% $10.00 0.00% 0.00% - 10.67%
4,774.45 -40.00% $10.00 0.00% 0.00% - 7.63%
5,570.19 -30.00% $10.00 0.00% 0.00% - 4.95%
6,365.93 -20.00% $10.00 0.00% 0.00% -2.55%
7,161.67 -10.00% $10.00 0.00% 0.00% -0.37%
7,957.41(3) 0.00% $10.00 0.00% 0.00% 1.64%
8,753.15 10.00% $10.19 1.85% 0.36% 3.49%
9,548.89 20.00% $11.11 11.11% 2.09% 5.22%
10,344.63 30.00% $12.04 20.37% 3.70% 6.84%
11,140.37 40.00% $12.96 29.63% 5.19% 8.36%
11,936.12 50.00% $13.89 38.89% 6.59% 9.80%
12,731.86 60.00% $14.81 48.15% 7.92% 11.17%
13,527.60 70.00% $15.74 57.41% 9.16% 12.48%
14,323.34 80.00% $16.67 66.67% 10.35% 13.72%
15,119.08 90.00% $17.59 75.93% 11.47% 14.91%
15,914.82 100.00% $18.52 85.19% 12.55% 16.05%
16,710.56 110.00% $19.44 94.44% 13.57% 17.15%
17,506.30 120.00% $20.37 103.70% 14.56% 18.21%
- ----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the Index
with the allocation of an amount reflecting the current relative
weights of the stocks in the Index;
(b) a percentage change in the aggregate price of the stocks that equals
the percentage change in the Index from the starting index value to
the relevant hypothetical Ending Index Value;
(c) a constant dividend yield of 1.72% per annum, paid quarterly from
the date of initial delivery of MITTS Securities, applied to the
value of the Index at the end of each quarter assuming this value
increases or decreases linearly from the starting index value to the
hypothetical Ending Index Value;
(d) no transaction fees or expenses;
(e) the term of the MITTS Securities is from December 23, 1997 to
January 14, 2003; and
(f) a final Index value equal to the hypothetical Ending Index
Value. The aggregate dividend yield of the stocks underlying the
Index as of December 17, 1997 was approximately 1.72%.
(3) The starting index value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the respective total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this
prospectus.
Adjustments to the Index; Market Disruption Events
If at any time the method of calculating the Index, or its value , is
changed in any material respect, or if the Index is in any other way modified
so that the Index does not, in the opinion of the calculation agent, fairly
represent the value of the Index had the changes or modifications not been
made, then, from and after that time, the calculation agent shall, at the
close of business in New York, New York, on each date that the closing value
with respect to the Ending Index Value is to be calculated, make any
adjustments as, in the good faith judgment of the calculation agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if any changes or modifications had not been made,
and calculate the closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of the Index is a fraction or a multiple of what it would have been if
it had not been modified for example, due to a split in the Index, then the
calculation agent shall adjust the Index in order to arrive at a value of the
Index as if it had not been modified for example, as if the split had not
occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more than
two hours of trading, or during the one-half hour period preceding the close
of trading on the applicable exchange, in each case, in 20% or more of the
stocks which then comprise the Index; or
(b) the suspension or material limitation, in each case, for more
than two hours of trading, whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise, in
(1) futures contracts related to the Index, or options on
these futures contracts, which are traded on any major U.S.
exchange or
(2) option contracts related to the Index which are traded
on any major U.S. exchange.
For the purposes of clause (a) above, any limitations on trading
during significant market fluctuations under New York Stock Exchange Rule 80A,
or any applicable rule or regulation enacted or promulgated by the NYSE or any
other self regulatory organization or the SEC of similar scope as determined
by the calculation agent, will be considered "material".
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
Discontinuance of the Index
If Dow Jones discontinues publication of the Index and Dow Jones or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the Index, this
index being referred to in this prospectus as a "Successor Index", then, upon
the calculation agent's notification of its determination to the trustee and
ML&Co., the calculation agent will substitute the Successor Index as
calculated by Dow Jones or any other entity for the Index. Upon any selection
by the calculation agent of a Successor Index, ML&Co. shall cause notice to be
given to holders of the MITTS Securities.
If Dow Jones discontinues publication of the Index and a Successor
Index is not selected by the calculation agent or is no longer published on
any of the Calculation Days, the value to be substituted for the Index for any
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the calculation agent for each
Calculation Day in accordance with the procedures last used to calculate the
Index before any discontinuance. If a Successor Index is selected or the
calculation agent calculates a value as a substitute for the Index as
described below, the Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists. If the calculation agent calculates a value as a
substitute for the Index, "Index Calculation Day" shall mean any day on which
the calculation agent is able to calculate a value.
If Dow Jones discontinues publication of the Index before the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of:
o the determination of the Ending Index Value and
o a determination by the calculation agent shall determine the
value that would be used in computing the Supplemental
Redemption Amount as described in the preceding paragraph as if
that day were a Calculation Day.
the calculation agent will cause notice of each value to be published not less
often than once each month in The Wall Street Journal (the "WSJ"), or another
newspaper of general circulation, and arrange for information with respect to
these values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the Index may
adversely affect trading in the MITTS Securities.
Events of Default and Acceleration
If an Event of Default with respect to any MITTS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a
MITTS Security upon any acceleration permitted by the MITTS Securities, with
respect to each $10 principal amount of the MITTS Securities, will be equal to
the principal amount and the Supplemental Redemption Amount, if any,
calculated as though the date of early repayment were the stated maturity date
of the MITTS Securities. See "Description of the MITTS Securities--Payment at
Maturity". If a bankruptcy proceeding is commenced in respect of ML&Co., the
claim of the beneficial owner of a MITTS Security may be limited, under
Section 502(b)(2) of Title 11 of the United States Code, to the principal
amount of the MITTS Security plus an additional amount of contingent interest
calculated as though the date of the commencement of the proceeding were the
maturity date of the MITTS Securities.
In case of default in payment at the maturity date of the MITTS
Securities, whether at their stated maturity or upon acceleration, from and
after the maturity date the MITTS Securities shall bear interest, payable upon
demand of their beneficial owners , at the rate of 6.18% per annum, to the
extent that payment of any interest shall be legally enforceable, on the
unpaid amount due and payable on any date in accordance with the terms of the
MITTS Securities to the date payment of any amount has been made or duly
provided for.
Global Securities
Description of the Global Securities
Beneficial owners of the MITTS Securities may not receive physical
delivery of the MITTS Securities nor may they be entitled to have the MITTS
Securities registered in their names. The MITTS Securities currently are
represented by one or more fully registered global securities. Each global
security was deposited with, or on behalf of, The Depository Trust Company or
DTC, (DTC, together with any successor to DTC, being a "depositary"), as
depositary, registered in the name of Cede & Co., DTC's partnership nominee.
Unless and until it is exchanged in whole or in part for MITTS Securities in
definitive form, no global security may be transferred except as a whole by
the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or by the
depositary or any a nominee to a successor of the depositary or a nominee of
that successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the MITTS Securities represented by a global security for
all purposes under the 1983 Indenture. Except as provided below, the
beneficial owners of the MITTS Securities represented by a global security
will not be entitled to have the MITTS Securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of the MITTS Securities in definitive form and will not be
considered the owners or holders under the 1983 Indenture, including for
purposes of receiving any reports delivered by ML&Co. or the trustee under the
1983 Indenture. Accordingly, each person owning a beneficial interest in a
global security must rely on the procedures of DTC and, if that person is not
a participant of DTC on the procedures of the participant through which that
person owns its interest, to exercise any rights of a holder under the 1983
Indenture. ML&Co. understands that under existing industry practices, in the
event that ML&Co. requests any action of holders or that an owner of a
beneficial interest in a global security desires to give or take any action
which a holder is entitled to give or take under the 1983 Indenture, DTC would
authorize the participants holding the relevant beneficial interests to give
or take any action, and the participants would authorize beneficial owners
owning through those participants to give or take action or would otherwise
act upon the instructions of beneficial owners. Conveyance of notices and
other communications by DTC to participants, by participants to indirect
participants and by participants and indirect participants to beneficial
owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
DTC Procedures
The following is based on information furnished by DTC:
DTC is the securities depositary for the MITTS Securities. The MITTS
Securities were issued as fully registered securities registered in the name
of Cede & Co., DTC's partnership nominee. One or more fully registered global
securities were issued for the MITTS Securities in the aggregate principal
amount of the MITTS Securities, and were deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under to the provisions of Section 17A of the Securities
and Exchange Act of 1934, as amended. DTC holds securities that its
participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants of DTC include securities brokers
and dealers, banks, trust companies, clearing corporations and other
organizations. DTC is owned by a number of its direct participants and by the
NYSE, the AMEX and the National Association of Securities Dealers, Inc. Access
to DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly. The
rules applicable to DTC and its participants are on file with the SEC.
Purchases of MITTS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the MITTS
Securities on DTC's records. The ownership interest of each beneficial owner
is in turn to be recorded on the records of direct and indirect participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which
the beneficial owner entered into the transaction. Transfers of ownership
interests in the MITTS Securities are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all MITTS Securities deposited
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of MITTS Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the MITTS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the MITTS
Securities are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
MITTS Securities. Under its usual procedures, DTC mails an omnibus proxy to
ML&Co. as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
identified in a listing attached to the omnibus proxy to whose accounts the
MITTS Securities are credited on the record date identified in a listing
attached to the omnibus proxy.
Principal, premium, if any, and/or interest, if any, payments on the
MITTS Securities will be made in immediately available funds to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the depositary's
records unless DTC has reason to believe that it will not receive payment on
that date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of the participant and not of DTC, the
trustee or ML&Co., subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to DTC is the responsibility of ML&Co. or the trustee,
disbursement of payments to direct participants is the responsibility of DTC,
and disbursement of payments to the beneficial owners is the responsibility of
direct and indirect participants.
Exchange for Certificated Securities
If:
o the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by ML&Co.
within 60 days,
o ML&Co. executes and delivers to the trustee a company order to
the effect that the global securities shall be exchangeable, or
o an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the MITTS Securities,
the global securities will be exchangeable for MITTS Securities in definitive
form of like tenor and of an equal aggregate principal amount, in
denominations of $10 and integral multiples of $10. The definitive MITTS
Securities will be registered in the name or names as the depositary shall
instruct the trustee. It is expected that instructions may be based upon
directions received by the depositary from participants with respect to
ownership of beneficial interests in the global securities.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, MITTS Securities
in definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has
been obtained from sources that ML&Co. believes to be reliable, but ML&Co.
takes no responsibility for its accuracy.
Same-Day Settlement and Payment
ML&Co. will make all payments of principal and the Supplemental
Redemption Amount, if any, in immediately available funds so long as the MITTS
Securities are maintained in book-entry form.
THE INDEX
Unless otherwise stated, all information in this prospectus on the
Index is derived from Dow Jones or other publicly available sources. This
information reflects the policies of Dow Jones as stated in these sources and
these policies are subject to change by Dow Jones. Dow Jones is under no
obligation to continue to publish the Index and may discontinue publication of
the Index at any time.
The Index is a price-weighted index, meaning that the weight of a
component stock in the Index is based on its price per share rather than the
total market capitalization of the issuer of a component stock, comprised of
30 common stocks chosen by the editors of the WSJ as representative of the
broad market of U.S. industry. The corporations represented in the Index tend
to be leaders within their respective industries and their stocks are
typically widely held by individuals and institutional investors. Changes in
the composition of the Index are made entirely by the editors of the WSJ
without consultation with the corporations represented in the Index, any stock
exchange, any official agency or ML&Co.. Changes to the common stocks included
in the Index tend to be made infrequently. Historically, most substitutions
have been the result of mergers, but from time to time, changes may be made to
achieve what the editors of the WSJ deem to be a more accurate representation
of the broad market of U.S. industry. In choosing a new corporation for the
Index, the editors of the WSJ look for leading industrial companies with a
successful history of growth and wide interest among investors. The WSJ may
change the component stocks of the Index at any time for any reason. Dow
Jones, publisher of the WSJ, is not affiliated with ML&Co. and has not
participated in any way in the creation of the MITTS Securities.
The Index initially consisted of 12 common stocks and was first
published in the WSJ in 1896. The Index was increased to include 20 common
stocks in 1916 and to 30 common stocks in 1928. The number of common stocks in
the Index has remained at 30 since 1928, and, in an effort to maintain
continuity, the constituent corporations represented in the Index have been
changed on a relatively infrequent basis.
The value of the Index is the sum of the primary exchange prices of
each of the 30 common stocks included in the Index, divided by a divisor that
is designed to provide a meaningful continuity in the value of the Index.
Because the Index is price-weighted, stock splits or changes in the component
stocks could result in distortions in the Index value. In order to prevent
these distortions related to extrinsic factors, the divisor is changed in
accordance with a mathematical formula that reflects adjusted proportions
within the Index. The current divisor of the Index is published daily in the
WSJ and other publications. In addition, other statistics based on the Index
may be found in a variety of publicly available sources.
ML&Co. or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the component stocks of the Index,
including extending loans to, or making equity investments in these issuers or
providing advisory services to these issuers, including merger and acquisition
advisory services. In the course of this business, ML&Co. or its affiliates
may acquire non-public information with respect to these issuers. ML&Co. does
not make any representation to any purchaser of MITTS Securities with respect
to any matters whatsoever relating to these issuers. Any prospective purchaser
of MITTS Securities should undertake an independent investigation of the
issuers of the component stocks of the Index as in its judgment is appropriate
to make an informed decision with respect to an investment in the MITTS
Securities. The composition of the Index does not reflect any investment or
sell recommendations of ML&Co. or its affiliates.
OTHER TERMS
ML&Co. issued the MITTS Securities as a series of senior debt
securities under the 1983 Indenture, dated as of April 1, 1983, as amended and
restated, between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of
the 1983 Indenture is filed as an exhibit to the registration statement
relating to the MITTS Securities of which this prospectus is a part. The
following summaries of the material provisions of the 1983 Indenture are not
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the 1983 Indenture, including the definitions of terms in
the 1983 Indenture.
ML&Co. may issue series of senior debt securities from time to time
under the 1983 Indenture, without limitation as to aggregate principal amount,
in one or more series and upon terms as ML&Co. may establish under the
provisions of the 1983 Indenture.
The 1983 Indenture and the MITTS Securities are governed by and
construed in accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from
those of senior debt securities previously issued, and issue additional senior
debt securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. However, because
ML&Co. is a holding company, the rights of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise are necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that a bankruptcy court may recognize claims
of ML&Co. itself as a creditor of the subsidiary . In addition, dividends,
loans and advances from certain subsidiaries, including MLPF&S, to ML&Co. are
restricted by net capital requirements under the Exchange Act, and under rules
of exchanges and other regulatory bodies.
Limitations Upon Liens
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned
directly or indirectly by ML&Co. of any majority-owned subsidiary, other than
a majority-owned subsidiary which, at the time of the incurrence of the
secured indebtedness, has a net worth of less than $3,000,000, unless the
outstanding senior debt securities are secured equally and ratably with the
secured indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
Limitation on Disposition of Voting Stock of, and Merger and Sale of Assets by,
MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any voting
stock of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of
its voting stock, unless, after giving effect to any transaction, MLPF&S
remains a Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of voting stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
Merger and Consolidation
ML&Co. may consolidate or merge with or into any other corporation
and ML&Co. may sell, lease or convey all or substantially all of its assets to
any corporation, provided that:
o the resulting corporation, if other than ML&Co., is a
corporation organized and existing under the laws of the United
States of America or any U.S. state and assumes all of ML&Co.'s
obligations to:
o pay any amounts due and payable or deliverable with respect to
all the senior debt securities; and
o perform and observe all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under
the 1983 Indenture.
Modification and Waiver
ML&Co. and the trustee may modify and amend the 1983 Indenture with
the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of senior debt securities affected. However, without the
consent of each holder of any outstanding senior debt security affected, no
amendment or modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any
senior debt security or any premium payable on redemption , or
change the redemption price;
o reduce the principal amount of, or the interest or Additional
Amounts payable on, any senior debt security or reduce the
amount of principal which could be declared due and payable
before the stated maturity date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior
debt security;
o impair the right to institute suit for the enforcement of any
payment on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding
senior debt securities of any series, the consent of whose
holders is required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past
default to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or
any Subsequent Indenture for subordinated debt securities may adversely affect
the rights of any holder of ML&Co.'s senior indebtedness without the consent
of each holder affected. The holders of at least a majority in principal
amount of outstanding senior debt securities of any series may, with respect
to that series, waive past defaults under the 1983 Indenture and waive
compliance by ML&Co. with provisions in the 1983 Indenture, except as
described under "--Events of Default".
Events of Default
Each of the following will be Events of Default with respect to
senior debt securities of any series:
o default in the payment of any interest or Additional Amounts payable
when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co.
contained in the 1983 Indenture for the benefit of that series
or in the senior debt securities of that series, continuing for
60 days after written notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the
1983 Indenture.
If an Event of Default occurs and is continuing for any series of senior debt
securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt
securities of any series but before the trustee has obtained a judgment or
decree for payment of money , the holders of a majority in principal amount of
the outstanding senior debt securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due, other
than those due as a result of acceleration, have been made and all Events of
Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue
price of the outstanding senior debt securities of that series may waive any
Event of Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable under the
debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture
which cannot be modified under the terms of that Indenture
without the consent of each holder of each outstanding security
of each series of senior debt securities affected.
The holders of a majority in principal amount of the outstanding
senior debt securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee with respect to those
senior debt securities, provided that any direction shall not be in conflict
with any rule of law or the 1983 Indenture. Before proceeding to exercise any
right or power under the 1983 Indenture at the direction of the holders, the
trustee shall be entitled to receive from the holders reasonable security or
indemnification against the costs, expenses and liabilities which might be
incurred by it in complying with any direction.
The MITTS Securities and other series of senior debt securities
issued under the 1983 Indenture do not have the benefit of any cross-default
provisions with other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as
to the fulfillment by ML&Co. of all of its obligations under the 1983
Indenture.
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying the final Treasury Department
Regulations, the "Final Regulations", concerning the proper United States
Federal income tax treatment of contingent payment debt instruments to the
MITTS Securities, ML&Co. has determined that the projected payment schedule
for the MITTS Securities will consist of payment on the maturity date of the
principal amount and a projected Supplemental Redemption Amount equal to
$3.6070 per unit, the "Projected Supplemental Redemption Amount". This
represents an estimated yield on the MITTS Securities equal to 6.18% per
annum, compounded semiannually.
The projected payment schedule, including both the Projected
Supplemental Redemption Amount and the estimated yield on the MITTS
Securities, has been determined solely for United States Federal income tax
purposes, for purposes of applying the Final Regulations to the MITTS
Securities, and is neither a prediction nor a guarantee of what the actual
Supplemental Redemption Amount will be, or that the actual Supplemental
Redemption Amount will even exceed zero.
The following table sets forth the amount of interest that will be
deemed to have accrued with respect to each unit of the MITTS Securities
during each accrual period over a term of five years and twenty-two days for
the MITTS Securities based upon the projected payment schedule for the MITTS
Securities, including both the Projected Supplemental Redemption Amount and
the estimated yield equal to 6.18% per annum, compounded semiannually, as
determined by ML&Co. for purposes of applying the Final Regulations to the
MITTS Securities:
Total Interest
Deemed to
Have Accrued
Interest Deemed to On the MITTS Securities
Accrue During as of End of
Accrual Period Accrual Period
Accrual Period (per Unit) (per Unit)
- ----------------------------------- ---------- ----------
January 15, 1998 through July 14, 1998..................... $0.3101 $0.3470
July 15, 1998 through January 14, 1999.................... $0.3197 $0.6667
January 15, 1999 through July 14, 1999.................... $0.3296 $0.9963
July 15, 1999 through January 14, 2000.................... $0.3398 $1.3361
January 15, 2000 through July 14, 2000.................... $0.3503 $1.6864
July 15, 2000 through January 14, 2001.................... $0.3611 $2.0475
January 15, 2001 through July 14, 2001.................... $0.3723 $2.4198
July 15, 2001 through January 14, 2002.................... $0.3837 $2.8035
January 15, 2002 through July 14, 2002.................... $0.3957 $3.1992
July 15, 2002 through January 14, 2003.................... $0.4078 $3.6070
- -------------
Projected Supplemental Redemption Amount = $3.6070 per Unit.
All prospective investors in the MITTS Securities should consult
their own tax advisors concerning the application of the Final Regulations to
their investment in the MITTS Securities. Investors in the MITTS Securities
may also obtain the projected payment schedule, as determined by ML&Co. for
purposes of the application of the Final Regulations to the MITTS Securities,
by submitting a written request for such information to Merrill Lynch & Co.,
Inc., Attn: Darryl W. Colletti, Corporate Secretary's Office, 100 Church
Street, 12th Floor, New York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by
visiting the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the MITTS Securities and other securities. For further information on
ML&Co. and the MITTS Securities, you should refer to our registration
statement and its exhibits. This prospectus summarizes material provisions of
contracts and other documents that we refer you to. Because the prospectus may
not contain all the information that you may find important, you should review
the full text of these documents. We have included copies of these documents
as exhibits to our registration statement of which this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to those
documents; and
o information that we file with the SEC will automatically update
and supersede this incorporated information.
We incorporate by reference the documents listed below which were
filed with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998; and
o current reports on Form 8-K dated December 28, 1998, January 19, 1999,
February 17, 1999, February 18, 1999, February 22, 1999, February 23,
1999 and March 26, 1999.
We also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this offering
is completed or after the date of this initial registration statement and before
the effectiveness of the registration statement:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus
is accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the MITTS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the MITTS Securities.
MLPF&S may act as principal or agent in these market-making
transactions.
The MITTS Securities may be offered on the NYSE or off the exchange
in negotiated transactions or otherwise.
The distribution of the MITTS Securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the Annual
Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), 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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated March 29, 1999
P R O S P E C T U S
- -------------------
Merrill Lynch & Co., Inc.
Nikkei 225 Market Index Target-Term Securities(R) due June 14, 2002
"MITTS(R) Securities"
$10 principal amount per unit
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in the MITTS
Securities.
The MITTS Securities: Payment at Maturity:
o 100% principal protection at maturity o On the maturity date, for each unit of the
o No payments before maturity MITTS Securities you own, we will pay you
o Senior unsecured debt securities of Merrill an amount equal to the sum of the principal
Lynch & Co., Inc. amount of each unit and an additional amount
o Linked to the value of the Nikkei Stock based on the product of the percentage change in the
Average value of the index and 140%
o The MITTS Securities are listed on the New York o You will receive no less than the principal amount of your
Stock Exchange under the symbol "MLN" MITTS Securities
Investing in the MITTS Securities involves risks.
See "Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the MITTS Securities will be the prevailing market
price at the time of sale.
------------------------
Merrill Lynch & Co.
------------------------
The date of this prospectus is , 199 .
"MITTS" and "Market Index Target-Term Securities" are registered service marks
of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
RISK FACTORS...............................................................3
MERRILL LYNCH & CO., INC...................................................7
RATIO OF EARNINGS TO FIXED CHARGES.........................................8
DESCRIPTION OF THE MITTS SECURITIES........................................9
THE INDEX.................................................................17
OTHER TERMS...............................................................19
PROJECTED PAYMENT SCHEDULE................................................22
WHERE YOU CAN FIND MORE INFORMATION.......................................23
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.........................23
PLAN OF DISTRIBUTION......................................................24
EXPERTS...................................................................24
RISK FACTORS
Your investment in MITTS Securities will involve risks. You should
carefully consider the following discussion of risks before deciding whether
an investment in the MITTS Securities is suitable for you.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT.
You should be aware that at maturity we will pay you no more than $10
for each unit of the MITTS Securities you own if the average value of the
index over five trading days shortly before the maturity date is less than
20,351.34, the value of the index on the date the MITTS Securities were
priced. This will be true even if at some time during the life of the MITTS
Securities, the value of the index, as adjusted, was higher than 20,351.34 but
later falls below 20,351.34.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF
COMPARABLE MATURITY.
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable debt security of
Merrill Lynch & Co., Inc. with the same maturity date. Your investment may not
reflect the full opportunity cost to you when you consider inflation or other
factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS INCLUDED IN THE
INDEX.
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the index and received the dividends paid
on those stocks. This is because the value of the index is calculated by
reference to the prices of the common stocks included in the index without
taking into consideration the value of dividends paid on those stocks.
YOUR RETURN WILL BE AFFECTED BY CURRENCY EXCHANGE RATES.
Although the stocks included in the index are traded in Japanese Yen
and the MITTS Securities are denominated in U.S. Dollars, we will not adjust
any amounts payable on the MITTS Securities for the currency exchange rate in
effect at maturity. Any amount in addition to the principal amount of each
unit payable to you at maturity is based solely upon the percentage increase
in the index. Changes in the exchange rate, however, may reflect changes in
the Japanese economy that may affect the value of the index and the MITTS
Securities.
YOUR RETURN MAY BE AFFECTED BY FACTORS AFFECTING THE VALUE OF JAPANESE STOCKS.
Because the underlying stocks included in the index have been issued
by Japanese companies, risks relating to an investment in Japanese equity
securities may affect the return on your MITTS Securities. The Japanese
securities markets may be more volatile than U.S. or other securities markets
and market developments can effect the Japanese markets in different ways than
U.S. or other securities markets. Direct or indirect government intervention
to stabilize the Japanese securities markets and cross-shareholdings in
Japanese companies on those markets may affect prices and volume of trading on
those markets. Also, there is generally less publicly available information
about Japanese companies than about those U.S. companies that are subject to
the reporting requirements of the U.S. Securities and Exchange Commission, and
Japanese companies are subject to accounting, auditing and financial reporting
standards and requirements that differ from those applicable to U.S. reporting
companies.
Securities prices in Japan are subject to political, economic,
financial and social factors that apply in Japan. In addition, recent or
future changes in the Japanese government's economic and fiscal policies, the
possible imposition of, or changes in, currency exchange laws or other
Japanese laws or restrictions applicable to Japanese companies or investments
in Japanese equity securities and fluctuations in the rate of exchange between
currencies may negatively affect the Japanese securities markets. Moreover,
the Japanese economy may differ favorably or unfavorably from the U.S. economy
in economic factors such as growth in gross national product, rates of
inflation, capital reinvestment, resources and self-sufficiency.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE MITTS SECURITIES IN THE
FUTURE.
Although the MITTS Securities are listed on the NYSE under the symbol
"MLN," you cannot assume that a trading market will continue to exist for the
MITTS Securities. If a trading market in the MITTS Securities continues to
exist, you cannot assume that there will be liquidity in the trading market.
The continued existence of a trading market for the MITTS Securities will
depend on our financial performance and other factors such as the
appreciation, if any, of the value of the index.
If a limited trading market for the MITTS Securities exists, and you
do not wish to hold your investment until maturity, fewer buyers may want to
purchase your MITTS Securities. This may affect the price you receive if you
sell before maturity.
THERE ARE MANY FACTORS AFFECTING THE TRADING VALUE OF THE MITTS SECURITIES.
We believe that the value of the index and by a number of other
factors will affect trading value of the MITTS Securities. Some of these
factors interrelate in complex ways; as a result, the effect of any one factor
may offset or magnify the effect of another factor. The following paragraphs
describe the expected impact on the trading value of the MITTS Securities
given a change in a specific factor, assuming all other conditions remain
constant.
o The value of the index. We expect that the market value of the MITTS
Securities will depend substantially on the amount by which the index
exceeds 20,351.34. If you choose to sell your MITTS Securities when the
value of the Index exceeds 20,351.34, you may receive substantially less
than the amount that would be payable at maturity based on that index
value because of the expectation that the index will continue to
fluctuate until shortly before the maturity date when the average value
of the index over five trading days is determined. If you choose to sell
your MITTS Securities when the value of the index is below 20,351.34,
you may receive less than the $10 principal amount per Unit of MITTS
Securities. In general, rising Japanese dividend rates, or dividends per
share, may increase the value of the index while falling Japanese
dividend rates may decrease the value of the Index. Political, economic
and other developments that affect the stocks underlying the index may
also affect the value of the index and the value of the MITTS
Securities.
o Interest rates. Because we will pay, at a minimum, the principal
amount per unit of the MITTS Securities at maturity, we expect that
changes in interest rates will affect the trading value of the MITTS
Securities. In general, if U.S. interest rates increase, we expect that
the trading value of the MITTS Securities will decrease and, conversely,
if U.S. interest rates decrease, we expect the trading value of the
MITTS Securities will increase. In general, if interest rates in Japan
increase, we expect that the trading value of the MITTS Securities will
increase. If interest rates in Japan decrease, we expect the trading
value of the MITTS Securities will decrease. However, interest rates in
Japan may also affect the Japanese economy and, in turn, the value of
the index. Rising interest rates in Japan may lower the value of the
Index and the MITTS Securities. Falling interest rates in Japan may
increase the value of the Index and the value of the MITTS Securities.
o Volatility of the index. Volatility is the term used to describe the
size and frequency of market fluctuations. If the volatility of the
Index increases, we expect that the trading value of the Securities will
increase. If the volatility of the Index decreases, we expect that the
trading value of the MITTS Securities will decrease.
o Time remaining to maturity. We anticipate that prior to the maturity of
the MITTS Securities, the MITTS Securities may trade at a value above
that which would be expected based on the level of interest rates and
the index. This difference will reflect a "time premium" due to
expectations concerning the value of the index during the period prior
to maturity of the MITTS Securities. However, as the time remaining to
maturity of the MITTS Securities decreases, we expect that this time
premium will decrease, lowering the trading value of the MITTS
Securities.
o Dividend yields. If dividend yields on the stocks comprising the index
increase, we expect that the value of the MITTS Securities will
decrease. Conversely, if dividend yields on the stocks comprising the
index decrease, we expect that the value of the MITTS Securities will
increase.
o Changes in our credit ratings. Our credit ratings are an assessment
of our ability to pay our obligations. Consequently, real or anticipated
changes in our credit ratings may affect the trading value of the MITTS
Securities. However, because your return on your MITTS Securities is
dependent upon factors in addition to our ability to pay our obligations
under the MITTS Securities, such as the percentage increase in the value
of the index at maturity, an improvement in our credit ratings will not
reduce investment risks related to the MITTS Securities.
We want you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any change in the trading value of the MITTS Securities attributable to
another factor, such as an increase in the index value.
In general, assuming all relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in most of the factors listed above will be less if it occurs later in
the term of the MITTS Securities than if it occurs earlier in the term of the
MITTS Securities except that we expect that the effect on the trading value of
the MITTS Securities of a given increase in the value of the index will be
greater if it occurs later in the term of the MITTS Securities than if it
occurs earlier in the term of the MITTS Securities.
AMOUNTS PAYABLE ON THE MITTS SECURITIES MAY BE LIMITED BY STATE LAW.
New York State laws govern the indenture under which the MITTS
Securities are 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 MITTS Securities. Under present New York law, the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not apply
to debt securities in which 2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state
or Federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that chargeable to and payable by a
borrower. We will promise, for the benefit of the MITTS Securities holders, to
the extent permitted by law, not to voluntarily claim the benefits of any laws
concerning usurious rates of interest.
PURCHASES AND SALES BY US AND OUR AFFILIATES MAY AFFECT YOUR RETURN.
We, MLPF&S, and our affiliates may from time to time buy or sell the
stocks underlying the index for our own accounts for business reasons or in
connection with hedging our obligations under the MITTS Securities. These
transactions could affect the price of these stocks and the value of the index
in a manner that would be adverse to your investment in the MITTS Securities.
POTENTIAL CONFLICTS OF INTEREST
Our subsidiary, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
MLPF&S, is our agent for the purposes of calculating the value of the index
and the amount payable to you at maturity. In some circumstances, MLPF&S's
role as our subsidiary and its responsibilities as calculation agent for the
MITTS Securities could give rise to conflicts of interests. These conflicts
could occur, for instance, in connection with its determination as to whether
the value of the index can be calculated on a particular trading day, or in
connection with judgments that it would be required to make in the event of a
discontinuance of the index. See "Description of the MITTS
Securities--Adjustments to the Index; Market Disruption Events" and
"--Discontinuance of the Index" in this prospectus. MLPF&S is required to
carry out its duties as calculation agent in good faith and using its
reasonable judgment. However, you should be aware that because we control
MLPF&S, potential conflicts of interest could arise.
We have entered into an arrangement with one of our subsidiaries to
hedge the market risks associated with our obligation to pay amounts due at
maturity on the MITTS Securities. This subsidiary expects to make a profit in
connection with this arrangement. We did not seek competitive bids for this
arrangement from unaffiliated parties.
OTHER CONSIDERATIONS.
It is suggested that you should reach an investment decision with
regard to the MITTS Securities only after carefully considering the
suitability of the MITTS Securities in the light of your particular
circumstances.
You should also consider the tax consequences of investing in the
MITTS Securities and should consult your tax adviser.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets
Bank Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and acquisitions
and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and related
services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the
sections entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
MITTS Securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn, Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
Year Ended Last Friday in December
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges(a)......... 1.2 1.2 1.2 1.2 1.1
=== === === === ===
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported
for the fiscal years 1994 through 1997.
For the purpose of calculating the ratio of earnings to fixed
charges, "earnings" consist of earnings from continuing operations before
income taxes and fixed charges, excluding capitalized interest and preferred
security dividend requirements. "Fixed charges" consist of interest costs, the
interest factor in rentals, amortization of debt issuance costs, preferred
security dividend requirements of subsidiaries, and capitalized interest.
DESCRIPTION OF THE MITTS SECURITIES
On June 3, 1997, ML&Co., Inc. issued an aggregate principal amount of
$255,000,000 or 25,500,000 units of the MITTS Securities.
The MITTS Securities were issued as a series of senior debt
securities under the 1983 Indenture which is more fully described in this
prospectus.
The MITTS Securities will mature on June 14, 2002.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of the MITTS Security plus the Supplemental Redemption
Amount described below, if any, there will be no other payment of interest,
periodic or otherwise. See "- Payment at Maturity" below.
ML&Co., or any beneficial owner, may not redeem the MITTS Securities
before maturity. Upon the occurrence of an Event of Default with respect to
the MITTS Securities, beneficial owners of the MITTS Securities may accelerate
the maturity of the MITTS Securities, as described under "- Events of Default
and Acceleration" and "Other Terms - Events of Default" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
Payment at Maturity
At the maturity date, a beneficial owner of a MITTS Security will be
entitled to receive the principal amount of each unit plus the Supplemental
Redemption Amount, if any, all as provided below. If the Supplemental
Redemption Amount is not greater than zero, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities.
The "Supplemental Redemption Amount" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount of each MITTS Security ($10 per Unit) X Ending Index Value-Starting Index Value X Participation Rate
------------------------------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption
Amount be less than zero.
The "Starting Index Value" equals 20,351.34, the closing value of the
Index on the Pricing Date.
The "Ending Index Value" will be determined by the calculation agent
and will equal the average or arithmetic mean of the closing values of the
Nikkei 225 Index (the "Index") determined on each of the first five
Calculation Days during the Calculation Period. If there are fewer than five
Calculation Days, then the Ending Value will equal the average or arithmetic
mean of the closing values of the Index on these Calculation Days, and if
there is only one Calculation Day, then the Ending Value will equal the
closing value of the Index on that Calculation Day. If no Calculation Days
occur during the Calculation Period , then the Ending Value will equal the
closing value of the Index determined on the last scheduled Index Business Day
in the Calculation Period, regardless of the occurrence of a Market Disruption
Event on that day.
The "Participation Rate" equals 140%.
The "Calculation Period" means the period from and including the
seventh scheduled Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation
Period on which a Market Disruption Event has not occurred.
An "Index Business Day" is a day on which the NYSE and the AMEX are
open for trading and the Index or any Successor Index, as defined on page 12
below, is calculated and published.
All determinations made by the calculation agent shall be at the sole
discretion of the calculation agent and, absent a determination by the
calculation agent of a manifest error, shall be conclusive for all purposes
and binding on ML&Co. and beneficial owners of the MITTS Securities.
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Index Values:
o the percentage change from the Starting Index Value to the Ending Index
Value;
o the total amount payable per unit of MITTS Securities;
o the total rate of return on the MITTS Securities;
o the pretax annualized rate of return on the MITTS Securities; and
o the pretax annualized rate of return of the stocks underlying
the Index, which includes an assumed aggregate dividend yield of
.75% per annum, as more fully described below.
Total Amount Pretax Pretax Annualized
Payable at Maturity Total Rate of Annualized Rate Rate of Return of
Percentage Change Per $10 Principal Return on of Return on Stocks Underlying
Hypothetical Ending Over the Starting Amount of MITTS the MITTS the MITTS the
Index Value Index Value Securities Securities Securities(1) Index(1)(2)
------------------- ----------------- ------------------- ------------- ---------------- ------------------
8,140.54 -60% $10.00 0.00% 0.00% -17.13%
10,175.67 -50% $10.00 0.00% 0.00% -12.86%
12,210.80 -40% $10.00 0.00% 0.00% -9.33%
14,245.94 -30% $10.00 0.00% 0.00% -6.32%
16,281.07 -20% $10.00 0.00% 0.00% -3.69%
18,316.21 -10% $10.00 0.00% 0.00% -1.35%
20,351.34(3) 0% $10.00 0.00% 0.00% 0.75%
22,386.47 10% $11.40 14.00% 2.62% 2.66%
24,421.61 20% $12.80 28.00% 4.97% 4.42%
26,456.74 30% $14.20 42.00% 7.09% 6.04%
28,491.88 40% $15.60 56.00% 9.04% 7.55%
30,527.01 50% $17.00 70.00% 10.83% 8.96%
32,562.14 60% $18.40 84.00% 12.50% 10.29%
34,597.28 70% $19.80 98.00% 14.05% 11.54%
36,632.41 80% $21.20 112.00% 15.51% 12.72%
38,667.55 90% $22.60 126.00% 16.88% 13.84%
40,702.68 100% $24.00 140.00% 18.18% 14.91%
42,737.81 110% $25.40 154.00% 19.42% 15.92%
44,772.95 120% $26.80 168.00% 20.59% 16.90%
46,808.08 130% $28.20 182.00% 21.71% 17.83%
- ----------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes:
(a) an investment of a fixed amount in the stocks underlying the Index
with the allocation of an amount reflecting the current relative
weights of the stocks in the Index; a constant dividend yield of
.75% per annum, paid quarterly from the date of initial delivery of
MITTS Securities, applied to the value of the Index at the end of
each quarter assuming this value increases or decreases linearly
from the Starting Value to the hypothetical Ending Index Value;
(b) a percentage change in the aggregate price of these stocks that
equals the percentage change in the Index from 20,351.34 to the
relevant hypothetical Ending Index Value;
(c) no transaction fees or expenses;
(d) the term of the MITTS Securities is from June 3, 1997 to June 14,
2002;
(e) a final Index value equal to the Ending Index Value. The aggregate
dividend yield of the stocks underlying the Index as of May 28, 1997
was approximately .75%.
(3) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the resulting total
and pretax annualized rate of return will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this
prospectus.
Adjustments to the Index; Market Disruption Events
"Market Disruption Event" means either of the following events, as
determined by the calculation agent:
(a) a suspension, material limitation or absence of trading on the
Tokyo Stock Exchange (the "TSE") of 20% or more of the
underlying stocks included in the Index or a Successor Index
during the one-half hour period preceding the close of trading
on the applicable exchange; or
(b) the suspension or material limitation on the Singapore
International Monetary Exchange, Ltd. (the "SIMEX"), the Osaka
Securities Exchange (the "OSE") or any other major futures or
securities market from trading in futures or options contracts
related to the Index or a Successor Index during the one-half
hour period preceding the close of trading on the applicable
exchange.
For the purposes of determining whether a Market Disruption Event has
occurred:
o 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,
o a decision to permanently discontinue trading in the relevant
futures or options contract will not constitute a Market
Disruption Event,
o a suspension in trading in a futures or options contracts on the
Index by a major securities market by reason of
o a price change violating limits set by that securities market,
o an imbalance of orders relating to futures or options contracts or
o a disparity in bid and ask quotes relating to futures or
options contracts will constitute a suspension or
material limitation of trading in futures or options
contracts related to the Index, and,
o an absence of trading on the TSE will not include any time when
the TSE is closed for trading under ordinary circumstances. In
some circumstances, the duties of MLPF&S as calculation agent in
determining the existence of Market Disruption Events could
conflict with the interests of MLPF&S as an affiliate of the
issuer of the MITTS Securities.
Discontinuance of the Index
If the publisher of the Nikkei 225 Index, Nihon Keizai Shimbum, Inc.
("NKS"), discontinues publication of the Index and NKS or another entity
publishes a successor or substitute index that the calculation agent
determines, in its sole discretion, to be comparable to the Index (any
successor or substitute index is referred to as a "Successor Index"), then,
upon the calculation agent's notification of its determination to the trustee
and ML&Co., the calculation agent will substitute the Successor Index as
calculated by NKS or other entity for the Index and calculate the Ending Value
as described above under "-Payment at Maturity". Upon any selection by the
calculation agent of a Successor Index, ML&Co. shall cause notice of that
selection to be given to holders of the MITTS Securities.
If NKS discontinues publication of the Index and a Successor Index is
not selected by the calculation agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for a Calculation
Day used to calculate the Supplemental Redemption Amount at maturity will be a
value computed by the calculation agent for each Calculation Day in accordance
with the procedures last used to calculate the Index prior to the
discontinuance. If a Successor Index is selected or the calculation agent
calculates a value as a substitute for the Index as described below, the
Successor Index or value shall be substituted for the Index for all purposes,
including for purposes of determining whether a Market Disruption Event
exists. If the calculation agent calculates a value as a substitute for the
Index, "Calculation Day" shall mean any day on which the calculation agent is
able to calculate that value.
If NKS discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
calculation agent determines that no Successor Index is available at that
time, then on each Business Day until the earlier to occur of
o the determination of the Ending Value and
o a determination by the calculation agent that a Successor Index is
available,
the calculation agent shall determine the value that would be used in
computing the Supplemental Redemption Amount as described in the preceding
paragraph as if that day were a Calculation Day. The calculation agent will
cause notice of these values to be published not less often than once each
month in The Wall Street Journal, or another newspaper of general circulation,
and arrange for information with respect to these values to be made available
by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the MITTS Securities.
Events of Default and Acceleration
If an Event of Default with respect to any MITTS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a
MITTS Security upon any acceleration permitted by the MITTS Securities, with
respect to each $10 principal amount per unit, will be equal to the principal
amount per unit and the Supplemental Redemption Amount, if any, calculated as
though the date of early repayment were the stated maturity date of the MITTS
Securities. See "- Payment at Maturity" in this prospectus. If a bankruptcy
proceeding is commenced in respect of ML&Co., the claim of the beneficial
owner of a MITTS Security may be limited, under Section 502(b)(2) of Title 11
of the United States Code, to the principal amount per unit of the MITTS
Security plus an additional amount of contingent interest calculated as though
the date of the commencement of the proceeding were the maturity date of the
MITTS Securities.
In case of default in payment of the MITTS Securities, whether at the
stated maturity or upon acceleration, from and after the maturity date the
MITTS Securities shall bear interest, payable upon demand of the beneficial
owners of the MITTS Securities, at the rate of 6.96% per annum, to the extent
that payment of any interest shall be legally enforceable, on the unpaid
amount due and payable on that date in accordance with the terms of the MITTS
Securities to the date payment of any amount has been made or duly provided
for.
Global Securities
Description of the Global Securities
Beneficial owners of the MITTS Securities may not receive physical
delivery of the MITTS Securities nor may they be entitled to have the MITTS
Securities registered in their names. The MITTS Securities currently are
represented by one or more fully registered global securities. Each global
security was deposited with, or on behalf of, The Depository Trust Company or
DTC, DTC, together with any successor, being a "depositary", as depositary,
registered in the name of Cede & Co., DTC's partnership nominee , unless and
until it is exchanged in whole or in part for MITTS Securities in definitive
form, the global security is not transferrable except as a whole by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or by the depositary or
any nominee to a successor of the depositary or a nominee of that successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as appropriate, will be considered the sole
owner or holder of the MITTS Securities represented by a global security for
all purposes under the 1983 Indenture. Except as provided below, the
beneficial owners of the MITTS Securities represented by a global security
will not be entitled to have the MITTS Securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of the MITTS Securities in definitive form and will not be
considered the owners or holders under the 1983 Indenture, including for
purposes of receiving any reports delivered by ML&Co. or the trustee under the
1983 Indenture. Accordingly, each person owning a beneficial interest in a
global security must rely on the procedures of DTC and, if that person is not
a participant of DTC on the procedures of the participant through which the
person owns its interest, to exercise any right