Filed Pursuant to Rule 424(b)(3)
     Registration No. 333-132911

 

$16,700,000.00

Accelerated Return Bear Market Notes

Linked to the Mortgage Finance Basket Due November 7, 2008

Term Sheet No. 2836

 

Pricing Date

Settlement Date

Maturity Date

CUSIP No.

   August 28, 2007
September 7, 2007
November 7, 2008
59022W448

 

 

 

 

 

Merrill Lynch & Co., Inc.

 

 

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Ÿ    3-to-1 return if the Basket decreases, subject to a cap of 19.50%

 

Ÿ    A maturity of 14 months

 

Ÿ    1-to-1 loss if the Basket increases above a 10% buffer up to a maximum loss of the entire original public offering price per unit.

 

Ÿ    Not listed on any securities exchange

 

Ÿ    No periodic payment of interest

  
  

The Notes will have the terms specified in this term sheet as supplemented by the documents indicated herein under “Additional Note Terms” (together the “Note Prospectus”). Investing in the Notes involves a number of risks. See “ Risk Factors” on page TS-5 of this term sheet and beginning on page PS-4 of product supplement ARNB-1.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Note Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

     Per Unit         Total     
Public offering price (1)    $ 10.00       $ 16,700,000   
Underwriting discount (1)    $ .20       $ 340,000   
Proceeds, before expenses, to Merrill Lynch & Co., Inc.    $ 9.80       $ 16,360,000   

 

  1) The public offering price and underwriting discount for any purchase of between 100,000 to 299,999 units will be $9.95 per unit and $.15 per unit, respectively, for any purchase of between 300,000 to 499,999 units will be $9.90 per unit and $.10 per unit, respectively, and for any purchase of 500,000 units or more will be $9.85 per unit and $.05 per unit, respectively. The foregoing pricing description will apply to any single transaction by an individual investor.

Merrill Lynch & Co.

August 28, 2007


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Summary

The Accelerated Return Bear Market Notes Linked to the Mortgage Finance Basket due November 7, 2008 (the “Notes”) are senior, unsecured debt securities of Merrill Lynch & Co., Inc. that provide a leveraged return for investors, subject to a cap, if the value of a basket consisting of eighteen common stocks (the “Basket Component Stocks” and together, the “Basket”) of companies engaged in the mortgage finance industry (the “Underlying Companies”) decreases moderately from the Starting Value of the Basket, determined on the Pricing Date, to the Ending Value of the Basket, determined on valuation dates shortly prior to the maturity date of the Notes. Investors must be willing to forego interest payments on the Notes and willing to accept a repayment that may be less, and potentially significantly less, than the original public offering price of the Notes if the value of the Basket increases.

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Hypothetical Payout Profile

 

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This graph reflects the hypothetical returns on the Notes, including the Capped Value of 19.50%. The orange line reflects the hypothetical returns on the Notes, while the blue dotted line reflects the hypothetical return of an investment in the Basket, excluding dividends.

 

This graph has been prepared for purposes of illustration only. Your actual return will depend on the actual Ending Value and the term of your investment.

 

Hypothetical Payments at Maturity

Examples

Set forth below are four examples of payment at maturity calculations, reflecting the Starting Value of 100 and the Capped Value of $11.95.

Example 1—The hypothetical Ending Value is 130% of the Starting Value:

Starting Value: 100

Hypothetical Ending Value: 130

Threshold Value: 110

 

  $10 –  

(

 

  $10 ×  

(

 

 

130 - 110

 

 

)

 

 

)

 

  = $8.00     
          100        

Payment at maturity (per unit) = $8.00

Example 2—The hypothetical Ending Value is 105% of the Starting Value (less than the Threshold Value):

Starting Value: 100

Hypothetical Ending Value: 105

Threshold Value: 110

Payment at maturity (per unit) = $10.00

Example 3—The hypothetical Ending Value is 97% of the Starting Value:

Starting Value: 100

Hypothetical Ending Value: 97

 

  $10 +  

(

 

  $30 ×  

(

 

 

100 - 97

 

 

)

 

 

)

 

  = $10.90     
          100        

Payment at maturity (per unit) = $10.90

Example 4—The hypothetical Ending Value is 70% of the Starting Value:

Starting Value: 100

Hypothetical Ending Value: 70

 

  $10 +  

(

 

  $30 ×  

(

 

 

100 - 70

 

 

)

 

 

)

 

  = $19.00     
          100        

Payment at maturity (per unit) = $11.95 (Payment at maturity cannot be greater than the Capped Value)

 

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The following table illustrates, for the Starting Value of 100 and a range of hypothetical Ending Values of the Basket:

 

  Ÿ the percentage change from the Starting Value to the hypothetical Ending Value;
  Ÿ the total amount payable on the maturity date per unit;
  Ÿ the total rate of return to holders of the Notes;
  Ÿ the pretax annualized rate of return to holders of the Notes; and
  Ÿ the pretax annualized rate of return of an investment in the Basket Component Stocks, which includes an assumed aggregate dividend yield of 3.57% per annum, as more fully described below.

The table below reflects the Capped Value of $11.95.

 

Hypothetical
Ending Value

  

Percentage change
from the
Starting Value
to the hypothetical
Ending Value

  

Total amount
payable on the
maturity date
per unit

  

Total

rate of

return on

the Notes

  

Pretax

annualized

rate of

return on

the Notes (1)

  

Pretax
annualized rate

of return of the
Basket Component Stocks (1)(2)

  50.00

   -50.00%    $11.95     19.50%    15.87%    -47.15%

  60.00

   -40.00%    $11.95     19.50%    15.87%    -35.29%

  70.00

   -30.00%    $11.95     19.50%    15.87%    -24.48%

  80.00

   -20.00%    $11.95     19.50%    15.87%    -14.49%

  90.00

   -10.00%    $11.95     19.50%    15.87%      -5.17%

  92.00

     -8.00%         $11.95 (4)     19.50%    15.87%      -3.38%

  94.00

     -6.00%    $11.80     18.00%    14.70%      -1.60%

  96.00

     -4.00%    $11.20     12.00%       9.95%      -0.15%

  98.00

     -2.00%    $10.60       6.00%       5.06%       1.88%

     100.00 (3)

      0.00%    $10.00       0.00%       0.00%       3.56%

102.00

      2.00%    $10.00       0.00%       0.00%       5.28%

104.00

      4.00%    $10.00       0.00%       0.00%       6.96%

106.00

      6.00%    $10.00       0.00%       0.00%       8.62%

108.00

      8.00%    $10.00       0.00%       0.00%     10.25%

     110.00 (5)

    10.00%    $10.00       0.00%       0.00%     11.88%

120.00

    20.00%      $9.00    -10.00%      -8.83%     19.75%

130.00

    30.00%      $8.00    -20.00%    -18.24%     27.26%

 

(1) The annualized rates of return specified in this column are calculated on a semiannual bond equivalent basis and assume an investment term from September 7, 2007 to November 7, 2008, the term of the Notes.

 

(2) This rate of return assumes:

 

  (a) a percentage change in the aggregate price of the Basket Component Stocks that equals the percentage change in the Basket from the Starting Value to the relevant hypothetical Ending Value;

 

  (b) a constant dividend yield of 3.57% per annum, paid quarterly from the date of initial delivery of the Notes, applied to the value of the Basket at the end of each quarter assuming this value increases or decreases linearly from the Starting Value to the applicable hypothetical Ending Value; and

 

  (c) no transaction fees or expenses.

 

(3) This is the Starting Value.

 

(4) The total amount payable on the maturity date per unit of the Notes cannot exceed the Capped Value.

 

(5) This represents the Threshold Value. Investors will receive $10 per unit if the Ending Value is greater than or equal to the Starting Value but less than or equal to the Threshold Value.

The above figures are for purposes of illustration only. The actual amount received by you and the resulting total and pretax annualized rates of return will depend on the actual Ending Value and term of your investment.

 

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Risk Factors

An investment in the Notes involves significant risks. The following is a list of certain of the risks involved in investing in the Notes. You should carefully review the more detailed explanation of risks relating to the Notes in the “Risk Factors” sections included in the product supplement and MTN prospectus supplement identified below under “Additional Note Terms”. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.

 

  Ÿ Your investment may result in a loss.

 

  Ÿ Your yield may be lower than the yield on other debt securities of comparable maturity.

 

  Ÿ You must rely on your own evaluations regarding the merits of an investment linked to the Basket.

 

  Ÿ Your return is limited to the Capped Value.

 

  Ÿ Your return will not reflect dividends or the return on a direct investment in the Basket Component Stocks, and you will not have the right to exercise ownership rights with respect to the Basket Component Stocks.

 

  Ÿ There may be an uncertain trading market for the Notes and the market price you may receive or be quoted for your Notes on a date prior to the stated maturity date will be affected by this and other important factors, including our costs of developing, hedging and distributing the Notes.

 

  Ÿ Many factors affect the trading value of the Notes; these factors interrelate in complex ways and the effect of any one factor may offset or magnify the effect of another factor.

 

  Ÿ Purchases and sales of the Basket Component Stocks by us and our affiliates may affect your return.

 

  Ÿ Potential conflicts of interest could arise.

 

  Ÿ Tax consequences are uncertain.

Risk Factor Specific to the Basket

The Basket Component Stocks are concentrated in one industry

All of the Underlying Companies that issue the Basket Component Stocks are concentrated in the mortgage finance industry. As a result, the stocks that will determine the performance of the Notes are concentrated in one industry. Although an investment in the Notes will not give holders any ownership or other direct interests in the Basket Component Stocks, the return on an investment in the Notes will be subject to many of the risks associated with direct equity investments in the mortgage finance industry.

Investor Considerations

 

You may wish to consider an investment in the Notes if:    The Notes may not be an appropriate investment for you if:

Ÿ     You anticipate that the Basket will depreciate moderately from

        the Starting Value to the Ending Value.

 

Ÿ     You accept that your investment may result in a loss, which could be

        significant, if the value of the Basket increases from the Starting Value

        to the Ending Value.

 

Ÿ     You accept that the return on the Notes will not exceed the Capped

        Value.

 

Ÿ     You are willing to forego interest payments on the Notes, such as fixed

        or floating rate interest paid on traditional interest bearing debt

        securities.

 

Ÿ     You want exposure to the Basket with no expectation of dividends or

        other benefits of owning the underlying securities.

 

Ÿ     You are willing to accept that a trading market for the Notes is not

        expected to develop.

  

Ÿ     You anticipate that the Basket will appreciate from the Starting

        Value to the Ending Value or that the Basket will not depreciate

        sufficiently over the term of the Notes to provide you with your

        desired return.

 

Ÿ     You are seeking principal protection or preservation of capital.

 

Ÿ     You seek a return on your investment that will not be capped at

        19.50%.

 

Ÿ     You seek interest payments or other current income on your

        investment.

 

Ÿ     You want to receive dividends paid on the Basket Component

        Stocks.

 

Ÿ     You want assurances that there will be a liquid market if and when

        you want to sell the Notes prior to maturity.

 

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Other Provisions

We may deliver the Notes against payment therefor in New York, New York on a date that is in excess of three Business Days following the Pricing Date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three Business Days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement on the Notes occurs more than three Business Days from the Pricing Date, purchasers who wish to trade Notes more than three Business Days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.

“Closing Market Price” means:

If a Basket Component Stock (or any other security for which a Closing Market Price must be determined for purposes of the Notes) is listed or admitted for trading on a national securities exchange in the United States registered under the Exchange Act (“registered national securities exchange”), is included in the OTC Bulletin Board Service (“OTC Bulletin Board”) operated by the National Association of Securities Dealers, Inc. (the “NASD”), or is quoted on a United States quotation medium or inter-dealer quotation system (e.g., the Pink Sheets), then the Closing Market Price for any date of determination on any Market Measure Business Day means for one Basket Component Stock (or any other security for which a Closing Market Price must be determined for purposes of the Notes):

 

  Ÿ the last reported sale price, regular way, on that day on the principal registered national securities exchange registered under the Exchange Act on which that security is listed or admitted to trading (without taking into account any extended or after-hours trading session);

 

  Ÿ if the last reported sale price is not obtainable on a registered national securities exchange, then the last reported sale price on the over-the-counter market as reported on the OTC Bulletin Board or, if not available on the OTC Bulletin Board, then the last reported sale price on any other United States quotation medium or inter-dealer quotation system on that day (without taking into account any extended or after-hours trading session); or

 

  Ÿ if the last reported sale price is not available for any reason on a registered national securities exchange, on the OTC Bulletin Board, or any other United States quotation medium or inter-dealer quotation system, including, without limitation, the occurrence of a Market Disruption Event, as described below, then the mean of the last reported bid and offer price of the principal trading session on the registered national securities exchange, or if there were no bids and offers on such exchange, then the mean of the last reported bid and offer on the over-the-counter market as reported on the Nasdaq GMS or OTC Bulletin Board or, if there were no bids and offers on the OTC Bulletin Board, then the mean of the last reported bid and offer on any other United States quotation medium or inter-dealer quotation system on that day as determined by the Calculation Agent or from as many dealers in that security, but not exceeding three, as have made the bid prices available to the Calculation Agent after 3:00 p.m., local time in the principal market, on that date (without taking into account any extended or after-hours trading session).

If a Basket Component Stock (or any other security for which a Closing Market Price must be determined for purposes of the Notes) is not listed on a registered national securities exchange or is not included in the OTC Bulletin Board or is not quoted on any other United States quotation medium or inter-dealer system, then the Closing Market Price for any date of determination on any Market Measure Business Day means for one Basket Component Stock (or any other security for which a Closing Market Price must be determined for purposes of the Notes) the U.S. dollar equivalent of the last reported sale price (as determined by the Calculation Agent in its reasonable judgment) on that day on a foreign securities exchange on which that security is listed or admitted to trading with the greatest volume of trading for the calendar month preceding that Market Measure Business Day as determined by the Calculation Agent; provided that if the last reported sale price is for a transaction which occurred more than four hours prior to the close of that foreign exchange, then the Closing Market Price will mean the U.S. dollar equivalent (as determined by the Calculation Agent in its reasonable judgment) of the average of the last available bid and offer price on that foreign exchange.

If a Basket Component Stock (or any other security for which a Closing Market Price must be determined for purposes of the Notes) is not listed on a registered national securities exchange, is not included in the OTC Bulletin Board, is not quoted on any other United States quotation medium or inter-dealer quotation system, is not listed or admitted to trading on any foreign securities exchange or if the last reported sale price or bid and offer is not obtainable, then the Closing Market Price will mean the average of the last available purchase and sale prices in the market of the three dealers which have the highest volume of transactions in that security in the immediately preceding calendar month as determined by the Calculation Agent based on information that is reasonably available to it.

“Market Disruption Event” means either of the following events as determined by the Calculation Agent:

(A) the suspension of, absence of, including the absence of an official closing price, or material limitation on trading for more than two hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange where the Basket Component Stocks trade as determined by the Calculation Agent (without taking into account any extended or after-hours trading session), of one or more of the Basket Component Stocks;

(B) the suspension of, absence of, including the absence of an official closing price, or material limitation on trading for more than two hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange that trades options contracts or futures contracts related to a Basket Component Stocks as determined by the Calculation Agent (without taking into account any extended or after-hours trading session), whether by reason of movements in price otherwise exceeding levels permitted by the relevant exchange or otherwise, in options contracts or futures contracts related to a Basket Component Stock; or

(C) a determination by the Calculation Agent that the event described in clauses (A) and (B) above materially interfered with the ability of ML&Co., MLPF&S or any of their affiliates to unwind all or a material portion of the hedge with respect to the Basket Component Stocks. For the purpose of determining whether a Market Disruption Event has occurred:

(1) a limitation on the hours in a trading day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange;

(2) a decision to permanently discontinue trading in the relevant futures or options contracts related to the applicable Basket Component Stock, will not constitute a Market Disruption Event;

 

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(3) limitations pursuant to any rule or regulation enacted or promulgated by the NYSE or The Nasdaq Stock Market or other regulatory organization with jurisdiction over the NYSE or The Nasdaq Stock Market on trading during significant market fluctuations will constitute a suspension or material limitation of trading in the Basket Component Stocks;

(4) a suspension in trading in a futures or options contracts on the applicable Basket Component Stock, by a major securities market by reason of (a) a price change violating limits set by that securities market, (b) an imbalance of orders relating to those contracts or (c) a disparity in bid and ask quotes relating to those contracts will constitute a suspension of or material limitation on trading in futures or options contracts related to that Basket Component Stock; and

(5) a suspension of or material limitation on trading on the relevant exchange will not include any time when that exchange is closed for trading under ordinary circumstances.

A “trading day” means a day on which the NYSE, the American Stock Exchange and The Nasdaq Stock Market are open for trading.

If the Exchange Property, as defined below under “—Reorganization Events” in this term sheet, includes securities other than the Basket Component Stocks, then the above definition will be revised to include each of those securities in the same manner as the Basket Component Stocks are considered in determining whether a Market Disruption Event exists.

The occurrence of a Market Disruption Event could affect the calculation of the Ending Value.

Multiplier Adjustments

Each Multiplier is subject to adjustment by the Calculation Agent as described in this section.

No adjustments to a Multiplier will be required unless the Multiplier adjustment would require a change of at least 0.1% in the Multiplier then in effect. The Multiplier resulting from any of the adjustments specified below will be rounded to the eighth decimal place with five one-billionths being rounded upward. The Calculation Agent will not be required to make any adjustments to a Multiplier after the close of business on the fourth Business Day immediately prior to the maturity date.

No adjustments to a Multiplier will be required other than those specified below. However, the Calculation Agent may, at its sole discretion, make additional adjustments to a Multiplier to reflect changes occurring in relation to the Basket Component Stocks or any other security received in a reorganization event in other circumstances where the Calculation Agent determines that it is appropriate to reflect those changes to ensure an equitable result. The required adjustments specified below do not cover all events that could affect the Closing Market Price of the Basket Component Stocks, including, without limitation, a partial tender or exchange offer for the Basket Component Stocks.

MLPF&S as Calculation Agent will be solely responsible for the determination and calculation of any adjustments to a Multiplier and of any related determinations and calculations with respect to any distributions of stock, other securities or other property or assets, including cash, in connection with any corporate event described below; and its determinations and calculations will be conclusive absent a determination of a manifest error.

No adjustments will be made for certain other events, such as offerings of common stock by the relevant Underlying Company for cash or in connection with the occurrence of a partial tender or exchange offer for the Basket Component Stocks by the relevant Underlying Company.

ML&Co. will, within ten Business Days following the occurrence of an event that requires an adjustment to a Multiplier, or, if later, within ten Business Days following the date on which ML&Co. becomes aware of this occurrence, provide written notice to the trustee, which will provide notice to the holders of the Notes of the occurrence of this event and a statement in reasonable detail setting forth the adjusted Multiplier.

Stock splits and reverse stock splits

If a Basket Component Stock is subject to a stock split or reverse stock split, then once any split has become effective, its Multiplier will be adjusted to equal the product of its prior Multiplier and the number of shares which a holder of record of one such Basket Component Stock before the effective date of that stock split or reverse stock split would have owned immediately following the applicable effective date.

Stock dividends

If a Basket Component Stock is subject to a (i) stock dividend, i.e., issuance of additional shares of that Basket Component Stock, that is given ratably to all holders of record of that Basket Component Stock or (ii) distribution of shares of that Basket Component Stock as a result of the triggering of any provision of the corporate charter of the related Underlying Company, then, once the dividend has become effective and the Basket Component Stock is trading ex-dividend, its Multiplier will be adjusted so that its new Multiplier will equal its prior Multiplier plus the product of:

 

  Ÿ its prior Multiplier; and

 

  Ÿ the number of shares which a holder of record of one such Basket Component Stock before the date the dividend became effective and the Basket Component Stock traded ex-dividend would have owned immediately following that date.

Extraordinary Dividends

There will be no adjustments to a Multiplier to reflect any cash dividends or cash distributions paid with respect to the Basket Component Stocks other than Extraordinary Dividends, as described below, and distributions described under the section entitled “—Reorganization Events” below.

An “Extraordinary Dividend” means, with respect to a cash dividend or other distribution with respect to a Basket Component Stock, a dividend or other distribution which exceeds the immediately preceding non-Extraordinary Dividend on the Basket Component Stock (as adjusted for any subsequent corporate event requiring an adjustment hereunder, such as a stock split or reverse stock split) by an amount equal to at least 10% of the Closing Market Price of the Basket Component Stock on the Market Measure Business Day preceding the ex-dividend date with respect to the Extraordinary Dividend (the “ex-dividend date”). If an Extraordinary Dividend occurs with respect to a Basket Component Stock, its Multiplier will be adjusted on the ex-dividend date with respect to the Extraordinary Dividend so that the new Multiplier will equal the product of:

 

  Ÿ its prior Multiplier; and

 

  Ÿ a fraction, the numerator of which is the Closing Market Price per Basket Component Stock on the Market Measure Business Day preceding the ex-dividend date, and the denominator of which is the amount by which the Closing Market Price per Basket Component Stock on the Market Measure Business Day preceding the ex-dividend date exceeds the Extraordinary Dividend Amount.

 

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The “Extraordinary Dividend Amount” with respect to an Extraordinary Dividend for a Basket Component Stock will equal:

 

  Ÿ in the case of cash dividends or other distributions that constitute quarterly dividends, the amount per Basket Component Stock of that Extraordinary Dividend minus the amount per share of the immediately preceding non-Extraordinary Dividend for that Basket Component Stock; or

 

  Ÿ in the case of cash dividends or other distributions that do not constitute quarterly dividends, the amount per Basket Component Stock of that Extraordinary Dividend.

To the extent an Extraordinary Dividend is not paid in cash, the value of the non-cash component will be determined by the Calculation Agent, whose determination will be conclusive. A distribution on a Basket Component Stock described in clause (a), (d) or (e) of the section entitled “—Reorganization Events” below that also constitutes an Extraordinary Dividend will only cause an adjustment pursuant to clause (a), (d) or (e) under the section entitled “—Reorganization Events”. A distribution on a Basket Component Stock described in the section entitled “—Issuance of transferable rights or warrants” that also constitutes an Extraordinary Dividend will only cause an adjustment pursuant to that section.

Issuance of transferable rights or warrants

If an Underlying Company issues transferable rights or warrants to all holders of record of its related Basket Component Stock to subscribe for or purchase that Basket Component Stock, including new or existing rights to purchase the Basket Component Stock pursuant to a shareholder’s rights plan or arrangement, then its Multiplier will be adjusted on the Business Day immediately following the issuance of those transferable rights or warrants so that its new Multiplier will equal its prior Multiplier plus the product of:

 

  Ÿ its prior Multiplier; and

 

  Ÿ the number of shares of that Basket Component Stocks that can be purchased with the cash value of those warrants or rights distributed on one share of that Basket Component Stock.

The number of shares that can be purchased will be based on the Closing Market Price of a Basket Component Stock on the date its new Multiplier is determined. The cash value of those warrants or rights, if the warrants or rights are traded on a national securities exchange, will equal the closing price of that warrant or right, or, if the warrants or rights are not traded on a national securities exchange, will be determined by the Calculation Agent and will equal the average of the bid prices obtained from three dealers at 3 p.m. on the date the new Multiplier is determined, provided that if only two of those bid prices are available, then the cash value of those warrants or rights will equal the average of those bids and if only one of those bids is available, then the cash value of those warrants or rights will equal that bid.

Reorganization Events

If prior to the maturity date of the Notes:

 

  (a) there occurs any reclassification or change of a Basket Component Stock, including, without limitation, as a result of the issuance of tracking stock by the related Underlying Company;

 

  (b) an Underlying Company, or any surviving entity or subsequent surviving entity of the Underlying Company (a “Successor Entity”), has been subject to a merger, combination or consolidation and is not the surviving entity;

 

  (c) any statutory exchange of securities of an Underlying Company or any Successor Entity with another corporation occurs, other than pursuant to clause (b) above;

 

  (d) an Underlying Company is liquidated or is subject to a proceeding under any applicable bankruptcy, insolvency or other similar law;

 

  (e) an Underlying Company issues to all of its shareholders equity securities of an issuer other than the Underlying Company, other than in a transaction described in clauses (b), (c) or (d) above;

 

  (f) a tender or exchange offer or going-private transaction is consummated for all the outstanding shares of an Underlying Company; or

 

  (g) an Underlying Company ceases to file the financial and other information with the SEC in accordance with Section 13(a) of the Securities Exchange Act of 1934

(an event in clauses (a) through (g) a “Reorganization Event”),

then the method of determining the amount payable on each Note will be adjusted as set forth below.

“Exchange Property” will consist of the securities, cash or any other assets distributed to holders of record of the Basket Component Stocks in or as a result of the Reorganization Event, and where Basket Component Stocks continue to be held by the holders receiving such distribution, the Basket Component Stocks.

If the Exchange Property received in a Reorganization Event

 

  Ÿ consists only of cash or if the Calculation Agent exercises its option to liquidate the Exchange Property following its distribution, then, (i) in the case where the Exchange Property delivered to the holders of record of the Basket Component Stocks consists of cash only, on the third Business Day succeeding the day on which that cash is distributed to holders of record of the Basket Component Stocks, or (ii) in the case where the Exchange Property is liquidated, on the date specified by ML&Co. as described below, the Basket will be adjusted by the Calculation Agent to include the product of (a) the amount of cash received with respect to one Basket Component Stock and the then current applicable Multiplier or (b) the value of the Exchange Property liquidated with respect to one Basket Component Stock and the then current applicable Multiplier, as applicable.

If the Calculation Agent exercises the option to liquidate the Exchange Property, ML&Co. will give notice to the trustee as to the election to liquidate the Exchange Property, which notice will specify the method by which the Exchange Property will be sold; and

 

  Ÿ consists of more than one type of property and the Calculation Agent has not exercised its option to liquidate the Exchange Property, then the Calculation Agent shall adjust the Basket to include a pro rata share of each such type of Exchange Property based on the then current applicable Multiplier.

In the event Exchange Property consists of securities, those securities will, in turn, be subject to the antidilution adjustments set forth in this term sheet.

In the case of a consummated tender or exchange offer or going-private transaction involving Exchange Property of a particular type, Exchange Property will be deemed to include the amount of cash or other property paid by the offeror in the tender or exchange offer with respect to that Exchange Property

 

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(in an amount determined on the basis of the rate of exchange in that tender or exchange offer or going-private transaction). In the event of a tender or exchange offer or a going-private transaction with respect to Exchange Property in which an offeree may elect to receive cash or other property, Exchange Property will be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash.

MLPF&S as Calculation Agent will be solely responsible for determination and calculation of the Exchange Property if a Reorganization Event occurs and the amount due upon early redemption, including the determination of the cash value of any Exchange Property, if necessary, and its determinations and calculations will be conclusive absent a determination of a manifest error.

“Business Day” means any day other than a Saturday or a Sunday that is not a day on which banking institutions in The City of New York are authorized or obligated by law, regulation or executive order to close.

Alternative Dilution and Reorganization Adjustments

The Calculation Agent may elect at its discretion to not make any of the adjustments to a Multiplier or to the method of determining the amount payable on each Note described above under “—Multiplier Adjustments” and “—Reorganization Events”, but may instead make adjustments in its discretion to a Multiplier or the method of determining the amount payable on each Note that will reflect the adjustments to the extent practicable made by the Options Clearing Corporation on options contracts on the Basket Component Stocks or any successor common stock. ML&Co. will provide notice of that election to the trustee not more than two Business Days following the date that the Options Clearing Corporation publishes notice of its adjustments relating to the Basket Component Stocks and will detail in that notice the actual adjustment made to that Multiplier or to the method of determining the amount payable on each Notes.

The Basket

The Mortgage Finance Basket

The Basket is designed to allow investors to participate in the percentage changes in the prices of the Basket Component Stocks from the Starting Value to the Ending Value of the Notes. The Basket Component Stocks are listed below, and additional detail regarding each Basket Component Stock can be found in Annex A to this term sheet. Each Basket Component Stock will be assigned an initial weighting so that each Basket Component Stock represents a portion of the value of the Basket on the Pricing Date.

The Basket was developed to represent the mortgage finance industry using certain liquidity and maximum weight constraints. The Basket Component Stocks underlying the Basket were selected based on the following criteria on July 30, 2007:

 

  Ÿ Market capitalization of at least $1 billion;

 

  Ÿ At least three years of performance data;

 

  Ÿ Assuming $100 million principal amount of the Notes, for each Basket Component Stock, the 3 month trailing daily average notional volume of such stock represented by the Basket is no more than 15% of the overall average notional trading volume of that stock.

The Basket Component Stocks were given a weighting determined on July 30, 2007 based on the 3-month average daily trading volume of each Basket Component Stock, with a maximum weight of 15%.

The Underlying Companies have no obligations relating to the Notes or amounts to be paid to you, including any obligation to take the needs of ML&Co. or of holders of the Notes into consideration for any reason. The Underlying Companies will not receive any of the proceeds of the offering of the Notes and are not responsible for, and have not participated in, the offering of the Notes and are not responsible for, and will not participate in, the determination or calculation of the amount receivable by holders of the Notes.

Determination of the Multiplier for each Basket Component Stock

A fixed factor (the “Multiplier”) was determined for each Basket Component Stock based upon the weighting of that Basket Component Stock. The Multiplier for each Basket Component Stock was calculated on the Pricing Date and equals:

 

  Ÿ the weighting (as a percentage) for that Basket Component Stock, multiplied by 100; and

 

  Ÿ divided by the closing price of that Basket Component Stock on the Pricing Date and rounded to eight decimal places.

The Multipliers were calculated in this way so that the value of the Basket equals 100 on the Pricing Date. The Multipliers for each Component Stock are listed under “—Computation of the Basket” below.

Computation of the Basket

The Calculation Agent will calculate the value of the Basket by summing the products of the Closing Market Price for each Basket Component Stock on the Calculation Days and the Multiplier applicable to each Basket Component Stock. The value of the Basket will vary based on the increase or decrease in the price of each Basket Component Stock. Any increase in the price of a Basket Component Stock (assuming no change in the prices of the other Basket Component Stocks) will result in an increase in the value of the Basket. Conversely, any decrease in the price of a Basket Component Stock (assuming no change in the prices of the other Basket Component Stocks) will result in a decrease in the value of the Basket. If a Reorganization Event occurs, the composition of the Basket may be revised.

 

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For each Basket Component Stock, the symbol, the initial weighting, the initial Closing Market Price, the Multiplier and the initial contribution to the Basket value are as follows:

 

Basket Component Stock                    Bloomberg
Symbol
  

Initial

Weighting

 

Closing

Market

Price(1)

   Multiplier(2)   

Initial

Basket

Value

Contribution

Washington Mutual, Inc.

   WM    15.00%   35.81    0.41887741      15.00

Countrywide Financial Corporation

   CFC    15.00%   19.31    0.77679959      15.00

Sovereign Bancorp, Inc.

   SOV    7.51%   17.38    0.43193076        7.51

Hudson City Bancorp, Inc.

   HCBK    9.10%   13.84    0.65772384        9.10

New York Community Bancorp, Inc.

   NYB    4.90%   17.14    0.28588176        4.90

People's United Financial, Inc.

   PBCT    8.44%   17.10    0.49336910        8.44

MGIC Investment Corporation

   MTG    11.01%   32.29    0.34108246      11.01

The PMI Group, Inc.

   PMI    4.03%   29.45    0.13700487        4.03

Radian Group Inc.

   RDN    5.18%   18.48    0.28016135        5.18

Capitol Federal Financial

   CFFN    0.28%   34.22    0.00831812        0.28

Astoria Financial Corporation

   AF    1.94%   25.17    0.07722889        1.94

Washington Federal, Inc.

   WFSL    1.46%   25.37    0.05739001        1.46

MAF Bancorp, Inc.

   MAFB    1.53%   52.25    0.02924110        1.53

Indymac Bancorp, Inc.

   IMB    6.60%   22.89    0.28844715        6.60

Newalliance Bancshares, Inc.

   NAL    3.28%   14.48    0.22636075        3.28

Downey Financial Corp.

   DSL    2.77%   52.99    0.05233213        2.77

First Niagra Financial Group, Inc.

   FNFG    1.58%   13.75    0.11520096        1.58

Northwest Bancorp, Inc.

   NWSB    0.38%   27.84    0.01358159        0.38

Starting Value

              100.00

                                             

 

(1) This is the Closing Market Price of each Basket Component Stock on the Pricing Date.

 

(2) The Multiplier equals the weighting of the Basket Component Stock (as a percentage) multiplied by 100, and then divided by the closing price of that Basket Component Stock on the Pricing Date and rounded to eight decimal places.

The following graph sets forth the historical performance of the Basket in the period from December 2004 through July 2007, including the Multipliers calculated on the Pricing Date. This historical data on the Basket is not necessarily indicative of the future performance of the Basket or what the value of the Notes may be. Any historical upward or downward trend in the value of the Basket during any period set forth below is not an indication that the Basket is more or less likely to increase or decrease at any time over the term of the Notes.

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ML&Co. is not affiliated with any of the Underlying Companies. The Underlying Companies have no obligations with respect to the Notes. This term sheet relates only to the Notes and does not relate to the Basket Component Stocks or other securities of the Underlying Companies. All disclosures contained in this term sheet regarding the Underlying Companies are derived from the publicly available documents described above. Neither ML&Co. nor MLPF&S has participated in the preparation of these documents or made any due diligence inquiry with respect to the Underlying Companies in connection with the offering of the Notes. Neither ML&Co. nor MLPF&S makes any representation that the publicly available documents or any other publicly available information regarding the Underlying Companies are accurate or complete. Furthermore, there can be no assurance that all events occurring prior to the date hereof, including events that would affect the accuracy or completeness of the publicly available documents described above, that would affect the trading price of the Basket Component Stocks have been publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning the Underlying Companies could affect the value of the Basket Component Stocks and therefore the trading value of the Notes. Neither ML&Co. nor any of its affiliates make any representation to any purchaser of the Notes as to the performance of the this Basket Component Stocks.

ML&Co. or its affiliates may presently or from time to time engage in business, directly or indirectly, with the Underlying Companies including extending loans to, or making equity investments in, the Underlying Companies or providing investment banking or advisory services to the Underlying Companies, including merger and acquisition advisory services. In the course of that business, ML&Co. or its affiliates may acquire non-public information with respect to the Underlying Companies and, in addition, one or more affiliates of ML&Co. may publish research reports with respect to the Underlying Companies. Any prospective purchaser of the Notes should undertake an independent investigation of the Underlying Companies as in its judgment is appropriate to make an informed decision with respect to an investment in the Notes.

 

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Certain U.S. Federal Income Taxation Considerations

Set forth below is a summary of certain U.S. federal income tax considerations relating to an investment in the Notes. The following summary is not complete and is qualified in its entirety by the discussion under the section entitled “United States Federal Income Taxation” in the accompanying product supplement ARNB-1 and MTN prospectus supplement, which you should carefully review prior to investing in the Notes.

General. There are no statutory provisions, regulations, published rulings or judicial decisions addressing or involving the characterization and treatment, for United States federal income tax purposes, of the Notes or securities with terms substantially the same as the Notes. Accordingly, the proper United States federal income tax characterization and treatment of the Notes is uncertain. Pursuant to the terms of the Notes, ML&Co. and every holder of a Note agree (in the absence of an administrative determination, judicial ruling or other authoritative guidance to the contrary) to characterize and treat a Note for all tax purposes as a pre-paid cash-settled forward contract linked to the value of the Basket. Due to the absence of authorities that directly address instruments that are similar to the Notes, significant aspects of the United States federal income tax consequences of an investment in the Notes are not certain, and no assurance can be given that the Internal Revenue Service (the “IRS”) or the courts will agree with the characterization and tax treatment described above. Accordingly, prospective purchasers are urged to consult their own tax advisors regarding the United States federal income tax consequences of an investment in the Notes (including alternative characterizations and tax treatments of the Notes) and with respect to any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Payment on the Maturity Date. Assuming that the Notes are properly characterized and treated as pre-paid cash-settled forward contracts linked to the value of the Basket, upon the receipt of cash on the maturity date of the Notes, a U.S. Holder (as defined in the accompanying product supplement ARNB-1) will recognize gain or loss. The amount of such gain or loss will be the extent to which the amount of the cash received differs from the U.S. Holder’s tax basis in the Note. A U.S. Holder’s tax basis in a Note generally will equal the amount paid by the U.S. Holder to purchase the Note. It is uncertain whether any such gain or loss would be treated as ordinary income or loss or capital gain or loss. Absent a future clarification in current law (by an administrative determination, judicial ruling or otherwise), where required, ML&Co. intends to report any such gain or loss to the IRS in a manner consistent with the treatment of such gain or loss as capital gain or loss. If such gain or loss is treated as capital gain or loss, then any such gain or loss will be long-term capital gain or loss if the U.S. Holder has held the Note for more than one year as of the maturity date.

Sale or Exchange of the Notes. Assuming that the Notes are properly characterized and treated as pre-paid cash-settled forward contracts linked to the value of the Basket, upon a sale or exchange of a Note prior to the maturity date of the Notes, a U.S. Holder will generally recognize capital gain or loss in an amount equal to the difference between the amount realized on such sale or exchange and such U.S. Holder’s tax basis in the Note so sold or exchanged. Any such capital gain or loss will be long-term capital gain or loss if the U.S. Holder has held the Note for more than one year as of the date of such sale or exchange.

Prospective purchasers of the Notes should consult their own tax advisors concerning the tax consequences, in light of their particular circumstances, under the laws of the United States and any other taxing jurisdiction, of the purchase, ownership and disposition of the Notes. See the discussion under the section entitled “United States Federal Income Taxation” in the accompanying product supplement ARNB-1.

Experts

The consolidated financial statements, the related financial statement schedule, and management’s report on the effectiveness of internal control over financial reporting incorporated in this term sheet by reference from ML&Co.’s Annual Report on Form 10-K for the year ended December 29, 2006 have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference (which reports (1) express an unqualified opinion on the consolidated financial statements and the related financial statement schedule and include an explanatory paragraph regarding the change in accounting method in 2006 for share-based payments to conform to Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment, (2) express an unqualified opinion on management’s assessment regarding the effectiveness of internal control over financial reporting, and (3) express an unqualified opinion on the effectiveness of internal control over financial reporting), and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

With respect to the unaudited condensed consolidated interim financial information for the three-month periods ended March 30, 2007 and March 31, 2006, and the three-month and six-month periods ended June 29, 2007 and June 30, 2006 which are incorporated herein by reference, Deloitte & Touche LLP, an independent registered public accounting firm, have applied limited procedures in accordance with the standards of the Public Company Accounting Oversight Board (United States) for a review of such information. However, as stated in their reports included in ML&Co.’s Quarterly Reports on Form 10-Q for the quarters ended March 30, 2007 and June 29, 2007 (which reports include an explanatory paragraph regarding the adoption of Statement of Financial Accounting Standards No. 157, “Fair Value Measurement”, Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115,” and FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109.) and incorporated by reference herein, they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Deloitte & Touche LLP are not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their reports on the unaudited condensed consolidated interim financial information because those reports are not “reports” or a “part” of the registration statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act.

 

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Additional Note Terms

You should read this term sheet, together with the documents listed below (collectively, the “Note Prospectus”), which together contain the terms of the Notes and supersede all prior or contemporaneous oral statements as well as any other written materials. You should carefully consider, among other things, the matters set forth under “Risk Factors” in the sections indicated on the cover of this term sheet. The Notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.

You may access the following documents on the SEC Website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC Website):

 

  Ÿ Product supplement ARNB-1 dated June 14, 2007:

 

     http://www.sec.gov/Archives/edgar/data/65100/000119312507135812/d424b2.htm

 

  Ÿ MTN prospectus supplement, dated March 31, 2006:

 

     http://www.sec.gov/Archives/edgar/data/65100/000119312506070946/d424b5.htm

 

  Ÿ General prospectus supplement dated March 31, 2006:

 

     http://www.sec.gov/Archives/edgar/data/65100/000119312506070973/d424b5.htm

 

  Ÿ Prospectus dated March 31, 2006:

 

     http://www.sec.gov/Archives/edgar/data/65100/000119312506070817/ds3asr.htm

Our Central Index Key, or CIK, on the SEC Website is 65100. References in this term sheet to “ML&Co.”, “we”, “us” and “our” are to Merrill Lynch & Co., Inc., and references to “MLPF&S” are to Merrill Lynch, Pierce, Fenner & Smith Incorporated.

 

ML&Co. has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (the “SEC”) for the offering to which this term sheet relates. Before you invest, you should read the prospectus in that registration statement, and the other documents relating to this offering that ML&Co. has filed with the SEC for more complete information about ML&Co. and this offering. You may get these documents without cost by visiting EDGAR on the SEC Website at www.sec.gov. Alternatively, ML&Co., any agent or any dealer participating in this offering, will arrange to send you the Note Prospectus if you so request by calling toll-free 1-866-500-5408.

 

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ANNEX A

This annex contains tables which provide a brief synopsis of the business of each of the Underlying Companies as well as the split-adjusted month-end closing price in U.S. dollars for each Basket Component Stock in each month from January 2002 through July 2007 (or from the first month-end for which that data is available). The historical prices of the Basket Component Stocks are not indicative of the future performance of the Basket Component Stocks. The following information, with respect to the business of each Underlying Company, has been derived from publicly available documents published by that company. Because the common stock of each of these companies is registered under the Securities Exchange Act of 1934, those companies are required to file periodically financial and other information specified by the Securities Exchange Commission (the “SEC”). For more information about the Underlying Companies, information provided to or filed with the SEC by these companies can be inspected at the SEC’s public reference facilities or accessed through the SEC’s web site at http://www.sec.gov.

ASTORIA FINANCIAL CORPORATION

Astoria Financial Corporation accepts retail deposits from the general public and invests those deposits, together with funds generated from operations, principal repayments on loans and securities and borrowings, primarily in one-to-four family mortgage loans, multi-family mortgage loans, commercial real estate loans and mortgage-backed securities.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January     January   17.30   January   26.31   January   25.09   January   28.80   January   29.59
February     February   16.75   February   26.89   February   25.05   February   28.67   February   28.27
March     March   15.49   March   25.35   March   25.30   March   30.96   March   26.59
April     April   16.68   April   22.95   April   26.51   April   31.32   April   26.56
May   23.26   May   17.63   May   25.51   May   27.54   May   30.26   May   26.66
June   21.37   June   18.62   June   24.39   June   28.47   June   30.45   June   25.04
July   22.43   July   18.76   July   22.77   July   27.94   July   29.75   July   23.55
August   22.32   August   21.43   August   24.23   August   27.93   August   30.70    
September   16.27   September   20.60   September   23.66   September   26.42   September   30.82    
October   17.45   October   23.09   October   26.06   October   27.95   October   29.01    
November   17.52   November   24.92   November   27.67   November   28.28   November   29.90    
December   18.10   December   24.80   December   26.65   December   29.40   December   30.16    

CAPITOL FEDERAL FINANCIAL

Capitol Federal Financial accepts retail deposits from the general public and invests those funds primarily in permanent loans secured by first mortgages on owner-occupied, one-to-four family residences. The company also originates consumer loans, loans secured by first mortgages on nonowner-occupied one-to-four family residences, permanent and construction loans secured by one-to-four family residences, commercial real estate loans and multi-family real estate loans.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   22.25   January   31.75   January   38.25   January   35.99   January   32.10   January   39.04
February   23.09   February   30.72   February   36.90   February   36.47   February   32.96   February   37.45
March   22.69   March   29.98   March   35.90   March   34.64   March   32.30   March   37.81
April   25.48   April   31.15   April   32.23   April   33.95   April   33.70   April   38.62
May   27.06   May   30.13   May   31.37   May   33.12   May   32.57   May   38.49
June   26.08   June   28.11   June   29.90   June   34.48   June   34.29   June   36.92
July   26.41   July   30.00   July   31.62   July   36.00   July   34.74   July   32.72
August   25.47   August   28.34   August   33.80   August   33.76   August   33.94    
September   22.15   September   29.36   September   32.18   September   34.22   September   35.56    
October   23.49   October   37.00   October   33.98   October   34.88   October   37.90    
November   27.51   November   34.73   November   35.28   November   34.14   November   37.28    
December   28.80   December   36.06   December   36.00   December   32.94   December   38.42    

 

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COUNTRYWIDE FINANCIAL CORPORATION

Countrywide Financial Corporation is a holding company which, through its subsidiaries, is engaged in mortgage lending and other real estate finance-related businesses, including mortgage banking, banking and mortgage warehouse lending, dealing in securities and insurance underwriting.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January     9.94   January   13.79   January   27.85   January   37.00   January   33.44   January   43.48
February   10.26   February   13.35   February   30.54   February   34.75   February   34.48   February   38.28
March   11.19   March   14.38   March   31.97   March   32.46   March   36.70   March   33.64
April   11.68   April   16.90   April   29.65   April   36.19   April   40.66   April   37.08
May   12.33   May   18.41   May   32.25   May   37.17   May   38.28   May   38.94
June   12.06   June   17.39   June   35.13   June   38.61   June   38.08   June   36.35
July   12.70   July   16.70   July   36.05   July   36.00   July   35.83   July   28.17
August   13.12   August   16.96   August   35.55   August   33.79   August   33.80    
September   11.79   September   19.57   September   39.39   September   32.98   September   35.04    
October   12.58   October   26.28   October   31.93   October   31.77   October   38.12    
November   12.33   November   26.40   November   33.21   November   34.81   November   39.72    
December   12.91   December   25.28   December   37.01   December   34.19   December   42.45    

DOWNEY FINANCIAL CORP.

Downey Financial Corp. focuses primarily on banking activities such as accepting funds from the general public and institutions and obtaining borrowings, originating and investing in loans, primarily residential real estate mortgage loans, investment securities and mortgage-backed securities and originating and selling loans to investors in the secondary markets. Downey is also involved in real estate investments.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   46.00   January   41.10   January   51.43   January   63.80   January   65.48   January   71.54
February   47.48   February   40.15   February   53.83   February   62.65   February   63.55   February   65.54
March   45.60   March   39.41   March   52.90   March   61.53   March   67.30   March   64.54
April   53.12   April   43.90   April   48.25   April   64.73   April   71.78   April   66.95
May   54.49   May   43.90   May   52.90   May   75.02   May   68.10   May   72.79
June   47.30   June   41.30   June   53.25   June   73.20   June   67.85   June   65.98
July   42.57   July   41.42   July   53.75   July   77.44   July   66.35   July   53.19
August   41.42   August   42.27   August   53.87   August   63.38   August   61.39    
September   34.25   September   46.73   September   54.96   September   60.90   September   66.54    
October   38.70   October   45.90   October   55.26   October   60.95   October   68.88    
November   39.51   November   48.30   November   57.74   November   64.70   November   72.80    
December   39.00   December   49.30   December   57.00   December   68.39   December   72.58    

 

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FIRST NIAGARA FINANCIAL GROUP, INC.

First Niagara Financial Group, Inc. provides retail and commercial banking services including residential and commercial real estate loans, commercial business loans and leases, consumer loans, and consumer and commercial deposit products. Additionally, the company offers risk management, wealth management and employee benefit administration services.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January     7.17   January   11.60   January   14.73   January   13.65   January   13.80   January   14.49
February     7.06   February   11.16   February   14.58   February   13.69   February   14.09   February   14.20
March     6.74   March   11.75   March   13.65   March   13.21   March   14.66   March   13.91
April     8.41   April   12.15   April   12.60   April   12.54   April   14.00   April   13.60
May     9.80   May   13.68   May   12.45   May   13.02   May   14.09   May   13.72
June   10.73   June   13.96   June   12.00   June   14.58   June   14.02   June   13.10
July   10.82   July   16.40   July   12.19   July   14.73   July   14.63   July   12.86
August   11.60   August   15.03   August   12.59   August   14.17   August   14.96    
September   12.21   September   15.10   September   13.38   September   14.44   September   14.58    
October   11.65   October   14.29   October   13.94   October   14.73   October   14.32    
November   11.79   November   15.19   November   14.44   November   14.49   November   14.37    
December   10.10   December   14.91   December   13.95   December   14.47   December   14.86    

HUDSON CITY BANCORP, INC.

Hudson City Bancorp, Inc. is a community, and consumer, oriented retail savings bank offering traditional deposit products, residential real estate mortgage loans and consumer loans. In addition, the company purchases mortgages, mortgage-backed securities, securities issued by the U.S. government and government-sponsored agencies and other investments permitted by applicable laws and regulations.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   4.76   January     5.98   January   12.31   January   10.97   January   12.42   January   13.77
February   4.94   February     5.92   February   12.12   February   11.60   February   12.91   February   13.40
March   5.06   March     6.31   March   11.80   March   11.40   March   13.29   March   13.68
April   5.86   April     7.23   April   10.54   April   10.35   April   13.41   April   13.32
May   6.11   May     7.91   May   11.16   May   10.75   May   13.69   May   13.19
June   6.16   June     7.98   June   10.43   June   11.41   June   13.33   June   12.22
July   5.75   July     8.49   July   10.81   July   11.83   July   12.97   July   12.22
August   5.78   August     9.03   August   10.68   August   12.50   August   13.06    
September   5.06   September     9.62   September   11.15   September   11.90   September   13.25    
October   5.82   October   10.77   October   11.40   October   11.84   October   13.73    
November   5.99   November   11.27   November   12.53   November   11.91   November   13.27    
December   5.81   December   11.91   December   11.48   December   12.12   December   13.88    

 

Accelerated Return Bear Market Notes   TS-16


LOGO

INDYMAC BANCORP, INC.

Indymac Bancorp, Inc. operates as a hybrid thrift/mortgage banker, providing cost-efficient financing for the acquisition, development, and improvement of single-family homes. Indymac also provides financing secured by single-family homes and other banking products to facilitate consumers’ personal financial goals.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   23.40   January   19.57   January   31.14   January   36.96   January   40.86   January   38.89
February   24.58   February   19.10   February   35.20   February   35.99   February   38.82   February   34.33
March   24.70   March   19.45   March   36.29   March   34.00   March   40.93   March   32.05
April   25.25   April   22.28   April   32.16   April   38.48   April   48.32   April   30.24
May   23.13   May   25.70   May   32.90   May   41.15   May   45.90   May   33.58
June   22.68   June   25.42   June   31.60   June   40.73   June   45.85   June   29.17
July   22.05   July   24.34   July   33.22   July   43.61   July   42.25   July   22.00
August   22.80   August   23.06   August   34.50   August   39.83   August   39.10    
September   19.27   September   23.17   September   36.20   September   39.58   September   41.16    
October   18.64   October   29.40   October   32.26   October   37.33   October   45.45    
November   18.15   November   29.60   November   32.49   November   38.28   November   45.95    
December   18.49   December   29.79   December   34.45   December   39.02   December   45.16    

MAF BANCORP, INC.

MAF Bancorp, Inc. offers checking, savings and other deposit accounts as well as investment services and securities brokerage, general insurance services and other financial services targeted to individuals, families and small to medium-sized businesses in their primary market areas.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   30.55   January   34.95   January   43.05   January   44.16   January   42.99   January   44.94
February   31.99   February   34.10   February   44.45   February   43.59   February   42.86   February   44.25
March   35.25   March   33.65   March   43.46   March   41.54   March   43.77   March   41.34
April   37.06   April   33.76   April   40.85   April   40.38   April   44.38   April   40.15
May   39.25   May   36.94   May   44.05   May   42.56   May   43.29   May   53.88
June   37.60   June   37.07   June   42.68   June   42.63   June   42.84   June   54.26
July   34.80   July   40.00   July   40.15   July   44.11   July   41.00   July   52.52
August   35.73   August   38.20   August   41.83   August   42.93   August   41.27    
September   30.90   September   38.20   September   43.13   September   41.00   September   41.29    
October   32.49   October   41.92   October   42.87   October   41.54   October   43.09    
November   34.46   November   43.91   November   45.90   November   42.57   November   43.99    
December   33.93   December   41.90   December   44.82   December   41.38   December   44.69    

 

Accelerated Return Bear Market Notes   TS-17


LOGO

MGIC INVESTMENT CORPORATION

MGIC Investment Corporation is a provider of private mortgage insurance in the United States to the home mortgage lending industry.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   67.00   January   43.13   January   68.94   January   63.90   January   66.01   January   61.72
February   67.12   February   39.46   February   66.18   February   62.74   February   63.75   February   60.35
March   68.43   March   39.27   March   64.23   March   61.67   March   66.63   March   58.92
April   71.36   April   45.46   April   73.62   April   59.00   April   70.70   April   61.61
May   72.78   May   54.02   May   73.00   May   61.34   May   65.87   May   65.00
June   67.80   June   46.64   June   75.86   June   65.22   June   65.00   June   56.86
July   63.00   July   55.50   July   71.00   July   68.58   July   56.91   July   38.66
August   60.21   August   56.37   August   68.27   August   62.43   August   57.87    
September   40.83   September   52.07   September   66.55   September   64.20   September   59.97    
October   41.96   October   51.31   October   64.31   October   59.24   October   58.76    
November   46.67   November   52.95   November   68.00   November   65.10   November   57.96    
December   41.30   December   56.94   December   68.91   December   65.82   December   62.54    

NEW YORK COMMUNITY BANCORP, INC.

New York Community Bancorp, Inc. offers traditional and non-traditional products and services, and provides small and mid-size businesses, professional associations, and government agencies with various business services, including installment loans, revolving lines of credit, and cash management services.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January     January   16.61   January   30.94   January   17.83   January   17.06   January   16.89
February     February   16.09   February   35.12   February   18.36   February   16.87   February   16.74
March     March   16.76   March   34.28   March   18.16   March   17.52   March   17.59
April     April   19.53   April   25.07   April   17.70   April   17.21   April   17.46
May     May   20.78   May   23.42   May   18.22   May   16.66   May   17.48
June     June   21.82   June   19.63   June   18.12   June   16.51   June   17.02
July     July   22.43   July   19.24   July   18.36   July   16.33   July   16.23
August     August   23.07   August   21.35   August   17.58   August   16.41    
September     September   23.63   September   20.54   September   16.40   September   16.38    
October     October   27.15   October   18.36   October   16.17   October   16.35    
November     November   29.14   November   19.78   November   16.65   November   16.16    
December   16.25   December   28.54   December   20.57   December   16.52   December   16.10    

 

Accelerated Return Bear Market Notes   TS-18


LOGO

NEWALLIANCE BANCSHARES, INC.

Newalliance Bancshares, Inc.’s products include both loan portfolios, in particular through growth in commercial real estate, commercial business, residential real estate and home equity loans using both organic and acquisition strategies, and wealth management services, including trust and the sale of insurance and investment products.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January     January     January     January   14.87   January   14.56   January   16.00
February     February     February     February   14.30   February   14.19   February   15.80
March     March     March     March   14.00   March   14.43   March   16.21
April     April     April     April   13.10   April   14.44   April   15.61
May     May     May     May   13.79   May   14.07   May   16.12
June     June     June     June   14.05   June   14.31   June   14.72
July     July     July     July   14.45   July   14.11   July   13.51
August     August     August     August   14.55   August   14.58    
September     September     September     September   14.64   September   14.65    
October     October     October     October   14.42   October   15.48    
November     November     November     November   14.94   November   16.35    
December     December     December   15.30   December   14.54   December   16.40    

NORTHWEST BANCORP, INC.

Northwest Bancorp, Inc. engages in lending activities focused both on loans secured by first mortgages on owner-occupied, one-to-four family residences and on consumer and commercial loans.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   11.49   January   15.18   January   22.48   January   22.48   January   22.14   January   26.39
February   11.80   February   15.14   February   25.34   February   21.45   February   22.72   February   26.26
March   11.85   March   16.17   March   25.57   March   21.41   March   24.76   March   27.09
April   13.30   April   16.30   April   20.63   April   20.57   April   24.92   April   27.26
May   14.59   May   16.02   May   22.24   May   19.90   May   25.04   May   28.18
June   13.21   June   16.00   June   22.90   June   21.26   June   26.50   June   26.14
July   12.18   July   16.51   July   20.94   July   21.40   July   25.25   July   26.26
August   12.50   August   16.53   August   21.46   August   22.70   August   26.60    
September   12.73   September   18.37   September   22.67   September   21.25   September   25.50    
October   13.70   October   20.83   October   23.80   October   22.63   October   26.75    
November   15.24   November   21.93   November   25.87   November   22.13   November   27.49    
December   14.79   December   21.36   December   25.09   December   21.26   December   27.46    

 

Accelerated Return Bear Market Notes   TS-19


LOGO

PEOPLE’S UNITED FINANCIAL, INC.

People’s United Financial, Inc. is a newly-formed Delaware corporation formed for the purpose of effectuating the conversion of People’s Bank and People’s Mutual Holdings from the mutual holding company structure to the stock holding company structure.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   4.64   January   5.39   January     8.02   January   11.76   January   14.61   January   21.42
February   4.85   February   5.45   February     9.51   February   12.13   February   14.73   February   21.14
March   5.22   March   5.34   March     9.84   March   13.00   March   15.60   March   21.14
April   5.63   April   5.58   April     8.93   April   13.18   April   15.60   April   19.91
May   5.74   May   5.97   May   10.15   May   13.48   May   15.68   May   20.19
June   5.53   June   6.14   June     9.89   June   14.40   June   15.64   June   17.73
July   5.38   July   6.03   July   10.00   July   14.91   July   17.09   July   16.12
August   5.17   August   6.33   August   10.47   August   14.04   August   17.21    
September   4.75   September   6.34   September   11.34   September   13.80   September   18.86    
October   5.21   October   6.93   October   11.90   October   15.33   October   19.38    
November   5.38   November   6.89   November   12.62   November   14.82   November   21.23    
December   5.32   December   6.90   December   12.35   December   14.79   December   21.25    

THE PMI GROUP, INC.

The PMI Group, Inc. is an international provider of credit enhancement as well as other products that promote homeownership and facilitate mortgage transactions in the capital markets. Through its subsidiaries and unconsolidated strategic investments, PMI offers residential mortgage and credit enhancement products domestically and internationally, financial guaranty insurance, and financial guaranty reinsurance.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   35.28   January   28.75   January   38.62   January   39.77   January   43.23   January   47.82
February   35.43   February   27.10   February   39.60   February   40.25   February   43.30   February   46.87
March   37.88   March   25.55   March   37.36   March   38.01   March   45.92   March   45.22
April   40.56   April   30.82   April   43.03   April   35.16   April   46.15   April   48.47
May   42.80   May   30.66   May   43.17   May   37.80   May   45.50   May   49.44
June   38.20   June   26.84   June   43.52   June   38.98   June   44.58   June   44.67
July   35.52   July   33.13   July   41.23   July   40.95   July   42.46   July   34.07
August   33.90   August   35.38   August   41.53   August   40.46   August   43.24    
September   27.21   September   33.75   September   40.58   September   39.87   September   43.81    
October   29.80   October   38.23   October   38.82   October   39.88   October   42.65    
November   32.59   November   37.23   November   41.18   November   40.60   November   43.31    
December   30.04   December   37.23   December   41.75   December   41.07   December   47.17    

 

Accelerated Return Bear Market Notes   TS-20


LOGO

RADIAN GROUP INC.

Radian Group Inc. is a global credit risk management company and a provider of credit enhancement to the global financial and capital markets, primarily through credit insurance products. Its subsidiaries provide products and services through three primary business lines: mortgage insurance, financial guaranty and other financial services.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   44.90   January   36.90   January   46.56   January   47.94   January   57.23   January   60.22
February   46.67   February   34.87   February   43.70   February   48.33   February   56.75   February   57.45
March   49.08   March   33.38   March   42.60   March   47.74   March   60.25   March   54.88
April   51.90   April   39.70   April   46.51   April   44.43   April   62.72   April   58.11
May   54.30   May   40.27   May   46.00   May   45.88   May   61.12   May   61.90
June   48.85   June   36.65   June   47.90   June   47.22   June   61.78   June   54.00
July   45.80   July   46.81   July   46.02   July   51.58   July   61.53   July   33.71
August   43.46   August   47.59   August   44.30   August   51.18   August   59.88    
September   32.66   September   44.40   September   46.23   September   53.10   September   60.00    
October   35.27   October   52.90   October   47.93   October   52.10   October   53.30    
November   40.90   November   49.35   November   51.25   November   56.56   November   53.21    
December   37.15   December   48.75   December   53.24   December   58.59   December   53.91    

SOVEREIGN BANCORP, INC.

Sovereign Bancorp, Inc.’s primary business consists of accepting deposits from its network of community banking offices, and originating small business and middle market commercial loans, multi-family loans, residential mortgage loans, home equity lines of credit, and auto and other consumer loans in the communities served by those offices.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   12.21   January   12.97   January   21.53   January   21.66   January   20.76   January   24.65
February   12.07   February   12.93   February   21.10   February   21.85   February   19.84   February   25.27
March   13.38   March   13.19   March   20.40   March   21.11   March   20.87   March   25.44
April   13.74   April   14.71   April   19.03   April   19.59   April   21.11   April   24.27
May   14.74   May   15.54   May   20.71   May   21.26   May   21.24   May   23.24
June   14.24   June   14.91   June   21.05   June   21.28   June   20.31   June   21.14
July   13.80   July   17.09   July   20.73   July   22.85   July   20.64   July   19.14
August   14.59   August   18.74   August   20.82   August   22.21   August   20.84    
September   12.29   September   17.67   September   20.78   September   20.99   September   21.51    
October   13.41   October   19.82   October   20.62   October   20.54   October   23.86    
November   13.16   November   21.58   November   20.81   November   20.82   November   24.98    
December   13.38   December   22.62   December   21.48   December   20.59   December   25.39    

 

Accelerated Return Bear Market Notes   TS-21


LOGO

WASHINGTON MUTUAL, INC.

Washington Mutual, Inc. is a consumer and small business banking company that has expanded its retail banking and lending operations organically and through a series of acquisitions of retail banking institutions and mortgage companies. The company’s earnings are primarily driven by lending to consumers and small businesses and by deposit taking activities which generate net interest income, and by activities that generate noninterest income, including the sale and servicing of loans and the provision of fee-based services to its customers.

 

2002   Closing
Price
  2003   Closing
Price
  2004   Closing
Price
  2005   Closing
Price
  2006   Closing
Price
  2007   Closing
Price
January   34.32   January   34.45   January   44.30   January   40.35   January   42.32   January   44.59
February   32.53   February   34.53   February   44.94   February   41.96   February   42.70   February   43.08
March   33.13   March   35.27   March   42.71   March   39.50   March   42.62   March   40.38
April   37.73   April   39.50   April   39.39   April   41.32   April   45.06   April   41.98
May   38.87   May   40.78   May   43.68   May   41.30   May   45.91   May   43.72
June   37.11   June   41.30   June   38.64   June   40.69   June   45.58   June   42.64
July   37.41   July   39.48   July   38.80   July   42.48   July   44.70   July   37.53
August   37.81   August   38.98   August   38.83   August   41.58   August   41.89    
September   31.47   September   39.37   September   39.08   September   39.22   September   43.47    
October   35.76   October   43.75   October   38.71   October   39.60   October   42.30    
November   35.98   November   45.81   November   40.71   November   41.19   November   43.68    
December   34.53   December   40.12   December   42.28   December   43.50   December   45.49    

 

Accelerated Return Bear Market Notes   TS-22