Terms

    1.1 Name - Merrill Lynch & Co., Inc. Top Ten Yield Market Index Target-Term Securities

    1.2 Vendor - Merrill Lynch & Co., Inc.

    1.3 Initial date of issue - August 8, 1996

    1.4  Initial price per share - $10.00

    1.5 Added sales charge, if any - None

    1.6 Underlying index or indices - Top Ten Yield Index (XMT)

        1.61 Description of underlying index or indices - The Index reflects the price movements and cash  dividends of a portfolio of the 10 common stocks with the highest dividend yields in the Dow Jones Industrial Average.  NOTE: At the end of each calendar quarter, the dividends accrued on the stocks underlying the Index will be incorporated into the Index by adjusting the Share Multipliers of such stocks.

    1.7 Expiration date - August 15, 2006

    1.8 Payment terms

        1.81 Description of payment terms

            1.811  Payments at expiration - At maturity, a beneficial owner of a Security will be entitled to receive to receive (A) the principal amount thereof and (B) the Supplemental Redemption Amount that will be no less than $2.40 per $10 principal amount of the Securities (This is the Minimum Supplemental Redemption Amount).  NOTE: However, if the Ending Index Value does not exceed the Starting Index Value by more than 24%, owners of the securities will receive at maturity only the principal amount and the Minimum Supplemental Redemption Amount.

            1.812  Payments (if any) prior to expiration - None

            1.813  Options for the vendor to alter the terms or call the product prior to expiration (if any) - None

        1.82  Details of payments at expiration

            1.821   Table of payments for alternative values of the underlying index
 

NOTE: The Indicated Hypothetical Ending Index Value reflects a deduction from the value of the Index at the end of each calendar quarter equal to 0.4375% of the then current Index value

            1.822   Diagram of payments for an initial investment of $100 (or 100 units of relevant currency)

            1.823   Diagram of payments for an investment of $100 (or 100 units of relevant currency) at the current price plotted with payments for an initial investment of $100 in the underlying index at its current price (Price of MTT as of 5/22/01: 16.30) (Price of XMT Index as of 5/21/01: 165.67)

Calculations:

1) $100/$16.30 per share=6.13 shares of MTT

2) 6.13 shares X Total Amount Payable At Maturity=Payment for an investment of $100 at the current price

3) $100/$165.67 per share=.603 shares of XMT (Underlying Index)

4) .603 shares X (Ending Index Value)=Payment of an initial investment of $100 in the underlying index at its current price

            1.824   Diagram of payments for an initial investment of $100 (or 100 units of relevant currency) at the current price plotted with payments for an initial investment of $100 in a treasury Strip at its current price  (TIGER 15 T15 at 76.977, Matures in 8/15/06)

Calculations:

$100/$76.977 per strip=1.2991 strips =>You receive $129.91 at Maturity 

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Secondary Market

    2.1 Exchange where traded - AMEX

    2.2  Ticker symbol - MTT

    2.3  Chart of prices since inception - (courtesy of BigCharts.com)

   2.4  Chart of change in value and S&P Index for the same time period (courtesy of BigCharts.com)

    2.5  Chart of change in value since inception and change in value of underlying index for the same time period (courtesy of BigCharts.com)

    2.6 Chart of change in value since inception and change in value of other Merrill Lynch PIPs for the same time period (courtesy of BigCharts.com)

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Backing and Hedging

    3.1 Guarantor/Underwriter - Merrill Lynch, Pierce, Fenner & Smith Incorporated

    3.2  Information (if any) about guarantor's hedging strategy - The net proceeds from the sale of the Securities will be used to hedge market risks of the Company affecting the value of the Supplemental Redemption Amount

    3.3 Credit rating of issuer and any guarantors - Not stated in prospectus

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Alternative Strategies

    4.1  Options on underlying index

        4.11 Nearest date to expiration date of PIP

            4.111  Call option -- current price: None

            4.112  Put Option -- current price: None

    4.2  Zero-coupon bonds for expiration date

        4.21  Current Price (as of 5/22/01)

            CAT S KS0 08/15/06 - 76.977

            TIGER 15 T15 08/15/06 - 76.977

            ETR 14 0 08/15/06 - 77.133

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Current Valuation

        5.11  Ending value for the underlying index that will make the final payment from the PIP equal to that from an investment today in the underlying index, based on investing $100 at the current prices in the PIP and the underlying index

• Considering that the price of MTT has been hovering around the 160-170 level and that volume is relatively low (less than 10,000 shares traded monthly), one would assume that the XMT will settle around that level come August of 2006.  However, since the maturity date is still five years away, it is hard to say with certainty the final payment of the PIP.  For the sake of this report, I will assume the Index will have an ending value of approximately 170.  The current cost of the product as of 5/21/01 is $16.30.  With $100, one can purchase approximately 6.135 MTT shares.  With the ending value of 170, the payment would be approximately $104.295.  With $100, we can purchase approximately .6036 XMT shares at $165.67 (the current price as of 5/21/01).  To achieve the same payment, the index must rise to about $172.96, before the maturity date.

        5.12  Ending value for the underlying index that will make the final payment from the PIP equal to that from an investment today in a treasury strip, based on investing $100 at the current prices in the PIP and the strip

• We could buy 1.299 of the TIGER's listed in 4.21.  On August 15th, 2006, we would be given about $129.90.  With a $100 and a PIP cost of $16.30, we can only buy about 6.13 shares of MTT.  In order to make the zero-coupon bond and the PIP pay the same amount, our per-share PIP payoff should be about $21.19.  Therefore, the index would need to close around $211.90 on the expiration date.

Calculations:

$10+($10 X [(Ending Index Value - 100) / 100])=$21.19

=>($10 X [(Ending Index Value - 100) / 100])=$11.19

=>[(Ending Index Value - 100) / 100] =$1.119

=>Ending Index Value - 100 = $111.90

=>Ending Index Value = $211.90

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Investor Characteristics

    6.1  Investment Horizon - About 10 years.   

    6.2  Attitude towards risk - Extremely low risk tolerance.  Because an investor who has purchased this PIP is guaranteed his or her principal plus a minimum amount of $2.40, the investor would have realized at least a 24% increase in their investment over the ten-year period of the PIP or 2.4% annually.  The PIP, like many others, gives investors (mainly novices) the illusion of participating in the market.  When considering this PIP, the idea of downside protection is very much at play.  Yet, the probability of any substantial gains made is highly unlikely considering the relative lack of movement in the underlying index. 

    6.3  Other investments - Investing in the underlying Index and hedging through T-Bills: As the payment graph demonstrates, investing in the underlying index is very comparable to investing in the PIP without incurring the 0.4375% quarterly reduction in the Index value.  To ensure some protection, one could invest in a treasury strip.

    6.4  Occupation - Low-middle income worker looking for downside protection and little upside potential.

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**All information cited on this page not credited is taken from Merrill Lynch & Co. Inc.

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