Prepared by R.R. Donnelley Financial -- FORM 10-K405

Table of Contents
SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549
FORM 10-K
     ANNUAL REPORT PURSUANT TO SECTION 13 
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
   
For the fiscal year ended December 28, 2001 Commission file number 1-7182
     
Merrill Lynch & Co., Inc.
(Exact name of Registrant as specified in its charter)
       
Delaware 13-2740599
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
        
4 World Financial Center 10080
New York, New York (Zip Code)
(Address of principal executive offices)
           
Registrant’s telephone number, including area code: (212) 449-1000
Securities registered pursuant to Section 12(b) of the Act:
     
Common Stock, par value $1.33
1
/3 and attached Rights to Purchase  
New York Stock Exchange; Chicago Stock
Series A Junior Preferred Stock.
 
Exchange; Pacific Exchange; Paris Stock Exchange; London
Stock Exchange; and Tokyo Stock Exchange
 
Depositary Shares representing 1/400th share of 9% Cumulative Preferred New York Stock Exchange
 
Stock, Series A. Nikkei 225 Market Index Target-Term Securities (“MITTS Securities”) due June 14, 2002; S&P 500 MITTS Securities due September
16, 2002; MITTS Securities based upon the Dow Jones Industrial Average (the “Dow Jones”) due January 14, 2003; S&P 500 MITTS Securities due
September 28, 2005; Top Ten Yield MITTS Securities due August 15, 2006; S&P 500 Inflation Adjusted MITTS Securities due September 24, 2007.
   
 
      
Nikkei 225 MITTS Securities due September 20, 2002; Major 8 European
 
American Stock Exchange
 
MITTS Securities due August 30, 2002; Major 11 International MITTS Securities due December 6, 2002; Russell 2000 MITTS Securities due
September 30, 2004; Global MITTS Securities due December 22, 2004; S&P 500 MITTS Securities due July 1, 2005; Nikkei 225 MITTS Securities
due September 21, 2005; Energy Select Sector SPDR Fund MITTS Securities due February 21, 2006; EuroFund MITTS Securities due February 28,
2006; S&P 500 MITTS Securities due March 27, 2006; Consumer Staples Select Sector SPDR Fund MITTS Securities due April 19, 2006; Select
Sector SPDR Fund Growth Portfolio MITTS Securities due May 25, 2006; Major 11 International MITTS Securities due May 26, 2006; MITTS
Securities based upon the Dow Jones due June 26, 2006; Russell 2000 MITTS Securities due July 21, 2006; Nikkei 225 MITTS Securities due August
4, 2006; S&P 500 MITTS Securities due August 4, 2006; Energy Select Sector SPDR Fund MITTS Securities due September 20, 2006; MTN, Series B,
Stock-Linked Notes due November 28, 2003; Series B, 1.5% Principal Protected Notes due December 15, 2005; MTN, Series B, 1% Callable and
Exchangeable Stock-Linked Notes due February 8, 2006; MTN, Series B, 0.25% Callable and Exchangeable Portfolio-Linked Notes due April 27,
2006; MTN, Series B, 1% Callable and Exchangeable Stock-Linked Notes due May 10, 2006; MTN, Series B, 1% Callable and Exchangeable Stock-
Linked Notes due July 20, 2006; Telebras Indexed Callable ProGroS Securities due May 19, 2005; Bond Index Notes, Domestic Master Series 1999A
due December 23, 2002; Euro Currency Warrants due February 28, 2002; Callable MITTS Securities due October 5, 2007 based upon Semiconductor
HOLDRS; Callable MITTS Securities due September 13, 2007 based upon Broadband HOLDRS; Callable Nasdaq-100 MITTS Securities due August
3, 2007; Callable MITTS Securities due August 3, 2007 based upon Biotech HOLDRS; Medium-Term Notes, Series B 2% Callable and Exchangeable
Stock-Linked Notes due July 26, 2005 (Linked to the performance of the common stock of Johnson & Johnson); Medium-Term Notes, Series B 7%
Stock-Linked Notes due July 8, 2002 (Linked to the performance of the common stock of The Gap, Inc.); Nikkei 225 MITTS Securities due March 30,
2007; Callable MITTS Securities due March 5, 2007 based upon Internet HOLDRS; Medium-Term Notes, Series B 0.50% Callable and Exchangeable
Stock-Linked Notes due February 3, 2005 (Linked to the performance of a specified portfolio of common stocks); Medium-Term Notes, Series B
0.25% Callable and Exchangeable Stock-Linked Notes due January 7, 2008 (Linked to the performance of Wells Fargo & Company); Nikkei 225
MITTS due June 27, 2007; Strategic Return Notes Linked to the Nasdaq-100 Index due November 30, 2004; Strategic Return Notes Linked to the
Select Ten Index due May 30, 2006; Strategic Return Notes Linked to the Industrial 15 Index due June 26, 2006; Strategic Return Notes Linked to the
Institutional Holdings Index due June 28, 2006; Strategic Return Notes Linked to the Select Ten Index due July 31, 2006; 8% Callable Stock Return
Income Debt Securities due October 23, 2003, payable at maturity with Cisco Systems, Inc. common stock; 9% Callable Stock Return Income Debt
Securities due October 23, 2003, payable at maturity with Sun Microsystems, Inc. common stock; Strategic Return Notes Linked to the Select Ten
Index due November 2, 2006; 8% Callable STock Return Income Debt Securities due November 21, 2003, payable at maturity with EMC Corporation
common stock; Top Ten Yield Market Index Target-Term Securities due August 15, 2006; Strategic Return Notes/SM/ Linked to the Select Ten Index
due March 1, 2007; 8% Callable STock Return Income DEbt Securities/SM/ due February 23, 2004, payable at maturity with Applied Materials, Inc.
common stock; 6% Callable STock Return Income DEbt Securities/SM/ due February 11, 2004, payable at maturity with Bed Bath & Beyond Inc.
common stock; Strategic Return Notes/SM/ Linked to the Biotech-Pharmaceutical Index due February 8, 2007; 9% Callable STock Return Income
DEbt Securities/SM/ due February 2, 2004, payable at maturity with JDS Uniphase Corporation common stock; Strategic Return Notes/SM/ Linked to
the Industrial 15 Index due February 1, 2007; and 8% Callable STock Return Income DEbt Securities/SM/ due January 29, 2004, payable at maturity
with Xilinx, Inc. common stock.
 
       
Securities registered pursuant to Section 12(g) of the Act:
S&P 500 Market Index Target-Term Securities (“MITTS Securities”) due June 29, 2007; and S&P 500 MITTS Securities due November 20, 2007; and S&P 500 MITTS Securities due August 29, 2008; MITTS Securities based
upon the Dow Jones Industrial Average due September 29, 2008; Enhanced Return Notes Linked to the Nasdaq-100 due February 28, 2003; Enhanced Return Notes/SM/ Linked to the Nasdaq-100 Index/®/ due March 1, 2004;
and Market Index Target-Term Securities/®/ based upon the Dow Jones Industrial Average/SM/ due January 16, 2009.
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes  x    No
  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the

Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

As of the close of business on February 26, 2002, there were 852,998,013 shares of Common Stock and 4,195,407 Exchangeable Shares outstanding. The Exchangeable

Shares, which were issued by Merrill Lynch & Co., Canada Ltd. in connection with the merger with Midland Walwyn Inc., are exchangeable at any time into Common Stock

on a one-for-one basis and entitle holders to dividend, voting, and other rights equivalent to Common Stock.

As of the close of business on February 26, 2002, the aggregate market value of the voting stock, comprising the Common Stock and the Exchangeable Shares, held by non-

affiliates of the Registrant was approximately $41.7 billion.

Documents Incorporated By Reference: Merrill Lynch & Co., Inc. 2001 Annual Report to Stockholders and the 2002 Proxy Statement for the Annual Meeting of

Stockholders of Merrill Lynch & Co., Inc. dated March 15, 2002, each incorporated by reference in Parts I-IV in this Form 10-K.

Table of Contents
 
 TABLE OF CONTENTS
Part I.
     
Item 1 Business 1
      
Overview 1
      
Business Environment 2
      
Description of Business Activities 2
      
Competition 10
      
Regulation 11
     
Item 2 Properties 13
     
Item 3 Legal Proceedings 13
     
Item 4 Submission of Matters to a Vote of Security Holders 15
     
Executive Officers of Merrill Lynch & Co., Inc. 16
     
Part II.
     
Item 5 Market for Registrant’s Common Equity and Related Stockholder
Matters 18
     
Item 6 Selected Financial Data 18
     
Item 7 Management’s Discussion and Analysis of Financial Condition
 
and Results of Operations 18
     
Item 7A Quantitative and Qualitative Disclosures About Market Risk 18
     
Item 8 Financial Statements and Supplementary Data 18
     
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 18
     
Part III.
     
Item 10 Directors and Executive Officers of the Registrant 18
     
Item 11 Executive Compensation 18
     
Item 12 Security Ownership of Certain Beneficial Owners and
Management 19
     
Item 13 Certain Relationships and Related Transactions 19
     
Part IV.
     
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 19

Table of Contents

PART I

Item 1. Business

Overview

Merrill Lynch & Co., Inc.,

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a Delaware corporation formed in 1973, is a holding company that, through its subsidiaries and affiliates, provides investment, financing,

advisory, insurance, banking, and related products and services on a global basis, including:

securities brokerage, trading, and underwriting

investment banking, strategic services (including mergers and acquisitions), and other corporate finance advisory activities

asset management

origination, brokerage, dealer and related activities in swaps, options, forwards, exchange-traded futures, other derivatives and foreign exchange products

securities clearance and settlement services

equity, debt, foreign exchange, and economic research

private equity investing activities

banking, trust, and lending services, including commercial and mortgage lending and related services

insurance underwriting and sales

investment advisory and related record keeping services

Merrill Lynch provides these products and services to a wide array of clients, including individual investors, small businesses, corporations, governments, governmental

agencies, and financial institutions.

Merrill Lynch’s business has three business segments: the Global Markets & Investment Banking Group (“GMI”) (formerly known as the Corporate and Institutional Client

Group (“CICG”)), the Private Client Group (“Private Client”), and Merrill Lynch Investment Managers (“MLIM”). Merrill Lynch provides financial services worldwide through

various subsidiaries and affiliates that frequently participate in the facilitation and consummation of a single transaction. This organizational structure is designed to enhance the

delivery of services to Merrill Lynch’s diverse global client base and position Merrill Lynch for worldwide growth.

Merrill Lynch has organized its operations outside the United States into five regions: Europe, Middle East, and Africa; Japan; Asia Pacific; Canada; and Latin America.

Merrill Lynch conducts its business from various locations throughout the world. Its world headquarters facility is located at the World Financial Center in New York City and

its other principal United States business and operational centers are in New Jersey and Florida. Merrill Lynch has a presence in 37 countries outside the United States,

including offices in Buenos Aires, Dubai, Dublin, Frankfurt, Geneva, Hong Kong, Johannesburg, London, Madrid, Melbourne, Mexico City, Milan, Paris, Sao Paulo,

Singapore, Sydney, Tokyo, Toronto, and Zurich.

Merrill Lynch employed approximately 57,400

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people at the end of 2001. Financial information concerning Merrill Lynch for each of the three fiscal years ended on the

last Friday in December 2001, 2000, and 1999, including the amount of total revenue contributed by classes of similar services that accounted for 10% or more of its

consolidated revenues in any one of these fiscal periods, as well as information with respect to Merrill Lynch’s operations by segment and geographic area, is set forth in Merrill

Lynch’s Consolidated Financial Statements and the Notes thereto in the Merrill Lynch & Co., Inc. 2001 Annual Report to Stockholders (the “Annual Report”) included as an

exhibit to this Form 10-K.

At the end of 2001, total assets in client accounts or under management were approximately $1.5 trillion.

In 2001, Merrill Lynch achieved strong positions in various industry league tables published by Thomson Financial Securities Data. According to Thomson Financial, in

2001 Merrill Lynch ranked number one in global equity and equity-linked origination and number two in global announced mergers and acquisitions, with increased full-year

market shares of 14.4% and 27.4%, respectively. International Financing Review magazine named Merrill Lynch Equity House and Equity-Linked House of the Year.

1

Unless the context otherwise requires, the term “Merrill Lynch” means Merrill Lynch & Co., Inc. and its consolidated subsidiaries. The term “ML & Co.” is used herein where

appropriate to refer solely to Merrill Lynch & Co., Inc., the parent holding company.

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Excludes 3,200 full-time employees who were terminated at year-end 2001 but who were receiving salary payments and benefits as part of their severance arrangements.

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Business Environment

The financial services industry, in which Merrill Lynch is a leading participant, is highly competitive and highly regulated. This industry and the global financial markets are

influenced by numerous unpredictable factors. These factors include economic conditions, monetary and fiscal policies, the liquidity of global markets, international and

regional political events, acts of war or terrorism, changes in applicable laws and regulations, the competitive environment, and investor sentiment. These conditions or events

can significantly affect the volatility and trading volumes of financial markets. Greater volatility increases risk, but could lead to increased order flow and revenues in the

trading and brokerage businesses. Revenues and net earnings may vary significantly from period to period due to these unpredictable factors and the resulting market volatility

and trading volumes.

The financial services industry continues to be affected by an intensifying competitive environment, as demonstrated by consolidation through mergers and acquisitions,

competition from new and established competitors using the internet or other technology to provide financial services, and diminishing margins in many mature products and

services. The trend of commercial and investment banks consolidating made possible by the enactment of the Gramm-Leach-Bliley Act has also increased the competition for

investment banking business through the use of lending activities in conjunction with investment banking activities.

Global financial markets, particularly equity markets, had a difficult year in 2001 as a slowdown in economic activity, reduced corporate earnings, widespread corporate

downsizing, the devaluation of technology and telecommunications companies, and the September 11th terrorist attacks caused equity markets to fall and investors to shift to

less volatile, fixed-income investments. The U.S. Federal Reserve’s interest rate cuts during the year did little to help the slumping U.S. economy. The September 11th terrorist

attacks negatively impacted stock markets around the world, and forced a suspension of trading in U.S. equity markets for an unprecedented four consecutive business days. A

modest rally occurred in global equity markets during the fourth quarter of 2001, but was not enough to put global indices in positive territory for the year. For a more

complete discussion of the impact of the September 11th terrorist attacks, see “September 11th-related Expenses” in Note 2 to the Consolidated Financial Statements on

page 59 of the Annual Report and Management’s Discussion and Analysis in the Annual Report, “Business Environment” on page 17, “GMI’s Results of Operations” on page

20, “Non-Interest Expenses, September 11th-related Expenses” on page 28, and “Process Risk” on page 37. See also Item 2 “Properties” below.

In addition to providing historical information, Merrill Lynch may make or publish forward-looking statements about management expectations, strategic objectives,

business prospects, anticipated expense savings and financial results, and other similar matters. A variety of factors, many of which are beyond Merrill Lynch’s control, affect

its operations, performance, business strategy, and results and could cause actual results and experience to differ materially from the expectations and objectives expressed in

these statements. These factors include, but are not limited to, the factors listed in the previous three paragraphs, as well as actions and initiatives of both current and potential

competitors, the effect of current, pending, and future legislation and regulation both in the United States and throughout the world, and the other risks and uncertainties detailed

in Management’s Discussion and Analysis in the Annual Report and throughout this Item 1.

Merrill Lynch undertakes no responsibility to update or revise any forward-looking statements.

Description of Business Activities

The business activities of Merrill Lynch, grouped into three business segments, GMI, Private Client, and MLIM and are described below. Merrill Lynch business activities

are conducted through numerous U.S. and non-U.S. subsidiaries. See Management’s Discussion and Analysis and the Notes to the Consolidated Financial Statements in the

Annual Report for further information about Merrill Lynch’s business segments, business activities, services, and the geographic markets within which Merrill Lynch operates.

Businesses within a particular segment can provide services and products to clients of a different business segment. For example, certain MLIM and GMI products are

distributed through Private Client distribution channels, and to a lesser extent, certain MLIM products are distributed through the distribution capabilities of GMI.

The Global Markets & Investment Banking Group

In December 2001, the Corporate and Institutional Client Group changed its name to the Global Markets & Investment Banking Group (“GMI”) in an effort to better

reflect the group’s global markets and investment banking business. GMI provides comprehensive investment banking, financing, and related products and services to

corporations, institutional clients, and sovereign governments throughout the world. These activities are conducted through a

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network of subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), Merrill Lynch International (“MLI”), and a number of other subsidiaries

located in and outside the United States. GMI’s activities involve providing investment banking and other strategic mergers and acquisitions advisory services; underwriting;

trading, both as a broker and as a dealer, in equity and equity-linked securities, debt securities, and derivative instruments; corporate lending, including syndicated and bridge

financing; and various other capital markets services, including securities clearance activities.

GMI’s operations in the United States are conducted primarily from Merrill Lynch’s headquarters in New York City and from other office locations throughout the United

States. Merrill Lynch’s GMI activities outside the United States are primarily conducted through MLI, with a significant presence in London, and through many locally

established affiliates strategically located throughout the world. The non-U.S. business is conducted from a network of offices, including representative and liaison offices,

located in 25 countries outside the United States. This office network services corporate clients, sovereign governments, and major “money center” institutions, as well as

thousands of regional institutions.

Investment Banking Activities:

Merrill Lynch is a leading global investment banking firm that participates in every aspect of investment banking for corporate, institutional, and governmental clients and

acts in principal, agency, and advisory capacities. Merrill Lynch provides a wide variety of financial services, including underwriting the sale of securities to the public, privately

placing securities (including those of third party funds) with investors, and developing structured and derivative financing, including project financing, and mortgage and lease

financing. Its financial advisory services include advice on strategic matters, including mergers and acquisitions, divestitures, spin-offs, restructurings, capital structuring,

leveraged buyouts, and defensive projects.

In connection with its investment banking activities, including the underwriting and private placement of securities in connection with, among other things, acquisition

transactions, Merrill Lynch has, from time to time, taken principal positions in transactions and has extended credit to clients in the form of senior and subordinated debt, as well

as provided bridge financing on a select basis, syndicated loans and participated in credit lines for commercial paper programs for certain corporate issuers. Before engaging in

any of these financing activities, an analysis is performed to ascertain the underlying creditworthiness of the particular client and the liquidity of the market for securities that

may be issued in connection with any such financings and to determine the likelihood of refinancing within a reasonable period. In addition, equity interests in the subject

companies are from time to time acquired as part of, or in connection with, such activities.

Brokerage, Dealer and Related Activities:

In the United States, MLPF&S is a broker for corporate, institutional and governmental clients, and is a dealer in the purchase and sale of corporate securities, primarily

equity and debt securities traded on exchanges or in the over-the-counter markets. MLPF&S also acts as a broker and/or a dealer in the purchase and sale of mutual funds,

money market instruments, government securities, high-yield bonds, municipal securities, futures, and options, including option contracts for the purchase and sale of various

types of securities. Merrill Lynch, through MLPF&S, MLI, and various other subsidiaries, is a dealer in equity and fixed income securities of a significant number of U.S. and

non-U.S. issuers, in government obligations of the United States and other sovereigns, in U.S. municipal securities, and in mortgage-backed and asset-backed securities.

As an adjunct to its trading activities, Merrill Lynch places its capital at risk by engaging in block positioning to facilitate transactions in large blocks of listed and over-the-

counter securities and by engaging, from time to time, in arbitrage and other transactions for its own account. In its block positioning activities, Merrill Lynch purchases

securities or sells them short for its own account, without having full commitments for their resale or covering purchase, thereby employing its capital to effect large

transactions. Such positioning activities are undertaken after analyzing a given security’s marketability, and any position taken typically is liquidated as soon as practicable. In

addition, Merrill Lynch facilitates various trading strategies involving the purchase and sale of financial futures contracts and options and, in connection with this activity, it may

establish positions for its own account and risk.

Merrill Lynch’s U.S. broker-dealers, MLPF&S and its affiliate, Herzog, Heine, Geduld, LLC (“HHG”), regularly make markets in approximately 12,000 equity securities.

It is anticipated that HHG will complete its merger and integration into MLPF&S by the end of 2002. In addition, MLPF&S engages in dealer transactions in approximately

4,400 securities of non-U.S. issuers traded in the over-the-counter markets. Outside the United States, MLI is a registered market maker in the equity securities of approximately

1,100 non-U.S. corporations. MLPF&S and MLI are also dealers in mortgage-backed, asset-backed, and corporate fixed-income securities.

Historically, the Nasdaq market has been primarily a dealer market. Market makers in dealer markets can realize profits by earning a “spread,” which is the difference

between the prices at which dealers buy and sell securities. The introduction of decimalization in the pricing of equity securities and various other factors has recently decreased

the amount of such spreads. In

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late 2001, MLPF&S instituted a program for providing enhanced brokerage services to certain of its customers with large size Nasdaq orders in exchange for an agreed upon

commission in lieu of the traditional spread.

Merrill Lynch Government Securities Inc. (“MLGSI”) is a primary dealer in obligations issued or guaranteed by the U.S. Government and regularly makes a market in

securities issued by Federal agencies and other government-sponsored entities, such as Government National Mortgage Association, Fannie Mae, and Freddie Mac, among

others. MLGSI deals in mortgage-backed pass-through certificates issued by certain of these entities, and also in related futures, options, and forward contracts for its own

account, to hedge its own risk, and to facilitate customers’ transactions. As a primary dealer, MLGSI acts as a counterparty to the Federal Reserve Bank of New York

(“FRBNY”) in the conduct of open market operations and regularly reports positions and activities to the FRBNY.

An integral part of MLGSI’s business involves entering into repurchase agreements and securities lending transactions. These transactions aid in financing MLGSI’s

inventory and provide short-term investment vehicles for customers, including Merrill Lynch affiliates. As part of MLGSI’s business as a dealer in governmental obligations,

MLGSI also enters into reverse repurchase transactions whereby MLGSI buys securities from counterparties and simultaneously agrees to sell them back at a future date. Such

agreements provide MLGSI with access to desired securities and provide customers with temporary liquidity for their investments in U.S. Government and agency securities.

Various non-U.S. Merrill Lynch subsidiaries act as dealers in certain securities issued or guaranteed by the governments of the countries where such subsidiaries are located.

Derivative Dealing and Foreign Exchange Activities:

Merrill Lynch, through MLPF&S, MLI, Merrill Lynch Capital Services, Inc. (“MLCS”), and Merrill Lynch Derivative Products AG (“MLDP”), acts as an intermediary and

principal in a variety of interest rate, currency, and other over-the-counter derivative transactions. MLI engages in equity and credit derivatives business in the over-the-counter

markets. MLCS and MLDP are Merrill Lynch’s primary interest rate and currency derivative product dealers. MLI is Merrill Lynch’s primary credit and equity derivatives

product dealer.

MLCS primarily acts as a counterparty for certain derivative financial products, including interest rate and currency swaps, caps and floors, and options. MLCS maintains

positions in interest-bearing securities, financial futures, and forward contracts to hedge its interest rate and currency risk related to derivative exposures. In the normal course of

its business, MLCS enters into repurchase and resale agreements with certain affiliated companies. MLCS also engages in certain commodity-related transactions as a principal.

MLDP acts as an intermediary for certain derivative products, including interest rate and currency swaps, between MLCS and counterparties that are highly rated or

otherwise acceptable to MLDP. Its activities address certain swap customers’ preference to limit their trading to those dealers having the highest credit quality. MLDP has been

assigned the Aaa, AAA, and AAA counterparty rating by the rating agencies Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, and Fitch Ratings,

respectively. Customers meeting certain credit criteria enter into swaps with MLDP and, in turn, MLDP enters into offsetting mirror swaps with MLCS. However, MLCS is

required to provide MLDP with collateral to meet certain exposures MLDP may have to MLCS.

MLCMBL (“MLCMBL”), an Irish bank with branch offices in Frankfurt and Milan, acts as a credit intermediary and conducts part of Merrill Lynch’s non-dollar swap

activities. It engages in swap and other derivative transactions, in addition to its underwriting, lending and institutional sales activities.

The Merrill Lynch Global Foreign Exchange group provides foreign exchange trading services to corporations and institutions in various countries through Merrill Lynch

International Bank Limited (“MLIB Limited”). The Merrill Lynch Global Foreign Exchange group has offices in London and agents in New York and Tokyo.

Mortgage Dealing Activities:

Merrill Lynch Mortgage Capital Inc. (“MLMCI”) is a dealer in whole loan mortgages, mortgage loan participations, mortgage servicing, and syndicated commercial loans.

MLMCI, through its CMO Passport/®/ service, provides dealers and investors with general indicative information and analytic capability with respect to collateralized mortgage

obligations, mortgage pass-through certificates, and asset-backed securities. As an integral part of its business, MLMCI enters into repurchase agreements whereby it obtains

funds by pledging its own whole loans as collateral. The repurchase agreements provide financing for MLMCI’s inventory and serve as short-term investments for MLMCI’s

customers. MLMCI also enters into reverse repurchase agreements through which it provides funds to customers collateralized by whole loan mortgages, thereby providing

them with

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temporary liquidity. In addition, MLMCI provides to its clients short-term financing secured by performing and non-performing commercial real estate. MLMCI also makes

proprietary equity investments in U.S. and non-U.S. companies owning performing, sub-performing and non-performing real estate and mortgages. Merrill Lynch Mortgage

Lending, Inc. is a commercial mortgage conduit that makes, and purchases from lenders, both commercial and multi-family mortgage loans and then securitizes these loans for

sale to investors.

Money Markets and Related Activities:

Merrill Lynch, through various subsidiaries including Merrill Lynch Money Markets Inc. (“MLMMI”) and MLPF&S, provides a full range of origination, trading, and

marketing services with respect to money market instruments, such as commercial paper, and institutional and retail certificates of deposit, and with respect to medium-term

notes, bank notes, and auction rate preferred securities.

Merrill Lynch provides standby or “backstop” credit in various forms (including lines of credit, bilateral credit facilities, participation in syndicated loan facilities, and

standby letters of credit) to large institutional clients generally in connection with their commercial paper programs. Merrill Lynch offers this service primarily through its

affiliate Merrill Lynch Bank USA (“MLBUSA”). While these credit facilities are typically available for the commercial paper issuer’s “general corporate purposes,” these

facilities are utilized typically as “backstop” liquidity to repay outstanding commercial paper as it matures or in the event of an inability to “rollover” its commercial paper.

Futures Business Activities:

In November 2001, Merrill Lynch Futures Inc. (“MLF”) was merged with and into MLPF&S with MLPF&S as the surviving entity in the merger. As a result of the merger,

all futures accounts maintained by MLF were assumed by MLPF&S and Merrill Lynch’s futures business activity is now conducted through MLPF&S and other subsidiaries.

MLPF&S holds memberships on all major commodity and financial futures exchanges and clearing associations in the United States and it also carries positions reflecting trades

executed on exchanges outside of the United States. Other Merrill Lynch subsidiaries also hold memberships on major commodity and financial futures exchanges and clearing

associations outside the United States and may also carry positions in proprietary and customer accounts. All futures and futures options transactions are executed, cleared

through, and carried by MLPF&S and other Merrill Lynch subsidiaries engaged in futures activities. In certain contracts, or on certain exchanges, third party brokers are utilized

to execute and clear trades. MLPF&S and certain of its affiliates may also take proprietary market positions in futures and futures options in certain instances.

Securities Services Division:

Merrill Lynch provides securities clearing services for Merrill Lynch, its customers, third party broker-dealers, and other professional trading entities, through its

subsidiaries, Broadcort Capital Corp. (“BCC”) and Merrill Lynch Professional Clearing Corp. (“MLPCC”). BCC provides these services to approximately 100 unaffiliated

broker-dealers. While the introducing broker-dealer firm retains all sales functions with its customers, BCC services the customers’ accounts and handles all settlement and

credit aspects of transactions. MLPCC clears transactions for specialists and market makers on various national and regional stock exchanges and clears futures transactions for

clients through a divisional clearing arrangement with MLPF&S. In addition, MLPCC clears transactions of arbitrageurs, customers, and other professional trading entities.

Merrill Lynch provides financing to clients, including margin lending and other extensions of credit such as repurchase and derivative transactions, and in connection with

prime brokerage services. In a margin-based transaction, Merrill Lynch extends credit for a portion of the market value of the securities in the client’s account up to the limit

imposed by internal Merrill Lynch policies and applicable margin rules and regulations. Since Merrill Lynch may have financial exposure if a client fails to meet a margin call,

any margin loan made by Merrill Lynch is collateralized by securities in the client’s margin account. Financial reviews, margin procedures, and other credit standards have been

implemented in an effort to limit any exposures resulting from this margin lending activity. Interest on margin loans is an important source of revenue for Merrill Lynch. To

finance margin loans, Merrill Lynch uses funds on which it pays interest (including ML & Co. borrowings), funds on which it does not pay interest (including its own capital),

funds derived from clients’ free credit balances to the extent permitted by regulations, and funds derived from securities loaned.

The Private Client Group

Through offices around the world, Private Client provides products and services related to the accumulation and management of wealth, including, for example, brokerage,

dealer and related activities; banking; retirement, investment and custody services; financial services for small and medium-sized businesses; insurance and trust services; and

mortgage lending and

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related activities.

Brokerage, Dealer and Related Activities:

Private Client provides a choice of wealth management services that assist clients around the world to build financial assets and maximize returns in relation to risk

tolerance and investment objectives. In the United States, MLPF&S is a broker (i.e., agent) and a dealer (i.e., acts for its own account) for individual, corporate, institutional and

governmental clients in the purchase and sale of corporate securities, primarily equity and debt securities traded on exchanges or in the over-the-counter markets. MLPF&S also

acts as a broker and a dealer in the purchase and sale of money market instruments, government securities, high-yield bonds, municipal securities, futures, and options. In

addition, MLPF&S acts as selected dealer in the distribution of mutual funds.

MLPF&S has established commission rates or fixed charges for all brokerage services that it performs. For certain accounts, however, MLPF&S’ policy is to negotiate

commissions based on economies of scale and the complexity of the particular trading transaction, and additionally, for its institutional customers, based on the competitive

environment and trading opportunities.

MLPF&S provides financial services to investors in the United States through its 14,000 Financial Advisors. MLPF&S offers to its clients Unlimited Advantage/SM/,

which is a non-discretionary brokerage service for U.S. clients offering transaction and non-transaction services for an annual asset-based fee. Unlimited Advantage clients may

receive a wide array of services, including Financial Advisor advice and guidance, Merrill Lynch research, no per-trade commissions on most transactions, a Cash Management

Account/®/ financial services program (the “CMA/®/ account”), the CMA/®/ Visa/®/ Signature/SM/ program, and online bill payment.

MLPF&S provides a wide range of client services, including trading in equity and fixed-income, and other securities through its securities account services, such as its

CMA/®/ account. At the end of 2001, there were more than 2.6 million CMA accounts with aggregate assets of approximately $626 billion. MLPF&S also offers various

investment advisory products, including Merrill Lynch Consults/®/, Merrill Lynch Mutual Fund Advisor/SM/ program, Merrill Lynch Mutual Fund Advisor Selects/SM/

program, and the Financial Foundation/®/ report. Through Merrill Lynch OnLine/®/, clients can access their Merrill Lynch accounts, including account information, real time

quotes, Merrill Lynch research, and a variety of other investment information. MLPF&S also provides financing to clients, including margin lending and other extensions of

credit. See “Securities Services Division” in this Item 1.

To be more responsive to client needs and enhance the quality of its clients’ experience, Merrill Lynch adopted a multi-channel service model in the United States, more

closely aligning its Financial Advisors with clients based on levels of investable assets. For example, ultra-high-net-worth clients will be aligned with Private Wealth Advisors

(“PWAs”). PWAs are Financial Advisors who have completed a rigorous accreditation program built around skill requirements including trust, tax minimization, restricted

stock, and executive stock options and who focus on clients with more than $10 million of investable assets. For clients with less than $100,000 of investable assets, Merrill

Lynch utilizes its Financial Advisory Center (“FAC”) to more effectively serve these clients. All FAC customers receive a team-based advisory service relationship, with 24-

hour-a-day, seven-day-a-week access by phone or online.

Merrill Lynch also provides electronic brokerage service through Merrill Lynch Direct/SM/, an internet-based brokerage service for U.S. clients preferring a self-directed

approach to investing. Merrill Lynch Direct/SM/ offers online equity and fixed income trading, mutual funds, access to Merrill Lynch research, and a variety of online investing

tools.

Outside the United States, Merrill Lynch provides comprehensive brokerage and investment services and related products, including the CMA account, in a number of

countries to private clients. During 2001, Merrill Lynch refocused and consolidated certain of its private client offices outside the United States. See “Significant Strategic

Initiatives” below. At the end of 2001, there were more than 70,000 International CMA/®/ accounts with aggregate assets of approximately $36 billion. These brokerage

services, investment services, and related products are made available through a network of offices located in 37 countries. In addition, in certain countries such as the United

Kingdom and Japan, clients can open accounts with Merrill Lynch affiliates that are locally regulated. Banking and trust services as well as asset management services are also

offered to private clients in many countries, as described below.

Merrill Lynch HSBC, a 50/50 joint venture between Merrill Lynch and HSBC Holdings plc, provides online financial services to those investors in the United Kingdom,

Australia, and Canada preferring the self-directed approach to investing.

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Banking Activities, Deposit Taking and Lending Services:

MLBUSA and Merrill Lynch Bank & Trust Co. (“MLBT” and with MLBUSA, the “ML U.S. Banks”) are state-chartered depository institutions insured by the FDIC. Both

banks offer certificates of deposit, transaction accounts and money market deposit accounts (including deposit accounts offered through the Merrill Lynch Banking

Advantage/SM/ program for the CMA service, the Retirement Asset Savings Program/SM/ for certain Merrill Lynch retirement accounts, and a deposit account program offered

for Merrill Lynch Direct accounts); and issue VISA/®/ cards. MLBUSA also originates and purchases secured and unsecured loans to both individuals and business entities. As

of December 28, 2001, MLBUSA had total outstanding loan commitments of approximately $5.0 billion.

In June of 2001, the ML U.S. Banks introduced tiered deposit rates for certain deposit products based on the scope of the clients’ relationships with Merrill Lynch as defined

by the value of the assets in their accounts. The combined ML U.S. Banks’ deposits have increased from approximately $55 billion at year-end 2000 to approximately $74

billion by year-end 2001. The ML U.S. Banks’ deposits primarily fund a high credit quality marketable investment securities portfolio which they held.

Retirement Services:

In 2001, MLPF&S formed the Merrill Lynch Retirement Group by combining its Benefits and Investment Solutions division and its Retirement and Education Savings

Marketing divisions. The Merrill Lynch Retirement Group is responsible for approximately $300 billion in retirement assets for approximately 5.7 million individuals. These

assets are held either in individual accounts or through one of approximately 16,300 workplace-based retirement programs covered by the group. Merrill Lynch Retirement

Group also has functional responsibility for its Merrill Lynch Howard Johnson subsidiary that provides specialized custom administrative services to large corporations which

in the aggregate represent 683,000 participants.

MLPF&S provides a wide variety of investment and custodial services to individuals through Individual Retirement Accounts (“IRAs”) and through small business

retirement programs such as the Merrill Lynch Simplified Employee Pension Plan and the Merrill Lynch Simple Retirement Account Plan. MLPF&S also provides investment,

administration, communications, and consulting services to corporations and their employees for their retirement programs. These programs include 401(k), pension, profit-

sharing, and non-qualified deferred compensation plans, as well as other retirement benefit plans.

Business Financial Services:

Merrill Lynch provides financing services to small- and medium-sized businesses in conjunction with the Working Capital Management Account/SM/ (“WCMA/®/

account”) through Merrill Lynch Business Financial Services Inc. (“MLBFS”). The WCMA/®/ account combines business checking, borrowing, investment, and electronic

funds transfer services into one account for participating business clients. At the end of 2001, there were more than 147,000 WCMA accounts that, in the aggregate, had

investment assets of more than $125 billion.

In addition to providing qualifying clients with short-term working capital financing through the WCMA commercial line of credit, MLBFS assists its business clients with

their term lending, equipment, and other asset-based financing needs, and is a source of financing for owner-occupied commercial real estate. In 2001, MLBFS originated more

than $2.4 billion in new commercial loans and, at the end of 2001, total outstanding loans held by MLBFS and its affiliates were more than $4.1 billion, of which over 97%

were secured by tangible assets pledged by customers.

Insurance Activities:

Merrill Lynch’s insurance activities consist of the underwriting of life insurance and annuity products by Merrill Lynch Life Insurance Company (“MLLIC”) and ML Life

Insurance Company of New York (“ML Life”) and of the sale of proprietary and non-proprietary life insurance and annuity products through Merrill Lynch Life Agency Inc.

and other insurance agencies affiliated or associated with MLPF&S operating in the United States.

MLLIC, an Arkansas stock life insurance company, is authorized to underwrite insurance and annuities products in 49 states, Puerto Rico, the District of Columbia, Guam,

and the United States Virgin Islands. These products are marketed to MLPF&S customers. Although authorized to do so, it does not presently underwrite accident and health

insurance. At year-end 2001, MLLIC had approximately $14.0 billion of life insurance in force. At year-end 2001, MLLIC had annuity contracts in force of more than $9.4

billion in value.

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ML Life, a New York stock life insurance company, is authorized to underwrite life insurance, annuities, and accident and health insurance in nine states; however, it does

not presently underwrite accident and health insurance. At year-end 2001, ML Life had approximately $1.7 billion of life insurance in force, which amount included

approximately $873 million reinsured from yearly renewable term insurance of an unaffiliated insurer. At year-end 2001, ML Life had annuity contracts in force of

approximately $792 million in value.

Through agency agreements, licensed affiliate insurance agencies and other insurance agencies associated with MLPF&S sell life and health insurance and annuity

products. A significant portion of these sales consists of products underwritten by MLLIC and ML Life.

Trust, Mortgage Lending and Related Activities:

Merrill Lynch provides personal trust, employee benefit trust, and custodial services to clients in the United States. In December 2001, Merrill Lynch streamlined the

delivery of trust services in the United States by merging its four state chartered trust institutions into Merrill Lynch Trust Company, FSB, a federally chartered savings bank

subsidiary. Trust services outside of the United States are provided by Merrill Lynch Bank and Trust Company (Cayman) Limited (“MLBT Cayman”).

Merrill Lynch Credit Corporation (“MLCC”), through an outsourcing arrangement with Cendant Mortgage Corporation, offers a broad selection of real estate-based lending

products enabling clients to purchase and refinance their homes as well as to manage their other personal credit needs. MLCC offers a variety of adjustable-rate, fixed-to-

adjustable-rate, and fixed-rate mortgages throughout the United States, including interest-only loans, 100 percent financing with a securities-based pledge, construction-to-

permanent financing, and home equity loans and lines of credit. Substantially all of the origination processing and servicing functions are performed by Cendant Mortgage

Corporation and Merrill Lynch employees are engaged in sales, marketing, and distribution of these products. MLCC offers these financing solutions to Merrill Lynch clients

and prospects through Merrill Lynch’s Financial Advisors and Merrill Lynch websites.

MLIB Limited, a United Kingdom bank and licensed deposit taker under the United Kingdom Banking Act, provides collateralized lending, letter of credit and foreign

exchange services to, and accepts deposits from, international private clients. It also has a global foreign exchange service, which is made available to institutional clients. In

addition, it has a number of branch offices in which Financial Advisors are located, who refer business to the various Private Client account carriers outside of the United

States.

Merrill Lynch Bank (Suisse) S.A. is a Swiss licensed bank, providing a full array of banking and brokerage products, including securities trading and custody, secured loans

and overdrafts, fiduciary deposits, foreign exchange trading and portfolio management services, and individual client services to international private clients.

Merrill Lynch Investment Managers

MLIM is one of the world’s largest asset management organizations with total assets under management of approximately $529 billion at year-end 2001. The principal

subsidiaries engaged in asset management activities conducted through the Merrill Lynch Investment Managers (“MLIM”) brand name are Merrill Lynch Investment Managers

LP (“MLIM LP”) and Merrill Lynch Investment Managers Limited (“MLIM Ltd”).

With portfolio managers located in the United States, the United Kingdom, Japan, Australia, Switzerland, and Italy, MLIM manages a wide variety of investment products.

These range from money market funds and other forms of short-term fixed income investments to long-term taxable and tax-exempt fixed income funds or portfolios, along a

broad spectrum of quality ratings and maturities. MLIM also manages a wide variety of equity and balanced funds or portfolios that invest in more than 60 markets globally. It

also sponsors a variety of alternative investment products.

MLIM offers a wide array of taxable fixed-income, tax-exempt fixed-income, equity and balanced open-ended mutual funds. In the United States, the MLIM brand of

mutual funds (except for its money market funds) is generally offered pursuant to the Merrill Lynch Select Pricing/SM/ system, which allows investors four pricing alternatives.

MLIM offers all of its brands of mutual funds to clients in the global markets through both the Merrill Lynch distribution network and through unaffiliated financial

intermediaries. At the end of 2001, MLIM provided global advisory services for open-ended mutual funds, unit investment trusts, and other non-U.S. equivalent products

totalling approximately $200 billion.

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MLIM provides separate account investment management services to a geographically diversified client base that includes pension funds, corporations, governments,

supranational organizations, central banks, and other institutions. Marketing offices in over 15 countries further support these services. At the end of 2001, the total assets

under management of such services were approximately $266 billion. MLIM offers similarly structured separate account investment management services for individual

clients and smaller institutions and corporations in the United States, in the United Kingdom and globally. The total assets under management for these services were $43

billion at the end of 2001.

MLIM also structures and manages a wide variety of alternative investment products, including hedge funds, fund of funds, private equity funds, managed futures, and

exchange funds. These products are sold to both U.S. and non-U.S. high-net-worth and institutional investors. At the end of 2001, MLIM acted as sponsor or trading manager

of alternative investment products, including its fund of funds product, in which a total of approximately $10.4 billion of client capital was committed and approximately $9.8

billion was invested.

MLIM’s Quantitative Advisers group manages assets for institutional investors who seek to track the performance of an index or outperform an index using risk-controlled

enhanced indexing and allocation strategies. The Quantitative Advisers group also manages the Merrill Lynch QA family of hedge funds, which are distributed primarily

through direct sales to institutions and other sophisticated investors in the United States and through Merrill Lynch’s non-U.S. brokerage businesses to high-net-worth

individuals. The Merrill Lynch QA hedge funds collectively held approximately $1.1 billion in assets as of the end of 2001. The Quantitative Advisers group also manages

mutual funds for individual investors that pursue index and asset allocation strategies. At the end of 2001, the Quantitative Advisers group managed a total of approximately

$34 billion.

Other Businesses

Private Equity Investing Activities:

Merrill Lynch is also engaged in the business of sponsoring and managing private equity funds that invest in equity and debt securities of various private companies and of

making investments for its own account in private companies and in private equity funds. In the Merrill Lynch-sponsored funds, a Merrill Lynch entity serves as the general

partner or manager of the funds and may also invest its own capital or monies as a limited partner. The private equity investing activities are undertaken in GMI, MLIM and

Private Client. The other limited partners of the Merrill Lynch-managed funds are corporate and institutional investors as well as Merrill Lynch’s high-net-worth client base

and its eligible employees. Merrill Lynch also invests as a limited partner in third party funds.

Merrill Lynch, through MLPF&S, MLI, and other subsidiaries, may underwrite, trade, invest, and make markets in certain securities of companies in which the Merrill

Lynch managed funds have invested, and may also provide financial advisory services to these companies or maintain a commercial relationship with them. The Merrill

Lynch employees who invest and manage the assets of the Merrill Lynch sponsored funds participate in the profits of these entities.

Research Services:

The Global Securities Research & Economics Group provides equity, fixed-income, and other research services on a global basis to Merrill Lynch’s institutional and

individual client sales forces and their customers. This group covers and distributes fundamental equity and fixed-income research, economic analyses, technical market and

quantitative analyses, convertible securities research, and investment strategy recommendations covering both equity and fixed-income markets.

Merrill Lynch consistently ranks among the leading research providers in the industry, and its analysts and other professionals in 19 countries cover approximately 3,200

companies. Current information and investment opinions on these companies, as well as on industry sectors and countries, are available to Merrill Lynch’s individual and

institutional customers through their Financial Advisors and account executives, and through various electronic means, including Merrill Lynch’s websites.

In mid-2001, in a further effort to ensure the independence and objectivity of its research, Merrill Lynch announced a new policy, which prohibits equity analysts and their

staff members from buying equity shares of companies they cover. In addition, for shares they already hold, they must either divest, transfer the securities to a managed

account over which they have no discretion, or maintain existing shares under stricter disclosure and disposition rules. Further, the existence of any equity position maintained

by any analyst with responsibility for any security discussed in a research report will be described in the research report.

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Significant Strategic Initiatives

During 2001, Merrill Lynch undertook a variety of actions to position the company for improved profitability and growth, including a detailed review of its business

operations to find efficiencies, the resizing of selected businesses, and other structural changes. These actions are expected to yield substantial benefits, including future expense

savings. As a result of these actions Merrill Lynch’s global workforce was reduced by approximately 9,000 employees during the fourth quarter of 2001. This reduction

occurred through the divestiture or the refocusing of certain businesses, voluntary and involuntary severance programs, and the offering of sabbatical programs. For a more

complete discussion of these actions and the related restructuring charge, see Management’s Discussion and Analysis, “Restructuring and Other Charges” on page 28 and Note

2 to the Consolidated Financial Statements, and “Restructuring Charge” on page 59 of the Annual Report.

As a result of the detailed review undertaken in respect of Private Client and related business activities outside the United States, Merrill Lynch sold its Private Client and

securities clearing businesses in Canada in December 2001, as well as the retail investment management business in Canada in January 2002 and the Private Client business in

South Africa in March 2002. Merrill Lynch is also refocusing and consolidating its Private Client businesses in Japan, and has restructured its Private Client business in

Australia.

As part of its ongoing evaluation of its businesses, Merrill Lynch completed a number of strategic transactions in 2001. These include the sale of certain energy trading

assets to Allegheny Energy Inc., the sale of a portion of its asset management business unit in Los Angeles, the sale of its GMI sales and trading business in the Philippines, the

agreement to sell and outsource its Securities Pricing Service business, and the sale of a number of discrete brokerage businesses. Merrill Lynch also entered into alliances and

ventures to position the Company for opportunities in certain markets, including the spin-off of i-Deal LLC, an internet technology company whose products enable the equity

and taxable debt capital raising process to be conducted over the internet.

Competition

All aspects of Merrill Lynch’s business are intensely competitive, particularly underwriting, trading, and advisory activities, and have been affected by the entry of several

new and non-traditional competitors, such as commercial banks, insurance companies, and on-line financial services providers, and by the consolidation of others. Merrill

Lynch competes for clients, market share, and human talent in every aspect of its business.

Merrill Lynch competes directly on a global basis with other U.S. and non-U.S. trading, investment banking, and financial advisory service firms, and brokers and dealers in

securities and futures. It also competes with commercial banks and their affiliates in these businesses, particularly in its derivatives and capital markets businesses. Many of

Merrill Lynch’s non-U.S. competitors may have competitive advantages in their home markets. Merrill Lynch’s competitive position depends to an extent on prevailing

worldwide economic conditions and U.S. and non-U.S. governmental policies.

Through its subsidiaries and affiliates, Merrill Lynch also competes for investment funds with mutual fund management companies, insurance companies, finance and

investment advisory companies, banks and trust companies, and other institutions. Merrill Lynch competes for individual and institutional clients on the basis of price, the range

of products that it offers, the quality of its services, its financial resources, and product and service innovation. Merrill Lynch’s insurance businesses operate in highly

competitive environments. Many insurance companies, both stock and mutual, are older and larger and have more substantial financial resources and larger agency

relationships than do Merrill Lynch’s insurance subsidiaries.

In the financial services industry, there is significant competition for qualified employees. Merrill Lynch faces competition for qualified employees from both traditional and

non-traditional competitors, including commercial banks, insurance companies, on-line financial services providers, and private equity funds. Merrill Lynch’s ability to compete

effectively in its businesses is substantially dependent on its continuing ability to attract, retain, and motivate qualified employees, including successful Financial Advisors,

investment bankers, trading professionals and other revenue-producing or experienced personnel.

Merrill Lynch’s businesses are highly dependent on the ability to timely process a large number of transactions across numerous and diverse markets in many currencies, at

a time when transaction processes have become increasingly complex and are increasing in volume. The proper functioning of financial, control, accounting and other data

processing systems is critical to Merrill Lynch’s businesses and its ability to compete effectively.

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Regulation

Certain aspects of Merrill Lynch’s business, as with that of its competitors and the financial services industry in general, are subject to stringent regulation by U.S. Federal

and state regulatory agencies and securities exchanges and by various non-U.S. governmental agencies or regulatory bodies, securities exchanges, and central banks, each of

which has been charged with the protection of the financial markets and the interests of those participating in those markets. These regulatory agencies in the United States

include, among others, the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), the Federal Deposit Insurance Corporation

(“FDIC”), the Municipal Securities Rulemaking Board (“MSRB”), the New York State Banking Department (“NYSBD”), and the Office of Thrift Supervision (“OTS”).

Outside the United States, these regulators include the Financial Services Authority (“FSA”) in the United Kingdom, which in 2001 assumed the regulatory responsibilities of

the Securities and Futures Authority, the Personal Investment Authority, and the Investment Management Regulatory Organization; the Central Bank of Ireland; the Federal

Banking Supervisory Authority in Germany; the Swiss Federal Banking Commission; the Japanese Financial Supervisory Agency; the Monetary Authority of Singapore; the

Office of Superintendent of Financial Institutions in Canada; the Canadian Securities Administrators; the Securities Commission in Argentina; the Securities Commission in

Brazil; the National Securities and Banking Commission in Mexico; and the Securities and Futures Commission in Hong Kong, among many others.

Additional legislation and regulations and changes in rules promulgated by the SEC or other U.S. Federal and state governmental regulatory authorities and self-regulatory

organizations and by non-U.S. government and governmental regulatory agencies may directly affect the manner of operation and profitability of Merrill Lynch. Certain of the

operations of Merrill Lynch are subject to compliance with privacy regulations enacted by the U.S. federal and state governments, the European Union, other jurisdictions,

and/or enacted by the various self-regulatory organizations or exchanges.

United States Regulatory Oversight and Supervision:

MLPF&S and certain other subsidiaries of ML & Co. are registered as broker-dealers with the SEC and as such are subject to regulation by the SEC and by self-regulatory

organizations, such as the National Association of Securities Dealers, Inc. (the “NASD”) and securities exchanges (including the New York Stock Exchange, Inc.) of which each

is a member. Certain Merrill Lynch subsidiaries and affiliates, including MLPF&S and the MLIM entities, are registered as investment advisers with the SEC.

The Merrill Lynch entities that are broker-dealers registered with the SEC and members of the U.S. national securities exchanges are subject to Rule 15c3-1 under the

Securities Exchange Act of 1934 (the “Exchange Act”) that is designed to measure the general financial condition and liquidity of a broker-dealer. Under this rule, these entities

are required to maintain the minimum net capital deemed necessary to meet broker-dealers’ continuing commitments to customers and others. Under certain circumstances, this

rule limits the ability of ML & Co. to withdraw capital from such broker-dealers. Additional information regarding certain net capital requirements is set forth in Note 16 to the

Consolidated Financial Statements on page 77 of the Annual Report.

Certain Merrill Lynch subsidiaries are also subject to the risk assessment rules adopted by the SEC under the Market Reform Act of 1990 which requires, among other

things, that certain broker-dealers maintain and preserve records and other information, describe risk management policies and procedures, and report on the financial condition

of certain affiliates whose financial and securities activities are reasonably likely to have a material impact on the financial and operating condition of the broker-dealer.

Broker-dealers are also subject to other regulations covering the operations of their business, including sales and trading practices, use of client funds and securities, and the

conduct of directors, officers, and employees. Broker-dealers are also subject to regulation by state securities administrators in those states where they do business. Violations of

the regulations governing the actions of a broker-dealer can result in the revocation of broker-dealer licenses, the imposition of censures or fines, the issuance of cease and

desist orders, and the suspension or expulsion from the securities business of a firm, its officers, or its employees. The SEC and the national securities exchanges emphasize in

particular the need for supervision and control by broker-dealers of their employees.

The SEC, various banking regulators, the Financial Accounting Standards Board, and Congress, among others, have launched a number of initiatives which have the effect

of increasing regulation or requiring greater disclosure by financial institutions and requiring greater disclosure of financial instruments, including derivatives positions and

activities. Merrill Lynch, along with certain other major US securities firms, has implemented a voluntary oversight framework to address issues related to capital, management

controls, and counterparty relationships arising out of the over-the-counter derivatives activities of

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unregulated affiliates of SEC-registered broker-dealers and CFTC-registered futures commission merchants. Merrill Lynch formed its Risk Oversight Committee as an

extension of its risk management process to provide general oversight of risk management for all of its institutional trading activities and to monitor compliance with its

commitments respecting this voluntary oversight initiative.

Each of MLIM Alternative Strategies LLC and QA Advisers, LLC is registered with the CFTC as a commodity pool operator and a commodity trading advisor and each is a

member on the National Futures Association (“NFA”) in such capacities.

MLGSI is subject to regulation by the NASD and the Chicago Board of Trade and is required to maintain minimum net capital pursuant to rules of the U.S. Department of

the Treasury. Merrill Lynch’s municipal finance professionals are subject to various trading and underwriting regulations of the MSRB. MLPF&S and ML Professional

Clearing Corp. are registered futures commission merchants and regulated by the CFTC, the NFA, and the commodity exchanges of which each is a member. The CFTC and the

NFA impose net capital requirements on these companies.

The Commodity Futures Modernization Act of 2000 (“CFMA”) provided, among other things, broad exemptions from the Commodity Exchange Act for over-the-counter

derivatives and permits futures trading on single-stocks and narrow-based stock indices in the United States. The enactment of the CFMA simplified and provided greater legal

certainty to the regulatory environment in which Merrill Lynch’s over-the-counter derivatives businesses operate.

Merrill Lynch’s banking and lending activities are supervised and regulated by a number of different Federal and state regulatory agencies. MLBT is regulated primarily by

the State of New Jersey and by the FDIC.

MLBUSA is regulated primarily by the State of Utah and by the FDIC. MLBFS and MLCC are wholly owned subsidiaries of MLBUSA, and certain of their activities are

regulated and subject to examination by the FDIC and the Utah Department of Financial Institutions. In addition to Utah and the FDIC, MLCC is also licensed or registered to

conduct its lending activities in 35 other jurisdictions and MLBFS is licensed or registered in eight jurisdictions, subjecting each to regulation and examination by the

appropriate authorities in those jurisdictions. Merrill Lynch Trust Company, FSB, a federal savings bank subsidiary, is subject to regulation by the OTS and, in addition, is an

investment adviser subject to regulation by the SEC.

Merrill Lynch’s insurance subsidiaries are subject to state insurance regulatory supervision. ML Life is subject to regulation and supervision by the New York State

Insurance Department. MLLIC is subject to regulation and supervision by the Insurance Department of the State of Arkansas. Both MLLIC and ML Life are subject to similar

regulation in the other states in which they are licensed.

Non-U.S. Regulatory Oversight and Supervision:

Merrill Lynch’s business is also subject to extensive regulation by various non-U.S. governments, securities exchanges, central banks, and regulatory bodies, particularly in

those countries where it has established an office. Certain Merrill Lynch subsidiaries are regulated as broker-dealers under the laws of the jurisdictions in which they operate.

MLI and MLIB Limited (“MLIBL”) are regulated and supervised in the United Kingdom by the FSA and in other jurisdictions, by local regulators. MLCMBL, which

engages in the derivatives business, is regulated by the Central Bank of Ireland. MLIBL and MLCMBL are also subject to regulation by the NYSBD. Merrill Lynch’s activities

in Australia are regulated by the Australian Securities and Investment Commission or the Australian Prudential Regulation Authority, and its Hong Kong and Singapore

operations are regulated and supervised by the Hong Kong Securities and Futures Commission and The Monetary Authority of Singapore, respectively. Merrill Lynch’s

Japanese business is subject to the regulation of the Financial Supervisory Agency as well as other Japanese regulatory authorities. Merrill Lynch Phatra Securities is regulated

primarily by the Securities and Exchange Commission of Thailand and the Stock Exchange of Thailand.

Merrill Lynch Canada Inc. is an investment dealer in Canada and is regulated under the laws of the Canadian provinces by securities commissions and by the Investment

Dealers Association of Canada. It is also a member of all major Canadian exchanges and is subject to their rules and regulations.

The business of MLIM LP and MLIM Ltd is regulated by a number of non-U.S. regulatory agencies or bodies. Their activities in the United Kingdom are regulated by the

FSA and, in other jurisdictions, by local regulators.

Merrill Lynch’s activities in Mexico, Brazil and Argentina are regulated by their respective securities commissions and exchanges as well as other regulatory authorities.

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Merrill Lynch’s subsidiaries engaged in banking and trust activities outside the United States are regulated by various governmental entities in the particular jurisdiction

where they are chartered, incorporated, and/or conduct their business activities. Merrill Lynch Bank (Suisse) S.A. is regulated by the Swiss Federal Banking Commission and

the NYSBD. MLBT Cayman is regulated by the Cayman Monetary Authority and the Florida Department of Banking. Banco Merrill Lynch S.A. is also regulated by the

Brazilian Central Bank.

Item 2. Properties

Merrill Lynch has offices in various locations throughout the world. Other than those described below as being owned, substantially all Merrill Lynch offices are located in

leased premises. Facilities owned or occupied by Merrill Lynch are believed to be adequate for the purposes for which they are currently used and are well maintained. Set forth

below is the location and the approximate square footage of the principal facilities of Merrill Lynch. Each of these principal facilities support various Merrill Lynch segments,

other than the property on King William Street in London referred to below which is utilized solely by Merrill Lynch Investment Managers. Information regarding Merrill

Lynch’s property lease commitments is set forth in “Leases” in Note 12 to the Consolidated Financial Statements in the Annual Report.

Principal Facilities in the United States:

Merrill Lynch’s executive offices and principal administrative offices are located in leased premises at the World Financial Center in New York City. Separate Merrill

Lynch affiliates lease the North Tower (1,800,000 square feet) and the South Tower (2,500,000 square feet); both leases expire in 2013. Another Merrill Lynch affiliate is a

partner in the partnership that holds the ground lessee’s interest in the North Tower. The September 11th terrorist attacks on the World Trade Center complex damaged buildings

occupied by Merrill Lynch and caused the temporary relocation of employees from the North and South Towers. By the end of 2001, Merrill Lynch had reoccupied and

reestablished business operations in the North Tower and is in the process of restoring the South Tower for occupancy. Merrill Lynch occupies the entire North Tower. After the

South Tower restoration is completed, Merrill Lynch plans to reoccupy approximately 25 percent of the South Tower, down, because of reduced real estate requirements, from

the approximately 50 percent of the South Tower that it occupied prior to September 11th.

In New York City, MLPF&S holds a lease for 662,000 square feet in lower Manhattan expiring in 2007. Merrill Lynch occupies 60 percent of a 760,000 square foot

building at 222 Broadway that is owned by a Merrill Lynch subsidiary; as third party leases expire, Merrill Lynch intends to occupy the entire building. The September 11th

terrorist attacks also caused the temporary relocation of employees from this building. Merrill Lynch also has reoccupied and reestablished business operations in this building.

In New Jersey, certain Merrill Lynch affiliates own a 389,000 square foot hotel, conference and training center and a 669,000 square foot office building in Plainsboro, and a

414,000 square foot building on 34 acres at 300 Davidson Avenue in Somerset that was vacated in 2001. MLPF&S holds a 590,000 square foot lease at 101 Hudson Street in

Jersey City. A Merrill Lynch affiliate utilizes facilities of 1,251,000 square feet of office space and 273,000 square feet of ancillary buildings on land owned by it in Hopewell,

New Jersey that will consolidate existing operations and allow for future expansion. Merrill Lynch currently occupies approximately 80 percent of this facility. Merrill Lynch

affiliates own a 54-acre campus in Jacksonville, Florida, with four buildings (a large portion of one of which is leased to a third party) and a 70-acre campus in Englewood,

Colorado with two buildings that Merrill Lynch plans to close in the second quarter of 2002.

Principal Facilities Outside the United States:

Merrill Lynch occupies various sites in London. In 1998, Merrill Lynch purchased a freehold site in the City of London and has recently completed the construction of a

headquarters complex of 560,000 square feet (460,000 of which are currently occupied). This new headquarters (known as Merrill Lynch Financial Centre) is intended to

replace a facility on Ropemaker Place. Merrill Lynch holds a lease of 137,000 square feet (118,000 of which are occupied) on 33 King William Street expiring in 2014, and a

lease of 74,000 square feet (50,000 of which are occupied) on 33 Chester Street expiring in 2006. In addition, Merrill Lynch leases support facilities of 204,000 square feet

(170,000 of which are occupied) expiring in 2015. In April 2001, Merrill Lynch entered into a commitment to lease 350,000 square feet in Tokyo to house Merrill Lynch’s new

headquarters in Japan. This building is under construction and it is expected to be occupied in 2004. It is planned that the new headquarters will replace certain other leased

facilities in Tokyo.

Item 3. Legal Proceedings

ML & Co., certain of its subsidiaries, including MLPF&S, and other persons have been named as parties in various legal actions and arbitration proceedings arising in

connection with the operation of ML & Co.’s businesses.

Merrill Lynch believes it has strong defenses to, and where appropriate, will vigorously contest, any of the actions described above that have not already been dismissed or

settled. Although the ultimate outcome of these and other legal actions, arbitration proceedings, and claims pending against ML & Co. or its subsidiaries as of March 14, 2002

cannot be ascertained at this time and the results of legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of the actions will

not have a material adverse effect on the financial position of Merrill Lynch as set forth in the Consolidated Financial Statements of Merrill Lynch included in the Annual

Report, but may be material to Merrill Lynch’s operating results for any particular period.

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IPO Allocation Class Actions:

Between March and December 2001, purported class actions involving the allocation of securities in initial public offerings (IPOs) were brought against over a thousand

defendants, including Merrill Lynch, in the United States District Court for the Southern District of New York. The complaints allege that defendants violated securities and

antitrust laws by allegedly requiring customers who were allocated IPO securities to pay back some of their profits in the form of higher commissions and to buy securities in

the aftermarket at inflated prices. Some of the complaints also allege that research issued by the financial services firms, including Merrill Lynch, improperly increased the price

of the IPO securities in the aftermarket. The complaints seek unspecified damages and other relief.

Research Class Actions:

Beginning in June 2001, purported class actions were brought against a number of firms, including Merrill Lynch, challenging the independence and objectivity of research

recommendations issued by firms that both issue research and conduct investment banking activities. These actions were brought in the United States District Courts for the

Southern and Eastern Districts of New York and in New York state court. The complaints seek unspecified damages and other relief. Merrill Lynch, together with other

financial services firms, received requests for information from governmental agencies in connection with their review of research independence issues. Consistent with its

policy, Merrill Lynch is cooperating with the requests.

Unilever Case:

In December 2001, Merrill Lynch settled an action brought by the Unilever Superannuation Trustees Limited as corporate trustee of the Unilever Superannuation Fund in

the Commercial Division of the High Court in London England. The plaintiff alleged that Mercury Asset Management Ltd (“Mercury”), which Merrill Lynch acquired in

December 1997, had invested assets of the fund negligently between January 1997 and March 1998. The matter was settled without any finding or admission of liability.

Shareholder Derivative Litigation:

In the shareholder derivative actions discussed below, ML & Co. is named as a nominal defendant because the action purports to be brought on behalf of ML & Co. Any

recovery obtained by plaintiffs would be for the benefit of ML & Co.

Miller v. Schreyer, et al., a consolidated derivative action instituted October 11, 1991 in the Supreme Court of the State of New York, New York County, alleges, among

other things, breach of fiduciary duty against certain present or former ML & Co. directors, and against Transmark USA, Inc. and one of its principals in connection with

securities trading transactions that occurred at year-end 1984, 1985, 1986, and 1988 between subsidiaries of ML & Co. and a subsidiary of Transmark USA, Inc., Guarantee

Security Life Insurance Company, which was later liquidated. Damages in an unspecified amount are sought. Merrill Lynch has moved to dismiss the action, and is awaiting a

decision on its motion.

On October 22, 2001, Merrill Lynch entered into a Stipulation of Dismissal to dismiss without prejudice the purported shareholder derivative action commenced against ML

& Co. and members of its Board of Directors in the United States District Court for the Southern District of New York instituted on June 14, 2001. The complaint alleged that

the directors breached their duties by causing and/or allowing Merrill Lynch to engage in the purported conduct alleged in IPO Allocation Class Actions described above and

sought unspecified damages and other relief.

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Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the 2001 fourth quarter.

15

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EXECUTIVE OFFICERS OF MERRILL LYNCH & CO., INC.

The following table sets forth the name, age, present title, principal occupation, and certain biographical information for the past five years for ML & Co.’s executive

officers, all of whom have been elected by the ML & Co. Board of Directors. Unless otherwise indicated, the officers listed are of ML & Co. Under ML & Co.’s by-laws,

elected officers are elected annually to hold office until their successors are elected and qualify or until their earlier resignation or removal.

David H. Komansky, 62

Chairman of the Board since April 1997; Chief Executive Officer since December 1996; President and Chief Operating Officer from January 1995 to April 1997.

E. Stanley O’Neal, 50

President and Chief Operating Officer since July 2001; Executive Vice President from April 1997 to July 2001; President of U.S. Private Client Group from February 2000 to

July 2001; Chief Financial Officer from March 1998 to February 2000; Co-Head of Corporate and Institutional Client Group (now known as GMI) from April 1997 to March

1998; Managing Director and Head of Global Capital Markets Group from April 1995 to April 1997.

Rosemary T. Berkery, 48

Executive Vice President since October 2001; General Counsel since September 2001; Senior Vice President and Head of U.S. Private Client Group Marketing and Investments

from June 2000 until September 2001; Co-Director of Global Securities Research and Economics Group from April 1997 to June 2000; Senior Vice President and Associate

General Counsel from November 1995 to April 1997.

Thomas W. Davis, 48

Executive Vice President since April 1997 and Vice Chairman, Private Equity and Global Research and Economics Group since October 2001; President of Corporate and

Institutional Client Group (now known as GMI) from March 1998 to October 2001; Co-Head of Corporate and Institutional Client Group from April 1997 to March 1998;

Managing Director and Co-Head of Investment Banking Group from April 1995 to April 1997.

James P. Gorman, 43

Executive Vice President since July 1999; President of U.S. Private Client Group since September 2001; Head of U.S. Private Client Relationship Group from May 2000 to

September 2001; Chief Marketing Officer from July 1999 to May 2000; Joined Merrill Lynch in July 1999. Prior to joining Merrill Lynch, Senior Partner, Financial Institutions

Practice of McKinsey & Company, Inc. from July 1997 to July 1999 and Partner, Financial Institutions Practice of McKinsey & Company, Inc. from December 1992 to July

1997.

Jerome P. Kenney, 60

Executive Vice President since September 1984 and Vice Chairman, Client Relationship Management since February 2002; Head of Corporate Strategy from October 2001 to

February 2002; Head of Corporate Strategy and Research from October 1990 to October 2001.

Michael J. P. Marks, 60

Executive Vice President since January 2001; Chairman, International Private Client Group since September 2001; Chairman, Merrill Lynch Investment Managers since

September 2001; Executive Chairman of Merrill Lynch Europe, Middle East & Africa (“MLEMEA”) since February 1998; Chief Operating Officer of MLEMEA from April

1997 to February 1998; Co-Head of Global Equity Markets Group from October 1995 to April 1997.

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John A. McKinley, Jr., 44

Executive Vice President since January 2000; Head of Global Technology & Services since February 2002; Head of the Technology Group from January 1999 to February

2002; Chief Technology Officer since October 1998; Senior Vice President of Technology Group from October 1998 to January 2000. Joined Merrill Lynch in October 1998.

Prior to joining Merrill Lynch, Chief Technology and Information Officer of GE Capital from October 1995 to October 1998.

Thomas H. Patrick, 58

Executive Vice President since July 1989; Chief Financial Officer since February 2000; Chairman of Special Advisory Services from March 1993 to February 2000.

Paul D. Roy, 54

Executive Vice President and Co-President of Global Markets and Investment Banking Group since October 2001; Senior Vice President and Head of Global Equity Markets

from July 1998 to October 2001; Managing Director and Head of Merrill Lynch Europe, Middle East & Africa Equity Markets from July 1995 to July 1998.

Arshad R. Zakaria, 40

Executive Vice President and Co-President of Global Markets and Investment Banking Group since October 2001; Senior Vice President and Head of Corporate Risk

Management from May 2000 to October 2001; Managing Director and Head of Corporate Finance Group from March 1999 to May 2000; Managing Director and Chief

Operating Officer of Corporate Finance Group from May 1996 to March 1999.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

The principal market in which the Registrant’s Common Stock is traded is the New York Stock Exchange. The high and low sales prices per share for each full quarterly

period within the two most recent fiscal years, the approximate number of holders of record of Common Stock, and the frequency and amount of any cash dividends declared

for the two most recent fiscal years, is set forth under the captions “Dividends Per Common Share” and “Stockholder Information” on page 79 of the Annual Report and such

information is incorporated herein by reference.

Item 6. Selected Financial Data

Selected financial data for the Registrant and its subsidiaries for each of the last five fiscal years is set forth in the financial table “Selected Financial Data” on page 16 of

the Annual Report (excluding for this purpose the financial ratio, leverage, and employee information set forth under the headings “Financial Ratios” and “Other Statistics”).

Such information, which was also previously filed by the Registrant on Form 8-K on March 7, 2002, is incorporated herein by reference and should be read in conjunction with

the Consolidated Financial Statements and the Notes thereto on pages 42 to 78 of the Annual Report.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) is set forth on pages 17 to 40 of the

Annual Report* under the caption “Management’s Discussion and Analysis.” The Management’s Discussion and Analysis, which was also previously filed by the Registrant on

Form 8-K on March 7, 2002, is incorporated herein by reference. All of such information should be read in conjunction with the Consolidated Financial Statements and the

Notes thereto on pages 42 to 78 of the Annual Report).

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosure about market risk is set forth on pages 35 to 36 of the Annual Report under the caption “Management’s Discussion and Analysis” and

in Note 6 to the Consolidated Financial Statements. Such information is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The Consolidated Financial Statements of the Registrant and its subsidiaries, together with the Notes thereto and the Report of Independent Auditors thereon, are contained

in the Annual Report on pages 42 to 78, and are incorporated herein by reference. In addition, the information under the caption “Quarterly Information” on page 79 of the

Annual Report is incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with accountants on accounting and financial disclosure during the last two fiscal years.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information relating to directors of the Registrant set forth under the caption “Election of Directors” on pages 4 to 8 of the 2002 Proxy Statement for the Annual Meeting of

Stockholders of ML & Co. dated March 15, 2002 (“2002 Proxy Statement”) is incorporated herein by reference. Information relating to the executive officers of the Registrant

is set forth at the end of Part I of this Form 10-K under the caption “Executive Officers of Merrill Lynch & Co., Inc.”

Item 11. Executive Compensation

Information relating to the compensation of the ML & Co. executive officers and directors set forth on pages 15 to 27 of the 2002 Proxy Statement is incorporated herein by

reference.

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Item 12. Security Ownership of Certain Beneficial Owners and Management

The information concerning security ownership of certain beneficial owners of ML & Co. Common Stock on page 14 of the 2002 Proxy Statement and the information

concerning the security ownership of ML & Co. directors and executive officers on page 13 of the 2002 Proxy Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Information regarding certain relationships and related transactions set forth under the caption “Certain Transactions” on page 27 of the 2002 Proxy Statement is

incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

(a) Documents filed as part of this Report:

1. Consolidated Financial Statements

The consolidated financial statements required to be filed hereunder are listed on page F-1 hereof by reference to the corresponding page number in the Annual

Report.

2. Financial Statement Schedule

The financial statement schedule required to be filed hereunder is listed on page F-1 hereof and the schedule included herewith appears on pages F-2 through F-7

hereof.

3. Exhibits

Certain of the following exhibits were previously filed as exhibits to other reports or registration statements filed by the Registrant and are incorporated herein by

reference to such reports or registration statements as indicated parenthetically below by the appropriate report reference date or registration statement number. For

convenience, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, Current Reports on Form 8-K, and Registration Statements on Form S-3 are

designated herein as “10-Q,” “10-K,” “8-K,” and “S-3,” respectively.

(3) Articles of Incorporation and By-Laws

(i) Restated Certificate of Incorporation of ML & Co., effective as of May 3, 2001 (Exhibit (3)(i) to 10-Q for the quarter ended March 30, 2001 (“First Quarter 2001

10-Q”)).

(ii) By-Laws of ML & Co., effective as of July 23, 2001 (Exhibit (3) to 10-Q for the quarter ended June 29, 2001 (“Second Quarter 2001 10-Q”)).

(4) Instruments defining the rights of security holders, including indentures

ML & Co. hereby undertakes to furnish to the SEC, upon request, copies of any agreements not filed defining the rights of holders of long-term debt securities of

ML & Co., none of which authorize an amount of securities that exceed 10% of the total assets of ML & Co.

(i) Senior Indenture dated as of April 1, 1983, as amended and restated as of April 1, 1987 between ML & Co. and The Chase Manhattan Bank (formerly known as

Chemical Bank, as successor by merger to Manufacturers Hanover Trust Company) (the “1983 Senior Indenture”) and the Supplemental Indenture thereto dated as

of March 15, 1990 (filed as Exhibit 4(i) to 1999 10-K for fiscal year ended December 29, 1999 (“1999 10-K”)).

(ii)

Sixth Supplemental Indenture dated as of October 25, 1993 to the 1983 Senior Indenture (filed as Exhibit 4(ii) to 1999 10-K).

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(iii) Twelfth Supplemental Indenture to the 1983 Senior Indenture dated as of September 1, 1998 between ML & Co. and The Chase Manhattan Bank (formerly known as

Chemical Bank, as successor by merger to Manufacturers Hanover Trust Company) (Exhibit 4(a) to 8-K dated October 21, 1998).

(iv) Senior Indenture dated as of October 1, 1993 between ML & Co. and The Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank N.A.) (the “1993

Senior Indenture”) (Exhibit (4)(iv) to 10-K for fiscal year ended December 25,1998 (“1998 10-K”)).

(v) First Supplemental Indenture to the 1993 Senior Indenture, dated as of June 1, 1998, between ML & Co. and The Chase Manhattan Bank (successor by merger to The

Chase Manhattan Bank N.A.) (Exhibit 4(a) to 8-K dated July 2, 1998).

(vi) Form of certificate representing Preferred Stock of ML & Co. (Exhibit 4(d) to S-3 (file no. 33-55363)).

(vii) Form of Depositary Receipt evidencing the Depositary Shares for the 9% Preferred Stock (filed as Exhibit (3)(i)(c) to 1999 10-K).

(viii) Deposit Agreement dated as of November 3, 1994 among ML & Co., Citibank, N.A. as Depositary, and the holders from time to time of the Depositary Receipts (filed

as Exhibit (3)(i)(e) to 1999 10-K).

(ix)

Form of Amended and Restated Rights Agreement dated as of December 2, 1997, between ML & Co. and ChaseMellon Shareholder Services, L.L.C. (Exhibit 4 to 8-K

dated December 2, 1997).

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(10) Material Contracts

(i) ML & Co. Equity Capital Accumulation Plan, as amended through July 26, 1999 (Exhibit 10(iii) to Second Quarter 1999 10-Q).

(ii) Written description of retirement programs for non-employee directors (page 24 of ML & Co.’s Proxy Statement for the 2002 Annual Meeting of Stockholders

contained in ML & Co.’s Schedule 14A filed on March 14, 2002).

(iii) Form of Severance Agreement between ML & Co. and certain of its directors and executive officers (Exhibit 10(x) to 10-K for fiscal year ended December 29,

1995).

(iv) Form of Indemnification Agreement entered into with all current directors of ML & Co. and to be entered into with all future directors of ML & Co. (Exhibit

10(viii) to 1998 10-K).

(v) Written description of ML & Co.’s incentive compensation programs (Exhibit 10(ix) to 1998 10-K).

(vi) Written description of ML & Co.’s compensation policy for executive officers and directors (pages 15 to 17 and pages 24 to 25 of ML & Co.’s Proxy Statement

for the 2002 Annual Meeting of Stockholders contained in ML & Co.’s Schedule 14A filed on March 14, 2002).

(vii) Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1986 (Exhibit 1(b) to Registration Statement on Form N-2

(File No. 2-99800)).

(viii) Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1987 (Exhibit 1(b) to Registration Statement on Form N-2

(File No. 33-11355)).

(ix)

Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1989 (Exhibit 1(b) to Registration Statement on Form N-2

(File No. 33-26561)).

(x)

Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1991 (Exhibit 1(b) to Registration Statement on Form N-2

(File No. 33-39489)).

(xi)

Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1994 (Exhibit (a)(ii) to Registration Statement on Form N-2

(File No. 33-51825)).

(xii) Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1997 (Exhibit (a)(ii) to Registration Statement on Form N-2

(File No. 333-15035)).

(xiii) Form of Amended and Restated Agreement of Limited Partnership of Merrill Lynch KECALP L.P. 1999 (Exhibit (a)(ii) to Registration Statement on Form N-2

(File No. 333-59143)).

(xiv) ML & Co. Deferred Restricted Unit Plan for Executive Officers (Exhibit 10(xxiii) to 10-K for fiscal year ended December 27, 1996 (“1996 10-K”)).

(xv)

Amendment dated February 12, 1998 to the ML & Co. Deferred Restricted Unit Plan for Executive Officers (Exhibit 10.32 to 10-K for the fiscal year ended

December 26, 1997 (“1997 10-K”)).

(xvi) ML & Co. Fee Deferral Plan for Non-Employee Directors, as amended through April 15, 1997 (Exhibit 10 to 1997 10-Q for the quarter ended March 28, 1997).

(xvii) Form of ML & Co. Amended and Restated 1994 Deferred Compensation Agreement for a Select Group of Eligible Employees, as amended through November

10, 1994 (Exhibit 10(ii) to 1999 10-K).

(xviii) ML & Co. 1995 Deferred Compensation Plan for a Select Group of Eligible Employees (Exhibit 10(xix) to 1999 10-K).

(xix) ML & Co. 1996 Deferred Compensation Plan for a Select Group of Eligible Employees (Exhibit 10(i) to 10-Q for the quarter ended September 29, 1995).

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(xx) ML & Co. 1997 Deferred Compensation Plan for a Select Group of Eligible Employees (Exhibit 10(xxvii) to 1996 10-K).

(xxi) ML & Co. 1998 Deferred Compensation Plan for a Select Group of Eligible Employees (Exhibit 10(i) to 10-Q for the quarter ended September 26, 1997

(the “Third Quarter 1997 10-Q”)).

(xxii) ML & Co. 2000 Deferred Compensation Plan for a Select Group of Eligible Employees (filed as Exhibit 10(xxiv) to 1999 10-K).

*(xxiii) ML & Co. 2001 Deferred Compensation Plan for a Select Group of Eligible Employees.

(xxiv) ML & Co. 1997 KECALP Deferred Compensation Plan for a Select Group of Eligible Employees (Exhibit 10(i) to 10-Q for the quarter ended June 27,

1997).

*(xxv) ML & Co. 2002 Deferred Compensation Plan for a Select Group of Eligible Employees.

(xxvi) Amendment dated September 18, 1996 to Deferred Compensation Plans (amending the Amended and Restated 1994 Deferred Compensation Agreement

for a Select Group of Eligible Employees, the ML & Co. 1995 Deferred Compensation Plan for a Select Group of Eligible Employees, and the ML & Co.

1996 Deferred Compensation Plan for a Select Group of Eligible Employees) (Exhibit 10 (xxxii) to 1996 10-K).

(xxvii) Amendment dated February 12, 1998 to the ML & Co. Deferred Compensation Plans for a Select Group of Eligible Employees for the years 1994, 1995,

1996, and 1997 (Exhibit 10.31 to 1997 10-K).

(xxviii) ML & Co. 1997 KECALP Deferred Compensation Plan for a Select Group of Eligible Employees (Exhibit 10(i) to Second Quarter 1997 10-Q).

(xxix) ML & Co. Deferred Stock Unit and Stock Option Plan for Non-Employee Directors (Exhibit 10 to 10-Q for the quarter ended March 30, 2001).

*(xxx) ML & Co. Long-Term Incentive Compensation Plan for Managers and Producers, as amended April 27, 2001.

(xxxi) ML & Co. Long-Term Incentive Compensation Plan, as amended April 27, 2001 (Exhibit 10(i) to 10-Q for the quarter ended June 29, 2001 (the “Second

Quarter 2001 10-Q”)).

*(xxxii) Form of Executive Annuity Agreement by and between ML & Co. and certain of its high level senior executive officers.

*(12) Statement re computation of ratios.

*(13) Excerpt of 2001 Annual Report to Stockholders.

*(21) Subsidiaries of ML & Co.

*(23) Consent of Independent Auditors, Deloitte & Touche LLP.

(99) Additional Exhibits.

*(i) Opinion of Deloitte & Touche LLP with respect to the Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred

Stock Dividends, which is included in Exhibit 12.

*(ii) Opinion of Deloitte & Touche LLP with respect to certain information in the Selected Financial Data, which is incorporated by reference in Part II, Item 6.

* Filed herewith

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(b) Reports on Form 8-K:

The following Current Reports on Form 8-K were filed with or furnished to the SEC during the fourth quarter of 2001.

(i) Current Report on Form 8-K dated October 12, 2001 for the purpose of furnishing notice of a webcast of a conference call scheduled for October 18, 2001 to

review ML & Co.’s operating results

(ii) Current Report on Form 8-K dated October 18, 2001 for the purpose of filing ML & Co.’s Preliminary Unaudited Earnings Summary for the three and nine-month

periods ended September 28, 2001.

(iii) Current Report on Form 8-K dated October 23, 2001 for the purpose of filing the form of ML & Co.’s 8% Callable Stock Return Income Debt Securities/®/ due

October 23, 2003.

(iv) Current Report on Form 8-K dated October 31, 2001 for the purpose of filing ML & Co.’s Preliminary Unaudited Consolidated Balance Sheet as of September 28,

2001.

(v) Current Report on Form 8-K dated November 1, 2001 for the purpose of filing the form of ML & Co.’s 9% Callable Stock Return Income Debt Securities due

November 3, 2003.

(vi) Current Report on Form 8-K dated November 2, 2001 for the purpose of filing the form of ML & Co.’s Strategic Return Notes due November 2, 2006.

(vii) Current Report on Form 8-K dated November 21, 2001 for the purpose of filing the form of ML & Co.’s 8% Callable Stock Return Income Debt Securities due

November 21, 2003.

(viii) Current Report on Form 8-K dated November 30, 2001 for the purpose of filing the form of ML & Co.’s Enhanced Return Notes Linked to the Nasdaq-100

Index/®/ due February 28, 2003.

*

Filed herewith

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MERRILL LYNCH & CO., INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
 
ITEMS 14(A)(1) AND 14(A)(2)
 
Page Reference
 
Form10-K
    
2001 Annual
Report to
Stockholders
Consolidated Financial Statements   
 
Independent Auditors’ Report   
 
     42
Consolidated Statements of Earnings   
 
     43
Consolidated Balance Sheets   
 
     44-45
Consolidated Statements of Changes in Stockholders’ Equity   
 
     46
Consolidated Statements of Comprehensive Income   
 
     47
Consolidated Statements of Cash Flows   
 
     48
Notes to Consolidated Financial Statements   
 
     49-78
Financial Statements Schedule   
 
Schedule I - Condensed Financial Information of Registrant F-2 to F-6     
 
Condensed Statements of Earnings
 
F-2     
 
Condensed Balance Sheets
 
F-3     
 
Condensed Statements of Cash Flows
 
F-4     
 
Notes to Condensed Financial Statements
 
F-5 to F-6     
 
Independent Auditors’ Report
 
F-7     
 
Specifically incorporated elsewhere herein by reference are certain portions of the following unaudited items:   
 
(i) Selected Financial Data*   
 
     16
(ii) Management’s Discussion and Analysis*   
 
     17-40
(iii) Quarterly Information   
 
     79
 
Schedules not listed are omitted because of the absence of the conditions under which they are required or because the information is included in the Consolidated Financial
Statements and Notes thereto in the 2001 Annual Report to Stockholders, which are incorporated herein by reference.
* This information was previously filed on Form 8-K on March 7, 2002 and except for pagination, the Selected Financial Data and Management’s Discussion and Analysis
contained in the Form 8-K is identical to the Selected Financial Data and Management’s Discussion and Analysis contained in the 2001 Annual Report to Stockholders.
 
F-1

Table of Contents

Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

MERRILL LYNCH & CO., INC.

(Parent Company Only)

CONDENSED STATEMENTS OF EARNINGS

(dollars in millions)

Year Ended Last Friday in December

2001

2000

1999

REVENUES

Interest (principally from affiliates) $ 3,397 $ 5,314 $ 3,693

Management service fees (from affiliates) 448 448 336

Other 14 16 20

Total Revenues 3,859 5,778 4,049

Interest Expense 3,694 5,401 4,094

Net Revenues 165 377 (45)

NON-INTEREST EXPENSES

Compensation and benefits 316 435 323

Restructuring charge

239

-

September 11th-related

71

-

Other 375 605 358

Total Non-Interest Expenses 1,001 1,040 681

EQUITY IN EARNINGS OF AFFILIATES 1,095 4,127 3,179

EARNINGS BEFORE INCOME TAXES 259 3,464 2,453

Income Tax Benefit

314 320 240

NET EARNINGS $ 573 $ 3,784 $ 2,693

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX (23) 45 (268)

COMPREHENSIVE INCOME $ 550 $ 3,829 $ 2,425

NET EARNINGS APPLICABLE TO

COMMON STOCKHOLDERS $ 535 $ 3,745 $ 2,654

See Notes to Condensed Financial Statements

F-2

Table of Contents

Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

MERRILL LYNCH & CO., INC.

(Parent Company Only)

CONDENSED BALANCE SHEETS

(dollars in millions, except per share amounts)

Deceember 28,

2001

December 29,

2000

ASSETS

Cash and cash equivalents $ 822 $ 5

Marketable investment securities 2,392 7,394

Loans to, receivables from and preference securities of affiliates 80,621 80,845

Investments in affiliates, at equity 22,238 21,435

Equipment and facilities (net of accumulated

depreciation and amortization of $201 in 2001 and $377 in 2000) 120 175

Other receivables and assets 3,232 2,473

TOTAL ASSETS $ 109,425 $ 112,327

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Commercial paper and other short-term borrowings $ 1,909 $ 12,978

Loans from and payables to affiliates 10,237 7,409

Other liabilities and accrued interest 4,666 6,299

Long-term borrowings 72,605 67,337

Total Liabilities 89,417 94,023

STOCKHOLDERS’ EQUITY

Preferred Stockholders’ Equity 425 425

Common Stockholders’ Equity:

Shares exchangeable into common stock

62 68

Common stock, par value $1.33 1/3 per share; authorized: 3,000,000,000 shares; issued: 2001 – 962,533,498 shares; 2000 –

962,533,498 shares

1,283 1,283

Paid-in capital 4,209 2,843

Accumulated other comprehensive loss (net of tax)

(368)

(345)

Retained earnings 16,150 16,156

21,336 20,005

Less: Treasury stock, at cost:

2001 – 119,059,651 shares; 2000 – 154,578,945 shares 977 1,273

Unamortized employee stock grants 776 853

Total Common Stockholders’ Equity 19,583 17,879

Total Stockholders’ Equity 20,008 18,304

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 109,425 $ 112,327

See Notes to Condensed Financial Statements

F-3

Table of Contents

Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

MERRILL LYNCH & CO., INC.

(Parent Company Only)

CONDENSED STATEMENTS OF CASH FLOWS

(dollars in millions)

Year Ended Last Friday in December

2001

2000

1999

Cash Flows from Operating Activities:

Net Earnings $ 573 $ 3,784 $ 2,693

Noncash items included in earnings:

Equity in earnings of affiliates (1,095 ) (4,127) (3,179)

Depreciation and amortization 65 53 45

Amortization of stock-based compensation

84 23 17

Restructuring charge 144 - -

Other (303) (98) 20

(Increase) decrease in

Operating assets, net of operating liabilities (316) 956 (287)

Dividends and partnerships distributions from affiliates 1,113 1,332 1,764

Cash Provided by Operating Activities 265 1,923 1,073

Cash Flows from Investing Activities:

Proceeds from (payments for):

Loans to affiliates, net of payments 3,162 5,121 (2,106)

Sales of available-for-sale securities 7,447 124 12

Purchases of available-for-sale securities (2,449 ) (6,315) (1,198)

Investments in affiliates, net of dispositions (886) (7,178) (4)

Equipment and facilities (104) (18) (95)

Cash Provided by (Used for) Investing Activities 7,170 (8,266) (3,391)

Cash Flows from Financing Activities:

Proceeds from (payments for):

Commercial paper and other short-term borrowings (11,069) (11,079) 7,071

Issuance and resale of long-term borrowings 35,380 25,888 11,685

Settlement and repurchase of long-term borrowings (31,211) (9,507) (16,092)

Common stock transactions 861 1,182 459

Dividends to shareholders (579) (515) (426)

Cash (Used for) Provided by Financing Activities (6,618 ) 5,969 2,697

Increase (Decrease) in Cash and Cash Equivalents 817 (374) 379

Cash and Cash Equivalents, beginning of year 5 379 -

Cash and Cash Equivalents, end of year $ 822 $ 5 $ 379

Supplemental Disclosure

Cash paid for:

Income taxes $ 313 $ 85 $ 261

Interest 4,471 5,109 4,149

See Notes to Condensed Financial Statements

F-4

Table of Contents

NOTES TO CONDENSED FINANCIAL STATEMENTS (PARENT COMPANY ONLY)

NOTE 1. BASIS OF PRESENTATION

The condensed unconsolidated financial statements of Merrill Lynch & Co., Inc. (“ML & Co.” or the “Parent Company”) should be read in conjunction with the Consolidated

Financial Statements of Merrill Lynch & Co., Inc. and subsidiaries (collectively, “Merrill Lynch”) and the Notes thereto in the Merrill Lynch 2001 Annual Report to

Stockholders (the “Annual Report”) included as an exhibit to this Form 10-K. Certain reclassification and format changes have been made to prior year amounts to conform to

the current year presentation. All 1999 amounts have been restated to reflect the 2000 merger of Herzog, Heine, Geduld, Inc. (“Herzog”) with Merrill Lynch, which was

accounted for as a pooling-of-interests (see Note 2 to the Consolidated Financial Statements in the Annual Report), and the two-for-one common stock split (see Note 11 to the

Consolidated Financial Statements in the Annual Report).

Investments in affiliates are accounted for in accordance with the equity method.

For information on the following, refer to the indicated Notes to the Consolidated Financial Statements within the Annual Report.

•

Summary of Significant Accounting Policies (Note

1)

•

Loans, Notes, and Mortgages (Note

7)

•

Commercial Paper and Short- and Long-Term Borrowings (Note

8)

•

Stockholders’ Equity (Note

11)

•

Commitments and Contingencies (Note

12)

•

Employee Incentive Plans (Note

14)

The Parent Company hedges certain risks arising from long-term borrowing payment obligations and investments in and loans to foreign subsidiaries. See Notes 8 and 1

(Derivatives section) to the Consolidated Financial Statements in the Annual Report, respectively, for additional information on these hedges.

NOTE 2. OTHER SIGNIFICANT EVENTS

Restructuring Charge

During the fourth quarter of 2001, Merrill Lynch’s management formally committed to a restructuring plan designed to position Merrill Lynch for improved profitability and

growth which included the resizing of selected businesses and other structural changes.

As a result, ML & Co. incurred a fourth quarter pre-tax restructuring charge to earnings of $239 million.

Restructuring charges relate primarily to severance costs of $95 million, facilities costs of $120 million, and technology and fixed asset write-offs of $17 million. Structural

changes include targeted workforce reductions of approximately 222 through a combination of involuntary and voluntary separations, across various business groups. At

December 28, 2001, the majority of employee separations were completed or announced and all had been identified. The $95 million of severance costs include non-cash

charges related to accelerated stock amortization for stock grants associated with employee separations totaling $17 million. Cash severance payments of $8 million have been

made as of year-end. Facilities-related costs include the closure or subletting of excess space. Management expects the remaining employee separations to be completed in 2002

and anticipates that substantially all of the cash payments related to real estate and severance will be funded by cash from operations.

For information on the consolidated restructuring charges, refer to Note 2 to the Consolidated Financial Statements within the Annual Report.

F-5

Table of Contents

September 11th-Related Expenses

On September 11th, terrorists attacked the World Trade Center complex, which subsequently collapsed and damaged surrounding buildings, some of which were occupied by

Merrill Lynch. These events caused the temporary relocation of approximately 9,000 employees from Merrill Lynch’s global headquarters in the North Tower of the World

Financial Center, the South Tower of the World Financial Center and from offices at 222 Broadway to back-up facilities.

Some of Merrill Lynch’s businesses were temporarily disrupted subsequent to September 11th. During the fourth quarter, Merrill Lynch reoccupied and reestablished business

operations in the North Tower as well as in 222 Broadway. The South Tower of the World Financial Center is in the process of being restored.

For the year ended December 28, 2001, ML & Co. recorded September 11th-related expenses of $71 million ($44 million after-tax), which are net of actual recoveries and

insurance receivables booked to date. These expenses include costs related to the write-off of damaged assets and sublease income; the repair and replacement of equipment;

and employee relocation, which required reconfiguring alternative office facilities, technology, and telecommunications and providing transportation. ML & Co. continues to

incur additional September 11th-related expenses, including the purchase of additional equipment and the restoration of facilities.

ML & Co. is also assessing the impact on operations from physical damage to determine lost profits due to business interruption. Therefore, the full financial impact to ML &

Co. cannot be currently determined.

ML & Co. is insured for loss caused by physical damage to property. This coverage includes repair or replacement of property and lost profits due to business interruption,

including costs related to lack of access to facilities. During the fourth quarter, ML & Co. received its first insurance advance payment related to September 11th of $90 million

and recognized an additional insurance receivable of $15 million. ML & Co. expects to recognize additional insurance receivables in future periods. Insurance payments are

based on recoverable cash expenditures, which will not necessarily be the same as expenses recognized under accounting principles generally accepted in the United States of

America.

For information on the consolidated September 11th-related expenses, refer to Note 2 to the Consolidated Financial Statements within the Annual Report.

NOTE 3. GUARANTEES

ML & Co. issues guarantees of counterparty obligations in connection with certain activities of subsidiaries (see Note 12 to the Consolidated Financial Statements in the Annual

Report for further information).

The Parent Company also guarantees certain obligations of subsidiaries, including obligations associated with foreign exchange forward contracts and interest rate swap

transactions.

ML & Co. also guarantees obligations related to Trust Originated Preferred Securities/SM/ issued by subsidiaries (see Note 10 to the Consolidated Financial Statements in the

Annual Report for further information).

F-6

Table of Contents

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of

Merrill Lynch & Co., Inc.:

We have audited the consolidated financial statements of Merrill Lynch & Co., Inc. and subsidiaries (“Merrill Lynch”) as of December 28, 2001 and December 29, 2000, and

for each of the three years in the period ended December 28, 2001, and have issued our report thereon dated February 25, 2002; such consolidated financial statements and our

report are included in your 2001 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Merrill

Lynch, listed in Item 14. Such financial statement schedule is the responsibility of Merrill Lynch’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the

information set forth therein.

/s/ DELOITTE & TOUCHE LLP

New York, New York

February 25, 2002

F-7

Table of Contents

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly

authorized on the 15th day of March, 2002.

W.H. CLARK /s/ W. H. Clark

W. H. Clark

Director

Merrill Lynch & Co., Inc.

Registrant

JILL K. CONWAY /s/ Jill K. Conway

Jill K. Conway

Director

ANDREA L. DULBERG /s/ Andrea L. Dulberg

Andrea L. Dulberg

Secretary

GEORGE B. HARVEY /s/ George B. Harvey

George B. Harvey

Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the Registrant in the capacities indicated on the 15th day of

March, 2002.

ROBERT P. LUCIANO /s/ Robert P. Luciano

Robert P. Luciano

Director

DAVID H. KOMANSKY /s/ David H. Komansky

David H. Komansky

Director, Chairman of the Board,

and Chief Executive Officer

(Principal Executive Officer)

HEINZ-JOACHIM NEUBÜRGER /s/ Heinz-Joachim Neubürger

Heinz-Joachim Neubürger

Director

THOMAS H. PATRICK /s/ Thomas H. Patrick

Thomas H. Patrick

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

DAVID K. NEWBIGGING /s/ David K. Newbigging

David K. Newbigging

Director

JOHN J. FOSINA /s/ John J. Fosina

John J. Fosina

Controller

(Principal Financial Officer)

E. STANLEY O'NEAL /s/ E. Stanley O'Neal

E. Stanley O'Neal

Director

AULANA L. PETERS /s/ Aulana L. Peters

Aulana L. Peters

Director

JOHN J. PHELAN, JR. /s/ John J. Phelan, Jr.

John J. Phelan, Jr.

Director

JOSEPH W. PRUEHER /s/ Joseph W. Prueher

Joseph W. Prueher

Director

II-1

EXHIBIT 10(xxiii)

MERRILL LYNCH & CO., INC.

2001 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

DATED AS OF OCTOBER 5, 2000

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE

BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

MERRILL LYNCH & CO., INC.

2001 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

Table of Contents

<TABLE>

Page

----

<S> <C>

I. GENERAL ............................................................................... 1

1.1 Purpose and Intent ............................................................. 1

1.2 Definitions .................................................................... 1

II. ELIGIBILITY ........................................................................... 5

2.1 Eligible Employees ............................................................. 5

(a) General Rule ............................................................. 5

(b) Individuals First Employed During Election Year or Plan Year ............. 5

(c) Disqualifying Factors .................................................... 5

III. DEFERRAL ELECTIONS; ACCOUNTS .......................................................... 6

3.1 Deferral Elections ............................................................. 6

(a) Timing and Manner of Making of Elections ................................. 6

(b) Irrevocability of Deferral Election ...................................... 6

(c) Application of Election .................................................. 6

3.2 Crediting to Accounts .......................................................... 6

(a) Initial Deferrals ........................................................ 6

(b) ML Ventures and Other Private Return Options ............................. 6

3.3 Minimum Requirements for Deferral .............................................. 6

(a) Minimum Requirements ..................................................... 7

(b) Failure to Meet Requirements ............................................. 7

3.4 Return Options; Adjustment of Accounts ......................................... 7

(a) Selection of ML Ventures Return Option ................................... 7

(b) Selection of Mutual Fund Return Options .................................. 7

(c) Selection of the ML Ventures Leverage Percentage by Eligible

Participants ............................................................. 8

(d) Adjustments of ML Ventures ............................................... 8

(e) Adjustment of Debit Balance .............................................. 8

(f) Adjustment of Mutual Fund Return Balances ................................ 8

(g) Annual Charge ............................................................ 9

(h) Rollover Option .......................................................... 9

3.5 Rescission of Deferral Election ................................................ 10

(a) Prior to December 1, 2000 ................................................ 10

(b) Adverse Tax Determination ................................................ 10

(c) Rescission For Amounts Not Yet Earned .................................... 10

IV. STATUS OF DEFERRED AMOUNTS AND ACCOUNT ................................................ 11

4.1 No Trust or Fund Created; General Creditor Status .............................. 11

4.2 Non-Assignability .............................................................. 11

4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans ......... 11

</TABLE>

-i-

<TABLE>

Page

----

<S> <C>

V. PAYMENT OF ACCOUNT ........................................................................... 11

5.1 Manner of Payment ..................................................................... 11

(a) Regular Payment Elections ....................................................... 11

(b) Modified Installment Payments ................................................... 12

5.2 Termination of Employment ............................................................. 12

(a) Death or Retirement ............................................................. 12

(b) Other Termination of Employment - Forfeiture of Leverage ........................ 13

(c) Leave of Absence, Transfer or Disability ........................................ 13

(d) Discretion to Alter Payment Date ................................................ 13

5.3 Withholding of Taxes .................................................................. 13

5.4 Beneficiary ........................................................................... 14

(a) Designation of Beneficiary ...................................................... 14

(b) Change in Beneficiary ........................................................... 14

(c) Default Beneficiary ............................................................. 14

(d) If the Beneficiary Dies During Payment .......................................... 14

5.5 Hardship Distributions ................................................................ 14

5.6 Domestic Relations Orders ............................................................. 15

VI. ADMINISTRATION OF THE PLAN ................................................................... 15

6.1 Powers of the Administrator ........................................................... 15

6.2 Payments on Behalf of an Incompetent .................................................. 15

6.3 No Right of Set Off ................................................................... 16

6.4 Corporate Books and Records Controlling ............................................... 16

VII. MISCELLANEOUS PROVISIONS ..................................................................... 16

7.1 Litigation ............................................................................ 16

7.2 Headings Are Not Controlling .......................................................... 16

7.3 Governing Law ......................................................................... 16

7.4 Amendment and Termination ............................................................. 16

</TABLE>

-ii-

MERRILL LYNCH & CO., INC.

2001 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

ARTICLE I

GENERAL

1.1 Purpose and Intent.

The purpose of the Plan is to encourage the employees who are integral

to the success of the business of the Company to continue their employment by

providing them with flexibility in meeting their future income needs. This Plan

is unfunded and maintained primarily for the purpose of providing deferred

compensation for a select group of management or highly compensated employees

within the meaning of Title I of ERISA, and all decisions concerning who is to

be considered a member of that select group and how this Plan shall be

administered and interpreted shall be consistent with this intention.

1.2 Definitions.

For the purpose of the Plan, the following terms shall have the

meanings indicated.

"Account" means the notional account established on the books and

records of ML & Co. for each Participant to record the Participant's interest

under the Plan.

"Account Balance" means, as of any date, the Deferred Amounts credited

to a Participant's Account, adjusted in accordance with Section 3.4 to reflect

the performance of the Participant's Selected Benchmark Return Options, the

Annual Charge, the Debit Balance, (if any) any adjustments in the event of a

Capital Call Default, and any payments made from the Account under Article V to

the Participant prior to that date.

"Adjusted Compensation" means the financial consultant incentive

compensation, account executive incentive compensation or estate planning and

business insurance specialist incentive compensation, in each case exclusive of

base salary, earned by a Participant during the Fiscal Year ending in 2001, and

payable after January 1, 2001, as a result of the Participant's production

credit level, or such other similar items of compensation as the Administrator

shall designate as "Adjusted Compensation" for purposes of this Plan.

"Administrator" means the Head of Human Resources of ML & Co., or his

or her functional successor, or any other person or committee designated as

Administrator of the Plan by the Administrator or the MDCC.

"Affiliate" means any corporation, partnership, or other organization

of which ML & Co. owns or controls, directly or indirectly, not less than 50% of

the total combined voting power of all classes of stock or other equity

interests.

"Annual Charge" means the charge to a Participant's Account provided

for in Section 3.4(g).

"Applicable Federal Rate" means the applicable federal rate for

short-term (0-3 years) obligations of the United States Treasury as determined

initially in the month of closing of ML Ventures and thereafter in January of

each subsequent year.

1

"Available Balance" means amounts in a Participant's Account that are

indexed to Benchmark Return Options with daily liquidity after the Account's

Debit Balance has been reduced to zero.

"Average Leveraged Principal Amount" means, for each Participant, for

any period, the sum of the Leveraged Principal Amounts outstanding at the end of

each day in the period divided by the number of days in such period.

"Benchmark Return Options" means such investment vehicles as the

Administrator may from time to time designate for the purpose of indexing

Accounts hereunder. In the event a Benchmark Return Option ceases to exist or is

no longer to be a Benchmark Return Option, the Administrator may designate a

substitute Benchmark Return Option for such discontinued option.

"Board of Directors" means the Board of Directors of ML & Co.

"Capital Call" means the periodic demands for funds from a

Participant's Account that will be equal to and occur simultaneously with

capital calls made by private equity funds (including ML Ventures) chosen as a

return option by the Participant.

"Capital Call Default" means that there is an insufficient Liquid

Balance in the Participant's Account to fund a Capital Call.

"Capital Demand Default Adjustment" means the negative adjustment

described in Section 3.4 in the number of "units" (including units acquired by

"Leverage") attributed to a Private Equity Fund Return Options that will be the

result of a Capital Call Default.

"Cash Compensation" means (1) (for VICP eligible employees) salary in

the reference year plus VICP earned in the reference year and paid in January or

February of the next calendar year or (2) (for Financial Consultants and other

employees receiving Adjusted Compensation) base salary plus Adjusted

Compensation paid in the reference year.

"Code" means the U.S. Internal Revenue Code of 1986, as amended from

time to time.

"Company" means ML & Co. and all of its Affiliates.

"Compensation" means, as relevant, a Participant's Adjusted

Compensation, Variable Incentive Compensation and/or Sign-On Bonus, or such

other items or items of compensation as the Administrator, in his or her sole

discretion, may specify in a particular instance.

"Debit Balance" means, as of any date, the dollar amount, if any,

representing each of: (1) the aggregate Annual Charge, accrued in accordance

with Section 3.4(g)(i); and (2) any Leveraged Principal Amount (together with

any pro rata Interest Amounts determined in accordance with Section 3.4(g)(ii),

if applicable), as reduced by any distributions recorded from ML Ventures Units

recorded in a Participant's Account in accordance with Section 3.4(e).

"Deferral Percentage" means the percentage (which, unless the

Administrator, in his or her sole discretion, determines otherwise, shall be in

whole percentage increments and not more than 90%) specified by the Participant

to be the percentage of each payment of Compensation he or she wishes to defer

under the Plan.

"Deferred Amounts" means, except as provided in Section 5.6, the

amounts of Compensation actually deferred by the Participant under this Plan.

2

"Election Year" means the 2000 calendar year.

"Eligible Compensation" means (1) for persons eligible for the Variable

Incentive Compensation Program or other similar programs: (A) a Participant's

1999 base earnings plus (B) any cash bonus awarded in early 2000, and (2) for

persons ineligible for such bonus programs, a Participant's 1999 Adjusted

Compensation.

"Eligible Employee" means an employee eligible to defer amounts under

this Plan, as determined under Section 2.1 hereof.

"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,

as amended from time to time.

"Fiscal Month" means the monthly period used by ML & Co. for financial

accounting purposes.

"Fiscal Year" means the annual period used by ML & Co. for financial

accounting purposes.

"Full-Time Domestic Employee" means a full-time employee of the Company

paid from the Company's domestic based payroll (other than any U.S. citizen or

"green card" holder who is employed outside the United States).

"Full-Time Expatriate Employee" means a U.S. citizen or "green card"

holder employed by the Company outside the United States and selected by the

Administrator as eligible to participate in the Plan (subject to the other

eligibility criteria).

"Initial Leveraged Amount" means the initial dollar amount by which a

Participant's deferral into ML Ventures Units is leveraged as determined in

accordance with Section 3.4(c).

"Interest" means the hypothetical interest accruing on a Participant's

Average Leveraged Principal Amount at the Applicable Federal Rate.

"Interest Amounts" means, for any Participant, as of any date, the

amount of Interest that has accrued to such date on such Participant's Average

Leveraged Principal Amount, from the date on which a Participant's Leveraged

Principal Amount is established, or from the most recent date that Interest

Amounts were added to the Leveraged Principal Amount.

"Leveraged or Unleveraged Distributions" means the distributions to a

Participant's Account attributable to the leveraged or unleveraged portion (as

the case may be) of a Participant's ML Ventures Units.

"Leverage-Eligible Participants" means persons who (1) are accredited

investors within the meaning of the Securities Act of 1933, and (2) received

Cash Compensation of at least $250,000 in 1999, and (3) received Cash

Compensation of at least $200,000 in 1998 and otherwise qualify, in accordance

with standards determined by the Administrator, to select a ML Ventures Return

Option on a leverage basis.

"Leveraged Principal Amount" means a Participant's Initial Leveraged

Amount, if any, as adjusted to reflect the addition of Interest Amounts (or any

pro rata Interest Amounts).

"Leverage Percentage" means the percentage of leverage chosen by a

Leverage-Eligible Participant, which percentage shall not exceed 200%.

3

"Liquid Balance" means, as of any date, the Deferred Amounts credited

to a Participant's Account, not including amounts that represent future

commitments to Private Equity Funds, including ML Ventures, adjusted (either up

or down) to reflect: (1) the performance of the Participant's Mutual Fund Return

Balances as provided in Section 3.4(f); (2) distributions with respect to ML

Ventures Units made in accordance with Section 3.4(d); (3) reduction of any

Debit Balance as provided in Section 3.4(e); and (4) any payments to the

Participant under Article V hereof.

"Maximum Deferral" means the whole dollar amount specified by the

Participant to be the amount of Compensation he or she elects to be deferred

under the Plan.

"MDCC" means the Management Development and Compensation Committee of

the Board of Directors.

"ML & Co." means Merrill Lynch & Co., Inc.

"ML Ventures Return Option" means the option of indexing returns

hereunder to the performance of a ML Ventures limited partnership, on a

leveraged or unleveraged basis.

"ML Ventures Units" means the record-keeping units credited to the

Accounts of Participants who have chosen the ML Ventures Return Option.

"Mutual Fund Return Options" means the mutual funds chosen as Benchmark

Return Options by the Administrator.

"Net Asset Value" means, with respect to each Benchmark Return Option

that is a mutual fund or other commingled investment vehicle for which such

values are determined in the normal course of business, the net asset value, on

the date in question, of the vehicle for which such value is being determined.

"Participant" means an Eligible Employee who has elected to defer

Compensation under the Plan.

"Plan" means this Merrill Lynch & Co., Inc. 2001 Deferred Compensation

Plan for a Select Group of Eligible Employees.

"Plan Year" means the Fiscal Year ending in 2001.

"Private Fund Return Option(s)" means one or more private funds that

are chosen by the Administrator to be offered - with such limitations as may be

required - to eligible Participants as Benchmark Return Options.

"Private Fund Unit(s)" means the record-keeping units credited to the

Accounts of Participants who have chosen one or more Private Fund Return

Options.

"Retirement" means a Participant's (i) termination of employment with

the Company for reasons other than for cause on or after the Participant's 65th

birthday, or (ii) resignation on or after the Participant's 55th birthday if the

Participant has at least 10 years of service, or (iii) resignation at any age

with the express approval of the Administrator, which will be granted only if

the termination is found by the Administrator to be in, or not contrary to, the

best interests of the Company.

4

"Remaining Deferred Amounts" means the product of a Participant's Deferred

Amounts times a fraction equal to the number of remaining installment payments

divided by the total number of installment payments.

"Selected Benchmark Return Option" means a Benchmark Return Option selected

by the Participant in accordance with Section 3.4.

"Sign-On Bonus" means a single-sum amount paid or payable to a new Eligible

Employee during the Plan Year upon commencement of employment, in addition to

base pay and other Compensation, to induce him or her to become an employee of

the Company, or any similar item of compensation as the Administrator shall

designate as "Sign-On Bonus" for purposes of this Plan.

"Undistributed Deferred Amounts" means, as of any date on which the Annual

Charge is determined, a Participant's Deferred Amounts (exclusive of any

appreciation or depreciation) minus, for each distribution to a Participant

prior to such date, an amount equal to the product of the Deferred Amounts and a

fraction the numerator of which is the amount of such distribution and the

denominator of which is the combined Net Asset Value (prior to distribution) of

the Participant's Account as of the date of the relevant distribution.

"Variable Incentive Compensation" means the variable incentive compensation

or office manager incentive compensation that is paid in cash to certain

employees of the Company generally in January or February of the Plan Year with

respect to the prior Fiscal Year, which for purposes of this Plan is considered

earned during the Plan Year regardless of when it is actually paid to the

Participant, or such other similar items of compensation as the Administrator

shall designate as "Variable Incentive Compensation" for purposes of this Plan.

"401(k) Plan" means the Merrill Lynch & Co., Inc. 401(k) Savings &

Investment Plan.

ARTICLE II

ELIGIBILITY

2.1 Eligible Employees.

(a) General Rule. An individual is an Eligible Employee if he or she (i) is

a Full-Time Domestic Employee or a Full-Time Expatriate Employee, (ii) has at

least $250,000 of Eligible Compensation for the year prior to the Election Year,

and (iii) has attained the title of Vice President or higher.

(b) Individuals First Employed During Election Year or Plan Year. Subject

to the approval of the Administrator in his or her sole discretion, an

individual who is first employed by the Company during the Election Year or the

Plan Year is an Eligible Employee if his or her Eligible Compensation, together,

if applicable, with the amount of any Variable Incentive Compensation that will

be payable to such individual in the next annual bonus cycle pursuant to a

written bonus guarantee, is greater than $250,000, and he or she is employed as

or is to be nominated for the title of Vice President or higher at the first

opportunity following his or her commencement of employment with the Company.

(c) Disqualifying Factors. An individual shall not be an Eligible Employee

if either (i) as of the deadline for submission of elections specified in

Section 3.1(a), the individual's wages have been attached or are being garnished

or are otherwise restrained pursuant to legal process, or (ii) within 13 months

prior to the deadline for submission of elections specified in Section 3.1(a),

the individual has made a hardship withdrawal of Elective 401(k) Deferrals as

defined under the 401(k) Plan.

5

ARTICLE III

DEFERRAL ELECTIONS; ACCOUNTS

3.1 Deferral Elections.

(a) Timing and Manner of Making of Elections. An election to defer

Compensation for payment in accordance with Article V shall be made by

submitting to the Administrator such forms as the Administrator may prescribe in

whatever manner that the Administrator directs. Each election submitted must

specify a Maximum Deferral and a Deferral Percentage with respect to each

category of Compensation to be deferred. All elections by a Participant to defer

Compensation under the Plan must be received by the Administrator or such person

as he or she may designate for the purpose by no later than October 27 of the

Election Year (or such later date as the Administrator, in his or her sole

discretion, may specify in any particular instance) or, in the event such date

is not a business day, the immediately preceding business day; provided,

--------

however, that the Eligible Employee's election to defer a Sign-On Bonus must be

- -------

part of such Eligible Employee's terms and conditions of employment agreed to

prior to the Eligible Employee's first day of employment with the Company.

(b) Irrevocability of Deferral Election. Except as provided in Sections 3.5

and 5.5, an election to defer the receipt of any Compensation made under Section

3.1(a) is irrevocable once submitted to the Administrator or his or her

designee. The Administrator's acceptance of an election to defer Compensation

shall not, however, affect the contingent nature of such Compensation under the

plan or program under which such Compensation is payable.

(c) Application of Election. The Participant's Deferral Percentage will be

applied to each payment of Compensation to which the Participant's deferral

election applies, provided that the aggregate of the Participant's Deferred

--------

Amounts shall not exceed the Participant's Maximum Deferral. If a Participant

has made deferral elections with respect to more than one category of

Compensation, this Section 3.1(c) shall be applied separately with respect to

each such category.

3.2 Crediting to Accounts.

(a) Initial Deferrals. A Participant's Deferred Amounts will be credited to

the Participant's Account as soon as practicable (but in no event later than the

end of the following month) after the last day of the Fiscal Month during which

such Deferred Amounts would, but for deferral, have been paid and will be

accounted for in accordance with Section 3.4. No interest will accrue, nor will

any adjustment be made to an Account, for the period until the Deferred Amounts

are credited.

(b) ML Ventures and other Private Return Options. Upon the closing of any

ML Ventures or Private Return Option, a Participant's Account will be credited

with a number of units determined by dividing by $1,000 the sum of the

following: (1) the portion of the Account Balance that the Participant has

elected to allocate to the ML Ventures Return Option or such other Private

Return Option, as of the day prior to the closing date; and (in the case of ML

Ventures only) (2) the Participant's Initial Leveraged Amount (computed in

accordance with Section 3.4(c)).

3.3 Minimum Requirements for Deferral.

(a) Minimum Requirements. Notwithstanding any other provision of this Plan,

no deferral will be effected under this Plan with respect to a Participant if:

(i) the Participant is not an Eligible Employee as of December 31, 2000,

6

(ii) the Participant's election as applied to the Participant's

Variable Incentive Compensation (determined by substituting the

Election Year for the Plan Year) or Adjusted Compensation

(determined by substituting the Fiscal Year immediately prior to

the Fiscal Year ending in the Election Year for the Fiscal Year

ending in the Plan Year) would have resulted in an annual

deferral of less than $15,000, or

(iii) the greater of (A) the sum of (1) the "Medicare wages" amount

listed on the Participant's W-2 form for the Plan Year, and (2)

any Compensation that is accelerated which the Participant may

receive in December of the Election Year which would have been

payable in the Plan Year in the absence of the action of the

Company to accelerate the payment, or (B) the Participant's

Eligible Compensation for the Plan Year, is less than $250,000;

provided, that any Participant who first becomes an employee of the Company

- --------

during the Plan Year shall not be required to satisfy conditions (i) and (ii).

Condition (ii) does not require a Participant's elections to result in an actual

------

deferral of at least $15,000.

(b) Failure to Meet Requirements. If the requirements of Section

3.3(a)(i) or (ii) are not met by a Participant to whom such requirements are

applicable, such Participant's Deferred Amounts, if any, will be paid to such

Participant, without adjustment to reflect the performance of any Selected

Benchmark Return Option, as soon as practicable after it has been determined

that the requirements have not been met. If the requirements of Section

3.3(a)(iii) are not met by a Participant, the greater of such Participant's

Deferred Amounts or Account Balance will be paid to such Participant as soon as

practicable after it has been determined that the requirements have not been

met.

3.4 Return Options; Adjustment of Accounts.

(a) Selection of ML Ventures Return Option or Private Fund Return

Options. In any year that a ML Ventures partnership or other Private Fund

partnership is offered as a return option, eligible Participants may select the

ML Ventures Return Option (and designate any Leverage Percentage) or select a

Private Fund Return Option. Participants should be aware that once the closing

of the relevant fund has occurred, Participants will not be able to change their

elections. Participants should also be aware that in the event of a Capital Call

Default, for certain Private Equity Funds, Including ML Ventures, they may be

penalized by having their Accounts adjusted downward in accordance with Section

3.4 (d).

(b) Selection of Mutual Fund Return Options. Coincident with the

Participant's election to defer Compensation, the Participant must select the

percentage of the Participant's Account to be adjusted to reflect the

performance of Mutual Fund Return Options, for use when a Participant's Account

has a Liquid Balance. All elections shall be in multiples of 1%. A Participant

may, by complying with such procedures as the Administrator may prescribe on a

uniform and nondiscriminatory basis, including procedures specifying the

frequency with respect to which such changes may be effected (but not more than

12 times in any calendar year), change the Selected Benchmark Return Options to

be applicable with respect to his or her Account.

(c) Selection of the ML Ventures Leverage Percentage by Eligible

Participants. Prior to the closing of the offering of an ML Ventures

partnership, Leverage-Eligible Participants who select the ML Ventures Return

Option on a leveraged basis must choose their Leverage Percentage, in accordance

with standards determined by the Administrator, by submitting such forms as the

Administrator shall prescribe. Prior to the closing of an ML Ventures

partnership, the Administrator will determine each Leverage-Eligible

Participant's Initial Leveraged Amount by applying such Participant's Leverage

Percentage to the dollar value of the portion of the Participant's Account

7

Balance allocated to the ML Ventures Return Option. The Initial Leveraged Amount

will be recorded as the Leveraged Principal Amount, to which amount Interest

Amounts will be added annually in accordance with Section 3.4(e).

(d) Adjustments of ML Ventures and other Private Fund Return Options.

(i) Whenever a distribution is paid on an actual unit of an ML

Ventures partnership or other Private Equity Fund Return Option,

an amount equal to such per unit distribution times the number of

units in the Participant's Account will first be applied against

any Debit Balance, as provided in Section 3.4(e), and then, if

any portion of such distribution remains after the Debit Balance

is reduced to zero, be credited to the Participant's Account to

be indexed to the Mutual Fund Return Option(s) chosen by the

Participant.

(ii) In the event of a Capital Call Default, a Participant's notional

investment in the relevant fund will be capped. If this occurs,

the number of units represented by the return option (including,

in the case of ML Ventures, any leveraged units) will be adjusted

downward to reflect a smaller investment and resulting lower

leverage.

(iii) The ML Ventures Units and the Debit Balance will also be adjusted

in accordance with Section 5.2 hereof in the event of a

Participant's termination.

(e) Adjustment of Debit Balance. Any Debit Balance shall be reduced

as soon as possible by any distributions relating to ML Ventures Units.

Reductions of the Debit Balance, as provided in the foregoing sentence, shall be

applied first to reduce the Debit Balance attributable to accrued Annual Charges

and then, after all such accrued Annual Charges have been satisfied, to reduce

any Leveraged Principal Amount. As of the last day of each Fiscal Year, Interest

Amounts computed by the Administrator shall be added to the Leveraged Principal

Amount. If on any date the Leveraged Principal Amount would be discharged

completely as a result of distributions or chargeoffs, Interest Amounts will be

computed through such date and added to the Leveraged Principal Amount as of

such date.

(f) Adjustment of Mutual Fund Return Balances. While the

Participant's Balances do not represent the Participant's ownership of, or any

ownership interest in, any particular assets, the Balances attributable to

Mutual Fund Return Options shall be adjusted to reflect credits or debits

relating to distributions with respect to the ML Ventures Units or chargeoffs

against the Debit Balance and to reflect the investment experience of the

Participant's Mutual Fund Return Options in the same manner as if investments or

dispositions in accordance with the Participant's elections had actually been

made through the ML Benefit Services Platform and ML II Core Recordkeeping

System, or any successor system used for keeping records of Participants'

Accounts (the "ML II System"). In adjusting Accounts, the timing of receipt of

Participant instructions or credits or debits by the ML II System shall control

the timing and pricing of the notional investments in the Participant's Mutual

Fund Return Options in accordance with the rules of operation of the ML II

System and its requirements for placing corresponding investment orders, as if

orders to make corresponding investments or dispositions were actually to be

made, except that in connection with the crediting of Deferred Amounts or

distributions to the Participant's Account and distributions from or debits to

the Account, appropriate deferral allocation instructions shall be treated as

received from the Participant prior to the close of transactions through the ML

II System on the relevant day. Each Mutual Fund Return Option shall be valued

using the Net Asset Value of the Mutual Fund Return Option as of the relevant

day; provided, that, in valuing a Mutual Fund Return Option for which a Net

--------

Asset Value is not computed, the value of the security involved for determining

Participants' rights under the Plan shall be the price reported for actual

transactions in that security through the ML II System on the

8

relevant day, without giving effect to any transaction charges or costs

associated with such transactions; provided, further, that, if there are no such

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transactions effected through the ML II System on the relevant day, the value of

the security shall be:

(i) if the security is listed for trading on one or more national

securities exchanges, the average of the high and low sale prices

for that day on the principal exchange for such security, or if

such security is not traded on such principal exchange on that

day, the average of the high and low sales prices on such

exchange on the first day prior thereto on which such security

was so traded;

(ii) if the security is not listed for trading on a national

securities exchange but is traded in the over-the-counter market,

the average of the highest and lowest bid prices for such

security on the relevant day; or

(iii) if neither clause (i) nor (ii) applies, the value determined by

the Administrator by whatever means he considers appropriate in

his or her sole discretion.

All debits and charges against the Account shall be applied as a pro rata

--------

reduction of the portion of the Account Balance indexed to each of the

Participant's Mutual Fund Return Options.

(g) Annual Charge. As of the last day of each Fiscal Year or such

earlier day in December as the Administrator shall determine, an Annual Charge

of 2.0% of the Participant's Deferred Amounts (exclusive of any appreciation or

depreciation determined under Section 3.4 (f)) shall be applied to reduce the

Account Balance.

(i) In the event that all or any portion of the Account Balance is

indexed to a Benchmark Return Option with less than daily

liquidity, the Annual Charge will accrue as a Debit Balance and

be paid out of future amounts credited to the Account Balance.

(ii) In the event that the Participant elects to have the Account

Balance paid in installments, the Annual Charge will be charged

on the Remaining Deferred Amounts after giving effect to the

installment payments.

(iii) In the event that the Account Balance is paid out completely

during a Fiscal Year prior to the date upon which the Annual

Charge is assessed, a pro rata Annual Charge will be deducted

--------

from amounts to be paid to the Participant to cover that fraction

of the Fiscal Year that Deferred Amounts (or Remaining Deferred

Amounts in the case of installment payments) were maintained

hereunder. The Annual Charge shall be applied as a pro rata

--------

reduction of the portion of the Account Balance indexed to each

of the Participant's Selected Benchmark Return Options. In

applying the Annual Charge, the pricing principles set forth in

Section 3.4(f) will be followed.

(h) Rollover Option. In the discretion of the Administrator or a

designee, additional Benchmark Return Options, including Return Options with

less than daily liquidity, may be offered to all Participants under the Plan or

to a more limited group of Participants. In such event, Participants will be

allowed, in such manner as the Administrator shall determine, to elect that all

or a portion of Account Balances be indexed to such Benchmark Return Options.

(i) With respect to Benchmark Return Options that do not provide

daily liquidity: (A) payments under Article V will be made in

accordance with a Participant's election at the time of the

Participant's original deferral, with any adjustments required

for the more limited liquidity of such Return Option; (B)

Participants may be limited in their

9

ability to elect, change or continue their Benchmark Return

Options in accordance with such terms and conditions as the

Administrator or a designee may determine; and (C) the Annual

Charge shall be accrued and paid, when possible, upon liquidation

of all or any portion of the Benchmark Return Option, provided

that no payment shall be made to a Participant under Article V

hereof until all accrued Annual Charges have been paid.

(ii) In the event that such limited liquidity options include future

ML Ventures Partnerships, the designated amounts shall be

credited to such Participant, accounted for, adjusted and paid

out to such Participant in accordance with the terms and

conditions of this Plan as they related to the ML Ventures Return

Option.

3.5 Rescission of Deferral Election.

(a) Prior to December 1, 2000. A deferral election hereunder may be

rescinded at the request of a Participant only (i) on or before December 1,

2000, and (ii) if the Administrator, in his or her sole discretion and upon

evidence of such basis that he or she finds persuasive (including a material

applicable change in the Participant's U.S. Federal and/or foreign income tax

rate during the period between October 27, 2000 and November 30, 2000), agrees

to the rescission of the election. In the event that the Administrator agrees to

the rescission, the Deferred Amounts, if any, credited to the Participant's

Account will be paid to the Participant as soon as practicable thereafter,

subject to reduction for any applicable withholding taxes.

(b) Adverse Tax Determination. Notwithstanding the provisions of

Section 3.5(a), a deferral election may be rescinded at any time if (i) a final

determination is made by a court or other governmental body of competent

jurisdiction that the election was ineffective to defer income for purposes of

U.S. Federal, state, local or foreign income taxation and the time for appeal

from this determination has expired, and (ii) the Administrator, in his or her

sole discretion, decides, upon the Participant's request and upon evidence of

the occurrence of the events described in (i) hereof that he or she finds

persuasive, to rescind the election. Upon such rescission, the Account Balance,

including any adjustment for performance of the Selected Benchmark Return

Options, will be paid to the Participant as soon as practicable, and no

additional amounts will be deferred pursuant to this Plan.

(c) Rescission For Amounts Not Yet Earned. Upon the Participant's

written request, the Administrator may in his or her sole discretion terminate

any deferral elections made hereunder with respect to Compensation not yet

earned and no further amounts will be deferred. In addition, in the event a

Participant receives a hardship withdrawal under the 401(k) Plan, the

Administrator shall, as of the date the Participant's Elective 401(k) Deferrals

(as defined in the 401(k) Plan) are suspended under the 401(k) Plan as a result

of such hardship withdrawal, terminate the Participant's deferrals under this

Plan in accordance with the preceding sentence, as if the Participant had

requested rescission in writing. In each case, amounts previously deferred will

continue to be governed by the terms of this Plan.

ARTICLE IV

STATUS OF DEFERRED AMOUNTS AND ACCOUNT

4.1 No Trust or Fund Created; General Creditor Status.

Nothing contained herein and no action taken pursuant hereto will be

construed to create a trust or separate fund of any kind or a fiduciary

relationship between ML & Co. and any Participant,

10

the Participant's beneficiary or estate, or any other person. Title to and

beneficial ownership of any funds represented by the Account Balance will at all

times remain in ML & Co.; such funds will continue for all purposes to be a part

of the general funds of ML & Co. and may be used for any corporate purpose. No

person will, by virtue of the provisions of this Plan, have any interest

whatsoever in any specific assets of the Company. TO THE EXTENT THAT ANY PERSON

ACQUIRES A RIGHT TO RECEIVE PAYMENTS FROM ML & CO. UNDER THIS PLAN, SUCH RIGHT

WILL BE NO GREATER THAN THE RIGHT OF ANY UNSECURED GENERAL CREDITOR OF ML & CO.

4.2 Non-Assignability.

The Participant's right or the right of any other person to the Account

Balance or any other benefits hereunder cannot be assigned, alienated, sold,

garnished, transferred, pledged, or encumbered except by a written designation

of beneficiary under this Plan, by written will, or by the laws of descent and

distribution.

4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans.

The effect of deferral on pension and welfare benefit plans in which

the Participant may participate will depend upon the provisions of each such

plan, as amended from time to time.

ARTICLE V

PAYMENT OF ACCOUNT

5.1 Manner of Payment.

(a) Regular Payment Elections. A Participant's Account Balance will be

paid by the Company, as elected by the Participant at the time of his or her

deferral election, either in a single payment to be made, or in the number of

annual installments (not to exceed 15) chosen by the Participant to commence,

(i) in the month following the month of the Participant's Retirement or death,

(ii) in any month and year selected by the Participant after the end of 2001, or

(iii) in any month in the calendar year following the Participant's Retirement;

provided that, if a Participant's election would result in payment (in the case

- --------

of a single payment) or commencement of payment (in the case of installment

payments) after the Participant's 70th birthday, then, notwithstanding the

Participant's elections, the Company will pay, or commence payment of, the

Participant's Account Balance in the month following the Participant's 70th

birthday unless the Participant continues to be an active full time employee at

such time, in which case the Company will pay, or commence payment of, the

Participant's Account Balance in the month following the Participant's cessation

of active service (to the extent payment has not already been made or

commenced). The amount of each annual installment, if applicable, shall be

determined by multiplying the Account Balance as of the last day of the month

immediately preceding the month in which the payment is to be made by a

fraction, the numerator of which is one and the denominator of which is the

number of remaining installment payments (including the installment payment to

be made). In the event that immediately prior to the lump sum payment or the

initial installment payment, all or any portion of a Participant's Account

Balance remains indexed to a Benchmark Return Option with less than daily

liquidity, such payment shall be adjusted, if necessary, for the liquidity

restraints of the Benchmark Return Option and, in the case of an election of 11

or more installment payments commencing upon Retirement or a date certain

coincident with Retirement, shall be delayed until such Account Balance is fully

liquid.

11

(b) Modified Installment Payments. In lieu of one of the regular

payment elections provided for in Section 5.1(a), a Participant may elect to

receive the Account Balance in at least 11 but no more than 15 annual

installment payments ("modified installment payments"), such modified

installment payments to commence on the last business day in March in the year

following the Participant's Retirement or death (the "Initial Payment Date"),

provided that, in the event that immediately prior to the initial payment of

such installment payments, all or any portion of a Participant's Account Balance

remains indexed to a Benchmark Return Option with less than daily liquidity,

such initial payment shall be delayed until such Account Balance is fully

liquid. The modified installment payments shall be computed in accordance with

last sentence of Section 5.1(a) and will in all other respects be treated like

regular installment payments under the Plan. By electing modified installment

payments, the Participant agrees that at any time prior to the last day of

February immediately preceding a Participant's Initial Payment Date (the

"Determination Date"), ML & Co. shall have the right, without the consent of the

Participant or any beneficiary, to change the Participant's method of payment to

11 annuitized payments ("annuitized payments"), in the event that, in the sole

discretion of the Administrator, it is determined that such a change is

necessary or appropriate in order to preserve the intended state tax benefits of

the modified installment payments to the Participant or any beneficiary. In the

event that the Administrator determines that annuitized payments shall be made,

the amount of the annuitized payments will be determined by applying the

Discount Rate, as defined below, to the Account Balance as of the Determination

Date to create a stream of 11 equal annual payments. If annuitized payments are

to be made, then the Account Balance shall cease to be adjusted pursuant to

Section 3.4 as of the Determination Date (except that a pro rata Annual Charge

--- ----

will be deducted from the Account Balance prior to calculation of the annuitized

payments to cover the fraction of the Fiscal Year preceding the Determination

Date) and the Company's only obligation to the Participant shall be to make the

annuitized payments when due. As used herein, Discount Rate shall mean ML &

Co.'s then-applicable after-tax cost of borrowing and is defined as (A) x (B),

where (A) is equal to 1 minus ML & Co.'s then-effective tax rate, expressed as a

decimal, and (B) is equal to the sum of: (i) the annual yield on the

then-current 5-year U.S. Treasury Note, and (ii) a spread (which will not be

less than 0.10%) indicative of ML & Co.'s borrowing cost for transactions of

similar structure and average maturity to the annuity, as determined by ML & Co.

5.2 Termination of Employment.

(a) Death or Retirement. Upon a Participant's death, Career Retirement

(as defined in the ML & Co. Long-Term Incentive Compensation Plans) or

Retirement prior to payment, the Account Balance will be paid, in accordance

with the Participant's elections and as provided in Section 5.1(a) or (b), as

applicable, to the Participant or to the Participant's beneficiary (in the event

of death); provided, however, that (1) in the event that the Participant enters

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into competition with the business of Merrill Lynch, he or she will not be

eligible for Retirement treatment under this Section 5.2 (a) and (2) in the

event that a beneficiary of the Participant's Account is the Participant's

estate or is otherwise not a natural person, then (i) if the Participant has

elected a regular payment election pursuant to Section 5.1(a), the applicable

portion of the Account Balance will be paid in a single payment to such

beneficiary notwithstanding any election of installment payments, and (ii) if

the Participant has elected modified installment payments pursuant to Section

5.1(b), the applicable portion of the Account Balance will continue to be

payable as modified installment payments or annuitized payments, as the case may

be, in accordance with Section 5.1(b), but only to a single person consisting of

the administrator or executor of the Participant's estate or another person

lawfully designated by the administrator or executor (and in the event no such

person is designated within a reasonable time, payment will be made in a lump

sum).

(b) Other Termination of Employment - Forfeiture of Leverage.

12

(1) If the Participant's employment terminates at any time for any

other reason than those described in Section 5.2 (a), then, notwithstanding the

Participant's elections hereunder, any Available Balance will be paid to the

Participant, as soon as practicable, in a single payment if the Account Balance

is fully liquid, or as available, as soon thereafter as is practicable,

notwithstanding the Participant's elections hereunder.

(2) In the event that a Participant's employment terminates at any time for

any reason other than death, disability or Retirement, such Participant

will forfeit all rights to the unvested leveraged portion of such

Participant's ML Ventures Units, including any future Leveraged

Distributions, unless the Administrator, in his or her sole discretion,

determines that such forfeiture would be detrimental to Merrill Lynch;

provided, however, that such forfeiture will not occur: if (a) the

Participant is terminated by ML & Co. as the result of a reduction in

staff, (b) the Participant delivers to ML & Co. a release of claims (in

a form approved by the Administrator and counsel) he or she may have

against the corporation or any of its subsidiaries, and (3) such

Participant complies with the terms of such release. In the event of

such forfeiture, the Participant's Account Balance and Debit Balance

will be restated, as of the date of termination, to reflect what such

balances would have been had the Participant selected no leverage under

Section 3.4(c). To the extent necessary, the Participant's Account

Balance will also be adjusted, as of the date of the termination, to

credit the Participant with the amount of any Unleveraged Distributions

that were previously applied to the repayment of the Leveraged

Principal Amount and any Interest Amounts and, to the extent necessary,

any Leveraged Distributions paid out to the Participant will be

restated as a Debit Balance. Leveraged and Unleveraged Distributions

shall be deemed to have been applied and distributed proportionately.

All calculations hereunder shall be made by the Administrator and shall

be final and conclusive.

(c) Leave of Absence, Transfer or Disability. The Participant's

employment will not be considered as terminated if the Participant (1) is on an

approved leave of absence; (2) transfers or is transferred but remains in the

employ of the Company or an unconsolidated affiliate; or (3) is eligible to

receive disability payments under the ML & Co. Basic Long-Term Disability Plan.

(d) Discretion to Alter Payment Date. Notwithstanding the provisions of

Sections 5.2(a) and (b), if the Participant's employment terminates for any

reason, the Administrator may, in his or her sole discretion, direct that the

Account Balance be paid at some other time or that it be paid in installments;

provided that no such direction that adversely affects the rights of the

- --------

Participant or his or her beneficiary under this Plan shall be implemented

without the consent of the affected Participant or beneficiary.

5.3 Withholding of Taxes.

ML & Co. will deduct or withhold from any payment to be made or

deferred hereunder any U.S. Federal, state or local or foreign income or

employment taxes required by law to be withheld or require the Participant or

the Participant's beneficiary to pay any amount, or the balance of any amount,

required to be withheld.

5.4 Beneficiary.

(a) Designation of Beneficiary. The Participant may designate, in a

writing delivered to the Administrator or his or her designee before the

Participant's death, a beneficiary to receive payments in the event of the

Participant's death. The Participant may also designate a contingent beneficiary

to receive payments in accordance with this Plan if the primary beneficiary does

not survive the Participant. The Participant may designate more than one person

as the Participant's

13

beneficiary or contingent beneficiary, in which case (i) no contingent

beneficiary would receive any payment unless all of the primary beneficiaries

predeceased the Participant, and (ii) the surviving beneficiaries in any class

shall share in any payments in proportion to the percentages of interest

assigned to them by the Participant.

(b) Change in Beneficiary. The Participant may change his or her

beneficiary or contingent beneficiary (without the consent of any prior

beneficiary) in a writing delivered to the Administrator or his or her designee

before the Participant's death. Unless the Participant states otherwise in

writing, any change in beneficiary or contingent beneficiary will automatically

revoke prior such designations of the Participant's beneficiary or of the

Participant's contingent beneficiary, as the case may be, under this Plan only;

and any designations under other deferral agreements or plans of the Company

will remain unaffected.

(c) Default Beneficiary. In the event that a Participant does not

designate a beneficiary, or no designated beneficiary survives the Participant,

the Participant's beneficiary shall be the Participant's surviving spouse, if

the Participant is married at the time of his or her death and not subject to a

court-approved agreement or court decree of separation, or otherwise the person

or persons designated to receive benefits on account of the Participant's death

under the ML & Co. Basic Group Life Insurance Plan (the "Life Insurance Plan").

However, if an unmarried Participant does not have coverage in effect under the

Life Insurance Plan, or the Participant has assigned his or her death benefit

under the Life Insurance Plan, any amounts payable to the Participant's

beneficiary under the Plan will be paid to the Participant's estate.

(d) If the Beneficiary Dies During Payment. If a beneficiary who is

receiving or is entitled to receive payments hereunder dies after the

Participant dies, but before all the payments have been made, the portion of the

Account Balance to which that beneficiary was entitled will be paid as soon as

practicable in one lump sum to such beneficiary's estate and not to any

contingent beneficiary the Participant may have designated; provided, however,

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that if the beneficiary was receiving modified installment payments or

annuitized payments pursuant to Section 5.1(b), the applicable portion of the

Account Balance will continue to be paid as modified installment payments or

annuitized payments, as the case may be, in accordance with Section 5.1(b), but

only to a single person consisting of the administrator or executor of the

beneficiary's estate or another person lawfully designated by the administrator

or executor (and in the event no such person is designated within a reasonable

time, payment will be made in a lump sum).

5.5 Hardship Distributions.

ML & Co. may pay to the Participant, on such terms and conditions as

the Administrator may establish, such part or all of the Account Balance as he

or she may, in his or her sole discretion based upon substantial evidence

submitted by the Participant, determine necessary to alleviate hardship caused

by an unanticipated emergency or necessity outside of the Participant's control

affecting the Participant's personal or family affairs. Such payment will be

made only at the Participant's written request and with the express approval of

the Administrator and will be made on the date selected by the Administrator in

his or her sole discretion. The balance of the Account, if any, will continue to

be governed by the terms of this Plan. Hardship shall be deemed to exist only on

account of expenses for medical care (described in Code Section 213(d)) of the

Participant, the Participant's spouse or the Participant's dependents (described

in Code Section 152); payment of unreimbursed tuition and related educational

fees for the Participant, the Participant's spouse or the Participant's

dependents; the need to prevent the Participant's eviction from or, foreclosure

on, the Participant's principal residence; unreimbursed damages resulting from a

natural disaster; or such other financial need deemed by the Administrator in

his or her sole discretion to be immediate and substantial.

14

5.6 Domestic Relations Orders.

Notwithstanding the Participant's elections hereunder, ML & Co. will

pay to, or to the Participant for the benefit of, the Participant's spouse or

former spouse the portion of the Participant's Account Balance specified in a

valid court order entered in a domestic relations proceeding involving the

Participant's divorce or legal separation. Such payment will be made net of any

amounts the Company may be required to withhold under applicable federal, state

or local law. After such payment, references herein to the Participant's

"Deferred Amounts" (including, without limitation, for purposes of determining

the Annual Charge applicable to any remaining Account Balance) shall mean the

Participant's original Deferred Amounts times an amount equal to one minus a

fraction, the numerator of which is the gross amount (prior to withholding) paid

pursuant to the order, and the denominator of which is the Participant's Account

Balance immediately prior to payment.

ARTICLE VI

ADMINISTRATION OF THE PLAN

6.1 Powers of the Administrator.

The Administrator has full power and authority to interpret, construe

and administer this Plan so as to ensure that it provides deferred compensation

for the Participants as members of a select group of management or highly

compensated employees within the meaning of Title I of ERISA. The

Administrator's interpretations and construction hereof, and actions hereunder,

including any determinations regarding the amount or recipient of any payments,

will be binding and conclusive on all persons for all purposes. The

Administrator will not be liable to any person for any action taken or omitted

in connection with the interpretation and administration of this Plan unless

attributable to his or her willful misconduct or lack of good faith. The

Administrator may designate persons to carry out the specified responsibilities

of the Administrator and shall not be liable for any act or omission of a person

as designated.

6.2 Rabbi Trust

Creation of Trust. The Administrator shall create a Grantor Trust to

hold assets representing the amounts deferred under this Plan on such terms and

conditions as the Administrator shall approve. The trustee of the Rabbi Trust

shall be a party unaffiliated with the Company.

6.3 Payments on Behalf of an Incompetent.

If the Administrator finds that any person who is entitled to any

payment hereunder is a minor or is unable to care for his or her affairs because

of disability or incompetency, payment of the Account Balance may be made to

anyone found by the Administrator to be the committee or other authorized

representative of such person, or to be otherwise entitled to such payment, in

the manner and under the conditions that the Administrator determines. Such

payment will be a complete discharge of the liabilities of ML & Co. hereunder

with respect to the amounts so paid.

6.4 No Right of Set-Off.

Unless specifically authorized by a Participant, the Company shall have

no right of set-off with respect to any Participant's Account Balances or

Account under the Plan and unless so authorized, the Company shall not withhold

any sums owed to a Participant under the Plan.

6.5 Corporate Books and Records Controlling.

15

The books and records of the Company will be controlling in the event

that a question arises hereunder concerning the amount of Adjusted Compensation,

Incentive Compensation, Sign-On Bonus, Eligible Compensation, the Deferred

Amounts, the Account Balance, the designation of a beneficiary, or any other

matters.

ARTICLE VII

MISCELLANEOUS PROVISIONS

7.1 Litigation.

The Company shall have the right to contest, at its expense, any ruling

or decision, administrative or judicial, on an issue that is related to the Plan

and that the Administrator believes to be important to Participants, and to

conduct any such contest or any litigation arising therefrom to a final

decision.

7.2 Headings Are Not Controlling.

The headings contained in this Plan are for convenience only and will

not control or affect the meaning or construction of any of the terms or

provisions of this Plan.

7.3 Governing Law.

To the extent not preempted by applicable U.S. Federal law, this Plan

will be construed in accordance with and governed by the laws of the State of

New York as to all matters, including, but not limited to, matters of validity,

construction, and performance.

7.4 Amendment and Termination.

ML & Co., through the Administrator, reserves the right to amend or

terminate this Plan at any time, except that no such amendment or termination

shall adversely affect the right of a Participant to his or her Account Balance

(as reduced by the Annual Charge, the Debit Balance or the Leveraged Principal

Amount and Interest thereon, as set forth in Section 3.4) as of the date of such

amendment or termination.

16

EXHIBIT 10(xxv)

MERRILL LYNCH & CO., INC.

2002 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

DATED AS OF SEPTEMBER 26, 2001

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE

BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

MERRILL LYNCH & CO., INC.

2002 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

Table of Contents

<TABLE>

Page

----

<S> <C>

I. GENERAL ................................................................................ 1

1.1 Purpose and Intent .............................................................. 1

1.2 Definitions ..................................................................... 1

II. ELIGIBILITY ............................................................................ 5

2.1 Eligible Employees .............................................................. 5

(a) General Rule .............................................................. 5

(b) Individuals First Employed During Election Year or Plan Year .............. 5

(c) Disqualifying Factors ..................................................... 6

III. DEFERRAL ELECTIONS; ACCOUNTS ........................................................... 6

3.1 Deferral Elections .............................................................. 6

(a) Timing and Manner of Making of Elections .................................. 6

(b) Irrevocability of Deferral Election ....................................... 6

(c) Application of Election ................................................... 6

3.2 Crediting to Accounts ........................................................... 6

(a) Initial Deferrals ......................................................... 6

(b) ML Ventures and Other Private Return Options .............................. 7

3.3 Minimum Requirements for Deferral ............................................... 7

(a) Minimum Requirements ...................................................... 7

(b) Failure to Meet Requirements .............................................. 7

3.4 Return Options; Adjustment of Accounts .......................................... 7

(a) Selection of ML Ventures Return Option .................................... 7

(b) Selection of Mutual Fund Return Options ................................... 8

(c) Selection of the ML Ventures Leverage Percentage by Eligible

Participants .............................................................. 8

(d) Adjustments of ML Ventures ................................................ 8

(e) Adjustment of Debit Balance ............................................... 8

(f) Adjustment of Mutual Fund Return Balances ................................. 8

(g) Annual Charge ............................................................. 9

(h) Rollover Option ........................................................... 10

3.5 Rescission of Deferral Election ................................................. 10

(a) Prior to December 1, 2001 ................................................. 10

(b) Adverse Tax Determination ................................................. 10

(c) Rescission For Amounts Not Yet Earned ..................................... 10

IV. STATUS OF DEFERRED AMOUNTS AND ACCOUNT ................................................. 11

4.1 No Trust or Fund Created; General Creditor Status ............................... 11

4.2 Non-Assignability ............................................................... 11

4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans .......... 11

</TABLE>

-i-

<TABLE>

Page

----

<S> <C>

V. PAYMENT OF ACCOUNT ................................................................ 11

5.1 Manner of Payment .......................................................... 11

(a) Regular Payment Elections ............................................ 11

(b) Modified Installment Payments ........................................ 12

5.2 Termination of Employment .................................................. 12

(a) Death, Retirement, Rule of 45 ........................................ 13

(b) Other Termination of Employment - Forfeiture of Leverage ............. 13

(c) Leave of Absence, Transfer or Disability ............................. 13

(d) Discretion to Alter Payment Date ..................................... 14

5.3 Withholding of Taxes ....................................................... 14

5.4 Beneficiary ................................................................ 14

(a) Designation of Beneficiary ........................................... 14

(b) Change in Beneficiary ................................................ 14

(c) Default Beneficiary .................................................. 14

(d) If the Beneficiary Dies During Payment ............................... 14

5.5 Hardship Distributions ..................................................... 15

5.6 Domestic Relations Orders .................................................. 15

VI. ADMINISTRATION OF THE PLAN ........................................................ 15

6.1 Powers of the Administrator ................................................ 15

6.2 Grantor Trust .............................................................. 15

6.3 Payments on Behalf of an Incompetent ....................................... 16

6.4 No Right of Set Off ........................................................ 16

6.5 Corporate Books and Records Controlling .................................... 16

VII. MISCELLANEOUS PROVISIONS .......................................................... 16

7.1 Litigation ................................................................. 16

7.2 Headings Are Not Controlling ............................................... 16

7.3 Governing Law .............................................................. 16

7.4 Amendment and Termination .................................................. 16

</TABLE>

-ii-

MERRILL LYNCH & CO., INC.

2002 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

ARTICLE I

GENERAL

1.1 Purpose and Intent.

The purpose of the Plan is to encourage the employees who are integral to

the success of the business of the Company to continue their employment by

providing them with flexibility in meeting their future income needs. This Plan

is unfunded and maintained primarily for the purpose of providing deferred

compensation for a select group of management or highly compensated employees

within the meaning of Title I of ERISA, and all decisions concerning who is to

be considered a member of that select group and how this Plan shall be

administered and interpreted shall be consistent with this intention.

1.2 Definitions.

For the purpose of the Plan, the following terms shall have the meanings

indicated.

"Account" means the notional account established on the books and records

of ML & Co. for each Participant to record the Participant's interest under the

Plan.

"Account Balance" means, as of any date, the Deferred Amounts credited to a

Participant's Account, adjusted in accordance with Section 3.4 to reflect the

performance of the Participant's Selected Benchmark Return Options, the Annual

Charge, the Debit Balance, (if any) any adjustments in the event of a Capital

Call Default, and any payments made from the Account under Article V to the

Participant prior to that date.

"Adjusted Compensation" means the financial advisor incentive compensation,

account executive incentive compensation or estate planning and business

insurance specialist incentive compensation, in each case exclusive of base

salary, earned by a Participant during the Fiscal Year ending in 2002, and

payable after January 1, 2002, as a result of the Participant's production

credit level, or such other similar items of compensation as the Administrator

shall designate as "Adjusted Compensation" for purposes of this Plan.

"Administrator" means the Head of Human Resources of ML & Co., or his or

her functional successor, or any other person or committee designated as

Administrator of the Plan by the Administrator or the MDCC.

"Affiliate" means any corporation, partnership, or other organization of

which ML & Co. owns or controls, directly or indirectly, not less than 50% of

the total combined voting power of all classes of stock or other equity

interests.

"Annual Charge" means the charge to a Participant's Account provided for in

Section 3.4(g).

"Applicable Federal Rate" means the applicable federal rate for short-term

(0-3 years) obligations of the United States Treasury as determined initially in

the month of closing of ML Ventures and thereafter in January of each subsequent

year.

1

"Available Balance" means amounts in a Participant's Account that are

indexed to Benchmark Return Options with daily liquidity after the Account's

Debit Balance has been reduced to zero.

"Average Leveraged Principal Amount" means, for each Participant, for any

period, the sum of the Leveraged Principal Amounts outstanding at the end of

each day in the period divided by the number of days in such period.

"Benchmark Return Options" means such investment vehicles as the

Administrator may from time to time designate for the purpose of indexing

Accounts hereunder. In the event a Benchmark Return Option ceases to exist or is

no longer to be a Benchmark Return Option, the Administrator may designate a

substitute Benchmark Return Option for such discontinued option.

"Board of Directors" means the Board of Directors of ML & Co.

"Capital Call" means the periodic demands for funds from a Participant's

Account that will be equal to and occur simultaneously with capital calls made

by private equity funds (including ML Ventures) chosen as a return option by the

Participant.

"Capital Call Default" means that there is an insufficient Liquid Balance

in the Participant's Account to fund a Capital Call.

"Capital Demand Default Adjustment" means the negative adjustment described

in Section 3.4 in the number of "units" (including units acquired by "Leverage")

attributed to a Private Equity Fund Return Options that will be the result of a

Capital Call Default.

"Cash Compensation" means (1) (for VICP eligible employees) salary in the

reference year plus VICP earned in the reference year and paid in January or

February of the next calendar year or (2) (for Financial Advisors and other

employees receiving Adjusted Compensation) base salary plus Adjusted

Compensation paid in the reference year.

"Code" means the U.S. Internal Revenue Code of 1986, as amended from time

to time.

"Company" means ML & Co. and all of its Affiliates.

"Compensation" means, as relevant, a Participant's Adjusted Compensation,

Variable Incentive Compensation and/or Sign-On Bonus, or such other items or

items of compensation as the Administrator, in his or her sole discretion, may

specify in a particular instance.