Subject to Completion
Preliminary Pricing Supplement dated March 3, 2006
PRICING SUPPLEMENT
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(To prospectus supplement and [GRAPHIC OMITTED]
prospectus dated February 25, 2005)
Pricing Supplement Number:
1,000,000 Units
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Strategic Return Notes(R)
Linked to the Industrial 15 Index
due April , 2011
(the "Notes")
$10 original public offering price per unit
------------------
The Notes: Payment on the maturity date or upon exchange:
o The Notes are designed for investors who are o The amount you receive on the maturity date or
willing to forego interest payments on the upon exchange will be based on the direction of
Notes in exchange for the ability to and percentage change in the level of the
participate in changes in the level of the Industrial 15 of Index, which includes a
Industrial 15 Index (index symbol "IXD") over reduction of an annual index the Notes.
the term of the Notes. adjustment factor of 1.5%, over the term of the
Notes.
o There will be no payments prior to the maturity
date unless exchanged at your option for a cash o The level of the Industrial 15 Index must
payment during a specified period in March of increase by approximately 1% in order for you
each year from 2007 through 2010 as described to receive at least the $10 original public
in this pricing supplement. offering price per unit on the maturity date or
upon exchange. If the level of the Industrial
o We have applied to have the Notes quoted on The 15 Index has declined or has not increased
Nasdaq National Market under the trading symbol sufficiently, you will receive less, and
"SRIB". If approval of this application is possibly significantly less, than the $10
granted, the Notes will be quoted on the Nasdaq original public offering price per unit.
National Market at the time of such approval.
We make no representation, however, that the
Notes will be quoted, or, if quoted, will
remain quoted for the entire term of the Notes.
o The Notes will be senior unsecured debt
securities of Merrill Lynch & Co., Inc. and
part of a series entitled "Medium-Term Notes,
Series C." The Notes will have the CUSIP
No. .
o The settlement date for the Notes is expected
to be April , 2006.
Information included in this pricing supplement supersedes
information in the accompanying prospectus supplement and prospectus to the
extent that it is different from that information.
Investing in the Notes involves risks that are described in the
"Risk Factors" section of this pricing supplement beginning on page PS-7 and
the accompanying prospectus supplement.
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Per unit Total
-------- -----
Public offering price (1)............................................. $10.00 $
Underwriting fee (1).................................................. $.20 $
Proceeds, before expenses, to Merrill Lynch & Co., Inc................ $9.90(2) $
(1)The public offering price and the underwriting fee for any single
transaction to purchase between 100,000 to 299,999 units will be
$9.95 per unit and $.15 per unit, respectively, and for any single
transaction to purchase 300,000 units or more will be $9.90 per unit
and $.10 per unit, respectively.
(2)$.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 "Supplemental Plan of
Distribution" in this pricing supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this pricing supplement or the accompanying prospectus supplement and
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Merrill Lynch & Co.
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The date of this pricing supplement is March , 2006.
"Strategic Return Notes" is a registered mark of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Pricing Supplement
Page
----
SUMMARY INFORMATION--Q&A........................................................ PS-3
RISK FACTORS.................................................................... PS-7
DESCRIPTION OF THE NOTES........................................................ PS-10
THE INDEX ...................................................................... PS-15
UNITED STATES FEDERAL INCOME TAXATION........................................... PS-20
ERISA CONSIDERATIONS............................................................ PS-23
USE OF PROCEEDS AND HEDGING..................................................... PS-24
SUPPLEMENTAL PLAN OF DISTRIBUTION .............................................. PS-24
EXPERTS ........................................................................ PS-24
INDEX OF CERTAIN DEFINED TERMS ................................................. PS-25
ANNEX A ........................................................................ A-1
Prospectus Supplement
Page
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RISK FACTORS.................................................................... S-3
DESCRIPTION OF THE NOTES........................................................ S-4
UNITED STATES FEDERAL INCOME TAXATION........................................... S-21
PLAN OF DISTRIBUTION............................................................ S-28
VALIDITY OF THE NOTES........................................................... S-29
Prospectus
Page
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MERRILL LYNCH & CO., INC........................................................ 2
USE OF PROCEEDS................................................................. 2
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS................................... 3
THE SECURITIES.................................................................. 3
DESCRIPTION OF DEBT SECURITIES.................................................. 4
DESCRIPTION OF DEBT WARRANTS.................................................... 15
DESCRIPTION OF CURRENCY WARRANTS................................................ 17
DESCRIPTION OF INDEX WARRANTS................................................... 18
DESCRIPTION OF PREFERRED STOCK.................................................. 24
DESCRIPTION OF DEPOSITARY SHARES................................................ 29
DESCRIPTION OF PREFERRED STOCK WARRANTS......................................... 33
DESCRIPTION OF COMMON STOCK..................................................... 35
DESCRIPTION OF COMMON STOCK WARRANTS............................................ 38
PLAN OF DISTRIBUTION............................................................ 41
WHERE YOU CAN FIND MORE INFORMATION............................................. 42
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................... 42
EXPERTS......................................................................... 43
PS-2
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from this pricing supplement and the accompanying prospectus
supplement and prospectus to help you understand the Strategic Return Notes(R)
Linked to the Industrial 15 Index due April , 2011 (the "Notes"). You should
carefully read this pricing supplement and the accompanying prospectus
supplement and prospectus to fully understand the terms of the Notes, the
Industrial 15 Index (the "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" sections in this pricing
supplement and the accompanying prospectus supplement, which highlight certain
risks associated with an investment in the Notes, to determine whether an
investment in the Notes is appropriate for you.
References in this pricing supplement to "ML&Co.", "we", "us" and "our"
are to Merrill Lynch & Co., Inc., and references to "MLPF&S" are to Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
What are the Notes?
The Notes will be part of a series of senior debt securities issued by
ML&Co. entitled "Medium- Term Notes, Series C" and will not be secured by
collateral. The Notes will rank equally with all of our other unsecured and
unsubordinated debt. The Notes will mature on April , 2011, unless exchanged
by you as described in this pricing supplement. We will not make any payments
on the Notes until the maturity date or upon exchange.
Each unit will represent a single Note with a $10 original public
offering price. You may transfer the Notes only in whole units. You will not
have the right to receive physical certificates evidencing your ownership
except under limited circumstances. Instead, we will issue the Notes in the
form of a global certificate, which will be held by The Depository Trust
Company, also known as DTC, or its nominee. Direct and indirect participants
in DTC will record your ownership of the Notes. You should refer to the
section entitled "Description of Debt Securities--Depositary" in the
accompanying prospectus.
Are there any risks associated with my investment?
Yes, an investment in the Notes is subject to risks, including the risk
of loss. Please refer to the section entitled "Risk Factors" in this pricing
supplement and the accompanying prospectus supplement.
Who publishes the Index and what does the Index measure?
The Index is calculated and disseminated by the American Stock Exchange
(the "AMEX") under the index symbol "IXD". The Index is an index which
reflects the price changes and dividends of the top fifteen dividend yielding
stocks (the "Underlying Stocks") from a group of certain stocks in the
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 Index has been calculated and disseminated since June 26, 2001. The Index
is reconstituted on June 26th of each year, the anniversary of the date the
Index was first calculated and disseminated or, under certain circumstances,
on a day shortly after the anniversary date, as described in this pricing
supplement. The Index was last reconstituted on June 27, 2005. For more
specific information about the Index and its reconstitution, and the Index
Adjustment Factor, please see the section entitled "The Index" in this pricing
supplement.
An investment in the Notes does not entitle you to any ownership
interest in the Underlying Stocks.
How has the Index performed historically?
The value of the Index was set to 100 on June 26, 2001, the date the
Index was initially calculated. We have included a table and a graph showing
the month-end closing levels of the Index from June 2001 through February 2006
in the section entitled "The Index--Historical Data on the Index" in this
pricing supplement.
We have provided this information to help you evaluate the behavior of
the Index in various economic environments; however, this information is not
necessarily indicative of how the Index will perform in the future.
What will I receive on the maturity date of the Notes?
On the maturity date, if you have not previously exchanged your Notes,
you will receive a cash payment per unit equal to the Redemption Amount.
The "Redemption Amount" to which you will be entitled will depend on the
percentage change in the level of the Index over the term of the Notes and
will equal:
( Ending Value )
$9.90 x (-------------------)
( Starting Value )
PS-3
Because the quotient of the Ending Value and the Starting Value will be
multiplied by $9.90, the level of the Index will need to increase by
approximately 1% in order for you to receive a Redemption Amount equal to or
greater than the $10 original public offering price per unit. If the Ending
Value does not exceed the Starting Value by more than approximately 1%, you
will receive less, and possibly significantly less, than the $10 original
public offering price per unit.
The "Starting Value" will equal the closing level of the Index on the
date the Notes are priced for initial sale to the public (the "Pricing Date")
which will be in March 2006. The Starting Value will be set forth in the final
pricing supplement made available in connection with sales of the Notes.
For purposes of determining the Redemption Amount, the "Ending Value"
means the average of the levels of the Index at the close of the market on
five index business days shortly before the maturity date of the Notes. We may
calculate the Ending Value by reference to fewer than five or even a single
day's closing level if, during the period shortly before the maturity date of
the Notes, there is a disruption in the trading of an Underlying Stock or
certain futures or options contracts relating to an Underlying Stock.
For more specific information about the Redemption Amount, please see
the section entitled "Description of the Notes" in this pricing supplement.
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 on the maturity date. We have designed the
Notes for investors who are willing to forego interest payments on the Notes,
such as fixed or floating interest rates paid on traditional interest bearing
debt securities, in exchange for the ability to participate in changes in the
level of the Index over the term of the Notes.
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 March of each year from 2007 through 2010 by
giving notice to the depositary or trustee of the Notes, as the case may be,
as described in this pricing supplement. Upon exchange, you will receive a
cash payment per unit (the "Exchange Amount") 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 level of the Index on the
exchange date. The Exchange Amount will be paid three banking 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 on the maturity date. The Exchange Amount you receive may be greater
than or less than the Redemption Amount on the maturity date depending upon
the performance of the Index during the period from the exchange date until
the maturity date.
For more specific information about the exchange feature, please see the
section entitled "Description of the Notes--Exchange of the Notes Prior to the
Maturity Date" in this pricing supplement.
What are the costs associated with an investment in the Notes?
Your return will reflect the deduction of the following costs over the
term of the Notes:
Index Adjustment Factor. The level of the Index will reflect a 1.5%
annual reduction that will be applied and accrue daily on the basis of a
365-day year to the benefit of MLPF&S as calculation agent. As a result of the
cumulative effect on this deduction, the levels of the Index used to calculate
the Redemption Amount during the five index business days shortly before the
stated maturity date will be approximately 7.23% less than the level of the
Index had the Index Adjustment Factor not been applied.
Sales Charge. Because the quotient of the Ending Value and the Starting
Value will be multiplied by $9.90 in order to determine the Redemption Amount
or Exchange Amount, the level of the Index must increase by approximately 1%
or more from the Starting Value for you to receive an amount equal to or
greater than the $10 original offering price per unit. This is analogous to
paying a sales charge of approximately 1% per unit of the Notes.
PS-4
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Examples
Set forth below are two examples of Redemption calculations:
Example 1--The hypothetical Ending Value is 40% below the hypothetical
Starting Value:
Hypothetical Starting Value: 126.22
Hypothetical Ending Value: 75.73
( 75.73 )
Redemption Amount (per Unit) = $9.90 x (--------) = $ 5.94
( 126.22 )
Example 2--The hypothetical Ending Value is 40% above the hypothetical
Starting Value:
Hypothetical Starting Value: 126.22
Hypothetical Ending Value: 176.71
( 176.71 )
Redemption Amount (per Unit) = $9.90 x (---------) = $ 13.86
( 126.22 )
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What about taxes?
The United States federal income tax consequences of an investment in
the Notes are complex and uncertain. By purchasing a Note, you and ML&Co.
agree, in the absence of an administrative determination, judicial ruling or
other authoritative guidance to the contrary, to characterize a Note for all
tax purposes as a pre-paid cash-settled forward contract linked to the level
of the 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 pricing supplement.
Will the Notes be listed on a national securities exchange or NASDAQ?
We have applied to have the Notes quoted on The Nasdaq National Market
under the trading symbol "SRIB". We make no representation, however, that the
Notes will be quoted on The Nasdaq National Market, or, if quoted, will remain
quoted for the entire term of the Notes. If approval of this application is
granted, the Notes will be quoted on The Nasdaq National Market at the time of
such approval. In any event, you should be aware that the quotation of the
Notes on The Nasdaq National Market 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
and the market price you may receive or be quoted for your Notes on a date
prior to the stated maturity date will be affected by this and other important
factors including our costs of developing, hedging and distributing the Notes"
in this pricing supplement.
What price can I expect to receive if I sell the Notes prior to the stated
maturity date?
In determining the economic terms of the Notes, and consequently the
potential return on the Notes, a number of factors are taken into account.
Among these factors are certain costs associated with creating, hedging and
offering the Notes. In structuring the economic terms of the Notes, we seek to
provide investors with what we believe to be commercially reasonable terms and
to provide MLPF&S with compensation for its services in developing the Notes.
If you sell your Notes prior to the stated maturity date, you will
receive a price determined by market conditions for the Notes. This price may
be influenced by many factors, such as interest rates, volatility and the
current levels of the Index. In addition, the price, if any, at which you
could sell your Notes in a secondary market transaction is expected to be
affected by the factors that we considered in setting the economic terms of
the Notes, namely the underwriting discount paid in respect of the Notes and
other costs associated with the Notes, including compensation for developing
and hedging the product. Depending on the impact of these factors, you may
receive significantly less than the $10 original public offering price per
unit of your Notes if sold before the stated maturity date.
In a situation where there had been no movement in the level of the
Index and no changes in the market conditions from those existing on the date
of this pricing supplement, the price, if any, at which you could sell your
Notes in a secondary market transaction is expected to be lower than the $10
original public offering price per unit. This is due to, among other things,
our costs of developing, hedging and distributing the Notes. Any
PS-5
potential purchasers for your Notes in the secondary market are unlikely to
consider these factors.
What is the role of MLPF&S?
Our subsidiary MLPF&S is the underwriter for the offering and sale of
the Notes. After the initial offering, MLPF&S intends to buy and sell Notes to
create a secondary market for holders of the Notes, and may stabilize or
maintain the market price of the Notes during their initial distribution.
However, MLPF&S will not be obligated to engage in any of these market
activities or continue them once it has started.
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 MLPF&S as our subsidiary and its responsibilities as calculation
agent.
What is ML&Co.?
Merrill Lynch & Co., Inc. is a holding company with various subsidiaries
and affiliated companies that provide investment, financing, insurance and
related services on a global basis.
For information about ML&Co., see the section entitled "Merrill Lynch &
Co., Inc." in the accompanying prospectus. You should also read other
documents ML&Co. has filed with the Securities and Exchange Commission, which
you can find by referring to the section entitled "Where You Can Find More
Information" in the accompanying prospectus.
PS-6
RISK FACTORS
Your investment in the Notes will involve risks. You should carefully
consider the following discussion of risks and the discussion of risks
included in the accompanying prospectus supplement before deciding whether an
investment in the Notes is suitable for you.
Your investment may result in a loss
We will not repay you a fixed amount of principal on the Notes on the
maturity date or upon exchange. The payment on the Notes you receive will
depend on the change in the level of the Index. Because the level of the Index
is subject to market fluctuations, the payment on the Notes you receive may be
more or less than the $10 original public offering price per unit of the
Notes. In addition, because the quotient of the Ending Value and the Starting
Value will be multiplied by $9.90, the level of the Index will need to
increase by more than approximately 1% in order for you to receive a
Redemption Amount equal to or greater than the $10 original public offering
price per unit. If the level of the Index declines or does not increase
sufficiently, you will receive less, and possibly significantly less than the
$10 original public offering price per unit. The level of the Index will also
reflect the deduction of the 1.5% Index Adjustment Factor.
The level of the Index is expected to affect the trading value of the Notes
We expect that the trading value of the Notes will depend substantially
on the amount, if any, by which the level of the Index exceeds or does not
exceed the Starting Value. However, if you choose to sell your Notes when the
level of the Index exceeds the Starting Value, you may receive substantially
less than the amount that would be payable on the maturity date based on this
level because of the expectation that the level of the Index will continue to
fluctuate until the Ending Value is determined. Additionally, because the
trading value and perhaps final return on your Notes is dependent on factors
in addition to the level of the Index, such as our credit rating, an increase
in the level of the 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 percentage increase in the level of
the Index over the term of the Notes, an improvement in our credit ratings
will not reduce the other investment risks related to the Notes.
Your yield, which could be negative, may be lower than the yield on other debt
securities of comparable maturity
The yield that you will receive on your Notes, which could be negative,
may be less than the return you could earn on other investments. Your yield
may be less than the yield you would earn if you bought a traditional interest
bearing debt security of ML&Co. with the same 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. Unlike traditional
interest bearing debt securities, the Notes do not guarantee the return of a
principal amount on the maturity date.
Your must rely on your own evaluation of the merits of an investment linked to
the Industrial 15 Index
In the ordinary course of their businesses, affiliates of ML&Co. may
express views on expected movements in the Underlying Stocks and these views
are sometimes communicated to clients who participate in these shares.
However, these views are subject to change from time to time. For these
reasons, you are encouraged to derive information concerning the Underlying
Stocks from multiple sources and should not rely on the views expressed by
affiliates of ML&Co.
Your return will not reflect the return of owning the Underlying Stocks
While the Index reflects the payment of dividends on the Underlying
Stocks as described in more detail below, the yield to the maturity date of
the Notes will not produce the same yield as that of other investments with
the same term which are based solely on the performance of the Underlying
Stocks. At the end of each quarterly period, the dividends paid on the
Underlying Stocks will be incorporated into the Index and those amounts will
then be subject to the change in the level of the Index. The level of the
Index will also reflect the deductions and charges described above under
"--Your investment may result in a loss", which will result in the return on
an investment in the Notes being less than the return on a similar
PS-7
investment in the Underlying Stocks. The trading value of the Notes and final
return on the Notes may also differ from the results of the Index for the
reasons described 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 and the market price
you may receive or be quoted for your Notes on a date prior to the stated
maturity date will be affected by this and other important factors including
our costs of developing, hedging and distributing the Notes
We have applied to have the Notes quoted on The Nasdaq National Market
under the trading symbol "SRIB". If approval of this application is granted,
the Notes will be quoted on The Nasdaq National Market at the time of such
approval. We make no representation, however, that the Notes will be quoted on
The Nasdaq National Market, or, if quoted, will remain quoted for the entire
term of the Notes. In any event, you should be aware that the quotation of the
Notes on The Nasdaq National Market does not ensure that a trading market will
develop for the Notes. While there have been a number of issuances of series
of Strategic Return Notes, trading volumes have varied historically from one
series to another and it is therefore impossible to predict how the Notes will
trade. 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,
including changes in the level of the Index.
If the trading market for the Notes is limited, there may be a limited
number of buyers for your Notes which may affect the price you receive if you
do not wish to hold your investment until the stated maturity date.
If a market-maker (which may be MLPF&S) makes a market in the Notes, the
price it quotes would reflect any changes in market conditions and other
relevant factors. In addition, the price at which you could sell your Notes in
a secondary market transaction is expected to be affected by the factors that
we considered in setting the economic terms of the Notes, namely the
underwriting discount paid in respect of the Notes and other costs associated
with the Notes, including compensation for developing and hedging the product.
This quoted price could be higher or lower than the original public offering
price. MLPF&S is not obligated to make a market in the Notes.
Assuming there is no change in the level of the Index and no change in
market conditions or any other relevant factors, the price at which a
purchaser (which may include MLPF&S) might be willing to purchase your Notes
in a secondary market transaction is expected to be lower than the $10
original public offering price per unit. This is due to, among other things,
the fact that the $10 original public offering price per unit included, and
secondary market prices are likely to exclude, underwriting discount paid with
respect to, and the developing and hedging costs associated with, the Notes.
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 holders of the Notes, 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 Underlying
Stocks or futures or option contracts on the Underlying Stocks or the Index
for our own accounts for business reasons and expect to enter into these
transactions in connection with hedging our obligations under the Notes. These
transactions could affect the price of the Underlying Stocks and, in turn, the
level of the 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 or decrease the prices of the
PS-8
Underlying Stocks. Temporary increases or decreases in the market prices of
the Underlying Stocks may also occur as a result of the purchasing activities
of other market participants. Consequently, the prices of the Underlying
Stocks may change subsequent to the Pricing Date, affecting the level of the
Index and therefore the trading 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 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 level of the Index can be calculated on a
particular trading day, or in connection with judgments that it would be
required to make in the event of a discontinuance or unavailability of the
Index. See the sections entitled "Description of the Notes--Adjustments to the
Index; Market Disruption Events" and "--Discontinuance of the Index" in this
pricing supplement. MLPF&S is required to carry out its duties as calculation
agent in good faith and using its reasonable judgment. However, 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 2007 through 2010 to brokers whose clients purchased their units 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. As a
result of these payments, your broker will receive a financial benefit each
year you retain your investment in the Notes. Please see the section entitled
"Supplemental Plan of Distribution" in this pricing supplement.
We expect to enter into arrangements to hedge the market risks
associated with our obligation to pay the Redemption Amount or Exchange
Amount, as applicable. We may seek competitive terms in entering into the
hedging arrangements for the Notes, but are not required to do so, and we may
enter into such hedging arrangements with one of our subsidiaries or
affiliated companies. Such hedging activity is expected to result in a profit
to those engaging in the hedging activity, which could be more or less than
initially expected, but which could also result in a loss for the hedging
counterparty.
ML&Co. or its affiliates may presently or from time to time engage in
business with one or more of the companies included in the Index including
extending loans to, or making equity investments in, those companies or
providing advisory services to those companies, including merger and
acquisition advisory services. In the course of business, ML&Co. or its
affiliates may acquire non-public information relating to those companies and,
in addition, one or more affiliates of ML&Co. may publish research reports
about those companies. ML&Co. does not make any representation to any
purchasers of the Notes regarding any matters whatsoever relating to the
companies included in the Index. Any prospective purchaser of the Notes should
undertake an independent investigation of the companies included in the Index
as in its judgment is appropriate to make an informed decision regarding an
investment in the Notes. The composition of the Index does not reflect any
investment recommendations of ML&Co. or its affiliates.
Tax consequences are uncertain
You should consider the tax consequences of investing in the Notes,
aspects of which are uncertain. See the section entitled "United States
Federal Income Taxation" in this pricing supplement.
PS-9
DESCRIPTION OF THE NOTES
ML&Co. will issue the Notes as part of a series of senior debt
securities entitled "Medium-Term Notes, Series C" under the 1983 Indenture,
which is more fully described in the accompanying prospectus. Unless exchanged
by you, the Notes will mature on April , 2011. Information included in this
pricing supplement supersedes information in the accompanying prospectus
supplement and prospectus to the extent that it is different from that
information. The CUSIP number for the Notes is .
While on the maturity date or upon exchange a holder 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 on the Maturity Date" and
"--Exchange of the Notes Prior to the Maturity Date" in this pricing
supplement.
The Notes may be exchanged by you prior to the maturity date, but are
not subject to repayment by ML&Co. prior to the maturity date.
ML&Co. will issue the Notes in denominations of whole units each with a
$10 original public offering price per unit. You may transfer the Notes only
in whole units. You will not have the right to receive physical certificates
evidencing your ownership except under limited circumstances. Instead, we will
issue the Notes in the form of a global certificate, which will be held by The
Depository Trust Company, also known as DTC, or its nominee. Direct and
indirect participants in DTC will record your ownership of the Notes. You
should refer to the section entitled "Description of Debt
Securities--Depositary" in the accompanying prospectus.
The Notes will not have the benefit of any sinking fund.
Payment on the Maturity Date
Unless you have exchanged your Notes prior to the maturity date, on the
maturity date you will be entitled to receive a cash payment per unit equal to
the Redemption Amount, as provided below.
Determination of the Redemption Amount
The "Redemption Amount" per unit will be determined by the calculation
agent and will equal:
( Ending Value )
$9.90 x (-------------------)
( Starting Value )
The "Starting Value" will equal the closing level of the Index on the
date the Notes are priced for initial sale to the public (the "Pricing Date").
The Starting Value will be set forth in the final pricing supplement made
available in connection with sales of the Notes.
For the purpose of determining the Redemption Amount, the "Ending Value"
will be determined by the calculation agent and will equal the average of the
closing levels of the Index determined on each of the 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 of
the closing levels of the Index on those Calculation Days. If there is only
one Calculation Day during the Calculation Period, then the Ending Value will
equal the closing level of the Index on that Calculation Day. If no
Calculation Days occur during the Calculation Period, then the Ending Value
will equal the closing level of the Index determined on the last scheduled
Index Business Day in the Calculation Period, regardless of the occurrence of
a Market Disruption Event (as described below under "--Adjustments to the
Index; Market Disruption Events") on that scheduled Index Business Day.
PS-10
The "Calculation Period" means the period from and including the seventh
scheduled Index Business Day before the maturity date to and including the
second scheduled Index Business Day before the maturity date.
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
(the "NYSE"), the American Stock Exchange (the "AMEX") and The Nasdaq Stock
Market (the "Nasdaq") are open for trading and the Index or any successor
index is calculated and published.
All determinations made by the calculation agent, absent a determination
of a manifest error, will be conclusive for all purposes and binding on ML&Co.
and the holders and beneficial owners of the Notes.
Exchange of the Notes Prior to the Maturity Date
You may elect to exchange all or a portion of the Notes you own during
any Business Day that occurs in an Exchange Notice Period by giving notice as
described below. An "Exchange Notice Period" means the period from and
including the first calendar day of the month of March to and including 12:00
noon in The City of New York on the fifteenth calendar day during the month of
March in the years 2007, 2008, 2009 and 2010. If the fifteenth calendar day of
the applicable month of March is not a Banking Business Day, then the Exchange
Notice Period will be extended to 12:00 noon in The City of New York on the
next succeeding Banking 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 level of the Index
on the Exchange Date. An "Exchange Date" will be the third Index Business Day
following the end of the applicable Exchange Notice Period. If a Market
Disruption Event occurs on the third 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 Banking 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 the section entitled "Description
of Debt Securities--Depositary" in the accompanying prospectus. 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 Index Business 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, N.A., 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.
A "Banking Business Day" means any day other than a Saturday or Sunday
that is not a day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close.
PS-11
Hypothetical Returns
The following tables illustrate for the hypothetical Starting Value and
a range of hypothetical Ending Values of the Index:
o the total amount payable on the maturity date of the Notes, and the
total amount payable on an investment in the Underlying Stocks;
o the total rate of return to holders of the Notes, and the total
rate of return on an investment in the Underlying Stocks; and
o the pretax annualized rate of return to holders of the Notes, and
the pretax annualized rate of return on an investment in the
Underlying Stocks.
The tables assume an initial investment of $10 in the Notes and an
initial investment of $10 in the Underlying Stocks.
Hypothetical Returns Related to Strategic Return Notes Hypothetical Returns Related to an Investment
Based on the Index in the Underlying Stocks
- ---------------------------------------------------------- -------------------------------------------------------------
Hypothetical
Ending Pretax
Pretax Value of an Total Total annualized
Hypothetical Total amount annualized Investment amount rate of rate of
Ending payable on Total rate of rate of in the payable on the return on return on
Value of the maturity return on return on Underlying maturity date the Underlying the Underlying
the Index date per unit(1) the Notes the Notes(2) Stocks(3) per unit Stocks Stocks(2)
- ------------- ---------------- ------------- ------------ ------------ -------------- --------------- --------------
20.00 1.57 -84.30% -33.79% 21.56 1.71 -82.92% -32.38%
40.00 3.14 -68.60% -21.86% 43.12 3.42 -65.84% -20.36%
60.00 4.71 -52.90% -14.50% 64.68 5.12 -48.76% -12.93%
80.00 6.27 -37.30% -9.12% 86.23 6.83 -31.68% -7.47%
100.00 7.84 -21.60% -4.81% 107.79 8.54 -14.60% -3.13%
120.00 9.41 -5.90% -1.21% 129.35 10.25 2.48% 0.49%
126.22(4) 9.90 -1.00% -0.20% 136.06 10.78 7.79% 1.51%
127.49 10.00 0.00% 0.00% 137.43 10.89 8.88% 1.71%
140.00 10.98 9.80% 1.88% 150.91 11.96 19.56% 3.60%
160.00 12.55 25.50% 4.59% 172.47 13.66 36.64% 6.34%
180.00 14.12 41.20% 7.02% 194.03 15.37 53.72% 8.78%
200.00 15.69 56.90% 9.21% 215.59 17.08 70.80% 10.99%
- ------------
(1) The amounts specified in this column reflect the 1% sales charge that will
be paid to MLPF&S.
(2) The annualized rates of return specified in this column are calculated on
a semiannual bond equivalent basis and assume an investment term from March
3, 2006 to March 3, 2011, a term expected to be equal to that of the Notes.
(3) An investment in the Underlying Stocks is assumed to be equivalent to an
investment in the Index, including the method and timing of reinvesting
dividends, except that the Index will be reduced daily by the pro rata
portion of the annual Index Adjustment Factor of 1.5%. The hypothetical
investment in the Underlying Stocks presented in this column does not take
into account transaction costs and taxes.
(4) This is the hypothetical Starting Value. The actual Starting Value will be
determined on the Pricing Date and set forth in the final pricing
supplement made available in connection with sales of the Notes.
The above figures are for purposes of illustration only. The actual
amount received by you and the resulting total and pretax annualized rates of
return will depend on the actual Starting Value, Ending Value and term of your
investment.
PS-12
Adjustments to the Index; Market Disruption Events
If at any time the AMEX makes a material change in the formula for or
the method of calculating the Index or in any other way materially modifies
the Index so that the Index does not, in the opinion of the calculation agent,
fairly represent the level of the Index had those changes or modifications not
been made, then, from and after that time, the calculation agent will, at the
close of business in New York, New York, on each date that the closing level
of the 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 level of an index comparable to the Index as if those changes
or modifications had not been made, and calculate the closing level with
reference to the Index, as so adjusted. Accordingly, if the method of
calculating the Index is modified so that the level of the Index is a fraction
or a multiple of what it would have been if it had not been modified, e.g.,
due to a split, then the calculation agent will adjust the Index in order to
arrive at a level of the 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 of 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 (without taking into account any extended or
after-hours trading session), in 20% or more of the
Underlying Stocks; or
(B) the suspension of 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 (without taking into account any extended or
after-hours trading session), whether by reason of movements
in price otherwise exceeding levels permitted by the
applicable exchange or otherwise, in option contracts or
futures contracts related to one or more of the Underlying
Stocks, the Index, or any successor index to the Index,
which are traded on any major United States exchange.
For the purpose of determining whether a Market Disruption Event has
occurred:
(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 applicable exchange;
(2) a suspension in trading in a futures or option contract on
an Underlying Stock, the Index, or any successor index to
the Index, by a major securities market by reason of (a) a
price change violating limits set by that securities market,
(b) an imbalance of orders relating to those contracts or
(c) a disparity in bid and ask quotes relating to those
contracts, will constitute a suspension of or material
limitation on trading in futures or option contracts related
to that stock or index;
(3) a suspension of or material limitation on trading on the
applicable exchange will not include any time when that
exchange is closed for trading under ordinary circumstances;
and
(4) for the purpose of clause (A) above, any limitations on
trading during significant market fluctuations under NYSE
Rule 80B, or any applicable rule or regulation enacted or
promulgated by the NYSE or any other self regulatory
organization or the Securities and Exchange Commission of
similar scope as determined by the calculation agent, will
be considered "material".
The occurrence of a Market Disruption Event could affect the calculation
of the payment on the maturity date or upon exchange you will receive. See
"--Payment on the Maturity Date" and "--Exchange of the Notes Prior to the
Maturity Date" in this pricing supplement.
PS-13
Discontinuance of the Index
If the AMEX discontinues publication of the Index and the AMEX or
another entity publishes a successor or substitute index that the calculation
agent determines, in its sole discretion, to be comparable to the Index (a
"successor index"), then, upon the calculation agent's notification of that
determination to the trustee and ML&Co., the calculation agent will substitute
the successor index as calculated by the AMEX or any other entity for the
Index and calculate the Ending Value as described above under "--Payment at
Maturity" or "--Exchange of the Notes Prior to the Maturity Date", as
applicable. Upon any selection by the calculation agent of a successor index,
ML&Co. will cause notice to be given to holders of the Notes.
In the event that the AMEX discontinues publication of the Index and:
o the calculation agent does not select a successor index; or
o the successor index is not published on any of the Calculation Days,
the calculation agent will compute a substitute level for the Index
in accordance with the procedures last used to calculate the Index
before any discontinuance. If a successor index is selected or the
calculation agent calculates a level as a substitute for the Index
as described below, the successor index or level will be used as a
substitute for the Index for all purposes, including the purpose of
determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the Index before the
Calculation Period and the calculation agent determines that no
successor index is available at that time, then on each Business
Day until the earlier to occur of:
o the determination of the Ending Value; or
o 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
or another newspaper of general circulation and arrange for information with
respect to these values to be made available by telephone.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Index may adversely affect trading in the Notes.
A "Business Day" means any day on which the NYSE, the AMEX and the
Nasdaq are open for trading.
Events of Default and Acceleration
In case an Event of Default with respect to any Notes has occurred and
is continuing, the amount payable to a holder of a Note upon any acceleration
permitted by the Notes, with respect to each $10 original public offering
price per unit, will be equal to the Redemption Amount, if any, calculated as
though the date of acceleration were the stated maturity date of the Notes.
In case of default in payment of the Notes, whether at their stated
maturity date or upon exchange or acceleration, from and after that date the
Notes will bear interest, payable upon demand of their holders, at the rate of
% per year, to the extent that payment of 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.
PS-14
THE INDEX
The level of the Index is calculated and disseminated by the AMEX under
the symbol "IXD". On any Business Day, the level of the Index equals (i) the
sum of the products of the current market price for each of the Underlying
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 level of the Index each day by the pro rata amount. As of March 1, 2006,
the index divisor for the Index was 1.0727595207024. The AMEX generally
calculates and disseminates the level of the Index based on the most recently
reported prices of the Underlying Stocks (as reported by the exchange or
trading system on which the Underlying Stocks are listed or traded), at
approximately 15-second intervals during the AMEX's business hours and 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
Underlying Stocks. The Underlying Stocks and their respective Dividend Yields
(as defined below) are shown below. The Underlying Stocks have been determined
by the AMEX to be the fifteen Qualifying Stocks in the S&P Industrial Index
having the highest Dividend Yield on June 23, 2005. 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 companies included in the Index (the "Industrial 15 Companies")
and historical stock price information for the Underlying Stocks in Annex A to
this pricing 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(2)
- ------- ---------- ------------
Abbott Laboratories............................................................................. 2.72% 0.17263
Anheuser-Busch Companies Inc.................................................................... 2.61% 0.18469
Avon Products, Inc.............................................................................. 2.46% 0.22925
Brown-Forman Corporation........................................................................ 1.46% 0.14071
The Clorox Company.............................................................................. 1.89% 0.15300
Colgate-Palmolive Company....................................................................... 2.13% 0.16863
ConAgra Foods, Inc.............................................................................. 5.17% 0.36452
Emerson Electric Co............................................................................. 2.13% 0.13385
Genuine Parts................................................................................... 3.05% 0.20635
Johnson Controls, Inc........................................................................... 1.58% 0.15251
Kimberly-Clark Corporation...................................................................... 3.29% 0.13507
Paychex, Inc.................................................................................... 1.59% 0.28265
PepsiCo Inc..................................................................................... 1.75% 0.15580
Rohm and Haas Company........................................................................... 2.29% 0.18632
Sysco Corporation............................................................................... 2.30% 0.23655
- ---------------
(1) As of March 2, 2006 as obtained from Bloomberg Financial Markets.
(2) As of March 1, 2006 as obtained from the AMEX.
The Dividend Yield on the Underlying Stocks as of March 2, 2006 was
2.24%. The Share Multipliers are recalculated by the AMEX on June 26th of each
year, or in certain circumstances on a day shortly thereafter as described
below, which is the anniversary of the date the Index was originally
calculated and disseminated. Each Share Multiplier is calculated to equate to
the number of shares of that Underlying Stock, or portion thereof, based upon
the closing market price of that stock on the Anniversary Date (as defined
below), which would represent approximately an equal percentage of the Index
as of the Anniversary Date. Each Share Multiplier remains constant until
adjusted for certain corporate events,
PS-15
quarterly dividend adjustments and annual reconstitutions as described below.
The last adjustment to the Share Multipliers took place on June 30, 2005.
Annual Industrial 15 Portfolio Reconstitution
As of the close of business on each Anniversary Date through the
Anniversary Date in 2010, 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"). The Index was last reconstituted on June 27, 2005.
"Anniversary Date" shall mean June 26th of each year, which is the anniversary
of the date the 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 Index to
remain within the criteria specified in the rules of the AMEX and within the
applicable rules of the SEC. 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 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 Underlying Stocks may have an
average monthly trading volume of 500,000 shares or more in the last six
months; (3) 90% of the Index's numerical index value and at least 80% of the
total number of component stocks will meet the then current criteria for
standardized option trading set forth in the rules of the AMEX and (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 Index in
effect at the close of business on the applicable Anniversary Date. As an
example, if the 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 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 Index equaled 60, then each of the fifteen New Stocks
would be allocated a portion of the value of the 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.
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 level 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
assigned to differing sectors based upon the company's principal business
activities.
Dividends
As described above, the level of the Index will include an amount
reflecting Current Quarter Dividends. "Current Quarter Dividends" for any day
will be determined by the AMEX and will equal the sum of the products for each
PS-16
Underlying 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
that 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. As of March 1, 2006, Current Quarter Dividends, as
obtained from the AMEX, amounted to $0.52909625. This amount, along with any
other Current Quarter Dividends accumulated through and including March 31,
2006, will be allocated to the Underlying Stocks prior to the opening of
trading on April 2, 2006.
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 Underlying Stock. The
amount of the Current Quarter Dividends allocated to each Underlying Stock
will equal the percentage of the value of each Underlying 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
outstanding Underlying 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 Underlying Stock can purchase of each such Underlying 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 Underlying Stock and the Industrial 15
Portfolio will be adjusted as follows:
1. If an Underlying Stock is subject to a stock split or reverse stock
split, then once the split has become effective, the Share Multiplier for that
Underlying Stock will be adjusted to equal the product of the number of shares
of that Underlying Stock issued in the split and the prior multiplier.
2. If an Underlying Stock is subject to a stock dividend, issuance of
additional shares of the Underlying Stock , that is given equally to all
holders of shares of the issuer of that Underlying Stock, then once the
dividend has become effective and that Underlying 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 Underlying Stock issued with respect to one such
share of that Underlying Stock and the prior multiplier.
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 Underlying Stock will continue to be included in the Industrial 15
Portfolio so long as a market price for that Underlying Stock is available. If
a market price is no longer available for an Underlying Stock for whatever
reason, including the liquidation of the issuer of the Underlying Stock or the
subjection of the issuer of the Underlying Stock to a proceeding under any
applicable bankruptcy, insolvency or other similar law, then the value of that
Underlying 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 that Underlying
Stock. If a market price is no longer available for an Underlying Stock as
described above, the Industrial 15 Portfolio Value will be computed based on
the remaining Underlying 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
Underlying 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 Underlying 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 Underlying 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 Underlying Stock.
PS-17
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 Underlying Stock. The Share Multiplier for
the new Underlying Stock will equal the product of the original Share
Multiplier with respect to the Underlying Stock for which the new Underlying
Stock is being issued (the "Original Industrial 15 Stock") and the number of
shares of the new Underlying Stock issued with respect to one share of the
Original Industrial 15 Stock.
No adjustments of any Share Multiplier of an Underlying 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
Underlying 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 Index if certain events would
otherwise alter the value of the Index despite no change in the market prices
of the Underlying Stocks.
We have derived all information regarding the IXD and AMEX from publicly
available sources. Such information reflects the policies of, and is subject
to change without notice by, AMEX. We make no representation or warranty as to
the accuracy or completeness or such information.
PS-18
Historical Data on the Index
The Index was originally calculated and disseminated on June 26,
2001 with an initial value of 100. The following chart sets forth the actual
month-end closing levels of the Index from June 2001 through February 2006.
Any historical upward or downward trend in the level of the Index during this
period is not an indication that the 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 2002 2003 2004 2005 2006
--------- ---------- --------- --------- --------- ----------
January.............................................. 107.83 95.54 116.26 122.06 122.46
February............................................. 111.40 92.21 116.70 122.69 125.32
March................................................ 112.00 92.69 114.33 122.62
April................................................ 108.60 99.17 116.70 120.82
May.................................................. 111.24 103.88 116.88 121.31
June................................................. 100.67 105.76 102.31 118.56 119.35
July................................................. 102.48 102.32 103.94 113.20 120.06
August............................................... 104.12 103.32 105.33 115.83 118.96
September............................................ 96.35 94.44 103.15 115.60 118.08
October.............................................. 98.19 99.71 108.99 115.93 119.68
November............................................. 105.85 105.97 112.22 119.80 122.08
December............................................. 106.46 100.95 117.29 124.26 122.39
The following graph sets forth the historical performance of the Index
presented in the table above. Past movements of the Index are not necessarily
indicative of the future Index levels.
[GRAPHIC OMITTED]
PS-19
UNITED STATES FEDERAL INCOME TAXATION
Set forth in full below is the opinion of Sidley Austin 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
discussion 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. The discussion below supplements
the discussion set forth under the section entitled "United States Federal
Income Taxation" that is contained in the accompanying prospectus supplement
and supersedes that discussion to the extent that it contains information that
is inconsistent with that which is contained in the accompanying prospectus
supplement. The discussion below deals only with Notes held as capital assets
and does not purport to deal with persons in special tax situations, such as
financial institutions, insurance companies, regulated investment companies,
real estate investment trusts, tax-exempt entities or persons holding Notes in
a tax-deferred or tax-advantaged account (except to the extent specifically
discussed below), dealers in securities or currencies, traders in securities
that elect to mark to market, persons subject to the alternative minimum tax,
persons holding Notes as a hedge against currency risks, as a position in a
"straddle" or as part of a "hedging", "conversion" or "integrated" transaction
for tax purposes, or persons whose functional currency is not the United
States dollar. It also does not deal with holders other than original
purchasers. If a partnership holds the Notes, the tax treatment of a partner
in the partnership will generally depend upon the status of the partner and
the activities of the partnership. Thus, persons who are partners in a
partnership holding the Notes should consult their own tax advisors. Moreover,
all persons considering the purchase of the Notes should consult their own tax
advisors concerning the application of U.S. 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) that is 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 the income of which 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 United States persons will also
be U.S. Holders 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, judicial ruling or other
authoritative guidance to the contrary) to characterize each Note for all tax
purposes as a pre-paid cash-settled forward contract linked to the level of
the Index. In the opinion of Tax Counsel, this 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
PS-20
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 discussion is based on the assumption
that the treatment described above is accepted for U.S. federal income tax
purposes.
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 on the maturity
date of the Notes, a U.S. Holder will recognize gain or loss. The amount of
that 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, judicial ruling or otherwise), where required,
ML&Co. intends to report any such gain or loss to the IRS in a manner
consistent with the treatment of that gain or loss as capital gain or loss. If
that gain or loss is treated as capital gain or loss, then any gain or loss
will generally be long-term capital gain or loss if the U.S. Holder has held
the Note for more than one year as of the maturity date. The deductibility of
capital losses is subject to certain limitations.
Sale or Exchange of the Notes. Upon a sale or exchange of a Note prior
to the maturity date of the Notes, a U.S. Holder will generally recognize
capital gain or loss in an amount equal to the difference between the amount
realized on that sale or exchange and that 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 has held the Note for more than one year at
the time of the sale or exchange. As discussed above, the deductibility of
capital losses is subject to certain limitations.
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 of
the Notes 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 "CPDI
Regulations").
If the IRS were successful in asserting that the CPDI Regulations
applied to the Notes, the timing and character of income, gain or loss
recognized with respect to the Notes would significantly differ from the
timing and character of income, gain or loss described above. 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 on the maturity date or
upon a sale or exchange of the Notes prior to the maturity date would
generally be treated as ordinary income, and any loss would be generally
treated as ordinary loss to the extent of the U.S. Holder's prior accruals of
original issue discount and capital loss thereafter.
In addition to the potential applicability of the CPDI Regulations 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.
PS-21
Constructive Ownership Law
Section 1260 of the Internal Revenue Code of 1986, as amended (the
"Code"), treats a taxpayer owning certain types of derivative positions in
property as having "constructive ownership" of that property, with the result
that all or a portion of any long-term capital gain recognized by that
taxpayer with respect to the derivative position will be recharacterized as
ordinary income. In its current form, Section 1260 of the Code does not apply
to the Notes. If Section 1260 of the Code were to apply to the Notes in the
future, however, the effect on a U.S. Holder of a Note would be to treat all
or a portion of any long-term capital gain recognized by that U.S. Holder on
the sale, exchange or maturity of a Note as ordinary income. In addition,
Section 1260 of the Code would impose an interest charge on any gain that was
recharacterized. U.S. Holders should consult their tax advisors regarding the
potential application of Section 1260 of the Code, if any, to the purchase,
ownership and disposition of a Note.
Unrelated Business Taxable Income
Section 511 of the Code generally imposes a tax, at regular corporate or
trust income tax rates, on the "unrelated business taxable income" of certain
tax-exempt organizations, including qualified pension and profit sharing plan
trusts and individual retirement accounts. As discussed above, the U.S.
federal income tax characterization of the Notes is uncertain. Nevertheless,
in general, if the Notes are held for investment purposes, the amount of
income or gain, if any, realized on the maturity date or upon a sale or
exchange of a Note prior to the maturity date, or any income that would accrue
to a holder of a Note if the Notes were characterized as contingent payment
debt instruments (as discussed above), will not constitute unrelated business
taxable income. However, if a Note constitutes debt-financed property (as
defined in Section 514(b) of the Code) by reason of indebtedness incurred by a
holder of a Note to purchase the Note, all or a portion of any income or gain
realized with respect to such Note may be classified as unrelated business
taxable income pursuant to Section 514 of the Code. Moreover, prospective
investors in the Notes should be aware that whether or not any income or gain
realized with respect to a Note which is owned by an organization that is
generally exempt from U.S. federal income taxation pursuant to Section 501(a)
of the Code constitutes unrelated business taxable income will depend upon the
specific facts and circumstances applicable to such organization. Accordingly,
any potential investors in the Notes that are generally exempt from U.S.
federal income taxation pursuant to Section 501(a) of the Code are urged to
consult with their own tax advisors concerning the U.S. federal income tax
consequences to them of investing in the Notes.
Non-U.S. Holders
Based on the treatment of each Note as a pre-paid cash-settled forward
contract linked to the level of the Index, in the case of a non-U.S. Holder, a
payment made with respect to a Note on the maturity date or upon a sale or
exchange will not be subject to United States withholding tax, provided that
the non-U.S. Holder complies with applicable certification requirements and
that the payment is not effectively connected with a United States trade or
business of the non-U.S. Holder. Any capital gain realized on the maturity
date or upon the sale or exchange of a Note by a non-U.S. Holder will
generally not be subject to U.S. federal income tax if (i) that gain is not
effectively connected with a United States trade or business of the non-U.S.
Holder and (ii) in the case of an individual non-U.S. Holder, the individual
is not present in the United States for 183 days or more in the taxable year
of the maturity date, sale or exchange, or the gain is not attributable to a
fixed place of business maintained by the individual in the United States, and
the 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 applicable
statutory rate. Prospective non-U.S. Holders of the Notes should consult their
own tax advisors in this regard.
PS-22
Backup Withholding
A beneficial owner of a Note may be subject to backup withholding at the
applicable statutory rate of U.S. federal income tax on certain amounts paid
to the beneficial owner unless the beneficial owner provides proof of an
applicable exemption or a correct taxpayer identification 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 the
beneficial owner's U.S. federal income tax provided the required information
is furnished to the IRS.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit
plan (a "plan") subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), should consider the fiduciary standards of ERISA
in the context of the plan's particular circumstances before authorizing an
investment in the Notes. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the
documents and instruments governing the plan, and whether the investment would
involve a prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit plans, as
well as individual retirement accounts and Keogh plans subject to Section 4975
of the Code (also "plans") from engaging in certain transactions involving
"plan assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("parties in interest") with respect to
the plan or account. A violation of these prohibited transaction rules may
result in civil penalties or other liabilities under ERISA and/or an excise
tax under Section 4975 of the Code for those persons, unless exemptive relief
is available under an applicable statutory, regulatory or administrative
exemption. Certain employee benefit plans and arrangements including those
that are governmental plans (as defined in Section 3(32) of ERISA), certain
church plans (as defined in Section 3(33) of ERISA) and foreign plans (as
described in Section 4(b)(4) of ERISA) ("non-ERISA arrangements") are not
subject to the requirements of ERISA or Section 4975 of the Code but may be
subject to similar provisions under applicable federal, state, local, foreign
or other regulations, rules or laws ("similar laws").
The acquisition of the Notes by a plan with respect to which we,
MLPF&S or certain of our affiliates is or becomes a party in interest may
constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless those Notes are acquired pursuant to and in accordance
with an applicable exemption. The U.S. Department of Labor has issued five
prohibited transaction class exemptions, or "PTCEs", that may provide
exemptive relief if required for direct or indirect prohibited transactions
that may arise from the purchase or holding of the Notes. These exemptions
are:
(1) PTCE 84-14, an exemption for certain transactions determined or
effected by independent qualified professional asset managers;
(2) PTCE 90-1, an exemption for certain transactions involving insurance
company pooled separate accounts;
(3) PTCE 91-38, an exemption for certain transactions involving bank
collective investment funds;
(4) PTCE 95-60, an exemption for transactions involving certain insurance
company general accounts; and
(5) PTCE 96-23, an exemption for plan asset transactions managed by
in-house asset managers.
PS-23
The Notes may not be purchased or held by (1) any plan, (2) any entity
whose underlying assets include "plan assets" by reason of any plan's
investment in the entity (a "plan asset entity") or (3) any person investing
"plan assets" of any plan, unless in each case the purchaser or holder is
eligible for the exemptive relief available under one or more of the PTCEs
listed above or another applicable similar exemption. Any purchaser or holder
of the Notes or any interest in the Notes will be deemed to have represented
by its purchase and holding of the Notes that it either (1) is not a plan or a
plan asset entity and is not purchasing those Notes on behalf of or with "plan
assets" of any plan or plan asset entity or (2) with respect to the purchase
or holding, is eligible for the exemptive relief available under any of the
PTCEs listed above or another applicable exemption. In addition, any purchaser
or holder of the Notes or any interest in the Notes which is a non-ERISA
arrangement will be deemed to have represented by its purchase and holding of
the Notes that its purchase and holding will not violate the provisions of any
similar law.
Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is
important that fiduciaries or other persons considering purchasing the Notes
on behalf of or with "plan assets" of any plan, plan asset entity or non-ERISA
arrangement consult with their counsel regarding the availability of exemptive
relief under any of the PTCEs listed above or any other applicable exemption,
or the potential consequences of any purchase or holding under similar laws,
as applicable.
USE OF PROCEEDS AND HEDGING
The net proceeds from the sale of the Notes will be used as described
under "Use of Proceeds" in the accompanying prospectus and to hedge market
risks of ML&Co. associated with its obligation to pay the Redemption Amount or
Exchange Amount.
SUPPLEMENTAL PLAN OF DISTRIBUTION
MLPF&S has advised ML&Co. that it proposes initially to offer all or
part of the Notes directly to the public on a fixed prices basis at the
offering price set forth on the cover of this pricing supplement. After the
initial public offering, the public offering prices may be changed. The
obligations of MLPF&S are subject to certain conditions and it is committed to
take and pay for all of the Notes if any are taken.
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 the
Redemption Amount or Exchange Amount, as applicable. In connection with this
arrangement, this subsidiary will pay MLPF&S $.10 per unit as part of its
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.
In addition to the compensation paid at the time of the original sale of
the Notes, MLPF&S will pay an additional amount on each anniversary of the
Pricing Date from 2007 through 2010 to brokers whose clients purchased the
units in the initial distribution and who 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 was the
stated maturity date. Also, MLPF&S may from time to time pay additional
amounts to brokers whose clients purchased Notes in the secondary market and
continue to hold those Notes.
EXPERTS
The consolidated financial statements, the related financial
statement schedule, and management's report on the effectiveness of internal
control over financial reporting incorporated in this pricing supplement by
reference from Merrill Lynch & Co., Inc.'s Annual Report on Form 10-K for the
year ended December 30, 2005 have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
PS-24
INDEX OF CERTAIN DEFINED TERMS
Page
--------
Anniversary Date................................................................ PS-16
Annual Determination Date....................................................... PS-16
Banking Business Day............................................................ PS-11
Business Day.................................................................... PS-14
Calculation Day................................................................. PS-11
Calculation Period.............................................................. PS-11
Current Quarter................................................................. PS-17
Current Quarter Dividends....................................................... PS-16
Dividend Yield.................................................................. PS-15
Ending Value.................................................................... PS-4
Exchange Amount................................................................. PS-4
Exchange Date................................................................... PS-11
Exchange Notice Period.......................................................... PS-11
Index........................................................................... PS-3
Index Adjustment Factor......................................................... PS-3
Index Business Day.............................................................. PS-11
Industrial 15 Companies......................................................... PS-15
Industrial 15 Portfolio......................................................... PS-15
Industrial 15 Portfolio Value................................................... PS-15
Market Disruption Event......................................................... PS-13
New Stocks...................................................................... PS-16
Notes........................................................................... PS-1
Original Industrial 15 Stock.................................................... PS-18
Pricing Date.................................................................... PS-4
Qualifying Stock................................................................ PS-15
Redemption Amount............................................................... PS-3
Share Multiplier................................................................ PS-16
Starting Value.................................................................. PS-4
successor index................................................................. PS-14
Underlying Stocks............................................................... PS-3
PS-25
ANNEX A
This annex contains tables which provide a brief synopsis of the
business of each of the Underlying Stocks as well as the split-adjusted
month-end closing market prices for each Underlying Stock in each month from
January 2001 through February 2006 (or from the first month-end for which that
data is available). The historical prices of the Underlying Stocks are not
indicative of the future performance of the Underlying Stocks or the Index.
The following information, with respect to the business of each company
issuing an Underlying Stock, has been derived from publicly available
documents published by that company. Because the common stock of each of those
companies is registered under the Securities Exchange Act of 1934, those
companies are required to file periodically financial and other information
specified by the Securities and Exchange Commission (the "SEC"). For more
information about those companies, information provided to or filed with the
SEC by those companies can be inspected at the SEC's public reference
facilities or accessed through the SEC's website at http://www.sec.gov.
ABBOTT LABORATORIES
Abbott Laboratories is a health care company that discovers,
develops, manufactures and sells health care products. Abbott's principal
businesses are pharmaceutical products, nutritionals, and medical products,
including diagnostics and cardiovascular devices.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 41.96 January 53.97 January 35.66 January 40.29 January 45.02 January 43.15
February 45.82 February 52.89 February 33.32 February 40.03 February 45.99 February 44.18
March 44.14 March 49.20 March 35.18 March 38.44 March 46.62
April 43.38 April 50.46 April 38.00 April 41.17 April 49.16
May 48.62 May 44.43 May 41.67 May 41.21 May 48.24
June 44.91 June 35.22 June 40.93 June 40.76 June 49.01
July 50.13 July 38.73 July 36.71 July 39.35 July 46.63
August 46.49 August 37.44 August 37.69 August 41.69 August 45.13
September 48.50 September 37.79 September39.80 September 42.36 September 42.40
October 49.55 October 39.16 October 39.86 October 42.63 October 43.05
November 51.44 November 40.95 November 41.34 November 41.96 November 37.71
December 52.15 December 37.41 December 43.59 December 46.65 December 39.43
ANHEUSER-BUSCH COMPANIES, INC.
Anheuser-Busch Companies, Inc. (the "Company") is the holding
company parent of Anheuser-Busch, Incorporated ("ABI"). In addition to ABI, a
large brewer of beer, the Company is also the parent corporation to a number
of subsidiaries that conduct various other business operations. The Company's
operations include the following principle business segments: domestic beer,
international beer, packaging and entertainment.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 43.36 January 47.27 January 47.47 January 50.72 January 49.18 January 41.44
February 43.70 February 50.85 February 46.50 February 53.22 February 47.45 February 41.54
March 45.93 March 52.20 March 46.61 March 51.00 March 47.39
April 39.99 April 53.00 April 49.88 April 51.24 April 46.87
May 44.00 May 51.61 May 52.63 May 53.27 May 46.85
June 41.20 June 50.00 June 51.05 June 54.00 June 45.75
July 43.31 July 51.71 July 51.82 July 51.90 July 44.35
August 43.04 August 53.16 August 51.54 August 52.80 August 44.31
September 41.88 September 50.60 September 49.34 September 49.95 September 43.04
October 41.66 October 52.76 October 49.26 October 49.95 October 41.26
November 43.10 November 49.12 November 51.82 November 50.09 November 43.74
December 45.21 December 48.40 December 52.68 December 50.73 December 42.96
A-1
AVON PRODUCTS, INC.
Avon Products, Inc. is a global manufacturer and marketer of beauty
and related products. Avon's products fall into three product categories:
Beauty, which consists of cosmetics, fragrances, skin care and toiletries;
Beauty Plus, which consists of fashion jewelry, watches, apparel and
accessories; and Beyond Beauty, which consists of home products, gift and
decorative products, candles and toys.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 21.15 January 24.60 January 25.00 January 31.66 January 42.22 January 28.32
February 21.23 February 25.85 February 26.00 February 35.30 February 42.77 February 28.85
March 20.00 March 27.16 March 28.53 March 37.94 March 42.94
April 21.16 April 27.93 April 29.09 April 42.00 April 40.08
May 21.88 May 26.48 May 30.47 May 44.33 May 39.74
June 23.14 June 26.12 June 31.10 June 46.14 June 37.85
July 23.20 July 23.13 July 31.20 July 43.01 July 32.71
August 23.07 August 24.37 August 32.05 August 44.18 August 32.82
September 23.13 September 23.05 September 32.28 September 43.68 September 27.00
October 23.42 October 24.25 October 33.98 October 39.55 October 26.99
November 23.87 November 25.68 November 34.25 November 37.54 November 27.35
December 23.25 December 26.94 December 33.75 December 38.70 December 28.55
BROWN-FORMAN CORPORATION
Brown-Forman Corporation manufactures, bottles, imports, exports,
and markets a wide variety of alcoholic beverage brands. The corporation also
manufactures and markets new and used oak barrels.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 33.10 January 32.75 January 31.07 January 46.71 January 48.23 January 70.92
February 31.75 February 33.98 February 34.78 February 48.86 February 50.90 February 70.36
March 30.98 March 36.38 March 38.45 March 47.66 March 54.75
April 30.40 April 39.31 April 38.27 April 46.86 April 55.50
May 32.75 May 39.36 May 39.43 May 48.05 May 59.62
June 31.97 June 34.50 June 39.31 June 48.27 June 60.46
July 34.17 July 33.89 July 38.95 July 46.51 July 58.45
August 32.25 August 35.22 August 39.52 August 47.49 August 56.63
September 31.59 September 33.48 September 39.56 September 45.80 September 59.54
October 29.72 October 36.15 October 42.19 October 44.90 October 63.34
November 30.45 November 33.05 November 45.87 November 48.02 November 68.86
December 31.30 December 32.68 December 46.73 December 48.68 December 69.32
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 product line includes household cleaning
products, home care products, water filtration 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
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 33.75 January 40.78 January 38.22 January 48.88 January 59.42 January 59.85
February 35.96 February 43.79 February 42.31 February 49.06 February 60.04 February 60.95
March 31.45 March 43.63 March 46.17 March 48.91 March 62.99
April 31.83 April 44.25 April 45.22 April 51.78 April 63.30
May 34.64 May 45.80 May 44.66 May 52.36 May 58.41
June 33.85 June 41.35 June 42.65 June 53.78 June 55.72
July 37.38 July 38.50 July 43.39 July 49.77 July 55.85
August 37.25 August 43.06 August 42.85 August 52.84 August 57.57
September 37.00 September 40.18 September 45.87 September 53.30 September 55.54
October 35.70 October 44.93 October 45.30 October 54.60 October 54.12
November 39.52 November 43.84 November 46.92 November 55.12 November 54.28
December 39.55 December 41.25 December 48.56 December 58.93 December 56.89
COLGATE-PALMOLIVE COMPANY
Colgate-Palmolive Company is a consumer products company whose
products are marketed in over 200 countries and territories. Colgate-Palmolive
Company manufactures and markets an array of products including toothpaste,
bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and
antiperspirants and shave products.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 60.08 January 57.15 January 50.91 January 51.27 January 52.54 January 54.89
February 59.05 February 55.98 February 50.31 February 55.45 February 52.92 February 54.48
March 55.26 March 57.15 March 54.44 March 55.10 March 52.17
April 55.85 April 53.01 April 57.17 April 57.88 April 49.79
May 56.64 May 54.20 May 59.62 May 57.20 May 49.97
June 58.99 June 50.05 June 57.95 June 58.45 June 49.91
July 54.20 July 51.35 July 54.60 July 53.20 July 52.94
August 54.15 August 54.55 August 55.28 August 54.00 August 52.50
September 58.25 September 53.95 September 55.89 September 45.18 September 52.79
October 57.52 October 54.98 October 53.19 October 44.62 October 52.96
November 58.36 November 51.39 November 52.50 November 45.99 November 54.52
December 57.75 December 52.43 December 50.05 December 51.16 December 54.85
A-3
CONAGRA FOODS, INC.
ConAgra Foods, Inc. operates in several different areas of the food
business and produces a wide variety of products including packaged foods,
food ingredients and agricultural products. Products produced by ConAgra
include shelf-stable products such as canned goods and cooking oils, in
addition to frozen food products, and refrigerated food products.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 23.40 January 24.80 January 24.53 January 25.94 January 29.50 January 20.73
February 19.68 February 23.41 February 23.07 February 27.19 February 27.32 February 21.03
March 18.24 March 24.25 March 20.08 March 26.94 March 27.02
April 20.81 April 24.50 April 21.00 April 28.89 April 26.75
May 20.85 May 24.61 May 24.27 May 28.12 May 26.15
June 19.81 June 27.65 June 23.60 June 27.08 June 23.16
July 21.49 July 25.11 July 22.53 July 26.00 July 22.71
August 22.95 August 26.29 August 22.00 August 26.20 August 22.83
September 22.45 September 24.85 September 21.24 September 25.71 September 24.75
October 22.90 October 24.25 October 23.84 October 26.40 October 23.27
November 22.97 November 24.37 November 24.50 November 27.05 November 21.50
December 23.77 December 25.01 December 26.39 December 29.45 December 20.28
EMERSON ELECTRIC CO.
Emerson Electric Co. is principally engaged in the design,
manufacture and sale of a range of electrical, electromechanical and
electronic products and systems. Emerson offers product lines that include
various products and systems involving industrial automation, electronics and
telecommunications, heating, ventilating and air conditioning systems,
appliances and tools.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 76.00 January 57.94 January 46.93 January 63.90 January 67.24 January 77.45
February 66.90 February 57.59 February 47.07 February 62.48 February 66.32 February 81.81
March 62.00 March 57.39 March 45.35 March 59.92 March 64.93
April 66.65 April 53.39 April 50.70 April 60.22 April 62.67
May 67.71 May 57.85 May 52.30 May 59.70 May 66.47
June 60.50 June 53.51 June 51.10 June 63.55 June 62.63
July 57.36 July 50.95 July 53.70 July 60.70 July 65.80
August 53.60 August 48.78 August 55.76 August 62.25 August 67.28
September 47.06 September 43.94 September 52.65 September 61.89 September 71.80
October 49.02 October 48.18 October 56.75 October 64.05 October 69.55
November 54.06 November 52.15 November 61.04 November 66.82 November 75.61
December 57.10 December 50.85 December 64.75 December 70.10 December 74.70
A-4
GENUINE PARTS COMPANY
Genuine Parts Company is a service organization engaged in the
distribution of automotive replacement parts, industrial replacement parts,
office products and electrical/electronic materials, and conducts its business
throughout the United States, in Canada and in Mexico from approximately 1,800
locations.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 25.36 January 35.52 January 29.50 January 32.96 January 42.33 January 42.53
February 26.96 February 36.53 February 28.80 February 34.73 February 43.28 February 44.52
March 25.91 March 36.77 March 30.51 March 32.72 March 43.49
April 27.00 April 34.51 April 31.97 April 35.80 April 42.90
May 28.57 May 36.55 May 32.87 May 37.64 May 42.96
June 31.50 June 34.87 June 32.01 June 39.68 June 41.09
July 32.92 July 30.71 July 30.94 July 37.73 July 45.79
August 30.76 August 33.25 August 32.02 August 37.91 August 45.82
September 31.86 September 30.64 September 31.98 September 38.38 September 42.90
October 32.50 October 29.54 October 31.82 October 39.89 October 44.37
November 33.70 November 31.79 November 31.48 November 43.41 November 44.31
December 36.70 December 30.80 December 33.20 December 44.06 December 43.92
JOHNSON CONTROLS, INC.
Johnson Controls, Inc. provides building control systems and
services including comfort, energy and security management for the
non-residential buildings market. In addition, Johnson provides for the
integration of management, operation and control of building systems such as
temperature, ventilation, humidity, fire safety and security. Johnson also
supplies various automotive interior products, including seating, instrument
panels, overhead components, floor consoles and door systems, electronics and
batteries.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 32.49 January 42.03 January 40.39 January 58.85 January 59.16 January 69.24
February 33.24 February 44.38 February 38.98 February 58.32 February 59.10 February 71.27
March 31.23 March 44.16 March 36.22 March 59.15 March 55.76
April 36.20 April 43.13 April 41.12 April 54.86 April 54.87
May 35.20 May 44.03 May 41.63 May 53.92 May 56.66
June 36.24 June 40.81 June 42.80 June 53.38 June 56.33
July 40.30 July 40.51 July 48.31 July 56.45 July 57.44
August 36.63 August 43.15 August 49.50 August 56.30 August 59.98
September 32.62 September 38.41 September 47.30 September 56.81 September 62.05
October 36.16 October 39.00 October 53.77 October 57.35 October 68.05
November 39.76 November 41.45 November 54.72 November 61.40 November 69.45
December 40.38 December 40.09 December 58.06 December 63.44 December 72.91
A-5
KIMBERLY-CLARK CORPORATION
Kimberly-Clark Corporation is a global health and hygiene company
focused on building its personal care, consumer tissue and
business-to-business operations. The corporation is principally engaged in the
manufacturing and marketing of a wide range of health and hygiene products
around the world. Most of these products are made from natural or synthetic
fibers using advanced technologies in fibers, nonfibers and absorbency.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 63.66 January 59.29 January 45.54 January 58.07 January 65.51 January 57.12
February 70.30 February 61.55 February 45.06 February 63.59 February 65.98 February 59.18
March 66.69 March 63.56 March 44.70 March 62.04 March 65.73
April 58.40 April 64.02 April 48.93 April 64.35 April 62.45
May 59.43 May 63.83 May 51.06 May 64.79 May 64.33
June 54.96 June 60.96 June 51.26 June 64.77 June 62.59
July 59.79 July 60.02 July 47.59 July 62.99 July 63.76
August 61.01 August 58.83 August 50.25 August 65.58 August 62.32
September 60.96 September 55.69 September 50.46 September 63.50 September 59.53
October 54.58 October 50.63 October 51.92 October 58.67 October 56.84
November 57.19 November 49.47 November 53.31 November 62.54 November 58.98
December 58.79 December 46.67 December 58.10 December 65.81 December 59.65
PAYCHEX, INC.
Paychex, Inc. is a provider of payroll and integrated human
resource and employee benefit outsourcing solutions for small-to medium-sized
businesses. Paychex offers payroll, payroll-related, and human resource
products that include payroll processing, tax filing and payments, employee
pay, retirement services administration, employee benefits administration,
regulatory compliance (new hire reporting and garnishment processing),
workers' compensation insurance, and human resource administrative services.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 45.13 January 36.70 January 25.18 January 37.48 January 30.49 January 36.35
February 39.94 February 36.95 February 26.22 February 32.17 February 31.93 February 40.05
March 37.06 March 39.70 March 27.47 March 35.60 March 32.82
April 34.56 April 37.33 April 31.14 April 37.28 April 30.60
May 38.43 May 34.65 May 30.52 May 37.51 May 28.88
June 40.00 June 31.29 June 29.31 June 33.88 June 32.54
July 39.30 July 26.31 July 32.53 July 30.71 July 34.91
August 37.07 August 23.40 August 36.00 August 29.67 August 34.13
September 31.51 September 24.27 September 33.93 September 30.15 September 37.08
October 32.06 October 28.82 October 38.92 October 32.79 October 38.76
November 35.01 November 29.20 November 38.47 November 33.16 November 42.41
December 34.85 December 27.90 December 37.20 December 34.08 December 38.12
A-6
PEPSICO INC.
PepsiCo, Inc. is a global snack and beverage company that manufactures,
markets and sells a variety of salty, convenient, sweet and grain-based
snacks, carbonated and non-carbonated beverages and foods. The trademarks
owned by PepsiCo., Inc. include, among others, Aquafina, Frito-Lay, Gatorade,
Mountain Dew, Pepsi, Quaker, 7UP, Tostitos and Tropicana.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 44.07 January 50.09 January 40.48 January 47.26 January 53.70 January 57.18
February 46.08 February 50.50 February 38.32 February 51.90 February 53.86 February 59.11
March 43.95 March 51.50 March 40.00 March 53.85 March 53.03
April 43.81 April 51.90 April 43.28 April 54.49 April 55.64
May 44.76 May 51.98 May 44.20 May 53.37 May 56.26
June 44.20 June 48.20 June 44.50 June 53.88 June 53.93
July 46.63 July 42.94 July 46.07 July 50.00 July 54.53
August 47.00 August 39.55 August 44.54 August 50.00 August 54.85
September 48.50 September 36.95 September 45.83 September 48.65 September 56.71
October 48.71 October 44.10 October 47.82 October 49.58 October 59.08
November 48.63 November 42.48 November 48.12 November 49.91 November 59.20
December 48.69 December 42.22 December 46.62 December 52.20 December 59.08
ROHM AND HAAS COMPANY
Rohm and Haas Company manufactures and markets a variety of
specialty chemicals and materials. These chemicals are used in paint and
coatings, electronic materials, household products, adhesives, plastics and
salt. Rohm and Haas and its subsidiaries operate manufacturing facilities
worldwide.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 35.90 January 36.78 January 30.85 January 39.27 January 44.24 January 50.90
February 36.75 February 38.41 February 28.54 February 39.75 February 48.17 February 49.75
March 30.81 March 42.27 March 29.78 March 39.84 March 48.00
April 34.37 April 37.11 April 33.11 April 38.78 April 43.66
May 33.20 May 37.68 May 32.43 May 38.54 May 46.65
June 32.90 June 40.49 June 31.03 June 41.58 June 46.34
July 34.34 July 37.50 July 35.37 July 39.20 July 46.06
August 35.91 August 36.39 August 36.33 August 40.53 August 43.41
September 32.76 September 31.00 September 33.45 September 42.97 September 41.13
October 32.47 October 33.27 October 39.30 October 42.39 October 43.53
November 35.50 November 35.39 November 40.15 November 44.09 November 43.80
December 34.63 December 32.48 December 42.71 December 44.23 December 48.42
A-7
SYSCO CORPORATION
Sysco Corporation, acting through its subsidiaries and divisions,
is the largest North American distributor of food and related products
primarily to the foodservice or "food-prepared-away-from-home" industry. The
corporation provides its products and services to approximately 400,000
customers, including restaurants, healthcare and educational facilities,
lodging establishments and other foodservice customers.
Closing Closing Closing Closing Closing Closing
2001 Price 2002 Price 2003 Price 2004 Price 2005 Price 2006 Price
- ------- -------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
January 26.92 January 29.62 January 29.37 January 37.93 January 34.97 January 30.68
February 27.26 February 29.57 February 27.12 February 39.65 February 34.42 February 30.09
March 26.51 March 29.82 March 25.44 March 39.05 March 35.80
April 28.12 April 29.01 April 28.73 April 38.25 April 34.60
May 29.73 May 27.85 May 30.94 May 37.50 May 37.16
June 27.15 June 27.22 June 30.04 June 35.87 June 36.19
July 26.84 July 26.05 July 30.13 July 34.45 July 36.06
August 28.02 August 28.36 August 31.46 August 32.14 August 33.38
September 25.54 September 28.39 September 32.71 September 29.92 September 31.37
October 24.11 October 31.68 October 33.66 October 32.27 October 31.91
November 24.59 November 29.42 November 36.32 November 34.75 November 32.32
December 26.22 December 29.79 December 37.23 December 38.17 December 31.05
A-8
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[GRAPHIC OMITTED]
1,000,000 Units
Merrill Lynch & Co., Inc.
Medium-Term Notes, Series C
Strategic Return Notes(R)
Linked to the Industrial 15 Index
due April , 2011
(the "Notes")
$10 original public offering price per unit
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P R I C I N G S U P P L E M E N T
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Merrill Lynch & Co.
March , 2006
"Strategic Return Notes" is a registered mark of Merrill Lynch & Co., Inc.
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