Table of Contents

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-122639

PRICING SUPPLEMENT    

(To prospectus supplement and prospectus dated February 25, 2005)

Pricing Supplement Number: 2505

 

 

LOGO

1,500,000 Units

Merrill Lynch & Co., Inc.

Medium-Term Notes, Series C

100% Protected Currency Notes

Linked to the Mexican Peso/United States Dollar Exchange Rate

due February 7, 2007

(the “Notes”)

$10 principal amount per unit


 

The Notes:

 

Ÿ  The Notes are designed for investors who believe that the value of the Mexican peso will appreciate moderately relative to the United States dollar over the term of the Notes.

 

Ÿ  100% principal protection on the maturity date.

 

Ÿ  There will be no payments prior to the maturity date and we cannot redeem the Notes prior to the maturity date.

 

Ÿ  The Notes will not be listed on any securities exchange.

 

Ÿ  The Notes will be senior unsecured debt securities of Merrill Lynch & Co., Inc., denominated and payable in United States dollars, and part of a series entitled “Medium-Term Notes, Series C”. The Notes will have the CUSIP No. 59021V664.

 

Ÿ  The settlement date for the Notes is expected to be February 7, 2006.

 

 

Payment on the maturity date:

 

Ÿ  The amount you receive on the maturity date per unit will be based upon the direction of and percentage change in the Mexican peso/United States dollar exchange rate over the term of the Notes from the starting value, which was set at 99% of the level of the Mexican peso/United States dollar exchange rate on the date the Notes were initially priced for sale to the public. If the Mexican peso/United States dollar exchange rate:

 

Ÿ  has increased from such starting value, you will receive the $10 principal amount per unit plus a supplemental redemption amount equal to 300% of the percentage increase up to a maximum total payment of $10.90, as described in this pricing supplement; or

 

Ÿ  has decreased or has not increased from such starting value, you will receive the $10 principal amount per unit.

 

Information included in this pricing supplement supercedes information in the accompanying prospectus supplement and prospectus to the extent that it is different from that information.

Investing in the Notes involves risks that are described in the “ Risk Factors” section beginning on page PS-7 of this pricing supplement and in the accompanying prospectus supplement.


       Per Unit

    

Total


Public offering price

     $10.000      $15,000,000

Underwriting discount

     $.075      $112,500

Proceeds, before expenses, to Merrill Lynch & Co., Inc. 

     $9.925      $14,887,500

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this pricing supplement or the accompanying prospectus supplement and prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 


Merrill Lynch & Co.


The date of this pricing supplement is February 2, 2006.


Table of Contents

TABLE OF CONTENTS

 

Pricing Supplement
     Page

SUMMARY INFORMATION—Q&A

   PS-3

RISK FACTORS

   PS-7

DESCRIPTION OF THE NOTES

   PS-11

THE MXN/USD EXCHANGE RATE

   PS-14

UNITED STATES FEDERAL INCOME TAXATION

   PS-16

ERISA CONSIDERATIONS

   PS-21

USE OF PROCEEDS AND HEDGING

   PS-22

SUPPLEMENTAL PLAN OF DISTRIBUTION

   PS-22

EXPERTS

   PS-22

INDEX OF CERTAIN DEFINED TERMS

   PS-23
Prospectus Supplement
     Page

RISK FACTORS

   S-3

DESCRIPTION OF THE NOTES

   S-4

UNITED STATES FEDERAL INCOME TAXATION

   S-21

PLAN OF DISTRIBUTION

   S-28

VALIDITY OF THE NOTES

   S-29

Prospectus

 

     Page

MERRILL LYNCH & CO., INC.

   2

USE OF PROCEEDS

   2

RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

   3

THE SECURITIES

   3

DESCRIPTION OF DEBT SECURITIES

   4

DESCRIPTION OF DEBT WARRANTS

   15

DESCRIPTION OF CURRENCY WARRANTS

   17

DESCRIPTION OF INDEX WARRANTS

   18

DESCRIPTION OF PREFERRED STOCK

   24

DESCRIPTION OF DEPOSITARY SHARES

   29

DESCRIPTION OF PREFERRED STOCK WARRANTS

   33

DESCRIPTION OF COMMON STOCK

   35

DESCRIPTION OF COMMON STOCK WARRANTS

   38

PLAN OF DISTRIBUTION

   41

WHERE YOU CAN FIND MORE INFORMATION

   42

INCORPORATION OF INFORMATION WE FILE WITH THE SEC

   42

EXPERTS

   43

 

PS-2


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SUMMARY INFORMATION—Q&A

 

This summary includes questions and answers that highlight selected information from this pricing supplement and the accompanying prospectus supplement and prospectus to help you understand the 100% Protected Currency Notes Linked to the Mexican Peso/United States Dollar Exchange Rate due February 7, 2007 (the “Notes”). You should carefully read this pricing supplement and the accompanying prospectus supplement and prospectus to fully understand the terms of the Notes, the Mexican peso/United States dollar exchange rate (the “MXN/USD Exchange Rate”) and the tax and other considerations that are important to you in making a decision about whether to invest in the Notes. You should carefully review the “Risk Factors” section in this pricing supplement and the accompanying prospectus supplement, which highlights certain risks associated with an investment in the Notes, to determine whether an investment in the Notes is appropriate for you.

 

References in this pricing supplement to “ML&Co.”, “we”, “us” and “our” are to Merrill Lynch & Co., Inc. and references to “MLPF&S” are to Merrill Lynch, Pierce, Fenner & Smith Incorporated.

 

What are the Notes?

 

The Notes will be part of a series of senior debt securities issued by ML&Co. entitled “Medium-Term Notes, Series C” and will not be secured by collateral. The Notes will rank equally with all of our other unsecured and unsubordinated debt. The Notes will mature on February 7, 2007. We cannot redeem the Notes at an earlier date. We will not make any payments on the Notes until the maturity date.

 

Each unit will represent a single Note with a $10 principal amount. You may transfer the Notes only in whole units. You will not have the right to receive physical certificates evidencing your ownership except under limited circumstances. Instead, we will issue the Notes in the form of a global certificate, which will be held by The Depository Trust Company, also known as DTC, or its nominee. Direct and indirect participants in DTC will record your ownership of the Notes. You should refer to the section entitled “Description of the Debt Securities—Depositary” in the accompanying prospectus.

 

Are there any risks associated with my investment?

 

Yes, an investment in the Notes is subject to risks. Please refer to the section entitled “Risk Factors” in this pricing supplement and the accompanying prospectus supplement.

 

Who determines the MXN/USD Exchange Rate and what does the MXN/USD Exchange Rate reflect?

 

Merrill Lynch Capital Services, Inc., as calculation agent (the “Calculation Agent”), will determine the MXN/USD Exchange Rate as described in the section entitled “The MXN/USD Exchange Rate” in this pricing supplement. The MXN/USD Exchange Rate reflects the number of United States dollars for which one Mexican peso can be exchanged. The MXN/USD Exchange Rate increases as the value of the Mexican peso increases relative to the United States dollar and decreases as the value of the Mexican peso declines relative to the United States dollar.

 

How has the MXN/USD Exchange Rate performed historically?

 

We have included a table and a graph showing historical month-end values of the MXN/USD Exchange Rate from January 2000 through January 2006. The table and graph are included in the section entitled “The MXN/USD Exchange Rate” in this pricing supplement. We have provided this historical information to help you evaluate the behavior of the Mexican peso relative to the United States dollar in various economic environments; however, this past performance is not necessarily indicative of how the MXN/USD Exchange Rate will fluctuate in the future.

 

What will I receive on the maturity date of the Notes?

 

On the maturity date, you will receive a cash payment per unit equal to the Redemption Amount.

 

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The “Redemption Amount” to which you will be entitled will depend on the direction of and percentage change in the MXN/USD Exchange Rate over the term of the Notes, will be denominated and payable in United States dollars and will equal:

 

(i) If the Ending Value is greater than the Starting Value:

 

$10   +   (   $10   ×  

 

Participation

Rate

  ×       (  

Ending

Value

   

Starting

Value

  ))   ;
                      Starting Value    

 

provided, however, the Redemption Amount will not exceed $10.90 per unit (the “Capped Value”); or

 

(ii) If the Ending Value is equal to or less than the Starting Value, $10.

 

The “Starting Value” equals 0.09444654, which was 99% of the MXN/USD Exchange Rate on February 2, 2006, the date the Notes were priced for initial sale to the public (the “Pricing Date”).

 

The “Ending Value” will equal the MXN/USD Exchange Rate as determined by the Calculation Agent on the Valuation Date, as described in this pricing supplement.

 

The “Valuation Date” will be the seventh scheduled business day before the maturity date of the Notes.

 

The “Participation Rate” equals 300%.

 

For more specific information about the Redemption Amount, please see the section entitled “Description of the Notes” in this pricing supplement.

 

 

 

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Examples

 

Set forth below are three examples of Redemption Amount calculations including a Participation Rate of 300% and a Capped Value of $10.9000:

 

Example 1—The hypothetical Ending Value is equal to 80% of the Starting Value:

 

MXD/USD Exchange Rate on the Pricing Date: 0.09540164

Starting Value: 99% ´ 0.09540164 = 0.09444654

Hypothetical Ending Value: 0.07555723

 

Redemption Amount (per unit)

  =   US$10.00  

(Redemption

Amount cannot be

less than $10.00)

 

   
             

 

Example 2—The hypothetical Ending Value is equal to 102% of the Starting Value:

 

MXD/USD Exchange Rate on the Pricing Date: 0.09540164

Starting Value: 99% ´ 0.09540164 = 0.09444654

Hypothetical Ending Value: 0.09633547

 

         Redemption Amount (per unit)   =   $10 +   (   $10 ´ 300% ´   (  

0.09633547 – 0.09444654


  ) )   = US$10.6000
            0.09444654    

 

Example 3—The hypothetical Ending Value is equal to 115% of the Starting Value:

 

MXD/USD Exchange Rate on the Pricing Date: 0.09540164

Starting Value: 99% ´ 0.09540164 = 0.09444654

Hypothetical Ending Value: 0.10861352

         Redemption Amount (per unit)   =   $10 +   (   $10 ´ 300% ´   (   0.10861352 – 0.09444654

  ) )   = US$10.9000
            0.09444654    

           (Redemption Amount cannot be greater than the Capped Value)      

 

Will I receive interest payments on the Notes?

 

You will not receive any interest payments on the Notes, but will instead receive the Redemption Amount on the maturity date. We have designed the Notes for investors who are willing to forego interest payments on the Notes, such as fixed or floating interest rates paid on traditional interest bearing debt securities, in exchange for the ability to participate in possible increases in the MXN/USD Exchange Rate over the term of the Notes.

 

What about taxes?

 

You will generally be required to pay taxes on income or gain from the Notes based upon your regular method of tax accounting. If you are a cash method taxpayer, you generally should be required to include in income any amount payable in excess of the principal amount of the Notes as ordinary interest on the date such payment is received. If you are an accrual method taxpayer, you generally should be required to accrue income over the term of the Notes even though you will not receive any payments until the maturity date of the Notes. For further information, see “United States Federal Income Taxation” in this pricing supplement.

 

Will the Notes be listed on a securities exchange?

 

The Notes will not be listed on any securities exchange and we do not expect a trading market for the Notes to develop, which may affect the price that you receive for your Notes upon any sale prior to the maturity date. You should review the section entitled “Risk Factors—A trading market for the Notes is not expected to develop and if trading does develop, the market price you may receive or be quoted for your Notes on a date prior to the stated maturity date will be affected by this and other important factors including our costs of developing, hedging and distributing the Notes” in this pricing supplement.

 

What price can I expect to receive if I sell the Notes prior to the stated maturity date?

 

In determining the economic terms of the Notes, and consequently the potential return on the

 

PS-5


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Notes to you, a number of factors are taken into account. Among these factors are certain costs associated with creating, hedging and offering the Notes. In structuring the economic terms of the Notes, we seek to provide investors with what we believe to be commercially reasonable terms and to provide MLPF&S with compensation for its services in developing the Notes.

 

If you sell your Notes prior to the stated maturity date, you will receive a price determined by market conditions for the Notes. This price may be influenced by many factors, such as interest rates, volatility of the MXN/USD Exchange Rate and the current MXN/USD Exchange Rate. In addition, the price, if any, at which you could sell your Notes in a secondary market transaction is expected to be affected by the factors that we considered in setting the economic terms of the Notes, namely the underwriting discount paid in respect of the Notes and other costs associated with the Notes, and compensation for developing and hedging the product. Depending on the impact of these factors, you may receive significantly less than the $10 principal amount per unit of your Notes if sold before the stated maturity date.

 

In a situation where there had been no movement in the MXN/USD Exchange Rate and no changes in the market conditions from those existing on the date of this pricing supplement, the price, if any, at which you could sell your Notes in a secondary market transaction is expected to be lower than the $10 principal amount per unit. This is due to, among other things, our costs of developing, hedging and distributing the Notes. Any potential purchasers for your Notes in the secondary market are unlikely to consider these factors.

 

What is the role of MLPF&S?

 

Our subsidiary MLPF&S is the underwriter for the offering and sale of the Notes. After the initial offering, MLPF&S intends to buy and sell Notes to create a secondary market for holders of the Notes, and may stabilize or maintain the market price of the Notes during their initial distribution. However, MLPF&S will not be obligated to engage in any of these market activities or continue them once it has started.

 

What is the role of the Merrill Lynch Capital Services, Inc.?

 

Merrill Lynch Capital Services, Inc. will serve as Calculation Agent for purposes of determining, among other things, the Ending Value and the Redemption Amount. Under certain circumstances, these duties could result in a conflict of interest between Merrill Lynch Capital Services, Inc. as our subsidiary and its responsibilities as Calculation Agent.

 

What is ML&Co.?

 

Merrill Lynch & Co., Inc. is a holding company with various subsidiaries and affiliated companies that provide investment, financing, insurance and related services on a global basis.

 

For information about ML&Co., see the section entitled “Merrill Lynch & Co., Inc.” in the accompanying prospectus. You should also read other documents ML&Co. has filed with the Securities and Exchange Commission, which you can find by referring to the section entitled “Where You Can Find More Information” in the accompanying prospectus.

 

PS-6


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RISK FACTORS

 

Your investment in the Notes will involve risks. You should carefully consider the following discussion of risks and the discussion of risks included in the accompanying prospectus supplement before deciding whether an investment in the Notes is suitable for you.

 

You may not earn a return on your investment and any return is limited

 

On the Valuation Date, if the Ending Value is less than or equal to the Starting Value (which equals 99% of the MXN/USD Exchange Rate on the Pricing Date), on the maturity date we will pay you only the $10 principal amount per unit. This will be true even if the MXN/USD Exchange Rate was higher than the Starting Value at some time over the term of the Notes but later falls below the Starting Value prior to the Valuation Date.

 

In addition, the opportunity to participate in the possible increases in the MXN/USD Exchange Rate through an investment in the Notes is limited because the Redemption Amount will never exceed the Capped Value, which represents an appreciation of 9.00% over the $10 original principal amount per unit of the Notes.

 

Your yield may be lower than the yield on other debt securities of comparable maturity

 

The yield that you will receive on your Notes may be less than the return you could earn on other investments. Your yield may be less than the yield you would earn if you bought a traditional interest bearing United States dollar-denominated debt security of ML&Co. with the same stated maturity date. Your investment may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money.

 

You must rely on your own evaluation of the merits of an investment linked to the MXN/USD Exchange Rate

 

In the ordinary course of their businesses, affiliates of ML&Co. from time to time express views on expected movements in foreign currency exchange rates. These views are sometimes communicated to clients who participate in foreign exchange markets. However, these views, depending upon world-wide economic, political and other developments, may vary over differing time-horizons and are subject to change. Moreover, other professionals who deal in foreign currencies may at any time have significantly different views from those of our affiliates. For reasons such as these, we believe that most investors in foreign exchange markets derive information concerning those markets from multiple sources. In connection with your purchase of the Notes, you should investigate the foreign exchange markets and not rely on views which may be expressed by our affiliates in the ordinary course of their businesses with respect to future exchange rate movements.

 

You should make such investigation as you deem appropriate as to the merits of an investment linked to MXN/USD Exchange Rate. Neither the offering of the Notes nor any views which may from time to time be expressed by our affiliates in the ordinary course of their businesses with respect to future exchange rate movements constitutes a recommendation as to the merits of an investment in the Notes.

 

The value of the United States dollar and the Mexican peso is affected by many complex factors

 

The value of any currency, including the United States dollar and the Mexican peso, may be affected by complex political and economic factors. The MXN/USD Exchange Rate is at any moment a result of the supply and demand for the United States dollar and the Mexican peso, and changes in the exchange rate result over time from the interaction of many factors directly or indirectly affecting economic and political conditions in the United States and Mexico, including economic and political developments in other countries. Of particular importance are the relative rates of inflation, interest rate levels, balance of payments and extent of governmental

 

PS-7


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surpluses or deficits in the United States and Mexico, all of which are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of those countries, and other countries important to international trade and finance.

 

Foreign exchange rates can either be fixed by sovereign governments or floating. Exchange rates of most economically developed nations, including the United States and Mexico, are permitted to fluctuate in value relative to other currencies. However, governments sometimes do not allow their currencies to float freely in response to economic forces. Governments, including the United States and Mexico, may use a variety of techniques, such as intervention by their central bank or imposition of regulatory controls or taxes, to affect the exchange rates of their respective currencies. They may also issue a new currency to replace an existing currency or alter the exchange rate or relative exchange characteristics by devaluation or revaluation of a currency. Thus, a special risk in purchasing the Notes is that their liquidity, trading value and amounts payable could be affected by the actions of sovereign governments which could change or interfere with theretofore freely determined currency valuation, fluctuations in response to other market forces and the movement of currencies across borders. There will be no adjustment or change in the terms of the Notes in the event that exchange rates should become fixed, or in the event of any devaluation or revaluation or imposition of exchange or other regulatory controls or taxes, or in the event of the issuance of a replacement currency or in the event of other developments affecting the United States dollar and the Mexican peso specifically, or any other currency.

 

Even though currency trades around-the-clock, your Notes will not

 

The interbank market in foreign currencies is a global, around-the-clock market. Therefore, the hours of trading for the Notes will not conform to the hours during which the United States dollar and the Mexican peso are traded. Significant price and rate movements may take place in the underlying foreign exchange markets that will not be reflected immediately in the price of the Notes. The possibility of these movements should be taken into account in relating the value of the Notes to those in the underlying foreign exchange markets.

 

There is no systematic reporting of last-sale information for foreign currencies. Reasonably current bid and offer information is available in certain brokers’ offices, in bank foreign currency trading offices and to others who wish to subscribe for this information, but this information will not necessarily be reflected in the MXN/USD Exchange Rate used to calculate the Redemption Amount. There is no regulatory requirement that those quotations be firm or revised on a timely basis. The absence of last-sale information and the limited availability of quotations to individual investors may make it difficult for many investors to obtain timely, accurate data about the state of the underlying foreign exchange markets.

 

A trading market for the Notes is not expected to develop and if trading does develop, the market price you may receive or be quoted for your Notes on a date prior to the stated maturity date will be affected by this and other important factors including our costs of developing, hedging and distributing the Notes

 

The Notes will not be listed on any securities exchange and we do not expect a trading market for the Notes to develop. Although our affiliate MLPF&S has indicated that it expects to bid for Notes offered for sale to it by holders of the Notes, it is not required to do so and may cease making those bids at any time. In addition, while we describe in this pricing supplement how you can determine the MXN/USD Exchange Rate from publicly available information, we will not publish the MXN/USD Exchange Rate over the term of the Notes and this may limit the trading market for the Notes. The limited trading market for your Notes may affect the price that you receive for your Notes if you do not wish to hold your investment until the maturity date.

 

If MLPF&S makes a market in the Notes, the price it quotes would reflect any changes in market conditions and other relevant factors. In addition, the price, if any, at which you could sell your Notes in a secondary market transaction is expected to be affected by the factors that we considered in setting the economic terms of the Notes, namely the underwriting discount paid in respect of the Notes and other costs associated with the Notes, and compensation for developing and hedging the product. This quoted price could be higher or

 

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lower than the $10 principal amount. Furthermore, there is no assurance that MLPF&S or any other party will be willing to buy the Notes. MLPF&S is not obligated to make a market in the Notes.

 

Assuming there is no change in the MXN/USD Exchange Rate and no change in market conditions or any other relevant factors, the price, if any, at which MLPF&S or another purchaser might be willing to purchase your Notes in a secondary market transaction is expected to be lower than the $10 principal amount. This is due to, among other things, the fact that the $10 principal amount included, and secondary market prices are likely to exclude, underwriting discount paid with respect to, and the developing and hedging costs associated with, the Notes.

 

Many factors affect the trading value of the Notes; these factors interrelate in complex ways and the effect of any one factor may offset or magnify the effect of another factor

 

The trading value of the Notes will be affected by factors that interrelate in complex ways. The effect of one factor may offset the increase in the trading value of the Notes caused by another factor and the effect of one factor may exacerbate the decrease in the trading value of the Notes caused by another factor. For example, a change in the volatility of the MXN/USD Exchange Rate may offset some or all of any increase in the trading value of the Notes attributable to another factor, such as an increase in value in the Mexican peso relative to the United States dollar. The following paragraphs describe the expected impact on the trading value of the Notes given a change in a specific factor, assuming all other conditions remain constant.

 

The MXN/USD Exchange Rate is expected to affect the trading value of the Notes.    We expect that the trading value of the Notes will depend substantially on the amount, if any, by which the MXN/USD Exchange Rate exceeds or does not exceed the Starting Value. However, if you choose to sell your Notes when the MXN/USD Exchange Rate exceeds the Starting Value, you may receive substantially less than the amount that would be payable on the maturity date based on this value because of the expectation that the MXN/USD Exchange Rate will continue to fluctuate until the Ending Value is determined. In addition, because the payment on the maturity date on the Notes will not exceed the Capped Value, we do not expect that the Notes will trade in the secondary market above the Capped Value.

 

Changes in the levels of interest rates are expected to affect the trading value of the Notes.    We expect that changes in interest rates will affect the trading value of the Notes. In general, if U.S. interest rates increase, we expect that the trading value of the Notes will decrease and, conversely, if U.S. interest rates decrease, we expect that the trading value of the Notes will increase. In addition, increases in interest rates in the United States relative to interest rates in Mexico may decrease the forward value of the United States dollar relative to the Mexican peso on future markets, which would generally tend to increase the value of the Notes, and decreases in interest rates in the United States relative to interest rates in Mexico may increase the forward value of the United States dollar relative to the Mexican peso on future markets, which would generally tend to decrease the value of the Notes. Increases in interest rates in Mexico relative to interest rates in the United States may decrease the forward value of the Mexican peso relative to the United States dollar on future markets, which would tend to decrease the value of the Notes, and decreases in interest rates in Mexico relative to interest rates in the United States may increase the forward value of the Mexican peso relative to the United States dollar on future markets, which would generally tend to increase the value of the Notes.

 

Changes in the volatility of the MXN/USD Exchange Rate are expected to affect the trading value of the Notes.    Volatility is the term used to describe the size and frequency of price and/or market fluctuations. If the volatility of the MXN/USD Exchange Rate increases or decreases, the trading value of the Notes may be adversely affected.

 

As the time remaining to the stated maturity date of the Notes decreases, the “time premium” associated with the Notes is expected to decrease.    We anticipate that before their stated maturity date, the Notes may trade at a value above that which would be expected based on the MXN/USD Exchange Rate. This difference will reflect a “time premium” due to expectations concerning the value of the United States dollar relative to the Mexican peso

 

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prior to the stated maturity date of the Notes. However, as the time remaining to the stated maturity date of the Notes decreases, we expect that this time premium will decrease, lowering the trading value of the Notes.

 

Changes in our credit ratings may affect the trading value of the Notes.    Our credit ratings are an assessment of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings may affect the trading value of the Notes. However, because the return on your Notes is dependent upon factors in addition to our ability to pay our obligations under the Notes, such as the percentage increase, if any, in the MXN/USD Exchange Rate over the term of the Notes from the Starting Value, an improvement in our credit ratings will not reduce the other investment risks related to the Notes.

 

In general, assuming all relevant factors are held constant, we expect that the effect on the trading value of the Notes of a given change in some of the factors listed above will be less if it occurs later in the term of the Notes than if it occurs earlier in the term of the Notes. We expect, however, that the effect on the trading value of the Notes of a given change in the MXN/USD Exchange Rate will be greater if it occurs later in the term of the Notes than if it occurs earlier in the term of the Notes.

 

Potential conflicts of interest could arise

 

Our subsidiary Merrill Lynch Capital Services, Inc. is our agent for the purposes of determining, among other things, the Ending Value and Redemption Amount. Under certain circumstances, Merrill Lynch Capital Services, Inc. as our subsidiary and its responsibilities as Calculation Agent for the Notes could give rise to conflicts of interest. These conflicts could occur, for instance, in connection with its determination as to whether the MXN/USD Exchange Rate can be obtained on a particular trading day, or in connection with judgments that it would be required to make in the event the MXN/USD Exchange Rate is unavailable. See the section entitled “The MXN/USD Exchange Rate” in this pricing supplement. Merrill Lynch Capital Services, Inc. is required to carry out its duties as Calculation Agent in good faith and using its reasonable judgment. However, because we control Merrill Lynch Capital Services, Inc., potential conflicts of interest could arise.

 

We expect to enter into arrangements to hedge the market risks associated with our obligation to pay the Redemption Amount due on the maturity date on the Notes. We may seek competitive terms in entering into the hedging arrangements for the Notes, but are not required to do so, and we may enter into such hedging arrangements with one of our subsidiaries or affiliated companies. Such hedging activity is expected to result in a profit to those engaging in the hedging activity, which could be more or less than initially expected, but which could also result in a loss for the hedging counterparty.

 

Un certain tax consequences

 

You should consider the tax consequences of investing in the Notes, aspects of which are uncertain. See the section entitled “United States Federal Income Taxation” in this pricing supplement.

 

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DESCRIPTION OF THE NOTES

 

ML&Co. will issue the Notes as part of a series of senior debt securities entitled “Medium-Term Notes, Series C” under the 1983 Indenture, which is more fully described in the accompanying prospectus. The Notes will mature on February 7, 2007. Information included in this pricing supplement supercedes information in the accompanying prospectus supplement and prospectus to the extent that it is different from that information. The CUSIP number for the Notes is 59021V664.

 

While on the maturity date a holder of a Note will receive an amount equal to the Redemption Amount, there will be no other payment of interest, periodic or otherwise. See the section entitled “—Payment on the Maturity Date”.

 

The Notes will not be subject to redemption by ML&Co. or repayment at the option of any holder of the Notes before the maturity date.

 

ML&Co. will issue the Notes in denominations of whole units each with a $10 principal amount per unit. You may transfer the Notes only in whole units. You will not have the right to receive physical certificates evidencing your ownership except under limited circumstances. Instead, we will issue the Notes in the form of a global certificate, which will be held by The Depository Trust Company, also known as DTC, or its nominee. Direct and indirect participants in DTC will record your ownership of the Notes. You should refer to the section entitled “Description of Debt Securities—Depositary” in the accompanying prospectus.

 

The Notes will not have the benefit of any sinking fund.

 

Payment on the Maturity Date

 

On the maturity date, you will be entitled to receive a cash payment per unit equal to the Redemption Amount, as provided below.

 

Determination of the Redemption Amount

 

The “Redemption Amount” per unit will be denominated and payable in United States dollars, will be determined by the Calculation Agent and will equal:

 

  (i) If the Ending Value is greater than the Starting Value:

 

$10   +   (   $10 ´ Participation Rate   ´   (   Ending Value – Starting Value

  )   )   ;
            Starting Value      

 

provided, however, the Redemption Amount will not exceed $10.9000 per unit (the “Capped Value”); or

 

  (ii) If the Ending Value is equal to or less than the Starting Value, $10.

 

The “Starting Value” equals 0.09444654, which was 99% of the MXN/USD Exchange Rate on February 2, 2006, the date the Notes were priced for initial sale to the public (the “Pricing Date”).

 

The “Ending Value” will equal the MXN/USD Exchange Rate as determined by the Calculation Agent on the Valuation Date, as described in the section entitled “The MXN/USD Exchange Rate” in this pricing supplement.

 

The “Valuation Date” will be the seventh scheduled Business Day before the maturity date of the Notes.

 

The “Participation Rate” equals 300%.

 

 

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A “Business Day” means any day other than a Saturday or Sunday that is neither a legal holiday nor a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to close and those banks are open for dealing in a foreign exchange and foreign currency deposits.

 

All determinations made by the Calculation Agent, absent a determination of a manifest error, will be conclusive for all purposes and binding on ML&Co. and the holders and beneficial owners of the Notes.

 

Hypothetical Returns

 

The following table illustrates, for the Starting Value and a range of hypothetical Ending Values:

 

  Ÿ the percentage change from the Starting Value to the hypothetical Ending Value;

 

  Ÿ the total amount payable on the maturity date per unit;

 

  Ÿ the total rate of return to holders of the Notes; and

 

  Ÿ the pretax annualized rate of return to holders of the Notes.

 

The table below includes a Participation Rate of 300%.

 

Hypothetical

Ending Value


 

Percentage

change from the

Starting Value

to the hypothetical

    Ending Value    


 

Total amount

payable on

the maturity

date per unit


 

Total rate

of return
on the Notes


 

Pretax Annualized
rate of return on

the Notes(1)


0.07555723   –20.00%   $10.0000   0.00%   0.00%
0.08500189   –10.00%   $10.0000   0.00%   0.00%
0.08972422     –5.00%   $10.0000   0.00%   0.00%
0.09161315     –3.00%   $10.0000   0.00%   0.00%
0.09255761     –2.00%   $10.0000   0.00%   0.00%
0.09350208     –1.00%   $10.0000   0.00%   0.00%
    0.09444654(2)       0.00%   $10.0000   0.00%   0.00%
0.09539101       1.00%   $10.3000   3.00%   2.98%
0.09633547       2.00%   $10.6000   6.00%   5.91%
0.09727994       3.00%       $10.9000(3)   9.00%   8.81%
0.09916887       5.00%   $10.9000   9.00%   8.81%
0.10861352     15.00%   $10.9000   9.00%   8.81%
0.11333585     20.00%   $10.9000   9.00%   8.81%

(1) The annualized rates of return specified in this column are calculated on a semiannual bond equivalent basis and assume an investment term from February 7, 2006 to February 7, 2007, a term expected to be equal to that of the Notes.
(2) This is the Starting Value.
(3) The total amount payable on the maturity date per unit of the Notes cannot exceed the Capped Value.

 

The above figures are for purposes of illustration only. The actual amount received by you and the resulting total and pretax annualized rates of return will depend on the actual Ending Value and the term of your investment.

 

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Events of Default and Acceleration

 

In case an Event of Default with respect to any Notes has occurred and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted by the Notes, with respect to each unit of the Notes, will be equal to the Redemption Amount, calculated as though the date of acceleration were the stated maturity date of the Notes.

 

In case of default in payment of the Notes, whether on the stated maturity date or upon acceleration, from and after that date the Notes will bear interest, payable upon demand of their holders, at the rate of 2.25% per annum, to the extent that payment of any interest is legally enforceable on the unpaid amount due and payable on that date in accordance with the terms of the Notes to the date payment of that amount has been made or duly provided for.

 

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THE MXN/USD EXCHANGE RATE

 

The MXN/USD Exchange Rate is a foreign exchange spot rate that measures the relative values of two currencies, the United States dollar and the Mexican peso. The MXN/USD Exchange Rate increases when the Mexican peso appreciates relative to the United States dollar and declines when the Mexican peso depreciates relative to the United States dollar. The MXN/USD Exchange Rate is expressed as a rate that reflects the amount of United States dollars that can be exchanged for one Mexican peso, and constitutes the inverse of the conventional market quotation expressing the number of Mexican peso for which one United States dollar can be exchanged.

 

The “MXN/USD Exchange Rate” will be the mid price currency exchange rate in the interbank market quoted as the United States dollar value of one Mexican peso as reported by Bloomberg L.P. (“Bloomberg”) on page WFX, or any substitute page thereto. For purposes of calculating the Starting Value and Ending Value, such currency exchange rate was and will be, as the case might be, that reported by Bloomberg on page WFX, or any substitute page thereto, or calculated in accordance with any substitute procedure, as described below, at approximately 12:00 p.m. in New York, New York on the relevant date. If the MXN/USD Exchange Rate is not so quoted on Bloomberg page WFX, or any substitute page thereto, then the MXN/USD Exchange Rate will equal the noon buying rate in New York for cable transfers in foreign currencies as announced by the Federal Reserve Bank of New York for customs purposes (the “Noon Buying Rate”). If the Noon Buying Rate is not announced on such date, then the MXN/USD Exchange Rate will be calculated on the basis of the arithmetic mean of the applicable spot quotations received by the Calculation Agent on the relevant date for the purchase or sale for deposits in the relevant currencies by the New York offices of three leading banks engaged in the interbank market (selected in the sole discretion of the Calculation Agent) (the “Reference Banks”). If fewer than three Reference Banks provide such spot quotations, then the MXN/USD Exchange Rate will be calculated on the basis of the arithmetic mean of the applicable spot quotations received by the Calculation Agent from two leading commercial banks in New York (selected in the sole discretion of the Calculation Agent), for the purchase or sale for deposits in the relevant currencies. If these spot quotations are available from fewer than two banks, then the Calculation Agent, in its sole discretion, shall determine which quotation is available and reasonable to be used. If no such spot quotation is available, then the MXN/USD Exchange Rate will be the rate the Calculation Agent, in its sole discretion, determines to be fair and reasonable under the circumstances at 12:00 p.m., New York City time, on the relevant date.

 

The Starting Value and Ending Value was and will be, as the case might be, rounded to eight decimal places. For example, .098765445 would be rounded to ..09876545. All per unit dollar amounts resulting from any calculation was or will be rounded to four decimal places.

 

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The following table sets forth the historical month-end values of the MXN/USD Exchange Rate from January 2000 through January 2006. This historical data is not necessarily indicative of the future performance of the MXN/USD Exchange Rate or what the value of the Notes may be. Any upward or downward trend in the historical value of the MXN/USD Exchange Rate during any period set forth below is not an indication that the MXN/USD Exchange Rate is more or less likely to increase or decrease at any time over the term of the Notes.

 

     Monthly Closing Values

     2000

   2001

   2002

   2003

   2004

   2005

   2006

January

   0.1042500    0.1033300    0.1093200    0.0917000    0.0904000    0.0893800    0.0957100

February

   0.1067300    0.1032200    0.1096600    0.0908000    0.0904000    0.0901500     

March

   0.1081300    0.1056900    0.1106800    0.0927500    0.0898500    0.0895100     

April

   0.1064400    0.1082400    0.1064400    0.0972000    0.0875000    0.0905500     

May

   0.1051900    0.1090100    0.1036800    0.0969000    0.0874500    0.0919100     

June

   0.1016800    0.1106100    0.1005400    0.0953000    0.0870500    0.0930400     

July

   0.1069300    0.1093900    0.1013500    0.0944000    0.0876500    0.0943700     

August

   0.1088100    0.1086400    0.1004200    0.0905000    0.0877900    0.0930200     

September

   0.1058600    0.1051100    0.0979500    0.0910500    0.0878500    0.0929500     

October

   0.1045300    0.1080000    0.0980400    0.0907500    0.0866900    0.0927100     

November

   0.1060800    0.1084100    0.0985500    0.0879500    0.0890800    0.0947200     

December

   0.1039500    0.1091100    0.0964000    0.0891000    0.0897100    0.0940500     

 

The following graph sets forth the historical performance of the MXN/USD Exchange Rate presented in the preceding table. This historical information is not necessarily indicative of the future performance of the MXN/USD Exchange Rate. On February 2, 2006, the Pricing Date, the MXN/USD Exchange Rate was 0.09540164 and the Starting Value was 0.09444654 (99% x 0.09540164).

 

LOGO

 

 

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UNITED STATES FEDERAL INCOME TAXATION

 

Set forth in full below is the opinion of Sidley Austin LLP, tax counsel to ML&Co., as to certain United States federal income tax consequences of the purchase, ownership and disposition of the Notes. This opinion is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (including retroactive changes in effective dates) or possible differing interpretations. The discussion below deals only with Notes held as capital assets and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, real estate investment trusts, dealers in securities or currencies, traders in securities that elect to mark to market, tax-exempt entities or persons holding Notes in a tax-deferred or tax-advantaged account (except to the extent specifically discussed below), persons whose functional currency is not the United States dollar, persons subject to the alternative minimum tax, or persons holding Notes as a hedge against currency risks, as a position in a “straddle” or as part of a “hedging”, “conversion” or “integrated” transaction for tax purposes. It also does not deal with holders other than original purchasers (except where otherwise specifically noted in this pricing supplement). If a partnership holds the Notes, the tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Thus, persons who are partners in a partnership holding the Notes should consult their own tax advisors. Moreover, all persons considering the purchase of the Notes should consult their own tax advisors concerning the application of the United States federal income tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of the Notes arising under the laws of any other taxing jurisdiction.

 

As used in this pricing supplement, the term “U.S. Holder” means a beneficial owner of a Note that is for United States federal income tax purposes (a) a citizen or resident of the United States, (b) a corporation, partnership or other entity treated as a corporation or a partnership that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia (other than a partnership that is not treated as a United States person under any applicable Treasury regulations), (c) an estate the income of which is subject to United States federal income taxation regardless of its source, (d) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (e) any other person whose income or gain in respect of a Note is effectively connected with the conduct of a United States trade or business. Notwithstanding clause (d) of the preceding sentence, to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996, and treated as United States persons prior to that date that elect to continue to be treated as United States persons also will be U.S. Holders. As used herein, the term “non-U.S. Holder” means a beneficial owner of a Note that is not a U.S. Holder.

 

General

 

There are no statutory provisions, regulations, published rulings or judicial decisions addressing or involving the characterization, for United States federal income tax purposes, of the Notes or securities with terms substantially the same as the Notes. However, although the matter is not free from doubt, under current law, each Note should be treated as a debt instrument of ML&Co. for United States federal income tax purposes. ML&Co. currently intends to treat each Note as a debt instrument of ML&Co. for United States federal income tax purposes and, where required, intends to file information returns with the Internal Revenue Service (the “IRS”) in accordance with this treatment, in the absence of any change or clarification in the law, by regulation or otherwise, requiring a different characterization of the Notes. Prospective investors in the Notes should be aware, however, that the IRS is not bound by ML&Co.’s characterization of the Notes as indebtedness, and the IRS could possibly take a different position as to the proper characterization of the Notes for United States federal income tax purposes. The following discussion of the principal United States federal income tax consequences of the purchase, ownership and disposition of the Notes is based upon the assumption that each Note will be treated as a debt instrument of ML&Co. for United States federal income tax purposes. If the Notes are not in fact treated as debt instruments of ML&Co. for United States federal income tax purposes, then the United States federal income tax treatment of the purchase, ownership and disposition of the Notes could differ

 

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from the treatment discussed below with the result that the timing and character of income, gain or loss recognized in respect of a Note could differ from the timing and character of income, gain or loss recognized in respect of a Note had the Notes in fact been treated as debt instruments of ML&Co. for United States federal income tax purposes.

 

U.S. Holders

 

General. Since the amount payable on the maturity date with respect to the Notes (i.e., the Redemption Amount) will be determined by reference to the MXN/USD Exchange Rate, the Notes generally should be subject to the rules set forth in Section 988 of the Internal Revenue Code of 1986, as amended (the “Code”) regarding foreign currency gain or loss (the “Foreign Currency Rules”). However, the Foreign Currency Rules do not set forth specific rules for determining the appropriate character, timing and amount of income, gain or loss that must be recognized by a taxpayer from holding a short-term debt instrument that provides for one or more foreign currency-related contingent payments, similar to the Notes. In the absence of any specific provision in the Foreign Currency Rules which would currently apply to the Notes, the United States federal income tax consequences of the purchase, ownership and disposition of the Notes generally should be governed by a combination of both the general principles contained in the Foreign Currency Rules and general principles of United States federal income tax law. Nevertheless, the proper United States federal income tax treatment of the Notes is uncertain and prospective investors in the Notes are urged to consult their own tax advisors regarding the proper United States federal income tax treatment of an investment in the Notes.

 

Cash Method U.S. Holders. The amount payable on the maturity date with respect to a Note in excess of the principal amount thereof, if any, generally should be includible in income by a U.S. Holder who uses the cash method of tax accounting as ordinary interest on the date the amount payable on the maturity date is received. Upon the sale or exchange of a Note prior to the maturity date, a U.S. Holder who uses the cash method of tax accounting generally should be required to recognize taxable gain or loss in an amount equal to the difference, if any, between the amount realized on the sale or exchange and such U.S. Holder’s tax basis in the Note. Such a U.S. Holder’s tax basis in a Note generally should equal such U.S. Holder’s initial investment in the Note. Any portion of such gain or loss that is attributable to changes in the MXN/USD Exchange Rate should constitute exchange gain or loss which will be characterized as ordinary income or loss. Any such gain or loss in excess of the portion of such gain or loss that constitutes exchange gain or loss (as described above) generally should be treated as short-term capital gain or loss. Notwithstanding the foregoing, all or a portion of any such gain should be treated as ordinary income to the extent of the amount of original issue discount (as described below under “Accrual Method U.S. Holders”) that has accrued on a straight-line basis, or upon election under a constant yield method (based on daily compounding), through the date of sale. Despite the foregoing, since the amount payable on the maturity date with respect to the Notes in excess of the principal amount thereof, if any, will be calculated by reference to the MXN/USD Exchange Rate, it is possible that the IRS could assert that all or any portion of the income, gain or loss recognized by a U.S. Holder with respect to the Notes should be treated as exchange gain or loss, which would be characterized as ordinary income or loss.

 

Accrual Method U.S. Holders. U.S. Holders who use the accrual method of tax accounting, and certain other holders including banks and dealers in securities, should be required to accrue original issue discount on a 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). Such original issue discount should accrue based upon an estimated yield for the Note. Upon maturity of a Note, to the extent that the actual yield on the Note (i.e., the actual Redemption Amount) differs from this estimated yield, such difference should be treated as additional original issue discount or as an offset to previously accrued original issue discount. Upon the sale or exchange of a Note prior to the maturity date, a U.S. Holder who uses the accrual method of tax accounting generally should recognize gain or loss (or, in some cases, possibly an offset to previously accrued original issue discount) in an amount equal to the difference between the amount realized on the sale or exchange and such U.S. Holder’s adjusted tax basis in the Note. Such a U.S. Holder’s adjusted tax basis generally should equal such U.S. Holder’s initial investment in the Note increased by any original issue discount previously included in income by the U.S. Holder. Any portion of such gain or loss that is attributable to changes in the MXN/USD Exchange Rate should

 

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constitute exchange gain or loss which will be characterized as ordinary income or loss. Any such gain or loss in excess of the portion of such gain or loss that constitutes exchange gain or loss (as described above) generally should be treated as short-term capital gain or loss. Despite the foregoing, since the amount payable on the maturity date with respect to the Notes in excess of the principal amount thereof, if any, will be calculated by reference to the MXN/USD Exchange Rate, it is possible that the IRS could assert that all or any portion of the income, gain or loss recognized by a U.S. Holder with respect to the Notes should be treated as exchange gain or loss, which would be characterized as ordinary income or loss.

 

Due to the uncertainty regarding the proper United States federal income tax treatment of the Notes, prospective investors in the Notes are urged to consult their own tax advisors concerning the United States federal income tax consequences of the purchase, ownership and disposition of the Notes.

 

Tax Return Disclosure Regulations

 

Pursuant to certain Treasury regulations (the “Disclosure Regulations”), any taxpayer that has participated in a “reportable transaction” and who is required to file a United States federal income tax return must generally attach a disclosure statement disclosing such taxpayer’s participation in the reportable transaction to the taxpayer’s tax return for each taxable year for which the taxpayer participates in the reportable transaction. The Disclosure Regulations provide that, in addition to certain other transactions, a “loss transaction” constitutes a “reportable transaction.” A “loss transaction” is any transaction resulting in the taxpayer claiming a loss under Section 165 of the Code in an amount equal to or in excess of certain threshold amounts. The Disclosure Regulations specifically provide that a loss resulting from a “Section 988 transaction,” such as a loss realized with respect to the Notes, will constitute a Section 165 loss. In the case of individuals or trusts, whether or not the loss flows through from an S corporation or partnership, if the loss arises with respect to a Section 988 transaction (as defined in Section 988(c)( 1) of the Code relating to foreign currency transactions), the applicable loss threshold amount is $50,000 in any single taxable year. Higher loss threshold amounts apply depending upon the taxpayer’s status as a corporation, partnership, or S corporation, as well as certain other factors. It is important to note, however, that the Disclosure Regulations provide that the fact that a transaction is a reportable transaction shall not affect the legal determination of whether the taxpayer’s treatment of the transaction is proper.

 

As previously mentioned, since the amount payable on the maturity date with respect to the Notes in excess of the principal amount thereof, if any, (i.e., the Redemption Amount), will be determined by reference to the MXN/USD Exchange Rate, the Notes generally should be subject to the Foreign Currency Rules and the acquisition of a Note should constitute a Section 988 transaction. Based upon the foregoing, in the absence of future administrative pronouncements to the contrary, a holder of the Notes that recognizes an exchange loss with respect to the Notes that equals or exceeds the loss threshold amount applicable to such holder may be required to file a disclosure statement (i.e., IRS Form 8886 or substitute form) as an attachment to the holder’s tax return for the first taxable year in which the loss threshold amount is reached and to any subsequent tax return that reflects any amount of such Section 165 loss from the Notes. Persons considering the purchase of the Notes should consult their own tax advisors concerning the application of the rules contained in the Disclosure Regulations with respect to an investment in the Notes and to determine their own tax return disclosure obligations, if any, with respect to an investment in the Notes, including any requirement to file IRS Form 8886 as well as any penalties which may be imposed as a result of a failure to comply with the Disclosure Regulations.

 

Unrelated Business Taxable Income

 

Section 511 of the Code generally imposes a tax, at regular corporate or trust income tax rates, on the “unrelated business taxable income” of certain tax-exempt organizations, including qualified pension and profit sharing plan trusts and individual retirement accounts. In general, if the Notes are held for investment purposes, the amount of income or gain realized with respect to the Notes will not constitute unrelated business taxable income. However, if a Note constitutes debt-financed property (as defined in Section 514(b) of the Code) by

 

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reason of indebtedness incurred by a holder of a Note to purchase the Note, all or a portion of any income or gain realized with respect to such Note may be classified as unrelated business taxable income pursuant to Section 514 of the Code. Moreover, prospective investors in the Notes should be aware that whether or not any income or gain realized with respect to a Note which is owned by an organization that is generally exempt from U.S. federal income taxation pursuant to Section 501(a) of the Code constitutes unrelated business taxable income will depend upon the specific facts and circumstances applicable to such organization. Accordingly, any potential investors in the Notes that are generally exempt from U.S. federal income taxation pursuant to Section 501(a) of the Code are urged to consult with their own tax advisors concerning the U.S. federal income tax consequences to them of investing in the Notes.

 

Non-U.S. Holders

 

A non-U.S. Holder will not be subject to United States federal income taxes on payments of principal, premium (if any) or interest (including original issue discount) on a Note, unless the non-U.S. Holder is a direct or indirect 10% or greater shareholder of ML&Co., a controlled foreign corporation related to ML&Co. or a bank receiving interest described in Section 881(c)(3)(A) of the Code. However, income allocable to non-U.S. Holders will generally be subject to annual tax reporting on IRS Form 1042-S. For a non-U.S. Holder to qualify for the exemption from taxation, any person, U.S. or foreign, that has control, receipt or custody of an amount subject to withholding, or who can disburse or make payments of an amount subject to withholding (the “Withholding Agent”) must have received a statement that (a) is signed by the beneficial owner of the Note under penalties of perjury, (b) certifies that the owner is a non-U.S. Holder and (c) provides the name and address of the beneficial owner. The statement may generally be made on IRS Form W-8BEN (or other applicable form) or a substantially similar form, and the beneficial owner must inform the Withholding Agent of any change in the information on the statement within 30 days of that change by filing a new IRS Form W-8BEN (or other applicable form). Generally, an IRS Form W-8BEN provided without a U.S. taxpayer identification number will remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. If a Note is held through a securities clearing organization or certain other financial institutions, the organization or institution may provide a signed statement to the Withholding Agent. Under certain circumstances, the signed statement must be accompanied by a copy of the applicable IRS Form W-8BEN (or other applicable form) or the substitute form provided by the beneficial owner to the organization or institution.

 

Under current law, a Note will not be includible in the estate of a non-U.S. Holder unless the individual is a direct or indirect 10% or greater shareholder of ML&Co. or, at the time of the individual’s death, payments in respect of that Note would have been effectively connected with the conduct by the individual of a trade or business in the United States.

 

Backup Withholding

 

Backup withholding at the applicable statutory rate of United States federal income tax may apply to payments made in respect of the Notes to registered owners who are not “exempt recipients” and who fail to provide certain identifying information (such as the registered owner’s taxpayer identification number) in the required manner. Generally, individuals are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Payments made in respect of the Notes to a U.S. Holder must be reported to the IRS, unless the U.S. Holder is an exempt recipient or establishes an exemption. Compliance with the identification procedures described in the preceding section would establish an exemption from backup withholding for those non-U.S. Holders who are not exempt recipients.

 

In addition, upon the sale of a Note to (or through) a broker, the broker must withhold on the entire purchase price, unless either (a) the broker determines that the seller is a corporation or other exempt recipient or (b) the seller provides, in the required manner, certain identifying information (e.g., an IRS Form W-9) and, in the case of a non-U.S. Holder, certifies that the seller is a non-U.S. Holder (and certain other conditions are met).

 

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This type of a sale must also be reported by the broker to the IRS, unless either (a) the broker determines that the seller is an exempt recipient or (b) the seller certifies its non-U.S. status (and certain other conditions are met). Certification of the registered owner’s non-U.S. status would be made normally on an IRS Form W-8BEN (or other applicable form) under penalties of perjury, although in certain cases it may be possible to submit other documentary evidence.

 

Any amounts withheld under the backup withholding rules from a payment to a beneficial owner would be allowed as a refund or a credit against the beneficial owner’s United States federal income tax provided the required information is furnished to the IRS.

 

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ERISA CONSIDERATIONS

 

Each fiduciary of a pension, profit-sharing or other employee benefit plan (a “plan”) subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), should consider the fiduciary standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in the Notes. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the plan, and whether the investment would involve a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

 

Section 406 of ERISA and Section 4975 of the Code prohibit plans, as well as individual retirement accounts and Keogh plans subject to Section 4975 of the Code (also “plans”) from engaging in certain transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code (“parties in interest”) with respect to the plan or account. A violation of these prohibited transaction rules may result in civil penalties or other liabilities under ERISA and/or an excise tax under Section 4975 of the Code for those persons, unless exemptive relief is available under an applicable statutory, regulatory or administrative exemption. Certain employee benefit plans and arrangements including those that are governmental plans (as defined in section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) (“non-ERISA arrangements”) are not subject to the requirements of ERISA or Section 4975 of the Code but may be subject to similar provisions under applicable federal, state, local, foreign or other regulations, rules or laws (“similar laws”).

 

The acquisition of the Notes by a plan with respect to which we, MLPF&S or certain of our affiliates is or becomes a party in interest may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless those Notes are acquired pursuant to and in accordance with an applicable exemption. The U.S. Department of Labor has issued five prohibited transaction class exemptions, or “PTCEs”, that may provide exemptive relief if required for direct or indirect prohibited transactions that may arise from the purchase or holding of the Notes. These exemptions are:

 

  (1) PTCE 84-14, an exemption for certain transactions determined or effected by independent qualified professional asset managers;

 

  (2) PTCE 90-1, an exemption for certain transactions involving insurance company pooled separate accounts;

 

  (3) PTCE 91-38, an exemption for certain transactions involving bank collective investment funds;

 

  (4) PTCE 95-60, an exemption for transactions involving certain insurance company general accounts; and

 

  (5) PTCE 96-23, an exemption for plan asset transactions managed by in-house asset managers.

 

The Notes may not be purchased or held by (1) any plan, (2) any entity whose underlying assets include “plan assets” by reason of any plan’s investment in the entity (a “plan asset entity”) or (3) any person investing “plan assets” of any plan, unless in each case the purchaser or holder is eligible for the exemptive relief available under one or more of the PTCEs listed above or another applicable similar exemption. Any purchaser or holder of the Notes or any interest in the Notes will be deemed to have represented by its purchase and holding of the Notes that it either (1) is not a plan or a plan asset entity and is not purchasing those Notes on behalf of or with “plan assets” of any plan or plan asset entity or (2) with respect to the purchase or holding, is eligible for the exemptive relief available under any of the PTCEs listed above or another applicable exemption. In addition, any purchaser or holder of the Notes or any interest in the Notes which is a non-ERISA arrangement will be deemed to have represented by its purchase and holding of the Notes that its purchase and holding will not violate the provisions of any similar law.

 

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Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is important that fiduciaries or other persons considering purchasing the Notes on behalf of or with “plan assets” of any plan, plan asset entity or non-ERISA arrangement consult with their counsel regarding the availability of exemptive relief under any of the PTCEs listed above or any other applicable exemption, or the potential consequences of any purchase or holding under similar laws, as applicable.

 

USE OF PROCEEDS AND HEDGING

 

The net proceeds from the sale of the Notes will be used as described under “Use of Proceeds” in the accompany prospectus and to hedge market risks of ML&Co. associated with its obligation to pay the Redemption Amount.

 

SUPPLEMENTAL PLAN OF DISTRIBUTION

 

MLPF&S has advised ML&Co. that it proposes initially to offer all or part of the Notes directly to the public on a fixed price basis at the offering price set forth on the cover of this pricing supplement. After the initial public offering, the public offering price may be changed. The obligations of MLPF&S are subject to certain conditions and it is committed to take and pay for all of the Notes if any are taken.

 

EXPERTS

 

The consolidated financial statements, the related financial statement schedule, and management’s report on the effectiveness of internal control over financial reporting incorporated in this pricing supplement by reference from Merrill Lynch & Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004 have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

 

With respect to the unaudited interim condensed consolidated financial information for the three-month periods ended April 1, 2005 and March 26, 2004, the three-month and six-month periods ended July 1, 2005 and June 25, 2004 and the three-month and nine-month periods ended September 30, 2005 and September 24, 2004 which is incorporated herein by reference, Deloitte & Touche LLP, an independent registered public accounting firm, have applied limited procedures in accordance with the standards of the Public Company Accounting Oversight Board (United States) for reviews of such information. However, as stated in their reports included in Merrill Lynch & Co., Inc.’s Quarterly Reports on Form 10-Q for the quarters ended April 1, 2005, July 1, 2005 and September 30, 2005 and incorporated by reference herein, they did not audit and they do not express opinions on that 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 are not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their reports on the unaudited interim condensed consolidated financial information because those reports are not “reports” or a “part” of the registration statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act.

 

 

PS-22


Table of Contents

INDEX OF CERTAIN DEFINED TERMS

 

     Page

Business Day

   PS-12

Calculation Agent

   PS-3

Capped Value

   PS-4

Ending Value

   PS-4

Notes

   PS-1

Participation Rate

   PS-4

Pricing Date

   PS-4

Redemption Amount

   PS-4

Starting Value

   PS-4

MXN/USD Exchange Rate

   PS-3

Valuation Date

   PS-4

 

PS-23


Table of Contents

 

 

 

 

 

LOGO

 

 

1,500,000 Units

 

Merrill Lynch & Co., Inc.

 

Medium-Term Notes, Series C

 

100% Protected Currency Notes

Linked to the Mexican Peso/United States Dollar Exchange Rate

due February 7, 2007

(the “Notes”)

$10 principal amount per unit

 

 

 

 

 

 

 

PRICING SUPPLEMENT

 

 

 

 

 

 

 

 

 

 

 

Merrill Lynch & Co.

 

 

 

 

 

 

 

 

 

 

February 2, 2006