-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OiplyMajnenDJGTyo0u7U1eHUWbauxUgHCibQaTxmJ5Wlv3+WcidXMhcNzezLooa clnfoUXNpcjpTw08DBtEIA== 0000950130-02-000520.txt : 20020414 0000950130-02-000520.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950130-02-000520 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20020131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH & CO INC CENTRAL INDEX KEY: 0000065100 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132740599 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 333-52822 FILM NUMBER: 02523644 BUSINESS ADDRESS: STREET 1: 4 WORLD FINANCIAL CTR CITY: NEW YORK STATE: NY ZIP: 10080 BUSINESS PHONE: 2124491000 MAIL ADDRESS: STREET 1: 4 WORLD FINANCIAL CTR CITY: NEW YORK STATE: NY ZIP: 10080 424B5 1 d424b5.txt FINAL PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5) Registration No. 333-52822 PROSPECTUS SUPPLEMENT - ------------------------ (To prospectus dated January 24, 2001) [LOGO] 7,200,000 Units Merrill Lynch & Co., Inc. Strategic Return Notes/SM/ Linked to the Industrial 15 Index due February 1, 2007 (the "Notes") $10 original public offering price per Unit ---------------- The Notes: Payment at maturity or upon exchange: . Senior unsecured debt securities of Merrill Lynch & Co., . At maturity or upon exchange, you will receive a cash Inc. amount based upon the percentage change in the value of the Industrial 15 Index, which reflects the total return . Exchangeable at your option for a cash payment during a of fifteen of the top dividend yielding stocks, specified period in January of each year from 2003 through reconstituted annually, in the S&P Industrial Index less 2006 as described in this prospectus supplement. an annual index adjustment factor of 1.5%. . No payments prior to maturity unless exchanged. . At maturity or upon exchange, the amount you receive will depend on the value of the Industrial 15 Index. The . Linked to the value of the Industrial 15 Index (index value of the Industrial 15 Index must increase in order symbol "IXD"). for you to receive at least the original public offering price of $10 per Note upon exchange or at maturity. If . The Notes have been approved for listing on the American the value of the Industrial 15 Index has declined or has Stock Exchange under the trading symbol "DSP", subject to not increased sufficiently, you will receive less, and official notice of issuance. possibly significantly less, than the original public offering price of $10 per Note. . Expected closing date: February 1, 2002.
Investing in the Notes involves risks that are described in the "Risk Factors" section beginning on page S-8 of this prospectus supplement. ---------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per Unit Total -------- ----- Public offering price.................................. $10.00 $72,000,000 Underwriting fee....................................... $.20 $1,440,000 Proceeds, before expenses, to Merrill Lynch & Co., Inc. $9.90* $71,280,000
---------------- Merrill Lynch & Co. ---------------- - -------- * $.10 per Unit of the underwriting fee will be paid to the underwriter by a subsidiary of Merrill Lynch & Co., Inc. For a description of this payment, please see the section entitled "Underwriting" in this prospectus supplement. The date of this prospectus supplement is January 29, 2002. "Strategic Return Notes" is a service mark of Merrill Lynch & Co., Inc. TABLE OF CONTENTS Prospectus Supplement
Page ---- SUMMARY INFORMATION--Q&A..................................................................... S-4 What are the Notes?....................................................................... S-4 What will I receive upon maturity of the Notes?........................................... S-4 How does the exchange feature work?....................................................... S-5 Who publishes the Industrial 15 Index and what does the Industrial 15 Index measure?...... S-5 How has the Industrial 15 Index performed historically?................................... S-6 Will I receive interest payments on the Notes?............................................ S-6 What about taxes?......................................................................... S-6 Will the Notes be listed on a stock exchange?............................................. S-6 What is the role of MLPF&S?............................................................... S-6 Who is ML&Co.?............................................................................ S-6 Are there any risks associated with my investment?........................................ S-7 RISK FACTORS................................................................................. S-8 Your investment may result in a loss...................................................... S-8 The value of the Industrial 15 Index is expected to affect the trading value of the Notes. S-8 Changes in our credit ratings may affect the trading value of the Notes................... S-8 Your investment may become concentrated................................................... S-8 Your yield may be lower than the yield on other debt securities of comparable maturity.... S-8 Your return will not reflect the return of owning the Industrial 15 Stocks................ S-8 There may be an uncertain trading market for the Notes.................................... S-9 Risk factors specific to companies included in the Industrial 15 Index.................... S-9 Amounts payable on the Notes may be limited by state law.................................. S-10 Purchases and sales by us and our affiliates may affect your return....................... S-10 Potential conflicts....................................................................... S-10 Uncertain tax consequences................................................................ S-11 DESCRIPTION OF THE NOTES..................................................................... S-12 Payment at maturity....................................................................... S-12 Exchange of the Notes prior to maturity................................................... S-13 Hypothetical returns...................................................................... S-13 Adjustments to the Industrial 15 Index; Market Disruption Events.......................... S-14 Discontinuance of the Industrial 15 Index................................................. S-15 Events of Default and Acceleration........................................................ S-16 Depositary................................................................................ S-16 Same-Day Settlement and Payment........................................................... S-19 THE INDUSTRIAL 15 INDEX...................................................................... S-20 Industrial 15 Index....................................................................... S-20 Dividends................................................................................. S-22 Adjustments to the Share Multiplier and Industrial 15 Portfolio........................... S-22 Historical Data on the Industrial 15 Index................................................ S-24 UNITED STATES FEDERAL INCOME TAXATION........................................................ S-26 General................................................................................... S-26 Tax Treatment of the Notes................................................................ S-27 Non-U.S. Holders.......................................................................... S-27 Backup Withholding and Information Reporting.............................................. S-28 ERISA CONSIDERATIONS......................................................................... S-28 USE OF PROCEEDS AND HEDGING.................................................................. S-28 WHERE YOU CAN FIND MORE INFORMATION.......................................................... S-28 UNDERWRITING................................................................................. S-29 VALIDITY OF THE NOTES........................................................................ S-30 EXPERTS...................................................................................... S-30 INDEX OF DEFINED TERMS....................................................................... S-31 ANNEX A...................................................................................... A-1
S-2 Prospectus
Page ---- MERRILL LYNCH & CO., INC............................................. 2 USE OF PROCEEDS...................................................... 2 RATIO OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS........................ 3 THE SECURITIES....................................................... 3 DESCRIPTION OF DEBT SECURITIES....................................... 4 DESCRIPTION OF DEBT WARRANTS......................................... 10 DESCRIPTION OF CURRENCY WARRANTS..................................... 12 DESCRIPTION OF INDEX WARRANTS........................................ 14 DESCRIPTION OF PREFERRED STOCK....................................... 19 DESCRIPTION OF DEPOSITARY SHARES..................................... 24 DESCRIPTION OF PREFERRED STOCK WARRANTS.............................. 28 DESCRIPTION OF COMMON STOCK.......................................... 30 DESCRIPTION OF COMMON STOCK WARRANTS................................. 34 PLAN OF DISTRIBUTION................................................. 36 WHERE YOU CAN FIND MORE INFORMATION.................................. 37 INCORPORATION OF INFORMATION WE FILE WITH THE SEC.................... 37 EXPERTS.............................................................. 38
S-3 SUMMARY INFORMATION--Q&A This summary includes questions and answers that highlight selected information from this prospectus supplement and the accompanying prospectus to help you understand the Strategic Return Notes/SM/ Linked to the Industrial 15 Index due February 1, 2007 (the "Notes"). You should carefully read this prospectus supplement and the accompanying prospectus to fully understand the terms of the Notes, the Industrial 15 Index 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, 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 prospectus supplement to "ML&Co.", "we", "us" and "our" are to Merrill Lynch & Co., Inc., and references to "MLPF&S" are to Merrill Lynch, Pierce, Fenner & Smith Incorporated. What are the Notes? The Notes will be a series of senior debt securities issued by ML&Co. 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 1, 2007 unless exchanged by you as described in this prospectus supplement. A Unit will represent a single Note with an original public offering price of $10.00 (a "Unit"). You may transfer the Notes only in whole Units. You will not have the right to receive physical certificates evidencing your ownership except under limited circumstances. Instead, we will issue the Notes in the form of a global certificate, which will be held by The Depository Trust Company, also known as DTC, or its nominee. Direct and indirect participants in DTC will record your ownership of the Notes. You should refer to the section entitled "Description of the Notes--Depositary" in this prospectus supplement. What will I receive upon maturity of the Notes? At maturity, if you have not previously exchanged your Notes, you will receive a cash payment on the Notes equal to the "Redemption Amount". The "Redemption Amount" per Unit will equal: ( Ending Value ) $9.90 X ( -------------- ) ( Starting Value )
The Industrial 15 Index must increase in order for you to receive a Redemption Amount equal to or greater than the original public offering price, and, if the value of the Industrial 15 Index declines or has not increased sufficiently, you will receive less than the original public offering price of the Notes. The "Starting Value" equals 104.86, which was the closing value of the Industrial 15 Index on January 29, 2002, the date the Notes were priced for initial sale to the public (the "Pricing Date"). For purposes of determining the Redemption Amount, the "Ending Value" means the average, arithmetic mean, of the values of the Industrial 15 Index at the close of the market on five business days shortly before the maturity of the Notes. We may calculate the Ending Value by reference to fewer than five or even a single day's closing value if, during the period shortly before the maturity date of the Notes, there is a disruption in the trading of a stock included in the Industrial 15 Index or certain futures or options contracts relating to a stock included in the Industrial 15 Index. For more specific information about the Redemption Amount, please see the section entitled "Description of the Notes" in this prospectus supplement. S-4 Examples Here are two examples of Redemption Amount calculations: Example 1--The Industrial 15 Index is below the hypothetical Starting Value at maturity: Starting Value: 104.86 Hypothetical Ending Value: 20.97 ( 20.97 ) Redemption Amount (per Unit) = $9.90 X ( ------ ) = $1.98 ( 104.86 ) Total payment at maturity (per Unit) = $1.98 Example 2--The Industrial 15 Index is above the hypothetical Starting Value at maturity: Starting Value: 104.86 Hypothetical Ending Value: 188.75 ( 188.75 ) Redemption Amount (per Unit) = $9.90 X ( ------ ) = $17.82 ( 104.86 ) Total payment at maturity (per Unit) = $17.82 How does the exchange feature work? You may elect to exchange all or a portion of your Notes during a specified period in the month of January in the years 2003 through 2006 by giving notice to the depositary or trustee of the Notes, as the case may be, as described in this prospectus supplement. The amount of the cash payment you receive upon exchange (the "Exchange Amount") will be equal to the Redemption Amount, calculated as if the Exchange Date, as defined in this prospectus supplement, were the stated maturity date, except that the Ending Value will be equal to the closing value of the Industrial 15 Index on the Exchange Date. The Exchange Amount will be paid three Business Days following the Exchange Date. If you elect to exchange your Notes, you will receive only the Exchange Amount and you will not receive the Redemption Amount at maturity. The Exchange Amount you receive may be greater than or less than the Redemption Amount at maturity depending upon the performance of the Industrial 15 Index during the period from the Exchange Date until the stated maturity date. In addition, if the value of the Industrial 15 Index has not increased sufficiently above the Starting Value, the Exchange Amount will be less than the original public offering price. For more specific information about the exchange feature, please see the section entitled "Description of the Notes--Exchange of the Notes prior to maturity" in this prospectus supplement. Who publishes the Industrial 15 Index and what does the Industrial 15 Index measure? The Industrial 15 Index is calculated and disseminated by the American Stock Exchange under the index symbol "IXD". The Industrial 15 Index is an index which reflects the price changes and dividends of the top fifteen dividend yielding stocks from a group of certain stocks in Standard & Poor's Industrial Index (the "S&P Industrial Index") less an annual index adjustment factor of 1.5% applied daily (the "Index Adjustment Factor"). The Industrial 15 Index was calculated and disseminated beginning June 26, 2001. The Industrial 15 Index will be reconstituted on June 26/th/ of each year, the anniversary of the date the Industrial 15 Index was originally calculated and disseminated or, under certain circumstances, on a day shortly after the anniversary date, as described in this prospectus supplement. For more specific information about the Industrial 15 Index and its reconstitution, and the Index Adjustment Factor, please see the section entitled "The Industrial 15 Index" in this prospectus supplement. The Notes are debt obligations of ML&Co., and an investment in the Notes does not entitle you to any ownership interest in the stocks included in the Industrial 15 Index (collectively, the "Industrial 15 Stocks"). S-5 How has the Industrial 15 Index performed historically? The value of the Industrial 15 Index was set to 100 on June 26, 2001, the date the Industrial 15 Index was initially calculated. On January 29, 2002, the closing value of the Industrial 15 Index was 104.86. While there is currently little historical information about the Industrial 15 Index, we have provided a table and a graph showing the hypothetical month-end closing values of the Industrial 15 Index from May 1996 through May 2001. These closing values have been calculated hypothetically on the same basis that the Industrial 15 Index is currently calculated. We have provided this information to illustrate how the Industrial 15 Index would have performed from May 1996 through May 2001. For further details on the calculation of these hypothetical closing values please refer to the section entitled "The Industrial 15 Index--Historical Data on the Industrial 15 Index" in this prospectus supplement. We have also provided the actual month-end closing values of the Industrial 15 Index from June 2001 through December 2001. Any historical upward or downward trend in the level of the Industrial 15 Index during the periods presented is not an indication that the Industrial 15 Index is more or less likely to increase or decrease at any time during the term of the Notes. Will I receive interest payments on the Notes? You will not receive any interest payments on the Notes, but you will receive the Exchange Amount following the exercise of your exchange option or the Redemption Amount at maturity. We have designed the Notes for investors who are willing to forego market interest payments on the Notes, such as fixed or floating interest rates paid on standard senior non-callable debt securities, in exchange for the Exchange Amount or the Redemption Amount. What about taxes? The U.S. federal income tax consequences of an investment in the Notes are complex and uncertain. By purchasing a Note, you and ML&Co. hereby agree, in the absence of an administrative or judicial ruling to the contrary, to characterize a Note for all tax purposes as a pre-paid cash-settled forward contract linked to the value of the Industrial 15 Index. Under this characterization of the Notes, you should be required to recognize gain or loss to the extent that you receive cash on the maturity date or upon a sale or exchange of a Note prior to the maturity date. You should review the discussion under the section entitled "United States Federal Income Taxation" in this prospectus supplement. Will the Notes be listed on a stock exchange? The Notes have been approved for listing on the AMEX under the symbol "DSP", subject to official notice of issuance. You should be aware that the listing of the Notes on the AMEX will not necessarily ensure that a liquid trading market will be available for the Notes. You should review the section entitled "Risk Factors--There may be an uncertain trading market for the Notes" in this prospectus supplement. What is the role of MLPF&S? Our subsidiary, MLPF&S, is the underwriter for the offering and sale of the Notes. After the initial offering, MLPF&S intends to buy and sell Notes to create a secondary market for holders of the Notes, and may stabilize or maintain the 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. MLPF&S will also be our agent for purposes of calculating, among other things, the Ending Value, Redemption Amount and Exchange Amounts. Under certain circumstances, these duties could result in a conflict of interest between the status of MLPF&S as our subsidiary and its responsibilities as calculation agent. Who is ML&Co.? Merrill Lynch & Co., Inc. is a holding company with various subsidiary and affiliated companies that provide investment, financing, insurance and related services on a global basis. S-6 For information about ML&Co., see the section entitled "Merrill Lynch & Co., Inc." in the accompanying prospectus. You should also read other documents we have filed with the SEC, which you can find by referring to the section entitled "Where You Can Find More Information" in this prospectus supplement. Are there any risks associated with my investment? Yes, an investment in the Notes is subject to risk. Please refer to the section entitled "Risk Factors" in this prospectus supplement. S-7 RISK FACTORS Your investment in the Notes will involve risks. An investment in the Notes involves credit risks which are identical to those related to investments in any other debt obligations of ML&Co., and additional risks which are similar to investing in each of the Industrial 15 Stocks. You should carefully consider the following discussion of risks before deciding whether an investment in the Notes is suitable for you. Your investment may result in a loss We will not repay you a fixed amount of principal on the Notes at maturity or upon exchange. The payment on the Notes will depend on the change in the value of the Industrial 15 Index. Because the value of the Industrial 15 Index is subject to market fluctuations, the amount of cash you receive may be more or less than the original public offering price of your Notes. If the applicable Ending Value, at maturity or at the time you exchange your Notes, is less than or not sufficiently above the Starting Value, then the amount you receive will be less than the original public offering price of each Note, in which case your investment in the Notes will result in a loss to you. The original public offering price of $10 per Unit exceeds the $9.90 per Unit amount used to calculate the Redemption Amount and therefore the Industrial 15 Index must increase in order for you to receive a Redemption Amount or Exchange Amount equal to the original public offering price. The value of the Industrial 15 Index is expected to affect the trading value of the Notes The market value of the Notes will depend substantially on the amount by which the Industrial 15 Index exceeds or does not exceed the Starting Value. The value of the Notes is related to the Industrial 15 Index, and consequently, a sale of the Notes may result in a loss. Additionally, because the trading value and perhaps final return on your Notes is dependent on factors in addition to the Industrial 15 Index, such as our credit rating, an increase in the value of the Industrial 15 Index will not reduce the other investment risks related to 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 value of the Industrial 15 Index at maturity, an improvement in our credit ratings will not reduce the other investment risks related to the Notes. Your investment may become concentrated As a result of market fluctuations and/or reconstitution events, an investment in the Notes may carry risks similar to a concentrated investment in one or more industries. Your yield may be lower than the yield on other debt securities of comparable maturity The amount we pay you at maturity or upon exchange may be less than the return you could earn on other investments. Your yield may be less than the yield you would earn if you bought other senior non-callable debt securities 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. Your return will not reflect the return of owning the Industrial 15 Stocks While the Industrial 15 Index does reflect the payment of dividends on the Industrial 15 Stocks as described in more detail below, the yield to the maturity of the Notes will not produce the same yield as if the S-8 Industrial 15 Stocks were purchased and held for a similar period. At the end of each calendar quarter, the dividends accrued on the Industrial 15 Stocks will be incorporated into the Industrial 15 Index by adjusting the Share Multipliers of the stocks and the amounts will thereafter be subject to the price movements of the stocks. In addition, at the end of each day, the Industrial 15 Index will be reduced by a pro rata portion of the annual Index Adjustment Factor of 1.5%. Due to the effect of the annual Index Adjustment Factor and to the matters discussed above under "Your investment may result in a loss", the return on an investment in the Notes will be less than the return on a similar investment in the Industrial 15 Stocks, assuming transaction costs and taxes are not taken into account. The trading value of the Notes and final return on the Notes may also differ from the results of the Industrial 15 Index for the reasons discussed above under "Changes in our credit ratings may affect the trading value of the Notes". There may be an uncertain trading market for the Notes The Notes have been approved for listing on the AMEX under the trading symbol "DSP", subject to official notice of issuance. However, you cannot assume that a trading market will develop for the Notes. If a trading market does develop, there can be no assurance that there will be liquidity in the trading market. The development of a trading market for the Notes will depend on our financial performance and other factors such as the change in the value of the Industrial 15 Index. If the trading market for the Notes is limited, there may be a limited number of buyers for your Notes if you do not wish to hold your investment until maturity. This may affect the price you receive. Risk factors specific to companies included in the Industrial 15 Index The Industrial 15 Index is an index which reflects the price changes and dividends of the top fifteen dividend yielding Qualifying Stocks in the S&P Industrial Index less an annual Index Adjustment Factor. The stock prices of some of the companies included in the Industrial 15 Index (the "Industrial 15 Companies") have been and may continue to be volatile. These stock prices could be subject to wide fluctuations in response to a variety of factors, including the following: . general market fluctuations; . actual or anticipated variations in the quarterly operating results of the Industrial 15 Companies; . announcements of technological innovations or new services offered by competitors of the Industrial 15 Companies; . changes in financial estimates by securities analysts; . regulatory or legal developments, including significant litigation matters, affecting the Industrial 15 Companies or in the industries in which they operate; . announcements by competitors of the Industrial 15 Companies of significant acquisitions, strategic partnerships, joint ventures or capital commitments; and . departures of key personnel of the Industrial 15 Companies. The international operations of some of the Industrial 15 Companies expose them to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations and other risks inherent to international business. Some of the Industrial 15 Companies have international operations, which are essential parts of their businesses. The risks of international business that these companies are exposed to include the following: . general economic, social and political conditions; . the difficulty of enforcing intellectual property rights, agreements and collecting receivables through certain foreign legal systems; S-9 . differing tax rates, tariffs, exchange controls or other similar restrictions; . currency fluctuations; . changes in, and compliance with, domestic and foreign laws and regulations which impose a range of restrictions on operations, trade practices, foreign trade and international investment decisions; and . reduction in the number or capacity of personnel in international markets. Amounts payable on the Notes may be limited by state law New York State law governs the 1983 Indenture under which the Notes will be issued. New York has usury laws that limit the amount of interest that can be charged and paid on loans, which includes debt securities like the Notes. Under present New York law, the maximum rate of interest is 25% per annum on a simple interest basis. This limit may not apply to debt securities in which $2,500,000 or more has been invested. While we believe that New York law would be given effect by a state or Federal court sitting outside of New York, many other states also have laws that regulate the amount of interest that may be charged to and paid by a borrower. We will promise, for the benefit of the Note 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 Industrial 15 Stocks or futures or options contracts on the Industrial 15 Index or the Industrial 15 Stocks for our own accounts for business reasons and expect to enter into such transactions in connection with hedging our obligations under the Notes. These transactions could affect the price of Industrial 15 Stocks and, in turn, the value of the Industrial 15 Index in a manner that would be adverse to your investment in the Notes. Any purchases by us, our affiliates or others on our behalf on or before the Pricing Date may temporarily increase the prices of the Industrial 15 Stocks. Temporary increases in the market prices of the Industrial 15 Stocks may also occur as a result of the purchasing activities of other market participants. Consequently, the prices of the Industrial 15 Stocks may decline subsequent to the Pricing Date reducing the value of the Industrial 15 Index and therefore the market value of the Notes. Potential conflicts Our subsidiary, MLPF&S, is our agent for the purposes of calculating the Ending Value, Redemption Amount and Exchange Amounts. Under certain circumstances, MLPF&S' role 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 value of the Industrial 15 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 Industrial 15 Index. See the sections entitled "Description of the Notes--Adjustments to the Industrial 15 Index; Market Disruption Events" and "--Discontinuance of the Industrial 15 Index" in this prospectus supplement. 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. MLPF&S, the underwriter, will pay an additional amount on each anniversary of the Pricing Date in 2003 through 2006 to brokers whose client accounts purchased their Notes in the initial distribution and continue to hold the Notes. In addition, MLPF&S may from time to time pay additional amounts to brokers whose clients purchased Notes in the secondary market and continue to hold the Notes. You should understand that as a result of this additional payment, your broker receives a financial benefit each year you retain your investment in the Notes. Please see the section entitled "Underwriting" in this prospectus supplement. 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 Notes. This subsidiary expects to make a profit in connection with this arrangement. We did not seek competitive bids for this arrangement from unaffiliated parties. S-10 ML&Co. or its affiliates may presently or from time to time engage in business with one or more of the Industrial 15 Companies including extending loans to, or making equity investments in, the Industrial 15 Companies or providing advisory services to the Industrial 15 Companies, including merger and acquisition advisory services. In the course of business, ML&Co. or its affiliates may acquire non-public information relating to the Industrial 15 Companies and, in addition, one or more affiliates of ML&Co. may publish research reports about the Industrial 15 Companies. ML&Co. does not make any representation to any purchasers of the Notes regarding any matters whatsoever relating to the Industrial 15 Companies. Any prospective purchaser of the Notes should undertake an independent investigation of the Industrial 15 Companies as in its judgment is appropriate to make an informed decision with respect to an investment in the Notes. The composition of the Industrial 15 Index does not reflect any investment or sell recommendations of ML&Co. or its affiliates. Uncertain 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 prospectus supplement. S-11 DESCRIPTION OF THE NOTES ML&Co. will issue the Notes as a series of senior debt securities under the 1983 Indenture, which is more fully described in the accompanying prospectus. Unless exchanged by you, the Notes will mature on February 1, 2007. While at maturity or upon exchange a beneficial owner of a Note will receive an amount equal to the Redemption Amount or the Exchange Amount, as the case may be, there will be no other payment of interest, periodic or otherwise. See the section entitled "--Payment at maturity" and "--Exchange of the Notes prior to maturity" in this prospectus supplement. The Notes may be exchanged by you during an Exchange Notice Period, but are not subject to redemption by ML&Co. before maturity. If an Event of Default occurs with respect to the Notes, beneficial owners of the Notes may accelerate the maturity of the Notes, as described under "--Events of Default and Acceleration" in this prospectus supplement and "Description of Debt Securities--Events of Default" in the accompanying prospectus. ML&Co. will issue the Notes in denominations of whole Units each with an original public offering price of $10 per Unit. The Notes will not have the benefit of any sinking fund. Payment at maturity For each Note that has not been exchanged prior to maturity, the holder will be entitled to receive the Redemption Amount, as provided below. Determination of the Redemption Amount The "Redemption Amount" per Unit will be determined by the calculation agent and will equal: ( Ending Value ) $9.90 X ( -------------- ) ( Starting Value )
The "Starting Value" equals 104.86, which was the closing value of the Industrial 15 Index on the Pricing Date. For the purpose of determining the Redemption Amount, the "Ending Value" will be determined by the calculation agent and will equal the average, arithmetic mean, of the closing values of the Industrial 15 Index determined on each of the first five Calculation Days during the Calculation Period. If there are fewer than five Calculation Days during the Calculation Period, then the Ending Value will equal the average, arithmetic mean, of the closing values of the Industrial 15 Index on those Calculation Days. If there is only one Calculation Day during the Calculation Period, then the Ending Value will equal the closing value of the Industrial 15 Index on that Calculation Day. If no Calculation Days occur during the Calculation Period, then the Ending Value will equal the closing value of the Industrial 15 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. S-12 A "Calculation Day" means any Index Business Day during the Calculation Period on which a Market Disruption Event has not occurred. An "Index Business Day" means a day on which the New York Stock Exchange and the AMEX are open for trading and the Industrial 15 Index or any successor index is calculated and published. All determinations made by the calculation agent shall be at the sole discretion of the calculation agent and, absent a determination by the calculation agent of a manifest error, shall be conclusive for all purposes and binding on ML&Co. and the holders and beneficial owners of the Notes. Exchange of the Notes prior to maturity You may elect to exchange all or a portion of the Notes you own during any Exchange Notice Period by giving notice as described below. An "Exchange Notice Period" means any Business Day from and including the first calendar day of the month of January to and including 12:00 noon in The City of New York on the fifteenth calendar day during the month of January in the years 2003, 2004, 2005 and 2006. If the fifteenth calendar day of the applicable month of January is not a Business Day, then the Exchange Notice Period will be extended to 12:00 noon in The City of New York on the next succeeding Business Day. The amount of the cash payment you receive upon exchange (the "Exchange Amount") will be equal to the Redemption Amount, calculated as if the Exchange Date were the stated maturity date, except that the Ending Value will be equal to the closing value of the Industrial 15 Index on the Exchange Date. An "Exchange Date" will be the second Index Business Day following the end of the applicable Exchange Notice Period. If a Market Disruption Event occurs on the second Index Business Day following an Exchange Notice Period, the Exchange Date for that year will be the next succeeding Index Business Day on which a Market Disruption Event does not occur. The Exchange Amount will be paid three Business Days after the Exchange Date. The Notes will be issued in registered global form and will remain on deposit with the depositary as described in this prospectus supplement. Therefore, you must exercise the option to exchange your Notes through the depositary. To make your exchange election effective, you must make certain that your notice is delivered to the depositary during the applicable Exchange Notice Period. To ensure that the depositary will receive timely notice of your election to exchange all or a portion of your Notes, you must instruct the direct or indirect participant through which you hold an interest in the Notes to notify the depositary of your election to exchange your Notes prior to 12:00 noon in The City of New York on the last day of the applicable Exchange Notice Period, in accordance with the then applicable operating procedures of the depositary. Different firms have different deadlines for accepting instructions from their customers. You should consult the direct or indirect participant through which you hold an interest in the Notes to ascertain the deadline for ensuring that timely notice will be delivered to the depositary. If at any time the global securities are exchanged for Notes in definitive form, from and after that time notice of your election to exchange must be delivered to JPMorgan Chase Bank, as trustee under the 1983 Indenture, through the procedures required by the trustee by 12:00 noon in The City of New York on the last day of the applicable Exchange Notice Period. Hypothetical returns The following tables illustrate, for a range of hypothetical Ending Values of the Industrial 15 Index during the Calculation Period: . the total amount payable at maturity of the Notes, and the total amount payable on an investment in the Industrial 15 Stocks, . the total rate of return to beneficial owners of the Notes, and the total return on an investment in the Industrial 15 Stocks, and S-13 . the pretax annualized rate of return to beneficial owners of the Notes, and the pretax annualized rate of return on an investment in the Industrial 15 Stocks. The tables below assume an initial investment of $10 in the Notes and an initial investment of $10 in the Industrial 15 Stocks.
Hypothetical Returns Related to Strategic Return Notes Hypothetical Returns Related to an Investment based on the Industrial 15 Index in the Industrial 15 Stocks - ------------------------------------------------------ ------------------------------------------------------- Hypothetical Pretax Hypothetical Total Pretax Ending Total Annualized Ending Amount Total Annualized Value of an Total Rate of Rate of Value of the Payable at Rate of Rate of Investment in Amount Return on Return on Industrial Maturity Return on Return on the Industrial Payable at the Industrial the Industrial 15 Index(1) Per Note the Notes the Notes(2) 15 Stocks(3) Maturity 15 Stocks 15 Stocks(2) ------------ ---------- --------- ------------ -------------- ---------- -------------- -------------- 20.00 $ 1.89 -81.12% -30.69% 21.56 $ 2.06 -79.44% -29.25% 40.00 $ 3.78 -62.24% -18.55% 43.12 $ 4.11 -58.88% -17.00% 60.00 $ 5.66 -43.35% -11.04% 64.68 $ 6.17 -38.32% -9.43% 80.00 $ 7.55 -24.47% -5.53% 86.23 $ 8.22 -17.76% -3.87% 100.00 $ 9.44 -5.59% -1.15% 107.79 $10.28 2.80% 0.55% 104.86(4) $ 9.90 -1.00% -0.20% 113.03 $10.78 7.79% 1.51% 120.00 $11.33 13.29% 2.51% 129.35 $12.34 23.36% 4.24% 140.00 $13.22 32.18% 5.65% 150.91 $14.39 43.92% 7.41% 160.00 $15.11 51.06% 8.42% 172.47 $16.45 64.48% 10.20% 180.00 $16.99 69.94% 10.89% 194.03 $18.50 85.03% 12.69% 200.00 $18.88 88.82% 13.12% 215.59 $20.56 105.59% 14.94% 220.00 $20.77 107.71% 15.16% 237.14 $22.62 126.15% 17.00% 240.00 $22.66 126.59% 17.04% 258.70 $24.67 146.71% 18.89% 260.00 $24.55 145.47% 18.78% 280.26 $26.73 167.27% 20.65% 280.00 $26.44 164.35% 20.41% 301.82 $28.78 187.83% 22.29%
- -------- (1)The Industrial 15 Index reflects the total return of the top fifteen dividend yielding Qualifying Stocks in the S&P Industrial Index less an annual Index Adjustment Factor of 1.5%. (2)The annualized rates of return are calculated on a semiannual bond equivalent basis and assume an investment term of 5 years. (3)An investment in the Industrial 15 Stocks is assumed to be the equivalent to an investment in the Industrial 15 Index, including the method and timing of reinvesting dividends, except that the Industrial 15 Index is reduced daily by the pro rata portion of the annual Index Adjustment Factor of 1.5%. The hypothetical investment in the Industrial 15 Stocks presented in this column does not take into account transaction costs and taxes. (4)This is the Starting Value of the Industrial 15 Index. The above figures are for purposes of illustration only. The actual Redemption Amount received by investors in the Notes and the resulting total and pretax annualized rates of return will depend on the actual Ending Value and term of your investment. Adjustments to the Industrial 15 Index; Market Disruption Events If at any time the AMEX changes its method of calculating the Industrial 15 Index, or the value of the Industrial 15 Index changes, in any material respect, or if the Industrial 15 Index is in any other way modified so that the Industrial 15 Index does not, in the opinion of the calculation agent, fairly represent the value of the Industrial 15 Index had those changes or modifications not been made, then, from and after that time, the calculation agent shall, at the close of business in New York, New York, on each date that the closing value of S-14 the Industrial 15 Index is to be calculated, make those 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 Industrial 15 Index as if those changes or modifications had not been made, and calculate the closing value with reference to the Industrial 15 Index, as so adjusted. Accordingly, if the method of calculating the Industrial 15 Index is modified so that the value of the Industrial 15 Index is a fraction or a multiple of what it would have been if it had not been modified, e.g., due to a split, then the calculation agent shall adjust the Industrial 15 Index in order to arrive at a value of the Industrial 15 Index as if it had not been modified, e.g., as if a split had not occurred. "Market Disruption Event" means either of the following events as determined by the calculation agent: (A)the suspension or material limitation on trading for more than two hours of trading, or during the one-half hour period preceding the close of trading, on the applicable exchange, in one or more stocks which then comprise the Industrial 15 Index; or (B)the suspension or material limitation, in each case, for more than two hours of trading, or during the one-half hour period preceding the close of trading, on the applicable exchange, whether by reason of movements in price otherwise exceeding levels permitted by the relevant exchange or otherwise, in option contracts or futures contracts related to the Industrial 15 Stocks, or the stocks included in any successor index, which are traded on any major U.S. exchange. For the purpose of the above definition: (1)a limitation on the hours in a trading day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange, and (2)for the purpose of clause (A) above, any limitations on trading during significant market fluctuations under NYSE 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". As a result of the terrorist attacks in Manhattan and Washington, D.C., the financial markets were closed from September 11, 2001 through September 14, 2001 and values of the Industrial 15 Index are not available for such dates. Such market closures would have constituted Market Disruption Events. Discontinuance of the Industrial 15 Index If the AMEX discontinues publication of the Industrial 15 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 Industrial 15 Index (a "successor index"), then, upon the calculation agent's notification of any determination to the trustee and ML&Co., the calculation agent will substitute the successor index as calculated by the AMEX or any other entity for the Industrial 15 Index and calculate the closing value as described above under "--Payment at maturity". Upon any selection by the calculation agent of a successor index, ML&Co. shall cause notice to be given to holders of the Notes. In the event that the AMEX discontinues publication of the Industrial 15 Index and: . the calculation agent does not select a successor index, or . the successor index is no longer published on any of the Calculation Days, the calculation agent will compute a substitute value for the Industrial 15 Index in accordance with the procedures last used to calculate the Industrial 15 Index before any discontinuance. If a successor index is S-15 selected or the calculation agent calculates a value as a substitute for the Industrial 15 Index as described below, the successor index or value will be used as a substitute for the Industrial 15 Index for all purposes, including for purposes of determining whether a Market Disruption Event exists. If the AMEX discontinues publication of the Industrial 15 Index before the period during which the 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: . the determination of the Ending Value, or . a determination by the calculation agent that a successor index is available, the calculation agent will determine the value that would be used in computing the Redemption Amount as described in the preceding paragraph as if that day were a Calculation Day. The calculation agent will cause notice of each value to be published not less often than once each month in The Wall Street Journal (the "WSJ") or another newspaper of general circulation, and arrange for information with respect to these values to be made available by telephone. A "Business Day" is any day on which the NYSE and the AMEX are open for trading. Notwithstanding these alternative arrangements, discontinuance of the publication of the Industrial 15 Index may adversely affect trading in the Notes. 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 beneficial owner of a Note upon any acceleration permitted by the Notes, with respect to each Unit, will be equal to the Redemption Amount, if any, calculated as though the date of early repayment were the stated maturity date of the Notes. See the section entitled "--Payment at maturity" in this prospectus supplement. If a bankruptcy proceeding is commenced in respect of ML&Co., the claim of the beneficial owner of a Note may be limited, under Section 502(b)(2) of Title 11 of the United States Code, to the original public offering price of the Note plus an additional amount of contingent interest calculated as though the date of the commencement of the proceeding was the maturity date of the Notes. In case of default in payment of the Notes, whether at their stated maturity or upon exchange or acceleration, from and after the maturity date the Notes will bear interest, payable upon demand of their beneficial owners, at the rate of 1.97% per year 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. Depositary Description of the Global Securities Upon issuance, all Notes will be represented by one or more fully registered global securities. Each global security will be deposited with, or on behalf of, DTC (DTC, together with any successor, being a "depositary"), as depositary, registered in the name of Cede & Co., DTC's partnership nominee. Unless and until it is exchanged in whole or in part for Notes 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. S-16 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 Notes represented by the global security for all purposes under the 1983 Indenture. Except as provided below, the beneficial owners of the Notes represented by a global security will not be entitled to have the Notes represented by a global security registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered the owners or holders of the Notes 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 that action, and those participants would authorize beneficial owners owning through those participants to give or take that 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 will act as securities depositary for the Notes. The Notes will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One or more fully registered global securities will be issued for the Notes in the aggregate original public offering price of such issue, and will be 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 pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants deposit with DTC. DTC also facilitates the settlement among participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants of DTC include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its direct participants and by the 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 Notes under DTC's system must be made by or through direct participants, which will receive a credit for the Notes 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 or indirect participants through which the beneficial owner entered into the transaction. Transfers of ownership interests in the Notes are to be made by entries on the books of participants acting on behalf of beneficial owners. To facilitate subsequent transfers, all Notes deposited with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Notes with DTC and their registration in the name of Cede & Co. S-17 effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the Notes; DTC's records reflect only the identity of the direct participants to whose accounts such Notes 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 participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to the Notes. 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 Notes are credited on the record date. Principal, premium, if any, and/or interest, if any, payments made in cash on the Notes will be made in immediately available funds to DTC. DTC's practice is to credit direct participants' accounts on the applicable payment date in accordance with their respective holdings shown on the depositary's records unless DTC has reason to believe that it will not receive payment on that date. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of that participant and not of DTC, the trustee or ML&Co., subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and/or interest, if any, to DTC is the responsibility of ML&Co. or the trustee, disbursement of those payments to direct participants shall be the responsibility of DTC, and disbursement of any payments to the beneficial owners will be the responsibility of direct participants and indirect participants. Exchange for Certificated Securities If: . 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, . ML&Co. executes and delivers to the trustee a company order to the effect that the global securities shall be exchangeable, or . an Event of Default under the 1983 Indenture has occurred and is continuing with respect to the Notes, the global securities will be exchangeable for Notes in definitive form of like tenor in whole Units and multiples of Units. The definitive Notes 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. DTC may discontinue providing its services as securities depositary with respect to the Notes at any time by giving reasonable notice to ML&Co. or the trustee. Under these circumstances, in the event that a successor securities depositary is not obtained, Notes are required to be printed and delivered. ML&Co. may decide to discontinue use of the system of book-entry transfers through DTC or a successor securities depositary. In that event, Notes will be printed and delivered. S-18 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 Settlement for the Notes will be made by the underwriter in immediately available funds. ML&Co. will make all payments in immediately available funds so long as the Notes are maintained in book-entry form. S-19 THE INDUSTRIAL 15 INDEX Industrial 15 Index The value of the Industrial 15 Index is calculated and disseminated by the AMEX under the symbol "IXD". On any Business Day, the value of the Industrial 15 Index equals (i) the sum of the products of the current market price for each of the Industrial 15 Stocks and the applicable share multiplier (the sum equals the "Industrial 15 Portfolio Value"), plus (ii) an amount reflecting Current Quarter Dividends (as defined below), and less (iii) a pro rata portion of the annual Index Adjustment Factor. The Index Adjustment Factor is 1.5% per annum and reduces the value of the Industrial 15 Index each day by the pro rata amount. The AMEX generally calculates and disseminates the value of the Industrial 15 Index based on the most recently reported prices of the Industrial 15 Stocks (as reported by the exchange or trading system on which the Industrial 15 Stocks are listed or traded), at approximately 15-second intervals during the AMEX's business hours and at the end of each Index Business Day via the Consolidated Tape Association's Network B. Initial Determination of Industrial 15 Portfolio At any time the "Industrial 15 Portfolio" consists of the then current Industrial 15 Stocks. The stocks currently included in the Industrial 15 Portfolio and their respective Dividend Yields are shown below. The initial stocks included in the Industrial 15 Portfolio have been determined by the Index Calculation Agent to be the fifteen Qualifying Stocks in the S&P Industrial Index having the highest Dividend Yield on May 31, 2001 (the "Initial Stocks"). Due to certain corporate events described below in more detail, the Industrial 15 Index currently consists of two stocks in addition to the fifteen Initial Stocks, for a total of seventeen stocks. A "Qualifying Stock" is any stock from the S&P Industrial Index that is in the top 75% of the stocks, as measured by market capitalization after the elimination of (i) stocks included in the Dow Jones Industrial Average; and (ii) stocks that do not have an S&P Common Stock Ranking of A or A+. We have included a brief description of each of the Industrial 15 Companies and historical stock price information for the Industrial 15 Stocks in Annex A to this prospectus supplement. "Dividend Yield" for each common stock is determined by annualizing the last quarterly or semi-annual ordinary cash dividend for which the ex-dividend date has occurred, excluding any extraordinary dividend, and dividing the result by the last available sale price for each stock on its primary exchange on the date that Dividend Yield is to be determined.
Dividend Share Company Yield(1) Multiplier(1) - ------- -------- ------------- Albertson's, Inc................................................ 2.65% 0.22836 ALLTEL Corporation.............................................. 2.49% 0.11601 Avery Dennison Corporation...................................... 2.27% 0.13151 Bristol-Myers Squibb Company.................................... 2.48% 0.12677 The Clorox Company.............................................. 2.10% 0.19366 ConAgra, Inc.................................................... 3.79% 0.34277 Emerson Electric Co............................................. 2.77% 0.10731 The Gillette Company............................................ 2.04% 0.23660 Hershey Foods Corporation....................................... 1.74% 0.10970 Imagistics International Inc.................................... 0.00% 0.01322 Johnson Controls, Inc........................................... 1.64% 0.09365 The May Department Stores Company............................... 2.65% 0.20272 Newell Rubbermaid Inc........................................... 3.11% 0.27618 Pitney Bowes Inc................................................ 2.97% 0.16522 Rohm and Haas Company........................................... 2.30% 0.21261 Textron Inc..................................................... 2.96% 0.11983 Zimmer Holdings, Inc............................................ 0.00% 0.01268
- -------- (1)As of January 29, 2002. S-20 The dividend yield on the Industrial 15 Index as of January 29, 2002, was 2.46%. Due to certain corporate events as described below under "Adjustments to the Share Multiplier and Industrial 15 Portfolio", the Industrial 15 Index currently consists of seventeen companies. This occurred as a result of Bristol-Myers Squibb Company and Pitney Bowes Inc. issuing to their shareholders equity securities of Zimmer Holdings, Inc. and Imagistics International Inc., respectively. It is expected the Industrial 15 Index will contain these two additional companies until the Industrial 15 Index is reconstituted on the Anniversary Date. The initial Share Multipliers were calculated by the AMEX on June 26, 2001, the date the Index was originally calculated and disseminated. Each initial Share Multiplier equaled the number of shares of that Initial Stock, or portion thereof, based upon the closing market price of that Initial Stock on June 26, 2001, so that each Initial Stock represented approximately an equal percentage of the Industrial 15 Index as of June 26, 2001. Each Share Multiplier remains constant until adjusted for certain corporate events, quarterly dividend adjustments and annual reconstitutions as described below. Annual Industrial 15 Portfolio Reconstitution As of the close of business on each Anniversary Date through the Anniversary Date in 2006, the Industrial 15 Portfolio shall be reconstituted to include the fifteen Qualifying Stocks in the S&P Industrial Index having the highest Dividend Yield (the "New Stocks") on the second scheduled Index Business Day prior to the applicable Anniversary Date (the "Annual Determination Date"). "Anniversary Date" shall mean June 26th of each year, which is the anniversary date of the date the Industrial 15 Index was originally calculated and disseminated; provided, however, that if the 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. The AMEX will only add a stock having characteristics as of the applicable Annual Determination Date that will permit the Industrial 15 Index to remain within the criteria specified in the rules of the AMEX and within the applicable rules of the Securities and Exchange Commission. The 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 Qualifying Stock with the next highest Dividend Yield which meets the rules and criteria. These criteria currently provide, among other things, (1) 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 Industrial 15 Index may have a market value of $50 million; (2) 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 Industrial 15 Index may have an average monthly trading volume of 500,000 shares or more in the last six months; (3) 90% of the Industrial 15 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 (4) 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 "Share Multiplier" for each New Stock will be determined by the AMEX and will equal the number of shares of each New Stock, based upon the closing market price of that New Stock on the Anniversary Date, so that each New Stock represents approximately an equal percentage of a value equal to the Industrial 15 Index in effect at the close of business on the applicable Anniversary Date. As an example, if the Industrial 15 Index in effect at the close of business on an Anniversary Date equaled 150, then each of the fifteen New Stocks would be allocated a portion of the value of the Industrial 15 Index equal to 10 and if, the closing market price of a New Stock on the Anniversary Date was 20, the applicable Share Multiplier would be 0.5. If the Industrial 15 Index equaled 60, then each of the fifteen New Stocks would be allocated a portion of the value of the Industrial 15 Index equal to 4 and if the closing market price of a New Stock on the Anniversary Date was 20, the applicable Share Multiplier would be 0.2. The last Anniversary Date on which a reconstitution will occur will be the Anniversary Date in 2006, which will be approximately one year prior to the maturity date of the Notes. S-21 S&P Industrial Index The S&P Industrial Index is a subset of the S&P 500 Index made up of the companies in the S&P 500 Index that are considered industrial companies. The S&P 500 Index is published by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. and is intended to provide an indication of the pattern of common stock price movement. The value of the S&P 500 Index is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943. Companies included in the S&P 500 Index are classified as one of four different types of companies: utility, transportation, financial or industrial. Dividends Current Quarter Dividend As described above, the value of the Industrial 15 Index will include an amount reflecting Current Quarter Dividends. "Current Quarter Dividends" for any day will be determined by the Index Calculation Agent and will equal the sum of the products for each Industrial 15 Stock of the cash dividend paid by an issuer on one share of stock during the Current Quarter multiplied by the Share Multiplier applicable to such stock on the ex-dividend date. "Current Quarter" shall mean the calendar quarter containing the day for which the applicable Current Quarter Dividends are 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 Industrial 15 Stock. The amount of the Current Quarter Dividends allocated to each Industrial 15 Stock will equal the percentage of the value of each Industrial 15 Stock contained in the Industrial 15 Portfolio relative to the value of the entire Industrial 15 Portfolio based on the closing market price on the last Index Business Day in the immediately preceding calendar quarter. The Share Multiplier of each such outstanding Industrial 15 Stock will be increased to reflect the number of shares, or portion of a share, that the amount of the Current Quarter Dividend allocated to such Industrial 15 Stock can purchase of each such Industrial 15 Stock based on the closing market price on the last Index Business Day in the immediately preceding calendar quarter. Adjustments to the Share Multiplier and Industrial 15 Portfolio The Share Multiplier for any Industrial 15 Stock and the Industrial 15 Portfolio will be adjusted as follows: 1. If an Industrial 15 Stock is subject to a stock split or reverse stock split, then once the split has become effective, the Share Multiplier for that Industrial 15 Stock will be adjusted to equal the product of the number of shares issued with respect to one such share of that Industrial 15 Stock and the prior multiplier. 2. If an Industrial 15 Stock is subject to a stock dividend, issuance of additional shares of the Industrial 15 Stock, that is given equally to all holders of shares of the issuer of that Industrial 15 Stock, then once the dividend has become effective and that Industrial 15 Stock is trading ex-dividend, the Share Multiplier will be adjusted so that the new Share Multiplier shall equal the former Share Multiplier plus the product of the number of shares of that Industrial 15 Stock issued with respect to one such share of that Industrial 15 Stock and the prior multiplier. S-22 3. If an Industrial 15 Company is being liquidated or is subject to a proceeding under any applicable bankruptcy, insolvency or other similar law, that Industrial 15 Stock will continue to be included in the Industrial 15 Portfolio so long as a market price for that Industrial 15 Stock is available. If a market price is no longer available for an Industrial 15 Stock for whatever reason, including the liquidation of the issuer of the Industrial 15 Stock or the subjection of the issuer of the Industrial 15 Stock to a proceeding under any applicable bankruptcy, insolvency or other similar law, then the value of that Industrial 15 Stock will equal zero in connection with calculating the Industrial 15 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 Industrial 15 Portfolio to compensate for the deletion of such Industrial 15 Stock. If a market price is no longer available for a Industrial 15 Stock as described above, the Industrial 15 Portfolio Value will be computed based on the remaining Industrial 15 Stocks for which market prices are available and no new stock will be added to the Industrial 15 Portfolio until the annual reconstitution of the Industrial 15 Portfolio. As a result, there may be periods during which the Industrial 15 Portfolio contains fewer than fifteen Industrial 15 Stocks. 4. If an Industrial 15 Company has been subject to a merger or consolidation and is not the surviving entity or is nationalized, then a value for that Industrial 15 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 Industrial 15 Stock and that value will be constant until the Industrial 15 Portfolio is reconstituted. At that time, no adjustment will be made to the Share Multiplier of the relevant Industrial 15 Stock. 5. If an Industrial 15 Company issues to all of its shareholders equity securities that are publicly traded of an issuer other than the Industrial 15 Company, or a tracking stock is issued by an Industrial 15 Company to all of its shareholders, then the new equity securities will be added to the Industrial 15 Portfolio as a new Industrial 15 Stock. The Share Multiplier for the new Industrial 15 Stock will equal the product of the original Share Multiplier with respect to the Industrial 15 Stock for which the new Industrial 15 Stock is being issued (the "Original Industrial 15 Stock") and the number of shares of the new Industrial 15 Stock issued with respect to one share of the Original Industrial 15 Stock. No adjustments of any Share Multiplier of an Industrial 15 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 Industrial 15 Stock or to the Industrial 15 Portfolio will be made other than those specified above, however, the AMEX may at its discretion make adjustments to maintain the value of the Industrial 15 Index if certain events would otherwise alter the value of the Industrial 15 Index despite no change in the market prices of the Industrial 15 Stocks. S-23 Historical Data on the Industrial 15 Index Actual Historical Data The Industrial 15 Index was originally calculated and disseminated beginning June 26, 2001 with an initial value of 100. The following chart sets forth the actual month-end closing levels of the Industrial 15 Index from June 2001 through December 2001. Any historical upward or downward trend in the level of the Industrial 15 Index during this period is not any indication that the Industrial 15 Index is more or less likely to increase or decrease at any time during the term of the Notes. All historical data presented in the following chart were calculated by the AMEX.
2001 Closing Price ---- ------------- June......................... 100.67 July......................... 102.48 August....................... 104.12 September.................... 96.35 October...................... 98.19 November..................... 105.85 December..................... 106.46
The closing value of the Industrial 15 Index on January 29, 2002 was 104.86. Hypothetical Historical Data The following table sets forth the hypothetical level of the Industrial 15 Index at the end of each month (the "Historical Month-End Closing Level"), in the period from May 1996 through May 2001 calculated as if the Industrial 15 Index had existed during that period. All hypothetical historical data presented in the following table were calculated by the AMEX. The closing levels have been calculated hypothetically on the same basis that the Industrial 15 Index is currently calculated. The Historical Month-End Closing Level was set to 100 on May 31, 1996 to provide an illustration of past movements of the Historical Month-End Closing Level only. We have provided this historical information to help you evaluate the behavior of the Industrial 15 Index in various economic environments; however, these hypothetical historical data on the Industrial 15 Index are not necessarily indicative of the future performance of the Industrial 15 Index or what the value of the Notes may be. Any historical upward or downward trend in the level of the Industrial 15 Index during any period set forth below is not any indication that the Industrial 15 Index is more or less likely to increase or decrease at any time during the term of the Notes. Historical Month-End Closing Levels
1996 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ ------ January..................................... 116.66 156.88 180.23 148.16 156.96 February.................................... 121.94 163.76 177.61 134.75 157.47 March....................................... 116.35 166.13 173.50 144.08 151.86 April....................................... 122.42 160.81 179.67 147.40 157.06 May......................................... 100.00 129.24 160.45 180.42 153.39 158.44 June........................................ 102.43 133.98 166.00 182.75 146.02 July........................................ 100.27 138.89 158.69 174.86 139.99 August...................................... 100.53 132.00 147.36 165.36 136.43 September................................... 106.19 139.56 157.49 152.86 138.76 October..................................... 108.67 137.94 169.59 159.93 147.94 November.................................... 115.62 146.17 174.35 158.64 150.78 December.................................... 111.65 153.56 179.81 155.87 155.93
S-24 The following graph sets forth the hypothetical historical performance of the Industrial 15 Index presented in the table above. Past movements of the Industrial 15 Index are not necessarily indicative of the future Industrial 15 Index values. [THE GRAPH APPEARING HERE SETS FORTH HYPOTHETICAL HISTORICAL MONTH END PERFORMANCE OF THE INDUSTRIAL 15 INDEX FROM MAY 1996 THROUGH MAY 2001, AS SET FORTH IN THE TABLE ON THE PREVIOUS PAGE. THE VERTICAL AXIS HAS A RANGE OF NUMBERS FROM 80 TO 200 IN INCREMENTS OF 20. THE HORIZONTAL AXIS HAS A RANGE OF DATES FROM MAY 1996 THROUGH MAY 2001 IN INCREMENTS OF ONE MONTH.] S-25 UNITED STATES FEDERAL INCOME TAXATION The following discussion is based upon the opinion of Sidley Austin Brown & Wood LLP, counsel to ML&Co. ("Tax Counsel"). As the law applicable to the U.S. federal income taxation of instruments such as the Notes is technical and complex, the discussion below necessarily represents only a general summary. The following summary is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (including changes in effective dates) or possible differing interpretations. It deals only with Notes held as capital assets and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, persons holding Notes as a hedge against currency risks, as a position in a "straddle" or as part of a "hedging" or "conversion" transaction for tax purposes, or persons whose functional currency is not the United States dollar. It also does not deal with holders other than original purchasers (except where otherwise specifically noted). Persons considering the purchase of the Notes should consult their own tax advisors concerning the application of United States federal income tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of the Notes arising under the laws of any other taxing jurisdiction. As used herein, the term "U.S. Holder" means a beneficial owner of a Note that is for U.S. federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation or a partnership (including an entity treated as a corporation or a partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise), (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, (iv) 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 (v) any other person whose income or gain in respect of a Note is effectively connected with the conduct of a United States trade or business. Certain trusts not described in clause (iv) above in existence on August 20, 1996 that elect to be treated as a United States person will also be a U.S. Holder for purposes of the following discussion. As used herein, the term "Non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder. General There are no statutory provisions, regulations, published rulings or judicial decisions addressing or involving the characterization and treatment, for U.S. federal income tax purposes, of the Notes or securities with terms substantially the same as the Notes. Accordingly, the proper U.S. federal income tax characterization and treatment of the Notes is uncertain. Pursuant to the terms of the Notes, ML&Co. and every holder of a Note agree (in the absence of an administrative determination or judicial ruling to the contrary) to characterize the Notes for all tax purposes as a pre-paid cash-settled forward contract linked to the value of the Industrial 15 Index. In the opinion of Tax Counsel, such characterization and tax treatment of the Notes, although not the only reasonable characterization and tax treatment, is based on reasonable interpretations of law currently in effect and, even if successfully challenged by the Internal Revenue Service (the "IRS"), will not result in the imposition of penalties. The treatment of the Notes described above is not, however, binding on the IRS or the courts. No statutory, judicial or administrative authority directly addresses the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to the Notes. Due to the absence of authorities that directly address instruments that are similar to the Notes, significant aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain, and no assurance can be given that the IRS or the courts will agree with the characterization described above. Accordingly, prospective purchasers are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of an investment in the Notes (including alternative characterizations of the Notes) and with respect to any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. Unless otherwise stated, the following discussions are based on the assumption that the treatment described above is accepted for U.S. federal income tax purposes. S-26 Tax Treatment of the Notes Assuming the characterization of the Notes as set forth above, Tax Counsel believes that the following U.S. federal income tax consequences should result. Tax Basis. A U.S. Holder's tax basis in a Note will equal the amount paid by the U.S. Holder to acquire the Note. Payment on the Maturity Date. Upon the receipt of cash at maturity of the Notes, a U.S. Holder will recognize gain or loss. The amount of such gain or loss will be the extent to which the amount of the cash received differs from the U.S. Holder's tax basis in the Note. It is uncertain whether any such gain or loss would be treated as ordinary income or loss or capital gain or loss. Absent a future clarification in current law (by an administrative determination or judicial ruling), where required, ML&Co. intends to report any such gain or loss to the IRS in a manner consistent with the treatment of such gain or loss as capital gain or loss. If such gain or loss is treated as capital gain or loss, then any such gain or loss will generally be long-term capital gain or loss, as the case may be, if the U.S. Holder held the Note for more than one year at maturity. Sale or Exchange of the Notes. Upon a sale or exchange of a Note prior to the maturity of the Notes, a U.S. Holder will generally recognize capital gain or loss equal to the difference between the amount realized on such sale or exchange and such U.S. Holder's tax basis in the Note so sold or exchanged. Capital gain or loss will generally be long-term capital gain or loss if the U.S. Holder held the Note for more than one year at the time of disposition. Possible Alternative Tax Treatments of an Investment in the Notes Due to the absence of authorities that directly address the proper characterization of the Notes, no assurance can be given that the IRS will accept, or that a court will uphold, the characterization and tax treatment described above. In particular, the IRS could seek to analyze the U.S. federal income tax consequences of owning the Notes under Treasury regulations governing contingent payment debt instruments (the "Contingent Payment Regulations"). If the IRS were successful in asserting that the Contingent Payment Regulations applied to the Notes, the timing and character of income thereon would be significantly affected. Among other things, a U.S. Holder would be required to accrue original issue discount on the Notes every year at a "comparable yield" for us, determined at the time of issuance of the Notes. Furthermore, any gain realized at maturity or upon sale or other disposition of the Notes would generally be treated as ordinary income, and any loss realized at maturity would be treated as ordinary loss to the extent of the U.S. Holder's prior accruals of original issue discount and capital loss thereafter. Even if the Contingent Payment Regulations do not apply to the Notes, other alternative U.S. federal income tax characterizations or treatments of the Notes may also be possible, and if applied could also affect the timing and the character of the income or loss with respect to the Notes. Accordingly, prospective purchasers are urged to consult their tax advisors regarding the U.S. federal income tax consequences of an investment in the Notes. Non-U.S. Holders Based on the treatment of each Note as a pre-paid cash-settled forward contract linked to the value of the Industrial 15 Index, in the case of a non-U.S. Holder, a payment made with respect to a Note on the maturity date or upon exchange will not be subject to United States withholding tax, provided that such non-U.S. Holder complies with applicable certification requirements and that such payments are not effectively connected with a United States trade or business of such non-U.S. Holder. Any capital gain realized upon the sale, exchange or S-27 other disposition of a Note by a non-U.S. Holder will generally not be subject to U.S. federal income tax if (i) such gain is not effectively connected with a United States trade or business of such non-U.S. Holder and (ii) in the case of an individual non-U.S. Holder, such individual is not present in the United States for 183 days or more in the taxable year of the sale or other disposition, or the gain is not attributable to a fixed place of business maintained by such individual in the United States and such individual does not have a "tax home" (as defined for U.S. federal income tax purposes) in the United States. As discussed above, alternative characterizations of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization of the Notes, by reason of a change or clarification of the law, by regulation or otherwise, cause payments with respect to the Notes to become subject to withholding tax, ML&Co. will withhold tax at the statutory rate. Prospective non-U.S. Holders of the Notes should consult their own tax advisors in this regard. Backup Withholding and Information Reporting A beneficial owner of a Note may be subject to information reporting and to backup withholding at a current rate of 30% (which rate is scheduled to be reduced periodically through 2006) of certain amounts paid to the beneficial owner unless such beneficial owner provides proof of an applicable exemption or a correct taxpayer indentification number, and otherwise complies with applicable requirements of the backup withholding rules. Any amounts withheld under the backup withholding rules from a payment to a beneficial owner would be allowed as a refund or a credit against such beneficial owner's U.S. federal income tax provided the required information is furnished to the IRS. ERISA CONSIDERATIONS The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code (the "Code") prohibit various transactions between certain parties and the assets of employee benefit plans, unless an exemption is available; governmental plans may be subject to similar prohibitions. Because transactions between a plan and ML&Co. may be prohibited absent an exemption, each fiduciary, by its purchase of any Notes on behalf of any plan, represents on behalf of itself and the plan, that the acquisition, holding and any subsequent disposition of the Notes will not result in a violation of ERISA, the Code or any other applicable law or regulation. USE OF PROCEEDS AND HEDGING The net proceeds from the sale of the Notes will be used as described under "Use of Proceeds" in the accompanying prospectus and to hedge market risks of ML&Co. associated with its obligation to pay the Redemption Amount. 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. The address of the SEC's Internet site is provided solely for the information of prospective investors and is not intended to be an active link. You may also read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. S-28 We have filed a registration statement on Form S-3 with the SEC covering the Notes and other securities. For further information on ML&Co. and the Notes, you should refer to our registration statement and its exhibits. The prospectus accompanying this prospectus supplement 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. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not, and the underwriter 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 the underwriter 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 supplement and the accompanying prospectus is accurate as of the date on the front cover of this prospectus supplement only. Our business, financial condition and results of operations may have changed since that date. UNDERWRITING MLPF&S has agreed, subject to the terms and conditions of the underwriting agreement and a terms agreement, to purchase from ML&Co. $72,000,000 aggregate original public offering price of Notes. The underwriting agreement provides that the obligations of the underwriter are subject to certain conditions and that the underwriter will be obligated to purchase all of the Notes if any are purchased. ML&Co. has entered into an arrangement with one of its subsidiaries to hedge the market risks associated with ML&Co.'s obligation to pay amounts due at maturity on the Notes. In connection with the arrangement, this subsidiary will pay MLPF&S, the underwriter, $.10 per Unit as part of the underwriting fee. The Notes are ineligible assets in MLPF&S' asset-based brokerage service Unlimited Advantage, which means that purchasers will not pay Unlimited Advantage annual asset-based fees on the Notes but will pay commissions on any secondary market purchases and sales of the Notes. The underwriter has advised ML&Co. that it proposes initially to offer all or part of the Notes directly to the public at the offering prices set forth on the cover page of this prospectus supplement. After the initial public offering, the public offering prices, concession and discount may be changed. The underwriter is offering the Notes subject to receipt and acceptance and subject to the underwriter's right to reject any order in whole or in part. Proceeds to be received by ML&Co. will be net of the underwriting fee and expenses payable by ML&Co. In addition to the compensation paid at the time of the original sale of the Notes, the underwriter will pay an additional amount on each anniversary of the Pricing Date in 2003 through 2006 to brokers whose client accounts purchased their Notes in the initial distribution and continue to hold their Notes. This additional amount will equal 1% per Unit based on the Redemption Amount of the Notes calculated as if the applicable anniversary of the Pricing Date is the maturity date and the Ending Value is equal to the closing value of the Industrial 15 Index on that date. In addition, MLPF&S may from time to time pay additional amounts to brokers whose client accounts purchased Notes in the secondary market and continue to hold their Notes. The underwriting of the Notes will conform to the requirements set forth in the applicable sections of Rule 2720 of the Conduct Rules of the NASD. The underwriter is permitted to engage in certain transactions that stabilize the price of the Notes. These transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Notes. S-29 If the underwriter creates a short position in the Notes in connection with the offering, i.e., if it sells more Notes than are set forth on the cover page of this prospectus supplement, the underwriter may reduce that short position by purchasing Notes in the open market. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of these purchases. "Naked" short sales are sales in excess of the underwriter's overallotment option or, where no overallotment option exists, sales in excess of the number of units an underwriter has agreed to purchase from the issuer. Because MLPF&S, as underwriter for the Notes, has no overallotment option, it would be required to close out a short position in the Notes by purchasing Notes in the open market. Neither ML&Co. nor the underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither ML&Co. nor the underwriter makes any representation that the underwriter will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. MLPF&S may use this prospectus supplement and the accompanying prospectus for offers and sales related to market-making transactions in the Notes. MLPF&S may act as principal or agent in these transactions, and the sales will be made at prices related to prevailing market prices at the time of sale. VALIDITY OF THE NOTES The validity of the Notes will be passed upon for ML&Co. and for the underwriter by Sidley Austin Brown & Wood LLP, New York, New York. EXPERTS The consolidated financial statements and the related financial statement schedule incorporated in this prospectus supplement by reference from the Annual Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries for the year ended December 29, 2000 have been audited by Deloitte & Touche LLP, independent auditors, 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 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 each of the 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 are not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended, for their reports on unaudited interim financial information because such 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 Securities Act of 1933, as amended. S-30 INDEX OF DEFINED TERMS
Page ---- Anniversary Date.......................................................... S-21 Annual Determination Date................................................. S-21 Business Day.............................................................. S-16 Calculation Day........................................................... S-13 Calculation Period........................................................ S-12 Code...................................................................... S-28 Contingent Payment Regulations............................................ S-27 Current Quarter........................................................... S-22 Current Quarter Dividends................................................. S-22 depositary................................................................ S-16 Dividend Yield............................................................ S-20 DTC....................................................................... S-4 Ending Value.............................................................. S-4 ERISA..................................................................... S-28 Exchange Amount........................................................... S-5 Exchange Date............................................................. S-13 Exchange Notice Period.................................................... S-13 Historical Month-End Closing Level........................................ S-24 Index Adjustment Factor................................................... S-5 Index Business Day........................................................ S-13 Industrial 15 Companies................................................... S-9 Industrial 15 Portfolio Value............................................. S-20 Industrial 15 Stocks...................................................... S-5 Initial Stocks............................................................ S-20 IRS....................................................................... S-26 Market Disruption Event................................................... S-15 ML&Co..................................................................... S-4 MLPF&S.................................................................... S-4 New Stocks................................................................ S-21 Non-U.S. Holder........................................................... S-26 Notes..................................................................... S-1 Original Industrial 15 Stock.............................................. S-23 Pricing Date.............................................................. S-4 Qualifying Stock.......................................................... S-20 Redemption Amount......................................................... S-4 Share Multiplier.......................................................... S-21 S&P Industrial Index...................................................... S-5 Starting Value............................................................ S-4 successor index........................................................... S-15 Tax Counsel............................................................... S-26 U.S. Holder............................................................... S-26 Unit...................................................................... S-4 WSJ....................................................................... S-16
S-31 ANNEX A This annex contains tables which provide a brief synopsis of the business of each of the Industrial 15 Companies as well as the split-adjusted closing market prices for each Industrial 15 Stock on its primary exchange in each month from January 1996 through December 2001, if available. Please note that the historical prices of the Industrial 15 Stocks are not indicative of the future performance of the Industrial 15 Stocks or the Industrial 15 Index. The following information has been derived from publicly available documents published by the Industrial 15 Companies. Because the common stock of the Industrial 15 Companies is registered under the Exchange Act, the Industrial 15 Companies are required to file periodically financial and other information specified by the SEC. For more information about the Industrial 15 Companies, information provided to or filed with the SEC by the Industrial 15 Companies can be inspected at the SEC's public reference facilities or accessed through the SEC's web site referenced in this prospectus supplement under the section entitled "Where You Can Find More Information". ALBERTSON'S, INC. Albertson's, Inc., is a retail food and drug chain. Albertson's operates under the names of Albertson's Acme Markets, Jewel Food Stores, Seessel's, Super Saver, Max Foods, Osco Drug and Sav-on Drugs. Their stores consist of combination food-drug stores, stand-alone drug stores, conventional supermarkets, warehouse stores and an electronic-commerce retail site. Albertson's distribution centers provide product exclusively to its retail stores.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 33.88 January 35.00 January 47.75 January 61.00 January 30.50 January 28.35 February 37.00 February 35.25 February 46.81 February 57.00 February 24.50 February 29.05 March 37.13 March 34.00 March 52.75 March 54.44 March 30.88 March 31.82 April 38.50 April 33.00 April 50.06 April 51.50 April 32.63 April 33.40 May 39.88 May 33.50 May 46.31 May 53.50 May 36.63 May 28.70 June 41.38 June 36.50 June 51.81 June 51.56 June 33.25 June 29.99 July 41.00 July 37.06 July 48.00 July 49.75 July 30.19 July 32.73 August 42.38 August 34.25 August 50.56 August 47.94 August 21.50 August 34.99 September 42.13 September 34.88 September 54.13 September 39.56 September 21.00 September 31.88 October 34.38 October 36.88 October 55.75 October 36.00 October 23.69 October 31.91 November 34.88 November 44.38 November 57.06 November 32.00 November 25.56 November 33.56 December 35.63 December 47.25 December 63.69 December 32.25 December 26.50 December 31.49
The closing price on January 29, 2002 was 28.67. ALLTEL CORPORATION ALLTEL Corporation is an information technology company that provides wireline and wireless communications and information services. ALLTEL owns subsidiaries that provide wireless and wireline local, long-distance, network access and Internet services, wide-area paging service and information processing management services and advanced application software. A subsidiary of ALLTEL also publishes telephone directories for affiliates and other independent telephone companies.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 31.38 January 32.13 January 42.75 January 64.56 January 66.75 January 59.18 February 33.25 February 35.38 February 45.69 February 59.88 February 58.00 February 53.70 March 30.88 March 32.50 March 43.69 March 62.38 March 63.25 March 52.46 April 32.88 April 31.50 April 42.75 April 67.44 April 66.63 April 54.61 May 31.50 May 32.88 May 39.44 May 71.69 May 65.63 May 57.99 June 30.75 June 33.44 June 46.50 June 71.50 June 61.94 June 61.26 July 27.38 July 32.88 July 41.94 July 71.81 July 61.63 July 61.65 August 28.25 August 31.63 August 44.88 August 67.63 August 50.56 August 58.00 September 27.88 September 34.50 September 47.13 September 70.38 September 52.19 September 57.95 October 30.50 October 35.38 October 46.81 October 83.25 October 64.44 October 57.14 November 31.88 November 39.75 November 53.00 November 86.50 November 61.25 November 65.08 December 31.38 December 41.06 December 59.81 December 82.69 December 62.44 December 61.73
The closing price on January 29, 2002 was 54.62. A-1 AVERY DENNISON CORPORATION Avery Dennison Corporation is engaged in the production of pressure-sensitive adhesives and related products such as labels, tapes and reflective sheeting. Avery Dennison also manufactures and sells a variety of consumer products not involving pressure-sensitive components, such as notebooks, three-ring binders, organizing systems, markers, fasteners, business forms, tickets, tags and imprinting equipment. Avery Dennison manufactures and markets its products in several countries worldwide.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 26.69 January 36.63 January 44.88 January 49.44 January 67.75 January 54.22 February 26.94 February 40.38 February 50.50 February 53.69 February 60.69 February 53.00 March 27.00 March 38.50 March 53.38 March 57.50 March 61.06 March 52.02 April 28.50 April 36.75 April 52.38 April 68.25 April 65.63 April 56.07 May 28.50 May 37.63 May 51.81 May 59.88 May 61.25 May 58.48 June 27.44 June 40.13 June 53.75 June 60.38 June 67.13 June 51.05 July 25.88 July 44.13 July 57.44 July 61.38 July 54.25 July 51.26 August 25.56 August 41.06 August 53.69 August 54.88 August 54.06 August 51.41 September 27.75 September 40.00 September 43.69 September 52.75 September 46.38 September 47.31 October 32.94 October 39.81 October 41.44 October 62.50 October 50.50 October 46.30 November 35.31 November 41.88 November 47.94 November 59.38 November 55.00 November 53.98 December 35.38 December 44.75 December 45.06 December 72.88 December 54.88 December 56.53
The closing price on January 29, 2002 was 58.15. BRISTOL-MYERS SQUIBB COMPANY Bristol-Myers Squibb Company is a diversified health and personal care company that focuses on the manufacture and sales of a broad range of pharmaceutical and related products. These products include: cardiovascular, anti-cancer, anti-infective and central nervous system prescription pharmaceuticals; consumer medicines, such as analgesics; personal care, such as skin and hair care products, cold remedies and deodorants; nutritional products; medical devices; and beauty care products. Bristol-Myers Squibb markets its products internationally to the retail and wholesale markets and some of its products are sold directly to other pharmaceutical companies, hospitals and healthcare professionals.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 22.13 January 31.69 January 49.84 January 64.13 January 66.25 January 61.89 February 21.28 February 32.63 February 50.09 February 62.97 February 57.25 February 63.41 March 21.40 March 29.50 March 52.16 March 64.13 March 58.00 March 59.40 April 20.56 April 32.75 April 52.94 April 63.56 April 52.44 April 56.00 May 21.34 May 36.69 May 53.75 May 68.75 May 55.06 May 54.24 June 22.50 June 40.50 June 57.47 June 70.44 June 58.25 June 49.78 July 21.66 July 39.16 July 56.97 July 66.50 July 49.63 July 56.29 August 21.94 August 38.00 August 48.94 August 70.38 August 53.00 August 56.14 September 24.09 September 41.38 September 51.94 September 67.50 September 57.13 September 55.56 October 26.44 October 43.94 October 55.34 October 76.81 October 60.94 October 53.45 November 28.44 November 46.81 November 61.00 November 73.00 November 69.31 November 53.76 December 27.25 December 47.31 December 66.91 December 64.19 December 73.94 December 51.00
The closing price on January 29, 2002 was 45.12. A-2 THE CLOROX COMPANY The Clorox Company is engaged primarily in the production and marketing of non-durable consumer products sold primarily through grocery and other retail stores. Clorox's extensive product line includes household cleaning products, home care products, water filtration products, charcoal, automotive care products, pet supplies, insecticides, dressings, sauces, professional products, food storage products and various other consumer products. Clorox manufactures and markets its products in several continents worldwide.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 20.59 January 29.66 January 38.31 January 62.56 January 47.75 January 33.75 February 21.19 February 29.88 February 43.88 February 59.16 February 40.44 February 35.96 March 21.53 March 28.09 March 42.97 March 58.59 March 33.00 March 31.45 April 20.66 April 31.84 April 41.97 April 57.69 April 36.75 April 31.83 May 21.28 May 31.56 May 41.81 May 50.47 May 39.63 May 34.64 June 22.16 June 33.05 June 47.81 June 53.41 June 44.81 June 33.85 July 22.72 July 34.95 July 51.38 July 56.00 July 41.31 July 37.38 August 23.41 August 32.84 August 48.22 August 45.25 August 36.19 August 37.25 September 23.97 September 37.13 September 41.25 September 38.25 September 39.56 September 37.00 October 27.22 October 35.06 October 54.63 October 40.94 October 44.63 October 35.70 November 26.06 November 38.97 November 55.53 November 44.56 November 44.69 November 39.52 December 25.09 December 39.69 December 58.41 December 50.38 December 35.50 December 39.55
The closing price on January 29, 2002 was 40.00. CONAGRA, INC. ConAgra, Inc. operates in several different areas of the food business, from basic agricultural inputs to production and sale of branded consumer products. ConAgra produces a wide variety of packaged foods, refrigerated foods and agricultural products in addition to marketing bulk agricultural commodities throughout the world through its grain procurement and merchandising, food-related commodity trading and commodity services.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 22.94 January 25.25 January 31.75 January 32.50 January 21.44 January 23.40 February 21.06 February 26.50 February 30.00 February 30.06 February 16.38 February 19.68 March 20.31 March 27.13 March 32.13 March 25.63 March 18.13 March 18.24 April 19.13 April 28.81 April 29.19 April 24.88 April 18.88 April 20.81 May 21.31 May 30.19 May 29.25 May 26.06 May 23.06 May 20.85 June 22.69 June 32.09 June 31.69 June 26.63 June 19.06 June 19.81 July 21.25 July 35.19 July 25.88 July 25.56 July 20.44 July 21.49 August 21.06 August 32.22 August 24.75 August 24.50 August 18.31 August 22.95 September 24.63 September 33.09 September 26.94 September 22.56 September 20.06 September 22.45 October 24.94 October 30.88 October 30.63 October 26.06 October 21.38 October 22.90 November 26.56 November 36.00 November 31.44 November 24.13 November 25.44 November 22.97 December 24.88 December 33.13 December 31.50 December 22.69 December 26.00 December 23.77
The closing price on January 29, 2002 was 24.83. A-3 EMERSON ELECTRIC CO. Emerson Electric Co. is principally engaged in the design, manufacture and sale of a broad range of electrical, electromechanical and electronic products and systems. Emerson offers an extensive product line which includes various products and systems involving industrial automation, electronics and telecommunications, heating, ventilating and air conditioning systems, appliances and tools. Emerson manufactures and markets its products in several countries worldwide.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price ---- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 41.88 January 49.25 January 60.50 January 58.19 January 55.06 January 76.00 February 38.94 February 49.50 February 63.81 February 57.44 February 45.56 February 66.90 March 40.38 March 45.00 March 65.19 March 52.94 March 53.13 March 62.00 April 41.81 April 50.75 April 63.69 April 64.50 April 54.88 April 66.65 May 42.81 May 54.00 May 60.75 May 63.88 May 59.00 May 67.71 June 45.19 June 55.06 June 60.38 June 62.94 June 60.38 June 60.50 July 42.19 July 59.00 July 59.44 July 59.69 July 61.06 July 57.36 August 41.88 August 54.69 August 57.00 August 61.94 August 66.19 August 53.60 September 45.06 September 57.63 September 62.25 September 63.19 September 67.00 September 47.06 October 44.50 October 52.44 October 66.00 October 60.06 October 73.44 October 49.02 November 49.06 November 55.00 November 65.00 November 57.00 November 72.88 November 54.06 December 48.44 December 56.44 December 60.50 December 57.38 December 78.81 December 57.10
The closing price on January 29, 2002 was 55.99. THE GILLETTE COMPANY The Gillette Company manufactures and sells a wide variety of consumer products throughout the world. Gillette's wide-ranging product line includes shaving products, toothbrushes, power plaque removers, various toiletries and specialty batteries and cells. Gillette also produces small household, hair care and personal diagnostic appliances.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price ---- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 26.81 January 41.25 January 49.25 January 58.50 January 37.63 January 31.62 February 27.06 February 39.56 February 54.00 February 53.94 February 35.25 February 32.51 March 25.88 March 36.31 March 59.34 March 59.44 March 37.69 March 31.17 April 27.00 April 42.50 April 57.72 April 52.19 April 37.00 April 28.36 June 31.19 June 47.38 June 56.88 June 41.00 June 34.94 June 28.99 July 31.88 July 49.50 July 52.25 July 43.63 July 29.19 July 27.87 August 31.88 August 41.44 August 41.13 August 46.63 August 30.00 August 30.65 September 36.06 September 43.16 September 38.25 September 33.94 September 30.88 September 29.80 October 37.38 October 44.53 October 45.06 October 36.25 October 34.88 October 31.09 November 36.94 November 46.16 November 45.94 November 40.13 November 33.88 November 32.70 December 38.88 December 50.22 December 47.81 December 41.19 December 36.13 December 33.40
The closing price on January 29, 2002 was 31.92. A-4 HERSHEY FOODS CORPORATION Hershey Foods Corporation and its subsidiaries are engaged in the manufacture, distribution and sale of consumer food products. Hershey's product line includes chocolate and non-chocolate confectionery products sold in the form of bar goods, bagged and boxed items, grocery products such as baking ingredients, chocolate drink mixes, peanut butter, dessert toppings and beverages.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 35.31 January 42.38 January 63.69 January 56.25 January 42.50 January 59.50 February 37.69 February 45.63 February 66.69 February 62.25 February 43.94 February 64.09 March 37.25 March 50.00 March 71.63 March 56.06 March 48.75 March 69.32 April 37.94 April 54.25 April 73.25 April 52.63 April 45.50 April 60.41 May 36.38 May 56.13 May 69.13 May 54.25 May 51.88 May 60.64 June 36.69 June 55.31 June 69.00 June 59.38 June 48.50 June 61.71 July 41.00 July 55.25 July 63.13 July 58.00 July 46.25 July 60.36 August 43.56 August 53.38 August 70.00 August 53.56 August 42.69 August 64.48 September 50.25 September 56.50 September 68.44 September 48.69 September 54.13 September 65.37 October 48.38 October 55.25 October 67.81 October 50.50 October 54.31 October 63.73 November 49.88 November 61.38 November 67.25 November 49.13 November 63.25 November 65.46 December 43.75 December 61.94 December 62.19 December 47.44 December 64.38 December 67.70
The closing price on January 29, 2002 was 69.36. IMAGISTICS INTERNATIONAL INC. Imagistics is a direct sales, service and marketing organization offering document imaging solutions, including copiers, facsimile machines and multifunctional products, in the United States and the United Kingdom. Imagistics markets their products to large corporate and government customers as well as small to mid-size businesses. On November 19, 2001 Pitney Bowes Inc. distributed all the shares of Imagistics common stock to Pitney Bowes shareholders in the form of a dividend of one share of Imagistics common stock for every 12.5 shares of Pitney Bowes common stock. The November and December month-end closing prices for Imagistics were 12.50 and 12.35, respectively. The closing price on January 29, 2002 was 16.80. JOHNSON CONTROLS, INC. Johnson Controls, Inc. installs and services facility control systems and provides broad-based management services for the non-residential buildings market. Johnson also manufactures various automotive interior products, including seating systems, instrument panels, overhead components and systems, floor consoles and storage systems, door systems, electronics, cargo management, and battery and power management.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 36.13 January 43.00 January 50.69 January 64.44 January 55.25 January 64.98 February 35.88 February 42.13 February 55.56 February 61.50 February 53.38 February 66.48 March 37.31 March 40.25 March 60.69 March 62.38 March 54.06 March 62.46 April 35.75 April 38.38 April 59.38 April 72.94 April 63.31 April 72.40 May 34.88 May 42.38 May 59.50 May 63.06 May 56.94 May 70.40 June 34.75 June 41.06 June 57.19 June 69.31 June 51.31 June 72.47 July 36.00 July 44.81 July 52.31 July 68.56 July 51.94 July 80.60 August 35.25 August 47.69 August 42.81 August 68.38 August 53.44 August 73.25 September 37.50 September 49.56 September 46.50 September 66.31 September 53.19 September 65.24 October 36.50 October 44.88 October 56.25 October 61.00 October 59.63 October 72.32 November 38.75 November 45.81 November 57.88 November 54.50 November 55.13 November 79.52 December 41.44 December 47.75 December 59.00 December 56.88 December 52.00 December 80.75
The closing price on January 29, 2002 was 80.43. A-5 THE MAY DEPARTMENT STORES COMPANY The May Department Stores Company operates regional department store companies, including Lord & Taylor, Hecht's, Foley's, Robinsons-May, Filene's, Kaufmann's, Famous-Barr, L.S.Ayres, The Jones Store, and Meier & Frank. May also operates David's Bridal, a retailer of bridal gowns and other bridal party merchandise.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 29.67 January 29.67 January 35.04 January 40.25 January 31.13 January 38.95 February 31.08 February 31.08 February 40.50 February 39.50 February 26.19 February 39.59 March 32.17 March 30.33 March 42.33 March 39.13 March 28.50 March 35.48 April 34.00 April 30.83 April 41.13 April 39.81 April 27.50 April 37.25 May 31.58 May 31.42 May 42.96 May 43.31 May 30.06 May 32.70 June 29.17 June 31.50 June 43.67 June 40.88 June 24.00 June 34.26 July 29.83 July 37.21 July 42.79 July 38.69 July 23.75 July 33.20 August 30.33 August 35.88 August 37.50 August 39.06 August 22.94 August 33.65 September 32.42 September 36.33 September 34.33 September 36.44 September 20.50 September 29.02 October 31.58 October 35.92 October 40.67 October 34.69 October 26.25 October 31.45 November 32.50 November 35.83 November 40.21 November 33.63 November 28.06 November 35.84 December 31.17 December 35.13 December 40.25 December 32.25 December 32.75 December 36.98
The closing price on January 29, 2002 was 35.48. NEWELL RUBBERMAID INC. Newell Rubbermaid Inc. is a global manufacturer and full-service marketer of name-brand consumer products serving the needs of volume purchasers, including discount stores, warehouse clubs, home centers, hardware stores, office superstores and contract stationers. Newell's product line consists of name-brand consumer products involving home decor, office supply, infant care, food preparation, hardware and household storage, organization and cleaning.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 26.38 January 33.00 January 41.06 January 41.56 January 29.94 January 27.20 February 27.75 February 37.13 February 45.88 February 42.50 February 23.25 February 26.31 March 26.75 March 33.50 March 48.44 March 47.50 March 24.81 March 26.50 April 28.50 April 35.13 April 48.31 April 47.44 April 25.19 April 26.96 May 30.00 May 38.25 May 48.25 May 40.50 May 26.25 May 25.27 June 30.63 June 39.75 June 49.81 June 46.38 June 25.75 June 25.10 July 32.00 July 42.13 July 51.50 July 43.25 July 26.94 July 21.68 August 31.13 August 39.50 August 47.75 August 41.00 August 25.94 August 22.90 September 30.00 September 40.00 September 46.06 September 28.56 September 22.81 September 22.71 October 28.38 October 38.38 October 44.13 October 34.63 October 19.19 October 27.64 November 31.00 November 40.81 November 44.25 November 32.81 November 19.44 November 25.65 December 31.50 December 42.50 December 41.25 December 29.00 December 22.75 December 27.57
The closing price on January 29, 2002 was 27.00. A-6 PITNEY BOWES INC. Pitney Bowes Inc. and its subsidiaries provide global mailing, enterprise solutions and capital services. Pitney Bowes' global mailing division is engaged in the sale, renting and financing of mailing equipment. Their enterprise solutions division provides management services and document messaging technology products and services. Their capital services division provides large-ticket financing and fee-based programs covering a broad range of products and other financial services. Pitney Bowes' products and services are marketed through an extensive network of offices in the United States and through a number of subsidiaries and independent distributors and dealers in many countries throughout the world as well as through direct marketing, outbound telemarketing and the Internet.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 22.63 January 28.81 January 45.88 January 68.81 January 49.00 January 34.97 February 24.13 February 31.06 February 46.88 February 63.19 February 49.50 February 34.05 March 24.50 March 29.38 March 50.19 March 63.75 March 44.69 March 34.75 April 24.38 April 32.00 April 48.00 April 69.94 April 40.88 April 38.07 May 24.81 May 35.13 May 47.00 May 63.75 May 43.50 May 39.54 June 23.88 June 34.75 June 48.13 June 64.25 June 40.00 June 41.11 July 24.25 July 37.56 July 50.50 July 63.63 July 34.63 July 39.23 August 24.13 August 38.19 August 49.63 August 59.00 August 36.56 August 42.44 September 26.38 September 41.59 September 52.56 September 60.94 September 39.44 September 37.28 October 27.94 October 39.66 October 55.06 October 45.56 October 29.69 October 35.78 November 29.50 November 42.03 November 56.00 November 47.94 November 29.06 November 40.48 December 27.38 December 44.97 December 66.06 December 48.31 December 33.13 December 37.61
The closing price on January 29, 2002 was 39.68. ROHM AND HAAS COMPANY Rohm and Haas Company manufactures and markets a wide variety of specialty chemicals. Extensive use of these specialty chemicals is made in the manufacture of paint and coatings, electronics, household products, water treatment products, adhesives, plastics and salt. Rohm and Haas and its subsidiaries operate manufacturing facilities worldwide.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 23.08 January 27.33 January 28.58 January 31.00 January 42.25 January 35.90 February 23.21 February 30.67 February 34.00 February 31.25 February 40.25 February 36.75 March 22.17 March 24.96 March 34.44 March 33.56 March 44.63 March 30.81 April 22.13 April 27.75 April 35.94 April 44.81 April 35.63 April 34.37 May 22.58 May 28.75 May 36.63 May 40.13 May 34.13 May 33.20 June 20.92 June 30.02 June 34.63 June 42.88 June 34.50 June 32.90 July 19.83 July 32.67 July 32.46 July 42.63 July 26.00 July 34.34 August 20.83 August 31.94 August 28.77 August 37.38 August 28.94 August 35.91 September 21.83 September 31.98 September 27.81 September 36.13 September 29.06 September 32.76 October 23.79 October 27.77 October 33.75 October 38.25 October 30.06 October 32.47 November 26.54 November 30.65 November 35.00 November 36.63 November 29.75 November 35.50 December 27.21 December 31.92 December 30.13 December 40.69 December 36.31 December 34.63
The closing price on January 29, 2002 was 34.83. A-7 TEXTRON INC. Textron Inc. is a global multi-industry company with operations in various business segments including aircraft, automotive, fastening systems, industrial products and finance. Textron offers an extensive product line ranging from helicopters, light and mid-size jets, automotive interior and exterior plastic components and systems, fasteners and fastening systems, hand and hydraulic powered tools, lawn care machinery and military defense weapons.
Closing Closing Closing Closing Closing Closing 1996 Price 1997 Price 1998 Price 1999 Price 2000 Price 2001 Price - --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- ------- January 39.31 January 48.69 January 59.81 January 74.44 January 59.69 January 51.00 February 39.38 February 49.31 February 74.94 February 78.00 February 61.00 February 52.98 March 40.00 March 52.50 March 77.00 March 77.38 March 60.88 March 56.84 April 42.88 April 55.69 April 78.25 April 92.13 April 61.94 April 53.02 May 42.38 May 59.25 May 74.19 May 89.06 May 62.75 May 57.61 June 39.94 June 66.38 June 71.69 June 82.31 June 54.31 June 55.04 July 40.00 July 70.06 July 73.88 July 82.25 July 57.06 July 56.32 August 42.69 August 62.31 August 62.75 August 80.75 August 56.06 August 52.39 September 42.50 September 65.00 September 60.63 September 77.38 September 46.13 September 33.61 October 44.38 October 57.81 October 74.38 October 77.19 October 50.44 October 31.65 November 47.69 November 59.13 November 77.69 November 71.50 November 50.63 November 39.65 December 47.13 December 62.50 December 75.94 December 76.69 December 46.50 December 41.46
The closing price on January 29, 2002 was 43.87. ZIMMER HOLDINGS, INC. Zimmer Holdings, Inc. designs, develops, manufactures and markets orthopedic reconstructive implants and fracture management products. These devices are primarily used to restore lost joint function and reattach or stabilize damaged bone and tissue, respectively. Zimmer also manufactures and markets other products relating to orthopedic and general surgery. Zimmer has operations in 20 different countries and markets products in approximately 70 different countries. Zimmer was incorporated as a wholly-owned subsidiary of Bristol-Myers Squibb Company on January 12, 2001. On August 6, 2001 Bristol-Myers Squibb distributed all the shares of Zimmer common stock to Bristol-Myers Squibb shareholders in the form of a dividend of one share of Zimmer common stock for every ten shares of Bristol-Myers Squibb common stock.
Closing 2001 Price --------- ------- January February March April May June July 28.60 August 27.20 September 27.75 October 30.91 November 32.26 December 30.54
The closing price on January 29, 2002 was 32.60. A-8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO] 7,200,000 Units Merrill Lynch & Co., Inc. Strategic Return Notes/SM/ Linked to the Industrial 15 Index due February 1, 2007 (the "Notes") $10 original public offering price per Unit ------------------------------ PROSPECTUS SUPPLEMENT ------------------------------ Merrill Lynch & Co. January 29, 2002 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----