Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - dealer and issuer are indirect subsidiariesof U.S.-based parent - issuer is therefore a "related issuer"of dealer - dealer proposing to underwrite 100% of certain offeringsof medium term notes to be made by issuer from time to timeunder a prospectus - notes will be guaranteed by U.S. parent- subsections 2.1(2) and (3) of National Instrument 33-105 UnderwritingConflicts require participation of independent underwriter inrelated issuer offering - relief granted from independent underwriterrequirement - filers expect that approximately 90% of the offeringswill be made to Canadian institutions, pension funds, endowmentfunds or mutual funds - offerings subject to a minimum subscriptionamount of $150,000 - all notes have and will have an approvedrating - the independent review provided by a rating agencyaccepted by the Decision Makers in the circumstances of thisoffering as an acceptable alternative to the independent reviewwhich an independent underwriter would provide.

Applicable Rules

National Instrument 33-105 Underwriting Conflicts,ss. 5.1, 2.1.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,ONTARIO, QUÉBEC, NOVA SCOTIA,

PRINCE EDWARD ISLAND AND NEWFOUNDLANDAND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

MERRILL LYNCH CANADA FINANCECOMPANY

MERRILL LYNCH & CO., INC.AND

MERRILL LYNCH CANADA INC.

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Ontario, Québec, Nova Scotia,Prince Edward Island and Newfoundland and Labrador (the "Jurisdictions")has received an application from Merrill Lynch Canada FinanceCompany (the "Issuer"), Merrill Lynch & Co., Inc.("ML&Co") and Merrill Lynch Canada Inc. ("MLCanada") (the Issuer, ML&Co and ML Canada are collectivelyreferred to herein as the "Filers") for a decisionunder section 5.1 of National Instrument 33-105 UnderwritingConflicts (the "National Instrument") and section263 of the Securities Act (Quebec) (the "Quebec Act")(collectively, the "Legislation") that the provisioncontained in section 2.1 of the National Instrument and sections236.1 and 237.1 of the regulation to the Quebec Act mandatingindependent underwriter involvement shall not apply to ML Canadaand the Issuer in respect of offerings (the "MLCFC Offerings")of medium term notes (the "Notes") issued by the Issuerfrom time to time by way of a short form base shelf prospectusdated May 10, 2002 (the "Prospectus") and pricingsupplements thereto (the "Prospectus Supplements")on the terms herein specified;

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System")the Ontario Securities Commission is the principal regulatorfor this Application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;

AND WHEREAS the Filers have representedto the Decision Makers that:

1. the Issuer is an unlimited liability companyincorporated under the Companies Act (Nova Scotia).The Issuer was incorporated on August 25, 1999 and has a registeredoffice in Halifax, Nova Scotia and its principal place ofbusiness in Toronto, Ontario. The Issuer is an indirect wholly-ownedsubsidiary of ML&Co.;

2. to date, the Issuer has completed sevenpublic medium term notes transactions (the "Prior Offerings");

3. the Issuer has been a "reporting issuer"pursuant to the securities legislation in each of the provincesof Canada for over 12 calendar months. Pursuant to a decisiondated May 3, 2002 of the Decision Makers of British Columbia,Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick,Nova Scotia Newfoundland and Labrador and Prince Edward Island(the "May 3, 2002 Decision"), the Issuer has beengranted certain relief in connection with the requirementin securities legislation of such jurisdictions to make continuousdisclosure of its financial results, and from other formsof continuous disclosure required under such legislation,provided that the Issuer complies with the conditions setout in the May 3, 2002 Decision;

4. pursuant to the May 3, 2002 Decision, therequirement to file an annual information form does not applyto the Issuer, provided that ML&Co complies with the requirementto file an annual information form as if it were the Issuerand the Filers comply with all of the conditions in the May3, 2002 Decision. ML&Co filed a renewal annual informationform with the U.S. Securities and Exchange Commission on March15, 2002 (consisting of Parts I and II and any exhibits relatingto the computation of the ratio of earnings to fixed chargesreferred to in item 14(a)(3) of Part IV of the annual reporton Form 10-K of ML&Co for the year ended December 28,2001 filed with the Securities and Exchange Commission pursuantto the Securities Exchange Act of 1934, as amended);

5. the Issuer was incorporated solely forthe purpose of undertaking financing activities, includingthe issuance of Notes, to raise funds for ML&Co's Canadianoperations, and does not and will not carry on any operatingor other business activities;

6. the Issuer may be considered to be a related(or equivalent) issuer (as defined in the Legislation) ofML Canada for the purposes of the MLCFC Offerings becauseboth ML Canada and the Issuer are indirect wholly-owned subsidiariesof ML&Co;

7. ML Canada was continued and amalgamatedunder the laws of Canada on November 5, 2002 and is an indirectwholly-owned subsidiary of ML&Co; the head office of MLCanada is located in Toronto, Ontario;

8. ML Canada is not a reporting issuer inany Canadian province;

9. ML Canada is registered in all Jurisdictionsas a dealer in the categories of "broker" and "investmentdealer" and is a member of the Investment Dealers Associationof Canada;

10. the Issuer has established a medium termnote program to raise up to $2,000,000,000 in Canada throughthe issuance of Notes pursuant to National Instrument 44-101Short Form Prospectus Distributions (the "POPRequirements") and National Instrument 44-102 ShelfDistributions (the "Shelf Requirements"); thedistributions of the Notes have been and will be qualifiedby the Prospectus and the Prospectus Supplements;

11. the Notes may be offered from time totime, under Prospectus Supplements, in an aggregate principalamount of up to $2,000,000,000 during the twenty-five monthperiod that the Prospectus, including any amendments thereto,is valid pursuant to the POP Requirements and the Shelf Requirements;

12. all Notes have and will have an approvedrating (as defined in the POP Requirements) and will be ratedby a recognized security evaluation agency in one of the categoriesdetermined by the Commission des valeurs mobilieres du Quebec(an "Approved Rating");

13. ML Canada proposes to act as the underwriterin connection with the distribution of 100% of the dollarvalue of the distribution of Notes for the MLCFC Offerings;

14. no Notes will be issued by the Issuerwhere ML Canada is underwriting 100% of the offering of suchNotes, unless the Notes have been rated by an approved ratingorganization;

15. based upon the experience of the PriorOfferings, the Filers expect that approximately 90% of suchMLCFC Offerings will be made to Canadian institutions, pensionfunds, endowment funds or mutual funds (collectively, "InstitutionalInvestors") who can be expected to be knowledgeable aboutthe appropriate pricing parameters for securities of the typeoffered under the MLCFC Offerings and to independently determinethe appropriateness of the price in making a purchase decisionwith respect to any such MLCFC Offering;

16. a minimum of 66 2/3 % of each MLCFC Offeringwill be made to Institutional Investors;

17. the initial offering price of each MLCFCOffering will be determined by market comparisons in boththe secondary and primary market for medium term notes atthe time of pricing; secondary market levels on comparableofferings will be obtained from other dealers and investorsand final pricing of each MLCFC Offering will be based onthe secondary market bid spread (being the difference in yieldbetween comparable medium term notes trading in the secondarymarket and the current Government of Canada bond) plus, inappropriate circumstances, a new issue premium plus the currentGovernment of Canada bond yield;

18. if ML Canada is underwriting 100% of anoffering of Notes, no Notes will be distributed at a yieldhigher (and correspondingly a price lower) than the mean ofa reasonably interpreted, internally generated yield curve(across all available maturities) which will be based on thesecondary market yields of the Issuer's outstanding debt aswell as the secondary market yields on outstanding publicdebt issued by similarly rated issuers at arm's length tothe Issuer, ML Canada or their affiliates;

19. Other than the proceeds of each MLCFCOffering, which are intended for general corporate purposes(including ML&Co's Canadian operations), the only financialbenefits which ML Canada will receive as a result of the MLCFCOfferings are the normal arm's length underwriting commissionand reimbursement of expenses associated with a public offeringin Canada, which commissions and reimbursements shall be deemedto include the increases or decreases contemplated by section1.5(b) of Form 44-101F3 Short Form Prospectus and by the applicablesecurities legislation in Quebec, and because the net proceedsfrom the sale of Notes may be loaned to or otherwise investedin various affiliates of the Issuer or of ML&Co, ML Canadamay also receive inter-company financing;

20. in connection with the proposed distributionby ML Canada of 100% of any Notes of the Issuer, the Prospectusand each Prospectus Supplement of the Issuer shall containthe following information:

(a) on the front page of each such document,the information listed in Appendix C of the National Instrumentas required information for the front page of such document;

(b) in the body of each such document, theinformation listed in Appendix C of the National Instrumentas required information for the body of such document; and

(c) on the front page of each such document,a statement that the minimum subscription amount is $150,000;

AND WHEREAS under the System this DecisionDocument evidences the decision of each Decision Maker (collectively,the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the requirement contained in the Legislationmandating independent underwriter involvement shall not applyto ML Canada and the Issuer in connection with the MLCFC Offeringsprovided that the Issuer complies with Paragraph 14, 16, 18and 20 hereof.

March 7, 2003.

"Iva Vranic"