Securities Law & Instruments

Headnote

MRRS - relief granted to wholly-owned Canadiansubsidiary of MJDS eligible U.S. issuer proposing to issue approved-ratingdebt, guaranteed by U.S. parent, using a short from prospectus- relief granted in respect of annual financial statement requirements,interim financial statement requirements, material change requirements,proxy requirements, insider reporting requirements, AIF requirement,Canadian GAAP requirement, Canadian GAAS reconciliation requirementand independent underwriter requirement.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c.S.5, as am.,s. 75, 77, 78, 79, 80(b)(iii), 81(2), 88(2)(b), 107, 108, 109,121(2), 147.

Regulations Cited

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am.,

National Instruments

NI 33-105 Underwriting Conflicts.
NI 44 -101 Short Form Prospectus Distributions, Form 44-101F3.

Ontario Rules

OSC Rule 51-501 - AIF and MD&A.

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, MANITOBA, ONTARIO,
QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA
NEWFOUNDLAND AND LABRADOR AND
PRINCE EDWARD ISLAND

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
MERRILL LYNCH & CO., INC.,
MERRILL LYNCH CANADA FINANCE COMPANY AND
MERRILL LYNCH CANADA INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Québec, New Brunswick, Nova Scotia, Newfoundland andLabrador and Prince Edward Island (the "Jurisdictions")has received an application from Merrill Lynch & Co., Inc.("ML&Co"), Merrill Lynch Canada Finance Company(the "Issuer") and Merrill Lynch Canada Inc. ("MLCanada") (collectively, the "Applicants") fora decision pursuant to the securities legislation of the Jurisdictions(the "Legislation") that the Applicants be exemptedfrom the following requirements of the Legislation:

(a) the requirement that the Issuer file andsend to its security holders audited annual financial statementsor annual reports, where applicable, and annual management'sdiscussion and analysis ("MD&A") (collectively,the "Annual Financial Statement Requirements");

(b) the requirement that the Issuer file andsend to its security holders unaudited interim financial statementsand interim MD&A (collectively, the "Interim FinancialStatement Requirements");

(c) the requirement that the Issuer issue andfile press releases with respect to material changes and filematerial change reports (collectively, the "Material ChangeRequirements");

(d) the requirement that the Issuer satisfythe shareholder communication, proxy and proxy solicitationrequirements contained in National Policy 41 ("NP 41"),including the requirement to file an information circular orreport in lieu thereof annually (the "Proxy Requirements");

(e) the requirement that the insiders of theIssuer file insider reports (the "Insider Reporting Requirements");

(f) the requirement that the Issuer file anannual information form with the Decision Makers in the provincesof Ontario, Québec and Saskatchewan (the "AIF Requirement");

(g) the requirement pursuant to National Instrument44-101 ("NI 44-101") to reconcile financial statementsincluded in a prospectus and prepared in accordance with generallyaccepted accounting principles ("GAAP") of a foreignjurisdiction to Canadian GAAP (the "Canadian GAAP Requirement");

(h) the requirement to provide, where financialstatements are audited in accordance with generally acceptedauditing standards ("GAAS") of a foreign jurisdiction,a statement by the auditor (a) disclosing any material differencesin the form and content of the auditor's report as comparedto a Canadian auditor's report and (b) confirming that the auditingstandards of the foreign jurisdiction are substantially equivalentto Canadian GAAS (the "Canadian GAAS Reconciliation Requirement");and

(i) the requirement in National Instrument 33-105("NI 33-105") mandating a specified level of independentunderwriter involvement in connection with the distributionof securities of a related issuer of an underwriter (the "IndependentUnderwriter Requirement").

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS the Applicants have representedto the Decision Makers that:

1. ML&Co was incorporated under the lawsof Delaware on March 27, 1973 and has been a reporting issuerin each of the Provinces of British Columbia, Alberta, Saskatchewan,Manitoba, Québec and Nova Scotia for greater than 12months, beginning in Nova Scotia on August 26, 1998 and mostrecently becoming a reporting issuer in Alberta as of October22, 1999;

2. ML&Co is a reporting company under theSecurities Exchange Act of 1934, as amended (the "1934Act") and has filed with the Securities and Exchange Commission(the "SEC") annual and quarterly reports on Form 10-Kand Form 10-Q, respectively, since the date it first becamea reporting company, in accordance with the filing obligationsset out in the 1934 Act;

3. As at January 16, 2002, ML&Co had approximatelyU.S.$77.2 billion in long term debt outstanding, all of whichis currently rated "AA-" by Standard & Poor'sCorporation, "Aa3" by Moody's Investors Service, Inc.,"AA(low)" by Dominion Bond Rating Service Limitedand "AA" by Fitch IBCA, Inc.;

4. The Issuer was incorporated under the lawsof Nova Scotia on August 25, 1999 and is an indirect wholly-ownedsubsidiary of ML&Co;

5. The Issuer was incorporated solely for thepurpose of undertaking financing activities, including the issuanceof medium term notes ("Notes"), to raise funds forML&Co's Canadian operations, and will not carry on any operatingor other business activities;

6. The Issuer became a reporting issuer or theequivalent in the Jurisdictions by virtue of filing a shortform shelf prospectus dated November 8, 1999 with the DecisionMakers in connection with the establishment in Canada of a mediumterm note program under the provisions of former National Policy47 and former National Policy 44, which program was permittedto lapse on December 8, 2001;

7. ML Canada was continued and amalgamated underthe laws of Canada on August 26, 1998, is an indirect wholly-ownedsubsidiary of ML&Co and is not a reporting issuer or theequivalent in any Canadian province;

8. ML Canada is registered as a dealer in thecategories of "broker" and/or "investment dealer"under the securities legislation of each of the Jurisdictions(and each of the territories of Canada) and is a member of theInvestment Dealers Association of Canada;

9. The Issuer proposes to establish a new mediumterm note program to raise up to Cdn. $2,000,000,000 in Canadathrough the issuance of Notes (the "Offering") fromtime to time over a twenty-five month period pursuant to NI44-101 and National Instrument 44-102 (collectively, the "ShelfRequirements");

10. The Notes will be fully and unconditionallyguaranteed by ML&Co as to payment of principal, interestand all other amounts due thereunder. All Notes will have anapproved rating (as defined in NI 44-101) and will be ratedby a recognized security evaluation agency in one of the categoriesdetermined by the Commission des valeurs mobilières duQuébec (an "Approved Rating");

11. ML&Co satisfies the criteria set forthin paragraph 3.1(a) of National Instrument 71-101 ("NI71-101") and is eligible to use the multi-jurisdictionaldisclosure system ("MJDS") described therein for thepurpose of distributing investment grade rated debt ("ApprovedDebt") in Canada based on compliance with U.S. prospectusrequirements with certain additional Canadian disclosure andwith the benefit of the relief from compliance with certaincontinuous and timely disclosure, shareholder communication,proxy solicitation and insider reporting requirements affordedto MJDS issuers;

12. Except for the fact that the Issuer is notincorporated under U.S. law, the Offering would, in substance,comply with the alternative eligibility criteria for offeringsof Approved Debt under the MJDS as set forth in paragraph 3.2(a)of NI 71-101;

13. In connection with the Offering:

(a) a short form base shelf prospectus and aprospectus supplement or supplements (the "Prospectus")will be prepared pursuant to the Shelf Requirements, with thedisclosure required by item 12 of Form 44-101F3 being addressedby incorporating by reference ML&Co's public disclosuredocuments, including ML&Co's annual report on Form 10-K,and the disclosure required by Item 7 of Form 44-101F3 beingaddressed by fixed charge coverage ratio disclosure with respectto ML&Co in accordance with U.S. requirements;

(b) the Prospectus will include all materialdisclosure concerning the Issuer;

(c) the Prospectus will incorporate by referencedisclosure made in ML&Co's most recent annual report onForm 10-K filed under the 1934 Act, together with its most recentquarterly report on Form 10-Q and current reports on Form 8-Krelating to results of operations and interim financial informationfiled subsequently under the 1934 Act, will incorporate by referenceany documents of the foregoing type filed after the date ofthe Prospectus and prior to termination of the Offering andwill state that purchasers of the Notes will not receive separatecontinuous disclosure information regarding the Issuer;

(d) the consolidated annual and interim financialstatements of ML&Co and its subsidiaries that will be includedin or incorporated by reference into the Prospectus are preparedin accordance with U.S. GAAP and otherwise comply with the requirementsof U.S. law, and in the case of audited annual financial statements,such financial statements are audited in accordance with U.S.GAAS;

(e) ML&Co will fully and unconditionallyguarantee payment of the principal and interest on the Notes,together with any other amounts that may be due under any provisionsof the trust indenture relating to the Notes, such that theNote holders shall be entitled to receive payment from ML&Cowithin 15 days of any failure by the Issuer to make a paymentas stipulated;

(f) the Notes will have an Approved Rating;and

(g) ML&Co will sign the Prospectus as creditsupporter;

14. ML&Co will undertake to file with theDecision Makers all documents that it files under sections 13(other than sections 13(d), (f) and (g) which relate, interalia, to holdings by ML&Co of securities of other publiccompanies) and 15(d) of the 1934 Act (provided that the 8-Ksto be filed will include only such reports relating to resultsof operations and material changes of ML&Co) until suchtime as the Notes are no longer outstanding;

15. In the circumstances, if the Issuer wereto effect the Offering under the MJDS, it would be unnecessaryfor it to reconcile to Canadian GAAP its financial statementsincluded in or incorporated by reference into the Prospectusin connection with the Offering and to provide a statement fromits auditor pursuant to the GAAS Reconciliation Requirement;

16. The Issuer is considered to be a "relatedissuer" and is also a "connected issuer" (assuch terms are defined in NI 33-105) of ML Canada in connectionwith the Offering because both ML Canada and the Issuer areindirect wholly-owned subsidiaries of ML&Co;

17. The Issuer proposes to offer Notes fromtime to time through an alternative syndicate structure pursuantto which ML Canada would act as an underwriter (either on afirm commitment or an agency basis) in respect of up to 49%of the distribution (based on either the dollar value of thedistribution or the total management fees for the distribution,as applicable) for certain issuances of Notes by the Issuerpursuant to the Offering (the "Minority Offerings");

18. Pursuant to NI 33-105, ML Canada is permittedto act as an underwriter in connection with the distributionof up to 80% of the distribution (based on either the dollarvalue of the distribution or the total management fees for thedistribution, as applicable) for each Offering by the Issuerprovided that an independent underwriter that is not a relatedissuer or a connected issuer (an "Independent Underwriter")distributes a percentage that is equal to the lesser of (i)the largest percentage of the distribution underwritten by anon-Independent Underwriter or (ii) 20% of the distribution(based on either the dollar value of the distribution or thetotal management fees for the distribution, as applicable);

19. The Issuer expects that, based on ML&Co'sU.S. experience, not less than 90% of each Minority Offeringmade under the alternative syndicate structure, in which theminimum subscription will be $500,000, will be purchased byCanadian institutions, pension funds, endowment funds or mutualfunds, who can be expected to be knowledgeable about the appropriatepricing parameters for securities of the type offered underthe Minority Offerings and to independently determine the appropriatenessof the price in making a purchase decision with respect to anysuch Minority Offering;

20. Other than the proceeds of the Offering,which are intended for general corporate purposes (includingML&Co's Canadian operations), the only financial benefitswhich ML Canada will receive as a result of each Offering arethe normal arm's length underwriting commissions and reimbursementof expenses associated with a public offering in Canada and,because the net proceeds from the sale of Notes may be loanedto or otherwise invested in various affiliates of the Issueror of ML&Co, ML Canada may also receive inter-company financing;

21. In connection with the proposed distributionby ML Canada of the Notes for each Minority Offering under thealternative syndicate structure:

(a) the Prospectus and each Prospectus Supplementof the Issuer will be prepared and filed in accordance withthe Shelf Requirements, and will contain the information requiredto be disclosed pursuant to Appendix C of NI 33-105, including:

(i) on the front page of each such document:

(A) a statement in bold type that the Issueris a connected issuer and a related issuer of ML Canada in connectionwith the distribution,

(B) a statement that the Issuer is a connectedissuer and a related issuer of ML Canada based on the commonownership by ML&Co of ML Canada and the Issuer,

(C) a cross-reference to the applicable sectionin the body of the document where further information concerningthe relationship between the Issuer and ML Canada is provided,and

(D) a statement that the minimum subscriptionfor each subscriber of Notes under the Offering is $500,000;
(ii) in the body of each such document:

(A) a statement that the Issuer is a connectedissuer and a related issuer of ML Canada in connection withthe distribution,

(B) disclosure regarding the basis on whichthe Issuer is a connected issuer and a related issuer of MLCanada, including details of the common ownership by ML&Coof ML Canada and the Issuer, and other aspects of the relationshipbetween ML Canada and the Issuer,

(C) disclosure regarding the involvement ofML Canada and of each related issuer of ML Canada in the decisionto distribute the Notes being offered and the determinationof the terms of the distribution, including disclosure concerningwhether the issue was required, suggested or consented to byML Canada or a related issuer of ML Canada and, if so, on whatbasis,

(D) details of the financial benefits describedin paragraph 20 hereof which ML Canada or a related issuer ofML Canada will receive, directly or indirectly, from the applicableOffering; and

(E) details of the method of distribution underthe applicable Offering, including the name of any underwriterinvolved in such Offering and the amount of any underwritingfee, discount or commission;

(b) one or more Independent Underwriters willunderwrite, in the aggregate, at least 51% of such Offering(based on either the dollar value of the distribution or thetotal management fees for the distribution, as applicable) willparticipate in the structuring and pricing of the distributionof such Offering and in the due diligence activities performedby the underwriters for the distribution, and will sign a Prospectuscertificate required by the Legislation; and

(c) each Prospectus Supplement will, to theextent not disclosed in the Prospectus, identify the IndependentUnderwriters and disclose the role of the Independent Underwritersin the structuring and pricing of the distribution of the applicableOffering and in the due diligence activities performed by theunderwriters for the distribution.

AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of each DecisionMaker (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 Makerspursuant to the Legislation in connection with the Offering(and, for greater clarity, provided that the requirements underthe Legislation shall continue to apply to the Issuer in respectof any securities offered by the Issuer other than pursuantto the Offering or pursuant to separate relief granted by theDecision Makers) is that:

A. the Annual Financial Statement Requirementsshall not apply to the Issuer, provided that (i) ML&Co fileswith the Decision Makers two copies of the annual reports onForm 10-K filed by it with the SEC promptly after they are filedwith the SEC; and (ii) such documents are provided to securityholders whose last address as shown on the books of the Issueris in Canada ("Canadian security holders") in themanner and at the time as would be required by applicable U.S.law if the Canadian security holders were holders of debt securitiesof ML&Co resident in the U.S.;

B. the Interim Financial Statement Requirementsshall not apply to the Issuer, provided that (i) ML&Co fileswith the Decision Makers two copies of the quarterly reportson Form 10-Q filed by it with the SEC promptly after they arefiled with the SEC; and (ii) such documents are provided toCanadian security holders in the manner and at the time as wouldbe required by applicable U.S. law if the Canadian securityholders were holders of debt securities of ML&Co residentin the U.S.;

C. the Material Change Requirements shall notapply to the Issuer, provided that

(i) ML&Co files with the Decision Makerstwo copies of each of the current reports on Form 8-K relatingto the financial condition of, or disclosing a material changein the affairs of, ML&Co which are filed by it with theSEC promptly after they are filed with the SEC;

(ii) ML&Co complies with the requirementsof the New York Stock Exchange in respect of making public disclosureof material information on a timely basis and forthwith issuesin each Jurisdiction any press release issued in this regard;

(iii) ML&Co forthwith issues in each Jurisdictionand files any press release which discloses a material changein ML&Co's affairs; and

(iv) if there is a material change in respectof the business, operations or capital of the Issuer that isnot a material change in respect of ML&Co, the Issuer willcomply with the requirements of the Legislation to issue a pressrelease and file a material change report notwithstanding thatthe change may not be a material change in respect of ML&Co;

D. the Proxy Requirements shall not apply tothe Issuer, provided that

(i) ML&Co complies with the requirementsof the 1934 Act and the rules and regulations thereunder relatingto proxy statements, proxies and proxy solicitations in connectionwith any meetings of its note holders;

(ii) ML&Co files with the Decision Makerstwo copies of the proxies and proxy solicitation materials preparedin connection with any meetings of ML&Co's note holdersand filed by it with the SEC promptly after they are filed withit by the SEC;

(iii) such documents are provided to Canadiansecurity holders in the manner and at the time as would be requiredby applicable U.S. law if the Canadian security holders wereholders of debt securities of ML&Co resident in the U.S.;and

E. the Insider Reporting Requirements shallnot apply to insiders of the Issuer, provided that each insider(as defined in the Legislation) files with the SEC, on a timelybasis, the reports, if any, required to be filed with the SECpursuant to subsection 16(a) of the 1934 Act and the rules andregulations thereunder;

for so long as

(i) the Notes maintain an Approved Rating;

(ii) ML&Co remains the direct or indirectsole beneficial owner of the voting shares, and any securitiesof the Issuer other than debt securities which are offered tothe public, in each case as the same may be issued and outstandingfrom time to time;

(iii) ML&Co maintains a class of securitiesregistered pursuant to section 12 of the 1934 Act;

(iv) ML&Co continues to satisfy the criteriaset forth in paragraph 3.1 of NI 71-101 (or any successor provision)and remains eligible to use MJDS (or any successor instrument)for the purpose of distributing Approved Debt in Canada basedon compliance with U.S. prospectus requirements with certainadditional disclosure;

(v) the Issuer carries on no other businessthan set out in paragraph 5 hereof;

(vi) ML&Co. continues to fully and unconditionallyguarantee payment of the principal and interest on the Notes,together with any other amounts that may be due under any provisionsof the trust indenture relating to the Notes, such that theNote holders shall be entitled to receive payment from ML&Cowithin 15 days of any failure by the Issuer to make a paymentas stipulated; and

(vii) all filing fees that would otherwise bepayable by the Issuer in connection with the requirements describedin paragraphs A to E, inclusive, are paid.

"Paul Moore"      "Theresa McLeod"

 

THE FURTHER DECISION of the DecisionMakers pursuant to the Legislation is that, in connection withthe Offering, the AIF Requirement shall not apply to the Issuer,provided that (i) ML&Co complies with the AIF requirementsof NI 44-101 as if it is the issuer; and (ii) the Applicantscomply with all of the conditions in the Decisions above andbelow.

"Margo Paul"

 

THE FURTHER DECISION of the DecisionMakers pursuant to the Legislation is that, in connection withthe Offering (and, for greater clarity, provided that the requirementsunder the Legislation shall continue to apply to the Issuerin respect of any securities offered by the Issuer other thanpursuant to the Offering or pursuant to separate relief grantedby the Decision Makers), the Applicants be exempted from theCanadian GAAP Requirement and the Canadian GAAS ReconciliationRequirement provided that:

(i) each of the Issuer and ML&Co complieswith paragraph 13 above;

(ii) the Issuer complies with all of the filingrequirements and procedures set out in NI 44-101 except as variedby the Decision;

(iii) ML&Co remains the direct or indirectbeneficial owner of all of the issued and outstanding votingsecurities of the Issuer; and

(iv) ML&Co continues to satisfy the criteriaset forth in paragraph 3.1 of NI 71-101 (or any successor provision)and remains eligible to use MJDS (or any successor instrument)for the purposes of distributing Approved Debt in Canada basedon compliance with U.S. prospectus requirements with certainadditional Canadian disclosure.

"Margo Paul"

 

THE FURTHER DECISION of the DecisionMakers of British Columbia, Alberta, Ontario, Québec,Nova Scotia, Prince Edward Island and Newfoundland and Labradorpursuant to the Legislation is that ML Canada shall be exemptedfrom the independent underwriter requirements contained in NI33-105 (or, in the case of Québec, the independent underwriterrequirements contained in sections 236.1 and 237.1 of the RegulationConcerning Securities and the requirements of Décisiongénérale - 33-105 A dated December 11, 2001; and,in the case of Newfoundland, the requirements of section 188(1)(b)of the regulations promulgated under the Newfoundland SecuritiesAct, in each such case until such time as NI 33-105 has beenadopted in Québec and Newfoundland, respectively) inrespect of the Minority Offerings, provided that:

(i) the Issuer complies with subparagraphs 21(a) and (c); and

(ii) the Independent Underwriters participatein each proposed Minority Offering as stated in subparagraph21(b) hereof.

"Margo Paul"

May 3, 2002.