Merrill Lynch amended the rules to make the operation of the index more efficient and to improve the index's performance. The amendments relate, among other things to (i) the method by which long positions in individual technology stocks will be chosen, (ii) the method by which the index value will be adjusted to reflect payments of cash dividends on underlying components, (iii) the method by which the index value will be adjusted to reflect the removal of an index component from the Index, (iv) the dates when the Index will be rebalanced, (v) the universe of short technology sectors and subsectors used in the calculation of the index and (vi) additional market variables that will be used to weight the index components.
A description of each of the amendments is available at www.trakrs.com. The Disclosure Document Supplement related to Long-Short Technology TRAKRS, dated as of July 1, 2002, as amended as of March 24, 2003, and the TRAKRS disclosure document, dated as of July 1, 2002, are also available at www.trakrs.com.
General Information on TRAKRS
TRAKRS, which stands for Total Return Asset ContractsSM, are designed to enable customers to track an index of stocks, bonds, currencies, commodities or other financial instruments. TRAKRS are futures contracts based on an index that is calculated on a total return basis. Dividends and certain other distributions are included in the calculation of the index. TRAKRS are the first broad-based index products traded on a U.S. futures exchange that can be sold by securities brokers.
TRAKRS differ from traditional futures contracts in significant ways. TRAKRS are not leveraged for most long non-institutional customers, who are required to post 100 percent of the TRAKRS market value at the time of purchase. As a result, these customers will not be subject to margin calls or any requirement to make any additional payments throughout the life of their TRAKRS positions. Non-institutional customers establishing short TRAKRS positions post 50 percent of the price. Short positions must make certain maintenance payments if the settlement price increases substantially. Securities brokers, subject to notice registering with the National Futures Association, are able to solicit trades in TRAKRS from non-institutional customers and hold a TRAKRS position in the securities account of a non-institutional customer.
Buyers and sellers of TRAKRS contracts may hold the contracts until their expiration three years in the future, when they will be cash-settled, or liquidate their positions during regular trading hours.
Qualified Institutional Buyers (QIB) - both buyers and sellers - post a performance bond to be determined by CME's Clearing House Division consistent with its normal margining requirements for futures contracts. In general, QIBs are defined in securities law and include, but are not limited to, institutions or entities that in the aggregate own and invest on a discretionary basis at least $100 million in securities that are not affiliated with them. Members of CME will be treated as QIBs for purposes of trading TRAKRS.
Merrill Lynch is one of the world's leading financial management and advisory companies, with offices in 36 countries and total client assets of approximately $1.3 trillion. As an investment bank, it is a leading global underwriter of debt and equity securities and strategic advisor to corporations, governments, institutions and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world's largest managers of financial assets. For more information on Merrill Lynch, please visit www.ml.com.
Chicago Mercantile Exchange Inc. (www.cme.com) is the largest futures exchange in the United States and the second largest exchange in the world for the trading of futures and options on futures. As an international marketplace, CME brings together buyers and sellers on its trading floors and GLOBEX® around-the-clock electronic trading platform. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moves an average of about $1.8 billion per day in settlement payments and manages $27.4 billion in collateral deposits. CME is a wholly owned subsidiary of Chicago Mercantile Exchange Holdings Inc. (NYSE: CME).
