RULE NO. 424(b)(5)
REGISTRATION NO. 333-68747
P R O S P E C T U S
- -------------------
MERRILL LYNCH & CO., INC.
TOP TEN YIELD MARKET INDEX TARGET-TERM SECURITIES(R) DUE AUGUST 15, 2006
"MITTS(R) SECURITIEs"
$10 PRINCIPAL AMOUNT PER UNIT
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 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
o Senior unsecured debt securities of an amount equal to the sum of the principal
Merrill Lynch & Co., Inc. amount of each unit and an additional amount
o Linked to the value of the Top Ten Yield based on the percentage increase, if any, in the
Index value of the index as described in this
o The MITTS Securities are listed on the prospectus
American Stock Exchange under the symbol o You will receive the principal amount of your
"MTT" MITTS Securities, plus an amount no less than
$2.40 per unit, representing a minimum
yield-to-maturity of 2.16% per year
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 June 24, 1999.
"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................................................6
RATIO OF EARNINGS TO FIXED CHARGES......................................7
DESCRIPTION OF THE MITTS SECURITIES.....................................8
THE INDEX..............................................................15
OTHER TERMS............................................................19
WHERE YOU CAN FIND MORE INFORMATION....................................22
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 investing in the
MITTS Securities. In addition, you should reach an investment decision with
regard to the MITTS Securities only after consulting with your legal and tax
advisers and considering the suitability of the MITTS Securities in the light of
your particular circumstances.
YOU MAY NOT EARN A RETURN ON YOUR INVESTMENT
You may not earn a return on your investment. You should be aware that
at maturity if the average value of the index over five trading days shortly
before the maturity date does not exceed 100 by more than 24%, we will pay you
no more than $10 plus $2.40 for each unit of your MITTS Securities. This will be
true even if, at some time during the life of the MITTS Securities the value of
the index exceeded 124.
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 Merrill Lynch & Co., Inc. debt
security with the same maturity. 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
While the index does reflect the payment of dividends on the stocks
underlying the index as described in more detail below, the yield based on the
index to the maturity of the MITTS Securities will not produce the same yield as
if you purchased the underlying stocks and held them for a similar period. At
the end of each calendar quarter, the dividends accrued on the stocks underlying
the index will be incorporated into the index by adjusting the share multipliers
of these stocks and these amounts will then be subject to the price movements of
the stocks. In addition, as described in more detail below, at the end of each
calendar quarter, an amount equal to 0.4375% of the current value of the index
will be deducted from the value of the index, provided that
o therewas no deduction at the end of the calendar quarter ending in
September 1996 and the deduction at the end of the calendar
quarter ending in December 1996 was increased to reflect the
quarterly rate of 0.4375% prorated for the period from the date of
the issuance of the MITTS Securities through the end of the
calendar quarter in December 1996, and
o there will be a prorated amount deducted on July 31, 2006 equal to
0.1507% of the then current index value to reflect the quarterly
rate of 0.4375% for the period from July 1, 2006 through July 31,
2006.
Although the index is based on stocks that are selected based on dividends paid,
you will not receive any interest, periodic or otherwise, on the MITTS
Securities before their 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
"MTT," 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.
MANY FACTORS AFFECT THE TRADING VALUE OF THE MITTS SECURITIES; THESE FACTORS
INTERRELATE IN COMPLEX WAYS AND THE EFFECT OF ANY ONE FACTOR MAY OFFSET OR
MAGNIFY THE EFFECT OF ANOTHER FACTOR
The trading value of the MITTS Securities will be affected by factors
that interrelate in complex ways. It is important for you to understand that the
effect of one factor may offset the increase in the trading value of the MITTS
Securities caused by another factor and that the effect of one factor may
magnify the decrease in the trading value of the MITTS Securities caused by
another factor. For example, an increase in U.S. 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. 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.
THE VALUE OF THE INDEX IS EXPECTED TO AFFECT THE TRADING VALUE OF THE
MITTS SECURITIES. We expect that the market value of the MITTS Securities will
depend substantially on the amount by which the index exceeds the starting index
value. If you choose to sell your MITTS Securities when the value of the index
exceeds the starting index value, 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 the starting index value, 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.
CHANGES IN THE LEVELS OF U.S. INTEREST RATES ARE EXPECTED TO AFFECT THE
TRADING VALUE OF THE MITTS SECURITIES. 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.
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
decrease the trading value of the MITTS Securities. Falling interest rates may
increase the value of the index, and, thus may increase the trading value of the
MITTS Securities.
CHANGES IN THE VOLATILITY OF THE INDEX ARE EXPECTED TO AFFECT THE
TRADING VALUE OF THE MITTS Securities. 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.
AS THE TIME REMAINING TO MATURITY OF THE MITTS SECURITIES DECREASES,
THE "TIME PREMIUM" ASSOCIATED WITH THE MITTS SECURITIES WILL DECREASE. We
anticipate that before 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.
CHANGES IN DIVIDEND YIELDS OF THE STOCKS INCLUDED IN THE INDEX ARE
EXPECTED TO AFFECT THE TRADING VALUE OF THE MITTS SECURITIES. 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.
CHANGES IN OUR CREDIT RATINGS MAY AFFECT THE TRADING VALUE OF THE MITTS
SECURITIES. 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.
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. 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 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. These transactions could affect
the price of these stocks and the value of the index in a manner that 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.
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:
FOR THE THREE
YEAR ENDED LAST FRIDAY IN DECEMBER MONTHS ENDED
1994 1995 1996 1997 1998 MARCH 26, 1999
---- ---- ---- ---- ---- --------------
Ratio of earnings to fixed charges(a).... 1.2 1.2 1.2 1.2 1.1 1.3
- ----------
(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 of subsidiaries. "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 August 26, 1996, ML&Co. issued $35,000,000 aggregate principal
amount, or 3,500,000 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 August 15, 2006.
While at maturity a beneficial owner of a MITTS Security will receive
the principal amount of each 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 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 a supplemental
redemption amount as provided below. If the ending index value does not exceed
the starting index value by more than 24%, a beneficial owner of a MITTS
Security will be entitled to receive only the principal amount of its MITTS
Securities and the minimum supplemental redemption amount.
The "INDEX" is the Top Ten Yield Index, described more fully on pages
15-19.
The "SUPPLEMENTAL REDEMPTION AMOUNT" for a MITTS Security will be
determined by the calculation agent and will equal:
Principal Amount X Ending Index Value - Starting Index Value
----------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than $2.40 per $10 principal amount of the MITTS Securities.
The "STARTING INDEX VALUE" was set at 100.
The "MINIMUM SUPPLEMENTAL REDEMPTION AMOUNT" is equivalent to a rate of
return of 2.16% per annum calculated on a semi-annual bond equivalent basis.
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
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, 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,
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 occurrence 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 NYSE and the AMEX are
open for trading and the index or any successor index, as defined on page 11
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 an investment in the
stocks underlying the Index, as adjusted from time to time,
that experience the same price changes and dividend payments
necessary to produce the indicated hypothetical ending index
value, which reflects a deduction from the value of the Index
at the end of each calendar quarter equal to 0.4375% of the
then current Index value.
The pretax annualized rate of return of the stocks underlying the Index
illustrated below is intended to reflect the return that might be earned by an
investor who seeks to replicate the Index return by trading in the actual stocks
underlying the Index and differs from the pretax annualized rate of return on
the MITTS Securities because of the percentage deducted from the value of the
Index each calendar quarter equal to 0.4375% of the then current Index value.
Investors seeking to replicate the Index return by trading in the actual
underlying stocks would not incur this periodic deduction although they might
incur commissions and other transaction-related costs.
Total Pretax Pretax Annualized
Percentage Change Amount Annualized Rate of Rate of Return of
Hypothetical Ending Over the Starting Payable at Return on theMITTS Stock Underlying
Index Value Index Value Maturity Securities(1) Index(1)(2)
----------- ----------- -------- ------------- -----------
50 -50% $ 12.40 2.16% -5.09%
60 -40% $ 12.40 2.16% -3.31%
70 -30% $ 12.40 2.16% -1.80%
80 -20% $ 12.40 2.16% -0.47%
90 -10% $ 12.40 2.16% 0.70%
100 (3) 0% $ 12.40 2.16% 1.75%
110 10% $ 12.40 2.16% 2.71%
120 20% $ 12.40 2.16% 3.59%
130 30% $ 13.00 2.64% 4.41%
140 40% $ 14.00 3.39% 5.16%
150 50% $ 15.00 4.10% 5.87%
160 60% $ 16.00 4.76% 6.53%
170 70% $ 17.00 5.38% 7.15%
180 80% $ 18.00 5.97% 7.74%
190 90% $ 19.00 6.52% 8.30%
200 100% $ 20.00 7.05% 8.84%
210 110% $ 21.00 7.56% 9.35%
220 120% $ 22.00 8.04% 9.83%
230 130% $ 23.00 8.50% 10.30%
240 140% $ 24.00 8.94% 10.74%
250 150% $ 25.00 9.37% 11.17%
260 160% $ 26.00 9.78% 11.58%
270 170% $ 27.00 10.17% 11.98%
280 180% $ 28.00 10.56% 12.37%
290 190% $ 29.00 10.93% 12.74%
300 200% $ 30.00 11.28% 13.10%
310 210% $ 31.00 11.63% 13.44%
320 220% $ 32.00 11.97% 13.78%
330 230% $ 33.00 12.29% 14.11%
340 240% $ 34.00 12.61% 14.43%
350 250% $ 35.00 12.92% 14.74%
360 260% $ 36.00 13.22% 15.04%
370 270% $ 37.00 13.51% 15.33%
380 280% $ 38.00 13.80% 15.62%
390 290% $ 39.00 14.07% 15.90%
400 300% $ 40.00 14.34% 16.17%
- ----------
(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, in addition to the price changes and
dividend payments described above:
(a) an initial investment of a fixed amount in the Top Ten Yield Stocks
with the allocation of this amount reflecting an equal dollar-weighted
portfolio of the stocks in the Index;
(b) a reconstruction of this portfolio investment on each Anniversary Date
so as to be an equal-dollar weighted portfolio of the ten common
stocks in the DJIA having the highest Dividend Yield on the second
scheduled Index Business Day prior to each Anniversary Date,
(c) a compounded quarterly rate of return on the stocks which is greater
than the compounded quarterly return on the Index by 0.4375%, the
amount of the quarterly deduction applied to the Index, with dividends
being reinvested on a quarterly basis
(d) no transaction fees or expenses;
(e) an investment term equal to the term of the securities; and
(f) a final Index value equal to the Ending Index Value.
(3) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the pretax annualized
rate of return resulting therefrom will depend entirely on the actual Ending
Index Value determined by the calculation agent as provided in this prospectus.
Historical data regarding the Index is included in this prospectus under "The
Index--Historical Data on the Index".
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the AMEX changes its method of calculating the Index, or
the Index's value changes 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 these 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 period one-half hour prior
to the close of trading, 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
futures contracts, which 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".
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 a subsidiary of ML&Co.
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 (that
index being referred to as a "SUCCESSOR INDEX"), then, upon the calculation
agent's notification of its determination to the Trustee, as defined below, and
ML&Co., the calculation agent will substitute the Successor Index as calculated
by the AMEX or 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 thereof 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 prior to 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 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:
(a) the determination of the Ending Index Value, and
(b) 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, (the "WSJ"), 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
thereof, at the rate of 7.76% 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, 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, 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 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
TOP TEN YIELD INDEX
AMEX will calculate and disseminate the value of the Index on any Index
Business Day; the Index will equal the Top Ten Yield Portfolio Value plus the
Current Quarter Dividends (as defined below) as of that Index Business Day. The
Top Ten Yield Portfolio Value will equal the sum of the products of the most
recently available market price and the applicable Share Multiplier for each Top
Ten Yield Stock. The AMEX will generally calculate and disseminate the value of
the Index based on the most recently reported prices of the stocks underlying
the Index, as reported by the exchange or trading system on which the underlying
stocks are listed or traded, 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 "DIVIDEND YIELD" for each common stock is determined by the AMEX by
annualizing the last quarterly or semi-annual ordinary cash dividend for which
the ex-dividend date has occurred, excluding any extraordinary dividend as
determined by the AMEX in its sole discretion, and dividing the result by the
last available sale price for each stock on its primary exchange on the date the
Dividend Yield is to be determined.
ANNUAL TOP TEN YIELD PORTFOLIO RECONSTITUTION
As of the close of business on each Anniversary Date, as defined below,
through the applicable Anniversary Date in 2005, the content of the Top Ten
Yield Portfolio shall be reconstituted to include the ten common stocks in the
DJIA having the highest Dividend Yield (the "NEW STOCKS") on the second
scheduled Index Business Day prior to the Anniversary Date (the "ANNUAL
DETERMINATION DATE"), provided, however, that the AMEX will only add a stock
having characteristics as of the Annual Determination Date that will permit the
Index to remain within the criteria specified in the AMEX rules and within the
applicable rules of the Securities and Exchange Commission. These criteria and
rules will apply only on an Annual Determination Date to exclude a proposed New
Stock. If a proposed New Stock does not meet these criteria or rules, the AMEX
will replace it with the common stock in the DJIA with the next highest Dividend
Yield which does meet these criteria and rules.
These criteria currently provide, among other things:
o that each component stock must have a minimum market value of at
least $75 million, except that up to 10% of the component
securities in the Index may have a market value of $50 million;
o that each component stock must have an average monthly trading
volume in the preceding six months of not less than 1,000,000
shares, except that up to 10% of the component stocks in the Index
may have an average monthly trading volume of 500,000 shares or
more in the last six months;
o 90% of the Index's numerical Index value and at least 80% of the
total number of component stocks will meet the then current
criteria for standardized option trading set forth in the rules of
the AMEX; and
o all component stocks will either be listed on the AMEX, the NYSE,
or traded through the facilities of the National Association of
Securities Dealers Automated Quotation System and reported as
National Market System securities.
The AMEX will determine the Share Multiplier for each New Stock and
will indicate the number of shares of each New Stock, given the closing market
price of the New Stock on the Anniversary Date, required to be included in the
calculation of the Top Ten Yield Portfolio Value so that each New Stock
represents approximately an equal percentage of a value equal to the Index in
effect at the close of business on the Anniversary Date. As an example, if the
Index in effect at the close of business on an Anniversary Date equaled 200,
then each of the ten New Stocks relating to the Anniversary Date would be
allocated a portion of the value of the Index equal to 20 and if the closing
market price of one the New Stock on the Anniversary Date was 40, the applicable
Share Multiplier would be 0.5. If the Index equaled 80, then each of the ten New
Stocks would be allocated a portion of the value of the Index equal to 8 and if
the closing market price of one New Stock on the Anniversary Date was 40, the
applicable Share Multiplier would be 0.2. The last Anniversary Date on which
this reconstitution will occur will be the Anniversary Date in 2005, which will
be approximately one year prior to the maturity date of the MITTS Securities.
"ANNIVERSARY DATE" shall mean the anniversary date of the date the MITTS
Securities are initially issued; provided, however, that if this date is not an
Index Business Day or a Market Disruption Event occurs on that date, then the
Anniversary Date for that year shall mean the immediately succeeding Index
Business Day on which a Market Disruption Event does not occur. "TOP TEN YIELD
STOCK" at any time shall mean the stocks contained in the Top Ten Yield
Portfolio at that time.
DOW JONES INDUSTRIAL AVERAGE
The DJIA is comprised of 30 common stocks chosen by the editors of the
WSJ as representative of the broad market of American industry generally. The
companies are major factors in their industries and their stocks are typically
widely held by individuals and institutional investors. Changes in the
composition of the DJIA are made entirely by the editors of the WSJ without
consultation with the companies, the stock exchange or any official agency or
ML&Co. For the sake of continuity, changes are made infrequently. Most
substitutions have result from mergers, but from time to time, changes may be
made to achieve a better representation. The components of the DJIA may be
changed at any time for any reason. Dow Jones & Company, Inc., publisher of the
WSJ, is not affiliated with ML&Co, has not participated in any way in the
creation of the MITTS Securities or in the selection of stocks to be included in
the Top Ten Yield Portfolio and has not reviewed or approved any information
included in this prospectus.
The first DJIA, consisting of 12 stocks, was published in the WSJ in
1896. The list grew to 20 stocks in 1916 and to 30 stocks on October 1, 1928.
For two periods of 17 consecutive years each, there were no changes to the list;
March 15, 1939-July 2, 1956 and June 2, 1959-August 8, 1976.
ML&Co or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the Top Ten Yield Portfolio stocks,
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 and, in addition,
one or more affiliates of ML&Co may publish research reports 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 Top Ten Yield Portfolio stocks 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.
CASH DIVIDENDS
Current Quarter Dividend
As described above, the value of the Index will include an amount
reflecting Current Quarter Dividends. "CURRENT QUARTER DIVIDENDS" for any day
will be determined by the AMEX and will equal the sum of the Dividend Payment
for each Top Ten Yield Stock. The "DIVIDEND PAYMENT" with respect to a Top Ten
Yield Stock for any day will equal the sum of the products of:
o each dividend paid by the issuer of that Top Ten Yield Stock on
one share of that Top Ten Yield Stock during the Current Quarter,
not including any reinvestment thereof, multiplied by
o the Share Multiplier applicable to that Top Ten Yield Stock at the
time each dividend is paid. A dividend will be considered paid by
an issuer at the open of business on the ex-dividend date,
generally, the trading day on which the market price of the stock
reflects the payment of the dividend. "CURRENT QUARTER" shall mean
the period from and including August 9, 1996 through December 31,
1996, and after December 31, 1996, from and including the first
day of the then current calendar quarter containing the day on
which the applicable Dividend Payment is being determined to and
including the day on which the applicable Dividend Payment is
being determined.
Quarterly Stock Dividend
As of the first day of the start of each calendar quarter, the AMEX
will allocate the Current Quarter Dividends as of the end of the immediately
preceding calendar quarter to each then outstanding Top Ten Yield Stock. The
amount of the Current Quarter Dividends allocated to each Top Ten Yield Stock
will equal the percentage of the value of that Top Ten Yield Stock contained in
the Top Ten Yield Portfolio relative to the value of the entire Top Ten Yield
Portfolio based on the closing market price on the last Index Business Day in
the immediately preceding calendar quarter. The AMEX will increase the Share
Multiplier of each outstanding Top Ten Yield Stock to reflect the number of
shares, or portion of a share, that the amount of the Current Quarter Dividend
allocated to that Top Ten Yield Stock can purchase of each Top Ten Yield Stock
based on the closing market price on the last Index Business Day in the
immediately preceding calendar quarter.
Quarterly Deduction
At the end of each calendar quarter, the Index will be reduced by a
value equal to 0.4375% of the then current Index, provided that:
o there will be no deduction at the end of the calendar quarter
ending in September 1996 and the deduction at the end of the
calendar quarter ending in December 1996 will be increased to
reflect the quarterly rate of 0.4375% prorated for the period from
the date of the issuance of the MITTS Securities through the end
of the calendar quarter in December 1996, and
o the Index will be reduced at the close of business on July 31,
2006 by a value equal to 0.1507% of the closing value of the Index
on that date. With respect to the period ending December 31, 1996,
the quarterly rate of 0.4375% will be prorated by multiplying it
by a factor equal to the result of dividing the number of days in
the period from the date the MITTS Securities are issued through
the calendar quarter ending in December 1996 by 90
ADJUSTMENTS TO THE SHARE MULTIPLIER AND TOP TEN YIELD PORTFOLIO
The Share Multiplier with respect to any Top Ten Yield Stock and the
Top Ten Yield Portfolio will be adjusted as follows:
1. If a Top Ten Yield Stock is subject to a stock split or reverse
stock split, then once the split has become effective, the Share Multiplier
relating to that Top Ten Yield Stock will be adjusted to equal the product of
the number of shares issued with respect to one share of that Top Ten Yield
Stock and the prior multiplier.
2. If a Top Ten Yield Stock is subject to a stock dividend, defined as
an issuance of additional shares of the Top Ten Yield Stock, that is given
equally to all holders of shares of the issuer of that Top Ten Yield Stock, then
once the dividend has become effective and that Top Ten Yield Stock is trading
ex-dividend, AMEX will adjust the Share Multiplier so that the new Share
Multiplier shall equal the former Share Multiplier plus the product of the
number of shares of that Top Ten Yield Stock issued with respect to one share of
that Top Ten Yield Stock and the prior multiplier.
3. If the issuer of a Top Ten Yield Stock is being liquidated or is
subject to a proceeding under any applicable bankruptcy, insolvency or other
similar law, that Top Ten Yield Stock will continue to be included in the Top
Ten Yield Portfolio so long as a Market Price for that Top Ten Yield Stock is
available. If a market price is no longer available for a Top Ten Yield Stock
for whatever reason, including the liquidation of the issuer of Top Ten Yield
Stock or the subjection of the issuer of that Top Ten Yield Stock to a
proceeding under any applicable bankruptcy, insolvency or other similar law,
then the value of that Top Ten Yield Stock will equal zero in connection with
calculating the Top Ten Yield Portfolio Value for so long as no market price is
available, and no attempt will be made to immediately find a replacement stock
or increase the value of the Top Ten Yield Portfolio to compensate for the
deletion of that Top Ten Yield Stock. If a market price is no longer available
for a Top Ten Yield Stock as described above, the Top Ten Yield Portfolio Value
will be computed based on the remaining Top Ten Yield Stocks for which market
prices are available and no new stock will be added to the Top Ten Yield
Portfolio until the annual reconstitution of the Top Ten Yield Portfolio. As a
result, there may be periods during which the Top Ten Yield Portfolio contains
fewer than ten Top Ten Yield Stocks.
4. If the issuer of a Top Ten Yield Stock has been subject to a merger
or consolidation and is not the surviving entity or is nationalized, then a
value for that Top Ten Yield Stock will be determined at the time the issuer is
merged or consolidated or nationalized and will equal the last available market
price for that Top Ten Yield Stock and that value will be constant until the Top
Ten Yield Portfolio is reconstituted. At that time, no adjustment will be made
to the Share Multiplier of that Top Ten Yield Stock.
5. If the issuer of a Top Ten Yield Stock issues to all of its
shareholders equity securities that are publicly traded of an issuer other than
the issuer of the Top Ten Yield Stock, then the new equity securities will be
added to the Top Ten Yield Portfolio as a new Top Ten Yield Stock. The Share
Multiplier for that new Top Ten Yield Stock will equal the product of the
original Share Multiplier with respect to the Top Ten Yield Stock for which the
new Top Ten Yield Stock is being issued (the "Original Top Ten Yield Stock") and
the number of shares of the new Top Ten Yield Stock issued with respect to one
share of the Original Top Ten Yield Stock.
No adjustments of any Share Multiplier of a Top Ten Yield Stock will be
required unless the adjustment would require a change of at least 1% in the
Share Multiplier then in effect. The Share Multiplier resulting from any of the
adjustments specified above will be rounded to the nearest ten-thousandth with
five hundred-thousandths being rounded upward.
The AMEX expects that no adjustments to the Share Multiplier of any Top
Ten Yield Stock or to the Top Ten Yield Portfolio will be made other than those
specified above, however, the AMEX may at its discretion make adjustments to
maintain the value of the Index if events would otherwise alter the value of the
Index despite no change in the market prices of the Top Ten Yield Stocks.
HISTORICAL PERFORMANCE OF THE INDEX
You should review the historical performance of the Index. The
historical performance of the Index should not be taken as an indication of
future performance, and no assurance can be given that the Index will increase
sufficiently to cause the beneficial owners of the MITTS Securities to receive
an amount in excess of the principal amount at the maturity of the MITTS
Securities.
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.
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;
o quarterly report on Form 10-Q for the period ended March 26, 1999; 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, March 26, 1999, April 13, 1999, April 19, 1999,
May 26, 1999, May 28, 1999 and June 1, 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:
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.
With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their reports included in such Quarterly Reports on Form 10-Q and
incorporated by reference herein, they did not audit and they do not express an
opinion on such interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP is
not subject to the liability provisions of Section 11 of the Securities Act for
any such report on unaudited interim financial information because any such
report is not a "report" or a "part" of the Registration Statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Securities Act.