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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 31, 1999
MERRILL LYNCH PREFERRED CAPITAL TRUST V
(Exact name of Registrant as specified in its certificate of trust)
COMMISSION FILE NO.: 1-7182-10
Delaware 13-7140866
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center
North Tower
New York, New York 10281
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
7.28% Trust Originated Preferred New York Stock Exchange
Securities ("TOPrS")
(and the related guarantee)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
MERRILL LYNCH PREFERRED FUNDING V, L.P.
(Exact name of Registrant as specified in its certificate of
limited partnership)
COMMISSION FILE NO.: 1-7182-09
Delaware 13-3983474
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
World Financial Center
North Tower
New York, New York 10281
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
7.28% Partnership Preferred Securities New York Stock Exchange
(and the related guarantee)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE Act: None
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have 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 Registrants' 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 March 28, 2000, no voting stock was held by non-affiliates of the
Registrants.
DOCUMENTS INCORPORATED BY REFERENCE:
PROSPECTUS, DATED OCTOBER 29, 1998, FILED PURSUANT TO RULE 424(b) IN CONNECTION
WITH REGISTRATION STATEMENT ON FORM S-3 (No. 333-59997) FILED BY THE REGISTRANTS
AND MERRILL LYNCH & CO., INC.- INCORPORATED BY REFERENCE IN PART I
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PART I
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ITEM 1. BUSINESS
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MERRILL LYNCH PREFERRED CAPITAL TRUST V
Merrill Lynch Preferred Capital Trust V (the "Trust") is a statutory
business trust formed under the Delaware Business Trust Act, as amended,
pursuant to a declaration of trust and the filing of a certificate of trust with
the Secretary of State on January 8, 1998, which was subsequently amended by an
amended and restated declaration of trust dated as of October 29, 1998. The
Trust exists for the exclusive purposes of (i) issuing trust securities,
consisting of 7.28% Trust Originated Preferred Securities (the "TOPrS") and
trust common securities (the "Trust Common Securities"), representing undivided
beneficial ownership interests in the assets of the Trust, (ii) investing the
gross proceeds of the trust securities in 7.28% Partnership Preferred Securities
(the "Partnership Preferred Securities") issued by Merrill Lynch Preferred
Funding V, L.P. (the "Partnership"), and (iii) engaging in only those other
activities necessary or incidental thereto.
MERRILL LYNCH PREFERRED FUNDING V, L.P.
The Partnership is a limited partnership formed under the Delaware Revised
Uniform Limited Partnership Act, as amended, pursuant to an agreement of limited
partnership and the filing of a certificate of limited partnership with the
Secretary of State on January 8, 1998, which was subsequently amended by an
amended and restated agreement of limited partnership dated November 3, 1998.
Merrill Lynch & Co., Inc. (the "Company") is the sole general partner of the
Partnership. The Partnership is managed by the general partner and exists for
the exclusive purposes of (i) issuing its partnership interests, consisting of
the Company's general partner interest and the Partnership Preferred Securities,
(ii) investing the proceeds thereof in certain eligible securities of the
Company and wholly owned subsidiaries of the Company (the "Affiliate Investment
Instruments") and certain eligible debt securities, and (iii) engaging in only
those other activities necessary or incidental thereto.
The information set forth under the headings "Merrill Lynch Preferred Capital
Trust V", "Merrill Lynch Preferred Funding V, L.P.", "Description of the Trust
Preferred Securities", "Description of the Trust Guarantee", "Description of the
Partnership Preferred Securities", "Description of the Partnership Guarantee",
and "Use of Proceeds" in the Prospectus dated October 29, 1998 of the Trust and
the Partnership is incorporated by reference herein.
ITEM 2. PROPERTIES
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Not Applicable.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Registrants know of no material legal proceedings involving the Trust, the
Partnership or the assets of either of them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matter was submitted to a vote of holders of any securities of the Trust
or the Partnership during the fiscal year covered by this report.
PART II
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ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
-------------------------------------------------------------
MATTERS
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(a) There is no established public market for the Trust Common Securities or
the general partnership interest in the Partnership.
(b) All of the Trust Common Securities and the entire general partnership
interest in the Partnership are owned of record and beneficially by the
Company.
(c) The Company, as holder of the Trust Common Securities, is entitled to
receive cumulative cash distributions accumulating from November 3, 1998
and payable quarterly in arrears on each March 30, June 30, September 30
and December 30, commencing December 30, 1998, at an annual rate of 7.28%
of the liquidation amount per annum. Distributions not paid on the
scheduled payment date will accumulate and compound quarterly at a rate per
annum equal to 7.28%. The certificate of limited partnership of the
Partnership does not require any regular periodic distributions to be made
to the general partner; however, to the extent that aggregate payments to
the Partnership on the Affiliate Investment Instruments and on certain
eligible debt securities exceed distributions accumulated or payable with
respect to the Partnership Preferred Securities, the Partnership may at
times have excess funds which shall be allocated to and may, in the general
partner's sole discretion, be distributed to the general partner.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The Registrants' activities are limited to issuing securities and investing the
proceeds as described in ITEM 1. - Business, above. Accordingly, the financial
statements included herein in response to ITEM 8. - Financial Statements and
Supplementary Data are incorporated by reference in response to this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Registrants' activities are limited to issuing securities and investing the
proceeds as described in ITEM 1. - Business above. Since the Trust was organized
on January 8, 1998, its activities, as specified in its declaration of trust,
have been limited to the issuance of the TOPrS and the Trust Common Securities,
the investing of the proceeds in the Partnership Preferred Securities, and the
payment of distributions on the TOPrS and the Trust Common Securities in
accordance with their terms. Since the Partnership was organized on January 8,
1998, its activities, as specified in its agreement of limited partnership, have
been limited to the issuance of the Partnership Preferred Securities, the
receipt of a capital contribution from the Company, as general partner, the
investment of the proceeds in Affiliate Investment Instruments and certain
eligible debt securities, and the payment of distributions on the Partnership
Preferred Securities.
In 1999 Merrill Lynch completed its efforts to address the Year 2000 issue (the
"Y2K issue"). The Y2K issue was the result of a widespread programming technique
that caused computer systems to identify a date based on the last two numbers of
a year, with the assumption that the first two numbers of the year are "19." As
a result, the year 2000 would be stored a "00," causing computers to incorrectly
interpret the year as 1900. Left uncorrected, the Y2K issue may have caused
serious failures in information technology systems and other systems. The Trust
and the Partnership have no independent operations and are dependent upon
Merrill Lynch. Merrill Lynch's efforts to address the Y2K issue are more fully
discussed in the Merrill Lynch & Co., Inc. Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, filed with the Securities and Exchange
Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
On November 3, 1998, the Trust invested the gross proceeds from the sale of the
Trust Common Securities and the TOPrS in the Partnership Preferred Securities
(the "Trust Assets"). The Partnership, in turn, invested the proceeds from the
sale of the Partnership Preferred Securities and a capital contribution from ML
& Co. in certain Affiliate Investment Instruments and eligible securities (the
"Partnership Assets"). To the extent the Partnership has funds available from
the Partnership Assets, the general partner of the Partnership may declare
distributions to the Trust, as holder of the Partnership Preferred Securities.
The Trust's ability to pay distributions to the holders of the TOPrS is
dependent on its receipt of distributions on the Trust Assets from the
Partnership. Therefore, upon the receipt by the Partnership of payments from the
Partnership Assets and the distribution thereof to the Trust, the Trust will
pass through such payments to the holders of the TOPrS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
In response to this ITEM 8, the financial statements and notes thereto and the
independent auditors' reports set forth on pages F-1 through F-15 are
incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURES
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None.
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The Trustees of the Trust are as follows:
Regular Trustees: John C. Stomber
Stanley Schaefer
Property Trustee: The Chase Manhattan Bank
Delaware Trustee: Chase Manhattan Bank Delaware
Stanley Schaefer is Senior Director of Corporate Tax for the Company and has
served in that capacity or another capacity with the Company for the last five
years. John C. Stomber is Senior Vice President and Treasurer of the Company.
Mr. Stomber joined the Company in March 1999. Mr. Stomber was an employee of
Deutsche Bank from 1991 to March 1999, serving as Deutsche Bank's Treasurer for
the Americas Region starting in 1996.
With the exception of Mr. Stomber, each Trustee has served since the Trust was
organized on January 8, 1998. Mr. Stomber has served since September 30, 1999.
The Trustees serve at the pleasure of the Company, as the holder of the Trust
Common Securities.
The Partnership has no directors or executive officers.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Neither the Trust nor the Partnership has any executive officers. No employee of
the Company receives any compensation for serving as a Regular Trustee or acting
in any capacity for the Trust or the Partnership separate from his or her
compensation as an employee of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information in ITEM 1. - Business and ITEM 5. - Market for Registrants'
Common Equity and Related Stockholder Matters with respect to ownership of the
Trust Common Securities is incorporated by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
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(a) Documents filed as part of this Report:
1. Financial Statements
The contents of the financial statements are listed on page F-1
hereof, and the financial statements and accompanying independent
auditors' reports appear on pages F-2 through F-15.
2. Financial Statement Schedules
None.
3. Exhibits
Certain of the following exhibits were previously filed as exhibits to
other reports or registration statements filed by the Registrants 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.
4.1 Certificate of Trust dated January 8, 1998, of the Trust
(incorporated by reference to Exhibit 4.1 to the Trust's Quarterly
Report on Form 10-Q for the period ended June 26, 1998 (File No.
333-44173-04))
4.2 Form of Amended and Restated Declaration of Trust of the
Trust(incorporated by reference to Exhibit 4.2 to Registration
Statement of Form S-3 (File No. 333-42859) (the "Registration
Statement"))
4.3 Certificate of Limited Partnership, dated as of January 8, 1998,
of the Partnership (incorporated by reference to Exhibit 4.3 to the
Partnership's Quarterly Report on Form 10-Q for the period ended June
26, 1998 (File No. 333-44173-03))
4.4 Form of Amended and Restated Agreement of Limited Partnership of
the Partnership (incorporated by reference to Exhibit 4.4 of the
Registration Statement)
4.5 Form of Trust Preferred Securities Guarantee Agreement between
the Company and The Chase Manhattan Bank, as guarantee trustee
(incorporated by reference to Exhibit 4.5 to the Registration
Statement)
4.6 Form of Partnership Preferred Securities Guarantee Agreement
between the Company and The Chase Manhattan Bank, as guarantee trustee
(incorporated by reference to Exhibit 4.6 to the Registration
Statement)
4.7 Form of Subordinated Debenture Indenture between the Company and
The Chase Manhattan Bank, as trustee (incorporated by reference to
Exhibit 4.7 to the Registration Statement)
4.8 Form of Affiliate Debenture Guarantee Agreement between the
Company and The Chase Manhattan Bank, as guarantee trustee
(incorporated by reference to Exhibit 4.8 to the Registration
Statement)
4.9 Form of Trust Preferred Security (included in Exhibit 4.2 above)
4.10 Form of Partnership Preferred Security (included in Exhibit 4.4
above)
4.11 Form of Subordinated Debenture (incorporated by reference to
Exhibit 4.11 to the Registration Statement)
12* Computation of Ratios of Earnings to Combined Fixed
Charges and Preferred Securities Distributions
23* Consent of Deloitte & Touche LLP
24* Powers of Attorney
27* Financial Data Schedules. The Financial Data Schedules to be
contained in Exhibit 27 are required to be submitted only
in the Registrants' electronic filing of this Form 10-K by means
of the EDGAR system.
(b) Reports on Form 8-K
None.
___________________
* Filed herewith
INDEX TO FINANCIAL STATEMENTS
-----------------------------
ITEM 14(a)(1)
FINANCIAL STATEMENTS PAGE
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MERRILL LYNCH PREFERRED CAPITAL TRUST V
Balance Sheets, December 31, 1999 and December 25, 1998 F-2
Statements of Earnings, Year Ended December 31, 1999 and
Period November 3, 1998 to December 25, 1998 F-3
Statements of Changes in Stockholders' Equity, Year Ended
December 31, 1999 and Period November 3, 1998 to
December 25, 1998 F-4
Statements of Cash Flows, Year Ended December 31, 1999
and Period November 3, 1998 to December 25, 1998 F-5
Notes to Financial Statements F-6
Independent Auditors' Report F-8
MERRILL LYNCH PREFERRED FUNDING V, L.P.
Balance Sheets, December 31, 1999 and December 25, 1998 F-9
Statements of Earnings, Year Ended December 31, 1999 and
Period November 3, 1998 to December 25, 1998 F-10
Statements of Changes in Partners' Capital, Year Ended
December 31, 1999 and Period November 3, 1998 to
December 25, 1998 F-11
Statements of Cash Flows, Year Ended December 31, 1999 and
Period November 3, 1998 to December 25, 1998 F-12
Notes to Financial Statements F-13
Independent Auditors' Report F-15
F-1
MERRILL LYNCH PREFERRED CAPITAL TRUST V
BALANCE SHEETS
(dollars in thousands, except per security amounts)
- -------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 DECEMBER 25, 1998
----------------- -----------------
ASSETS
Investment in partnership preferred securities $ 876,300 $ 876,300
Income receivable - 10,101
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Total Assets $ 876,300 $ 886,401
========== ==========
LIABILITY AND STOCKHOLDERS' EQUITY
Distributions payable $ - $ 10,101
---------- ----------
Stockholders' equity:
Preferred securities (7.28% Trust
Originated Preferred Securities;
34,000,000 authorized, issued, and
outstanding; $25 liquidation
amount per security) 850,000 850,000
Common securities (7.28% Trust Common
Securities; 1,052,000 authorized,
issued, and outstanding;
$25 liquidation amount per security) 26,300 26,300
---------- ----------
Total stockholders' equity 876,300 876,300
---------- ----------
Total Liability and Stockholders' Equity $ 876,300 $ 886,401
========== ==========
See Notes to Financial Statements
F-2
MERRILL LYNCH PREFERRED CAPITAL TRUST V
STATEMENTS OF EARNINGS
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 3, 1998 TO
DECEMBER 31, 1999 DECEMBER 25, 1998
------------------ -------------------
EARNINGS
Income on partnership preferred securities $ 63,795 $ 10,101
========= =========
See Notes to Financial Statements
F-3
MERRILL LYNCH PREFERRED CAPITAL TRUST V
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
- ------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 3, 1998 TO
DECEMBER 31, 1999 DECEMBER 25, 1998
------------------ -------------------
PREFERRED SECURITIES
Balance, beginning of period $ 850,000 $ -
Issuance of preferred securities - 850,000
--------- ---------
Balance, end of period 850,000 850,000
--------- ---------
COMMON SECURITIES
Balance, beginning of period 26,300 -
Issuance of common securities - 26,300
--------- -------
Balance, end of period 26,300 26,300
--------- -------
UNDISTRIBUTED EARNINGS
Balance, beginning of period - -
Earnings 63,795 10,101
Distributions (63,795) -
Distributions payable - (10,101)
--------- ---------
Balance, end of period - -
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Total Stockholders' Equity $ 876,300 $ 876,300
========= =========
See Notes to Financial Statements
F-4
MERRILL LYNCH PREFERRED CAPITAL TRUST V
STATEMENTS OF CASH FLOWS
(dollars in thousands)
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FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 3, 1998 TO
DECEMBER 31, 1999 DECEMBER 25, 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 63,795 $ 10,101
Decrease (increase) in income receivable 10,101 (10,101)
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Cash provided by operating activities 73,896 -
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of partnership preferred securities - (876,300)
-------- --------
Cash used for investing activities - (876,300)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (73,896) -
Proceeds from issuance of preferred securites - 850,000
Proceeds from issuance of common securities - 26,300
-------- --------
Cash (used for) provided by financing activities (73,896) 876,300
-------- --------
NET CHANGE IN CASH - -
CASH, BEGINNING OF PERIOD - -
-------- --------
CASH, END OF PERIOD $ - $ -
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Preferred and common distributions of $9,798 and $303, respectively, were
accrued at December 25, 1998 and distributed in the following fiscal year.
See Notes to Financial Statements
F-5
MERRILL LYNCH PREFERRED CAPITAL TRUST V
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND PURPOSE
Merrill Lynch Preferred Capital Trust V (the "Trust") is a statutory business
trust formed under the laws of the State of Delaware on January 8, 1998 for
the exclusive purposes of (i) issuing its preferred and common securities (the
"Trust Preferred Securities" and the "Trust Common Securities", respectively),
(ii) purchasing partnership preferred securities (the "Partnership Preferred
Securities"), representing the limited partnership interest of Merrill Lynch
Preferred Funding V, L.P. (the "Partnership"), with the proceeds from the sale
of Trust Preferred and Common Securities, and (iii) engaging in only those other
activities necessary or incidental thereto. The Trust has a perpetual existence,
subject to certain termination events as provided in the Declaration of Trust
under which it was formed.
Merrill Lynch & Co., Inc. (the "Company") has paid compensation to the
underwriters of the offering of the Trust Preferred Securities. The Company also
has agreed to (i) pay all fees and expenses related to the organization and
operations of the Trust (including taxes, duties, assessments, or government
charges of whatever nature (other than withholding taxes) imposed by the United
States or any other domestic taxing authority upon the Trust) and the offering
of the Trust Preferred Securities and (ii) be responsible for all debts and
other obligations of the Trust (other than with respect to the Trust Preferred
and Common Securities). The Company has agreed to indemnify the trustees and
certain other persons.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements are presented in accordance with U.S. generally
accepted accounting principles, which require management to make estimates that
affect reported amounts and disclosure of contingencies in the financial
statements. As such, actual results could differ from those estimates.
INVESTMENT
The investment in Partnership Preferred Securities represents a limited
partnership interest in the Partnership and is recorded at cost. As of year end,
the fair value of the investment approximates its carrying value. Income on the
Partnership Preferred Securities is accrued when earned.
INCOME TAXES
The Trust does not incur any income tax liabilities. Such liabilities are
incurred directly by the security holders.
F-6
MERRILL LYNCH PREFERRED CAPITAL TRUST V
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
3. INVESTMENT IN PARTNERSHIP PREFERRED SECURITIES
The Trust holds 35,052,000 7.28% Partnership Preferred Securities, $25
liquidation preference per security. The interest payment dates and redemption
provisions of the Partnership Preferred Securities, which are redeemable after
September 30, 2008 at the option of the Partnership, correspond to the
distribution payment dates and redemption provisions of the Trust Preferred
Securities. Upon any redemption of the Partnership Preferred Securities, the
Trust Preferred Securities will be redeemed. The Company has guaranteed, on a
subordinated basis, the payment of distributions by the Partnership on the
Partnership Preferred Securities if, as, and when declared out of funds legally
available and payments upon liquidation of the Partnership or the redemption of
the Partnership Preferred Securities to the extent of funds legally available.
4. STOCKHOLDERS' EQUITY
TRUST PREFERRED SECURITIES
The Trust issued 34,000,000 7.28% Trust Preferred Securities, $25
liquidation amount per security in a public offering on November 3, 1998. The
Trust Preferred Securities are redeemable on or after September 30, 2008 at the
option of the Trust, in whole or in part, at a redemption price equal to $25 per
security. Distributions on the Trust Preferred Securities are cumulative from
the date of original issue and are payable quarterly if, as, and when the Trust
has funds available for payment. Holders of the Trust Preferred Securities have
limited voting rights and are not entitled to vote to appoint, remove, or
replace, or to increase or decrease the number of, trustees, which voting rights
are vested exclusively in the holder of the Trust Common Securities. Under
certain circumstances, the Trust Preferred Securities have preferential rights
to payment relative to the Trust Common Securities. The Company has guaranteed,
on a subordinated basis, the payment in full of all distributions and other
payments on the Trust Preferred Securities to the extent that the Trust has
funds legally available. This guarantee and the partnership distribution
guarantee are subordinated to all other liabilities of the Company and rank
equally with the most senior preferred stock of the Company.
TRUST COMMON SECURITIES
The Trust issued 1,052,000 7.28% Trust Common Securities, $25 liquidation
amount per security, to the Company on November 3, 1998. The Trust Common
Securities are redeemable on or after September 30, 2008 at the option of the
Trust, in whole or in part, at a redemption price equal to $25 per security.
F-7
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Merrill Lynch Preferred Capital Trust V
We have audited the accompanying balance sheets of Merrill Lynch Preferred
Capital Trust V (the "Trust") as of December 31, 1999 and December 25, 1998, and
the related statements of earnings, changes in stockholders' equity and cash
flows for the period ended December 31, 1999 and for the period November 3, 1998
to December 25, 1998. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Trust at December 31, 1999 and December
25, 1998, and the results of its operations and its cash flows for the period
ended December 31, 1999 and for the period November 3, 1998 to December 25, 1998
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
March 28, 2000
F-8
MERRILL LYNCH PREFERRED FUNDING V, L.P.
BALANCE SHEETS
(dollars in thousands)
- --------------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 DECEMBER 25, 1998
----------------- -----------------
ASSETS
Cash $ 1 $ -
Investments:
Affiliate debentures 1,020,640 1,020,640
U.S. Treasury bills 10,406 10,374
---------- ----------
Total investments 1,031,046 1,031,014
Interest receivable - 11,765
---------- ----------
Total Assets $1,031,047 $1,042,779
========== ==========
LIABILITY AND PARTNERS' CAPITAL
Distributions payable $ - $ 11,765
---------- ----------
Partners' capital:
Limited partnership interest 876,300 876,300
General partnership interest 154,747 154,714
---------- ----------
Total partners' capital 1,031,047 1,031,014
---------- ----------
Total Liability and Partners' Capital $1,031,047 $1,042,779
========== ==========
See Notes to Financial Statements
F-9
MERRILL LYNCH PREFERRED FUNDING V, L.P.
STATEMENTS OF EARNINGS
(dollars in thousands)
- -----------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 3, 1998 TO
DECEMBER 31, 1999 DECEMBER 25, 1998
------------------ -------------------
EARNINGS
Interest income:
Affiliate debentures $ 74,303 $ 11,765
U.S. Treasury bills 495 64
--------- ---------
Earnings $ 74,798 $ 11,829
========= =========
See Notes to Financial Statements
F-10
MERRILL LYNCH PREFERRED FUNDING V, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(dollars in thousands)
- -----------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 3, 1998 TO
DECEMBER 31, 1999 DECEMBER 25, 1998
------------------ -------------------
LIMITED PARTNER'S CAPITAL
Balance, beginning of period $ 876,300 $ -
Issuance of preferred securities - 876,300
Net income allocated to limited partner 63,795 10,101
Distributions (63,795) -
Distributions payable - (10,101)
--------- ---------
Balance, end of period 876,300 876,300
--------- ---------
GENERAL PARTNER'S CAPITAL
Balance, beginning of period 154,714 -
Capital contribution - 154,650
Net income allocated to general partner 11,003 1,728
Distributions (10,970) -
Distributions payable - (1,664)
--------- ---------
Balance, end of period 154,747 154,714
--------- ---------
TOTAL PARTNERS' CAPITAL $1,031,047 $1,031,014
========== ==========
See Notes to Financial Statements
F-11
MERRILL LYNCH PREFERRED FUNDING V, L.P.
STATEMENTS OF CASH FLOWS
(dollars in thousands)
- --------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 3, 1998 TO
DECEMBER 31, 1999 DECEMBER 25, 1998
------------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings $ 74,798 $ 11,829
Accretion of U.S. Treasury bills (495) (64)
Decrease (increase) in interest receivable 11,765 (11,765)
-------- --------
Cash provided by operating activities 86,068 -
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of affiliate debentures - (1,020,640)
Purchases of investment securities (20,619) (10,310)
Maturities of investment securities 21,082 -
-------- ---------
Cash provided by (used for) investing activities 463 (1,030,950)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partner (73,896) -
Distributions to general partner (12,634) -
Proceeds from issuance of preferred securities - 876,300
Capital contribution - general partner - 154,650
-------- ---------
Cash (used for) provided by financing activities (86,530) 1,030,950
-------- ---------
NET CHANGE IN CASH 1 -
CASH, BEGINNING OF PERIOD - -
-------- ---------
CASH, END OF PERIOD $ 1 $ -
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Distributions of $11,765 were accrued at December 25, 1998 and
distributed in the following fiscal year.
See Notes to Financial Statements
F-12
MERRILL LYNCH PREFERRED FUNDING V, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND PURPOSE
Merrill Lynch Preferred Funding V, L.P. (the "Partnership") is a limited
partnership that was formed under the Delaware Revised Uniform Limited
Partnership Act on January 8, 1998 for the exclusive purpose of purchasing
certain eligible debt instruments of Merrill Lynch & Co., Inc. (the "Company")
and wholly owned subsidiaries of the Company with (i) the proceeds from the sale
of its preferred securities (the "Partnership Preferred Securities"),
representing a limited partner interest, to Merrill Lynch Preferred Capital
Trust V (the "Trust") and (ii) a capital contribution from the Company in
exchange for the general partnership interest in the Partnership.
The Company, in its capacity as sole general partner of the Partnership, has
agreed to (i) pay all fees and expenses related to the organization and
operations of the Partnership (including taxes, duties, assessments, or
government charges (other than withholding taxes) imposed by the United States
or any other domestic taxing authority upon the Partnership) and (ii) be
responsible for all debts and other obligations of the Partnership (other than
with respect to the Partnership Preferred Securities). The Company has also
agreed to indemnify certain officers and agents of the Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements are presented in accordance with U.S. generally
accepted accounting principles, which require management to make estimates that
affect reported amounts and disclosure of contingencies in the financial
statements. As such, actual results could differ from those estimates.
INVESTMENTS
The Partnership's investment in affiliate debentures is recorded at cost, and
its investment in U.S. Treasury bills is classified as available-for-sale and
recorded at accreted cost, which approximates fair value.
INCOME TAXES
The Partnership does not incur any income tax liabilities. Such liabilities are
incurred directly by the partners.
F-13
MERRILL LYNCH PREFERRED FUNDING V, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
3. INVESTMENT IN AFFILIATE DEBENTURES
The Partnership holds debentures of the Company and a wholly owned subsidiary of
the Company. The debentures have a term of approximately 20 years and bear
interest at 7.28% per annum. The interest payment dates and redemption
provisions of the debentures, which are redeemable at the option of the Company
and its subsidiary on or after September 30, 2008, correspond to the
distribution payment dates and redemption provisions of the Partnership
Preferred Securities. Interest and redemption payments on the subsidiary
debenture are guaranteed by the Company on a subordinated basis.
4. PARTNERS' CAPITAL
The Partnership issued 35,052,000 7.28% Partnership Preferred Securities, $25
liquidation preference per security, to the Trust on November 3, 1998.
Distributions on the Partnership Preferred Securities are cumulative from the
date of original issue and are payable quarterly if, as, and when declared by
the general partner. The Partnership Preferred Securities are redeemable on or
after September 30, 2008 at the option of the Partnership, at a redemption price
equal to $25 per security. Except as provided in the Limited Partnership
Agreement and Partnership Preferred Securities Guarantee Agreement, and as
otherwise provided by law, the holders of the Partnership Preferred Securities
have no voting rights.
The Company has guaranteed the payment of distributions by the Partnership on
the Partnership Preferred Securities if, as, and when declared out of funds
legally available and payments upon liquidation of the Partnership or the
redemption of the Partnership Preferred Securities to the extent of funds
legally available. This guarantee is subordinated to all other liabilities of
the Company and ranks equally with the most senior preferred stock of the
Company.
F-14
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partner of
Merrill Lynch Preferred Funding V, L.P.
We have audited the accompanying balance sheets of Merrill Lynch Preferred
Funding V, L.P. (the "Partnership") as of December 31, 1999 and December 25,
1998, and the related statements of earnings, changes in partners' capital, and
cash flows for the period ended December 31, 1999 and for the period November 3,
1998 to December 25, 1998. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 1999 and
December 25, 1998, and the results of its operations and its cash flows for the
period ended December 31, 1999 and for the period November 3, 1998 to December
25, 1998 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
March 28, 2000
F-15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized on the 29th day of March,
2000.
MERRILL LYNCH PREFERRED CAPITAL TRUST V*
By: /s/ John C. Stomber
--------------------------------------------------
Name: John C. Stomber
Title: Regular Trustee
By: /s/ Stanley Schaefer
--------------------------------------------------
Name: Stanley Schaefer
Title: Regular Trustee
MERRILL LYNCH PREFERRED FUNDING V, L.P.*
By: MERRILL LYNCH & CO., INC., as General Partner
By: /s/ John C. Stomber
--------------------------------------------------
Name: John C. Stomber
Title: Senior Vice President and Treasurer, and as
Attorney-in-Fact for a majority of the Board of
Directors**
- ------------
* There is no principal executive officer(s), principal financial officer,
controller, principal accounting officer or board of directors of the
Registrants. The Trustees of the Trust (which include the Regular
Trustees, the Property Trustee and the Delaware Trustee) together exercise
all powers and perform all functions with respect to the Trust.
** Pursuant to Powers of Attorney filed as Exhibit 24 hereto.
EXHIBIT INDEX
4.1 Certificate of Trust dated January 8, 1998, of the Trust
(incorporated by reference to Exhibit 4.1 to the Trust's Quarterly
Report on Form 10-Q for the period ended June 26, 1998 (File No.
333-44173-04))
4.2 Form of Amended and Restated Declaration of Trust of the Trust
(incorporated by reference to Exhibit 4.2 to Registration Statement of
Form S-3 (File No. 333-42859) (the "Registration Statement"))
4.3 Certificate of Limited Partnership, dated as of January 8, 1998,
of the Partnership (incorporated by reference to Exhibit 4.3 to the
Partnership's Quarterly Report on Form 10-Q for the period ended June
26, 1998 (File No. 333-44173-03))
4.4 Form of Amended and Restated Agreement of Limited Partnership of
the Partnership (incorporated by reference to Exhibit 4.4 of the
Registration Statement)
4.5 Form of Trust Preferred Securities Guarantee Agreement between
the Company and The Chase Manhattan Bank, as guarantee trustee
(incorporated by reference to Exhibit 4.5 to the Registration
Statement)
4.6 Form of Partnership Preferred Securities Guarantee Agreement
between the Company and The Chase Manhattan Bank, as guarantee trustee
(incorporated by reference to Exhibit 4.6 to the Registration
Statement)
4.7 Form of Subordinated Debenture Indenture between the Company and
The Chase Manhattan Bank, as trustee (incorporated by reference to
Exhibit 4.7 to the Registration Statement)
4.8 Form of Affiliate Debenture Guarantee Agreement between the
Company and The Chase Manhattan Bank, as guarantee trustee
(incorporated by reference to Exhibit 4.8 to the Registration
Statement)
4.9 Form of Trust Preferred Security (included in Exhibit 4.2 above)
4.10 Form of Partnership Preferred Security (included in Exhibit 4.4
above)
4.11 Form of Subordinated Debenture (incorporated by reference to
Exhibit 4.11 to the Registration Statement)
12* Computation of Ratios of Earnings to Combined Fixed Charges and
Preferred Securities Distributions
23* Consent of Deloitte & Touche LLP
24* Powers of Attorney
27* Financial Data Schedules. The Financial Data Schedules to be
contained in Exhibit 27 are required to be submitted only in the
Registrants' electronic filing of this Form 10-K by means of the EDGAR
system.
_____________________
* Filed herewith