ORANGE COUNTY, MERRILL LYNCH ANNOUNCE SETTLEMENT OF LAWSUIT


SANTA ANA, Calif., June 2 -- Orange County, California and Merrill Lynch & Co., Inc. today announced that they have reached a $400 million settlement to end the county's lawsuit against Merrill Lynch.

Thomas W. Hayes, the former California State Treasurer who led Orange County's litigation effort, said: "This has been a long and difficult period for the people of Orange County. We are very pleased that in a spirit of mutual cooperation, we were able to negotiate an end to this lengthy and contentious litigation. I believe this is a fair settlement for the County and the approximately 200 other municipal entities, and goes a long way toward making them whole for the losses suffered by the investment pool."

Merrill Lynch said: "We are confident we acted properly and professionally in our relationship with Orange County. However, after weighing the substantial costs and distraction of continuing to litigate, we determined that it would be in the best interests of Merrill Lynch and all our constituents to definitively bring this matter to a close and end the uncertainty inherent in any judicial proceeding."

The two sides said the settlement ends their adversarial relationship and presents the opportunity for constructive relationships between the County, the other municipal entities and Merrill Lynch in the future.

Merrill Lynch also stated that it is fully reserved for the settlement and that the payment will have no financial impact on earnings reported in the 1998 second quarter or subsequent quarters.

Merrill Lynch also said it will return excess collateral of approximately $20 million that it has been holding to Mr. Hayes for distribution to the pool participants.

Separately, Merrill Lynch said it has also reached an agreement to settle a lawsuit brought by the Irvine Ranch Water District for an additional $17.1 million.