Filed Pursuant to Rule 424(b)(3)

Registration no. 333-132911

 

1,330,000 Units    Pricing Date        February 27, 2008
Merrill Lynch Long Short NotesSM    Settlement Date        March 5, 2008
Linked to the Consumer Staples Select Sector/Consumer    Maturity Date        May 5, 2009

Discretionary Select Sector Long Short Index—Series XVIII

Due May 5, 2009

$10 principal amount per unit

Term Sheet No. 2933

  

CUSIP No.

       59022Y345

 

Merrill Lynch & Co., Inc.
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•       Exposure to changes in the level of a composite index consisting of a leveraged long position in the Consumer Staples Select Sector Index and a short position in the Consumer Discretionary Select Sector Index (the “Composite Index”)

 

•       A maturity of 14 months

 

•       1-to-1 downside exposure to decreases in the level of the Composite Index

 

•       Subject to early redemption if the closing level of the Composite Index is equal to or less than 50

 

•       No listing on any securities exchange

 

•       No periodic interest payments

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 LS-1.

In connection with this offering, each of Merrill Lynch, Pierce, Fenner & Smith Incorporated and its broker-dealer affiliate First Republic Securities Company, LLC is acting in its capacity as a principal.

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    $13,300,000
Underwriting discount (1)    $.20    $266,000
Proceeds, before expenses, to Merrill Lynch & Co., Inc.    $9.80    $13,034,000

 

  (1) The public offering price and underwriting discount for any purchase of 500,000 or more units in a single transaction by an individual investor will be $9.95 per unit and $.15 per unit, respectively.

“Merrill Lynch Long Short NotesSM” is a registered service mark of Merrill Lynch & Co., Inc.

“Standard & Poor’s®”, “Standard & Poor’s 500®”, “S&P 500®” and “S&P®” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch & Co., Inc. is an authorized sublicensee.

Merrill Lynch & Co.

February 27, 2008


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Summary

The Merrill Lynch Long Short NotesSM Linked to the Consumer Staples Select Sector/Consumer Discretionary Select Sector Long Short Index—Series XVIII due May 5, 2009 (the “Notes”) are senior, unsecured debt securities of Merrill Lynch & Co., Inc. (“ML&Co.”) designed for investors seeking exposure to a leveraged long position in the Consumer Staples Select Sector Index and a short position in the Consumer Discretionary Select Sector Index.

The Consumer Staples Select Sector/Consumer Discretionary Select Sector Long Short Index—Series XVIII (the “Composite Index”) will reflect a leveraged long position in the Consumer Staples Select Sector Index (the “Long Component”) equal to 150% of the initial level of the Composite Index, and a short position in the Consumer Discretionary Select Sector Index (the “Short Component”, and each Long Component or Short Component, an “Index Component”) equal to 50% of the initial level of the Composite Index. The Composite Index will not take into account the dividends paid on any of the stocks included in the Long Component or the Short Component.

Investors will receive a return on their investment if the level of the Composite Index increases from the Starting Value of the Composite Index, determined on February 27, 2008, the date the Notes were priced for initial sale to the public (the “Pricing Date”), to the Ending Value of the Composite Index, determined on the Calculation Days shortly prior to the maturity date of the Notes, unless redeemed by us as indicated below. Investors must be willing to forego interest payments on the Notes and be willing to accept a repayment that may be less, and potentially significantly less, than the original public offering price of the Notes.

 

Terms of the Notes    Determining Payment for the Notes
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Merrill Lynch Long Short NotesSM   TS-2


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Hypothetical Payments at Maturity

Examples

Set forth below are six examples of Redemption Amount calculations, assuming:

 

  Ÿ  

A Starting Value for the Composite Index of 100 based upon the closing levels of the Consumer Staples Select Sector Index (the “Long Component”) and the Consumer Discretionary Select Sector Index (the “Short Component”) on the Pricing Date.

 

  Ÿ  

Multipliers based upon these closing levels. The Multipliers and related calculations are described in more detail in the section entitled “The Composite Index” in product supplement LS-1. You are encouraged to read that section of the product supplement in order to fully understand the examples below.

 

  Ÿ  

The closing level of the Composite Index was not equal to or less than 50 on any date before the first scheduled Calculation Day of the Calculation Period. Therefore, the Notes were not subject to early redemption.

For each Index Component, the following table sets forth the Starting Value, the Multiplier and the hypothetical closing level used to calculate the level of the Composite Index and the Redemption Amount in each of the examples below.

 

     Starting
Value
   Multiplier    Hypothetical Closing Levels
Index          Example 1    Example 2    Example 3    Example 4    Example 5    Example 6

Consumer Staples Select Sector Index

   278.33    0.53892861    292.25    292.25    292.25    231.01    264.01    264.01

Consumer Discretionary Select Sector Index

   328.73    -0.15210051    345.17    384.61    312.29    345.17    312.29    272.85
                                       

Composite Index

   100.00       105.00    99.00    110.00    72.00    95.00    101.00
                                     

Redemption Amount per unit

         $10.50    $9.90    $11.00    $7.20    $9.50    $10.10

Example 1—The level of each Index Component has increased by 5%:

 

Redemption Amount (per unit)= $10 ×  

(

 

 

105

 

)

 

  =  $10.50     
    100      

Example 2—The level of the Long Component has increased by 5% and the level of the Short Component has increased by 17%:

 

Redemption Amount (per unit)= $10 ×  

(

 

 

99

 

)

 

  =  $9.90     
    100      

Example 3—The level of the Long Component has increased by 5% and the level of the Short Component has decreased by 5%:

 

Redemption Amount (per unit)= $10 ×  

(

 

 

110

 

)

 

  =  $11.00     
    100      

Example 4—The level of the Long Component has decreased by 17% and the level of the Short Component has increased by 5%:

 

Redemption Amount (per unit)= $10 ×  

(

 

 

72

 

)

 

  =  $7.20     
    100      

Example 5—The level of each Index Component has decreased by 5%:

 

Redemption Amount (per unit)= $10 ×  

(

 

 

95

 

)

 

  =  $9.50     
    100      

Example 6—The level of the Long Component has decreased by 5% and the level of the Short Component has decreased by 17%:

 

Redemption Amount (per unit)= $10 ×  

(

 

 

101

 

)

 

  =  $10.10     
    100      

 

Merrill Lynch Long Short NotesSM   TS-3


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

 

  Ÿ  

the percentage change from the Starting Value to the hypothetical Ending Value;

 

  Ÿ  

the total amount payable on the maturity date for each Note;

 

  Ÿ  

the pretax annualized rate of return to holders of the Notes; and

 

  Ÿ  

the pretax annualized rate of return on an investment in the applicable long and short positions in the stocks underlying the Index Components (the “Component Stocks”), which includes an assumed aggregate dividend yield for those stocks, as more fully described in the notes to the table below.

This table assumes that the closing level of the Composite Index is not equal to or less than 50 on any date before the first scheduled Calculation Day of the Calculation Period. Therefore, the Notes were not subject to early redemption.

 

Hypothetical

Ending Value

  

Percentage change

from the Starting Value

to the hypothetical
Ending Value

  

Total amount

payable on the
maturity date

per unit

  

Pretax

annualized

rate of

return on

the Notes (1)(2)

  

Pretax

annualized rate

of return of the

Component Stocks (1)(2)(3)

  60.00    -40.00%      $6.00    -39.32%    -32.21%
  70.00    -30.00%      $7.00    -28.35%    -23.53%
  80.00    -20.00%      $8.00    -18.24%    -14.81%
  90.00    -10.00%      $9.00      -8.83%      -6.03%
     100.00 (4)        0.00%    $10.00        0.00%        2.80%
110.00      10.00%    $11.00        8.34%      11.71%
120.00      20.00%    $12.00      16.25%      20.70%
130.00      30.00%    $13.00      23.80%      29.76%
140.00      40.00%    $14.00      31.02%      38.92%

 

(1) The annualized rates of return are calculated on a semiannual bond equivalent basis.

 

(2) These yields assume an investment term from March 5, 2008 to May 5, 2009, the term of the Notes.

 

(3) This yield assumes:

 

  (a) a percentage change in the aggregate price of the long stock positions and the short stock positions which results in an aggregate percentage change in those positions that equals the percentage change in the Composite Index from the Starting Value to the relevant hypothetical Ending Value;

 

  (b) a constant dividend yield of 2.43% for the stocks included in the Consumer Staples Select Sector Index and 1.75% for the stocks included in the Consumer Discretionary Select Sector Index, paid quarterly from the date of initial delivery of the Notes, applied to the level of the Index Components (dividends paid on stocks included in the Long Component will increase this rate of return while dividends paid on stocks included in the Short Component will decrease this rate of return) at the end of each quarter assuming the aggregate dividends payable increases or decreases linearly from the level of such Index Component on the Pricing Date to the percentage change required to arrive at the applicable hypothetical Ending Value; and

 

  (c) no transaction fees or expenses or margin charges.

 

(4) This is the Starting 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 the term of your investment.

 

Merrill Lynch Long Short NotesSM   TS-4


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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, which could be negative, may be lower than the yield on other debt securities of comparable maturity.

 

  Ÿ  

You must rely on your own evaluation of the merits of an investment linked to the Composite Index.

 

  Ÿ  

Your return will not reflect the return of owning the Component Stocks.

 

  Ÿ  

The long and short positions of the Index Components will have a substantial effect on the level of the Composite Index, and in turn, the value of the Notes.

 

  Ÿ  

In seeking to provide investors with what we believe to be commercially reasonable terms for the Notes while providing MLPF&S with compensation for its services, we have considered the costs of developing, hedging and distributing the Notes. If a trading market develops for the Notes (and such a market may not develop), these costs are expected to affect the market price you may receive or be quoted for your Notes on a date prior to the stated maturity date.

 

  Ÿ  

The publisher of the Index Components may adjust such Index Components in a way that affects their levels, and the publisher has no obligation to consider your interests.

 

  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  

Amounts payable on the Notes may be limited by state law.

 

  Ÿ  

Purchases and sales by us and our affiliates may affect your return on the Notes.

 

  Ÿ  

Potential conflicts of interest could arise.

 

  Ÿ  

Tax consequences are uncertain.

Additional Risk Factor

MLPF&S, acting as the Index Compilation Agent, will determine the composition of the Select Sector Indices after consultation with Standard & Poor’s. The stocks included in each Select Sector Index, including the Consumer Staples Select Sector Index and the Consumer Discretionary Select Sector Index, are selected by MLPF&S (the “Index Compilation Agent”). The Index Compilation Agent, after consultation with Standard & Poor’s (“S&P”), assigns a company’s stock to a particular Select Sector Index on the basis of the company’s sales and earnings composition and the sensitivity of the company’s stock price and business results to the common factors that affect other companies in each Select Sector Index. S&P has sole control over the removal of stocks from the S&P 500 Index and the selection of replacement stocks to be added to the S&P 500 Index. However, S&P plays only a consulting role in the Select Sector Index assignment of the S&P 500 Index component stocks, which is the sole responsibility of the Index Compilation Agent. The Index Compilation Agent will compile the Select Sector Indices without regard to the Notes. The Index Compilation Agent has no obligation to take the interests of the Note holders into consideration in compiling the Select Sector Indices, including when compiling the Consumer Staples Select Sector Index and the Consumer Discretionary Select Sector Index.

Investor Considerations

 

You may wish to consider an investment in the Notes if:

 

Ÿ  

You anticipate that the level of the Consumer Staples Select Sector Index will appreciate, and that the level of the Consumer Discretionary Select Sector Index will depreciate, from the time of calculating the Starting Value to the time of calculating the Ending Value.

 

Ÿ  

You accept that your investment may result in a loss, which could be significant, if the level of the Composite Index decreases from the Starting Value to the Ending 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 Index Components with no expectation of dividends or other benefits or owning the Component Stocks.

 

Ÿ  

You are willing to accept that a trading market for the Notes is not expected to develop for the Notes.

 

The Notes may not be appropriate investments for you if:

 

Ÿ  

You anticipate that the level of the Composite Index will depreciate from the Starting Value to the Ending Value or that the level of the Composite Index will not appreciate 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 interest payments or other current income on your investment.

 

Ÿ  

You want to receive dividends or other distributions paid on the 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.


 

 

Merrill Lynch Long Short NotesSM   TS-5


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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.

If you place an order to purchase these offered securities, you are consenting to each of MLPF&S and its broker-dealer affiliate First Republic Securities Company, LLC acting as a principal in effecting the transaction for your account. MLPF&S is acting as an underwriter and/or selling agent for this offering and will receive underwriting compensation from the issuer of the securities.

Supplement to the Plan of Distribution

MLPF&S and First Republic Securities Company, LLC, each a broker-dealer subsidiary of ML&Co., are members of the Financial Industry Regulatory Authority, Inc. (formerly the National Association of Securities Dealers, Inc. (the “NASD”)) and will participate in distribution of the Notes. Accordingly, offerings of the Notes will conform to the requirements of NASD Rule 2720.

MLPF&S and First Republic Securities Company, LLC may use this Note Prospectus for offers and sales in secondary market transactions and market-making transactions in the Notes. MLPF&S and First Republic Securities Company, LLC may act as principal or agent in these transactions, and any such sales will be made at prices related to prevailing market prices at the time of the sale.

 

Merrill Lynch Long Short NotesSM   TS-6


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The Composite Index

The Composite Index is designed to allow investors to participate in the percentage change in the value of a leveraged long position in the Consumer Staples Select Sector Index and a short position in the Consumer Discretionary Select Sector Index, both indices comprising the Composite Index, from the Starting Value to the Ending Value of the Notes. The Index Components are described in the section below. Each Index Component was assigned an initial weighting and that weighting reflects the initial relative contribution of that Index Component to the level of the Composite Index. The positive weighting of 150% of the initial level of the Composite Index in the Long Component can be viewed as a leveraged long position in the Long Component. The negative weighting of 50% of the initial level of the Composite Index in the Short Component can be viewed as a short position in the Short Component.

The publisher of the Index Components has no obligations relating to the Notes or amounts to be paid to you, including any obligation to take the needs of Merrill Lynch & Co., Inc. or of holders of the Notes into consideration for any reason. The publisher will not receive any of the proceeds of the offering of the Notes and is not responsible for, and has not participated in, the offering of the Notes and is not responsible for, and will not participate in, the determination or calculation of the amount receivable by holders of the Notes. All disclosure contained in this term sheet regarding an Index Component, including with limitation, its make-up, method of calculation and changes in components, has been derived from publicly available information prepared by the distributor of the Index Component. Neither Merrill Lynch & Co., Inc. nor MLPF&S have independently verified the accuracy or completeness of that information.

For more information on the Composite Index, please see the section entitled “The Composite Index” in the product supplement LS-1.

On the Pricing Date, for each Index Component, the weighting, closing level, Multiplier and initial Composite Index contribution were as follows:

 

Index Components

       Bloomberg
Symbol
   Initial Weighting   Closing
Level (1)
   Multiplier (2)    Composite
Index
Contribution

Consumer Staples Select Sector Index

     IXR    150.00%   278.33    0.53892861    150.00

Consumer Discretionary Select Sector Index

     IXY    -50.00%   328.73    -0.15210051    -50.00

Starting Value:

                100.00

 

(1) This was the closing level of the Index Component on the Pricing Date.

 

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

While historical information on the Composite Index did not exist before the Pricing Date, the following graph sets forth the hypothetical historical performance of the Composite Index in the period from January 2003 through January 2008, based upon historical levels of each Index Component, the Multipliers and a Composite Index level of 100 on the Pricing Date. The hypothetical historical data on the Composite Index is not necessarily indicative of the future performance of the Composite Index or what the value of the Notes may be. Any historical upward or downward trend in the level of the Composite Index during any period set forth below is not an indication that the Composite Index is more or less likely to increase or decrease at any time over the term of the Notes.

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Merrill Lynch Long Short NotesSM   TS-7


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The Index Components

The Select Sector Indices

The Select Sector Indices are sub-indices of the S&P 500 Index. Each stock in the S&P 500 Index is allocated to only one Select Sector Index, and the combined companies of the nine Select Sector Indexes represent all of the companies in the S&P 500 Index. The industry indexes are sub-categories within each Select Sector Index and represent a specific industry segment of the overall Select Sector Index. The nine Select Sector Indices, with the approximate percentage of the market capitalization of the S&P 500 Index included in each sector as of January 31, 2008 indicated in parentheses, are: Consumer Discretionary (8.8%); Consumer Staples (10.3%); Energy (12.3%); Financials (18.6%); Health Care (12.1%); Industrials (11.7%); Technology (19.1%); Materials (3.4%); and Utilities (3.6%).

Each Select Sector Index was developed and is maintained in accordance with the following criteria:

 

  Ÿ  

Each of the component stocks in a Select Sector Index (the “Component Stocks”) is a constituent company of the S&P 500 Index.

 

  Ÿ  

The nine Select Sector Indexes together will include all of the companies represented in the S&P 500 Index and each of the stocks in the S&P 500 Index will be allocated to one and only one of the Select Sector Indices.

 

  Ÿ  

The Index Compilation Agent, assigns each constituent stock of the S&P 500 Index to a Select Sector Index. The Index Compilation Agent, after consultation with S&P, assigns a company’s stock to a particular Select Sector Index on the basis of such company’s sales and earnings composition and the sensitivity of the company’s stock price and business results to the common factors that affect other companies in each Select Sector Index.

 

  Ÿ  

Each Select Sector Index is calculated by the American Stock Exchange Index Services Group (“ISG”) using a modified “market capitalization” methodology. This design ensures that each of the component stocks within a Select Sector Index is represented in a proportion consistent with its percentage with respect to the total market capitalization of such Select Sector Index. Under certain conditions, however, the number of shares of a component stock within the Select Sector Index may be adjusted to conform to Internal Revenue Code requirements.

Each Select Sector Index is calculated using the same methodology utilized by S&P in calculating the S&P 500 Index, using a base–weighted aggregate methodology. The daily calculation of each Select Sector Index is computed by dividing the total market value of the companies in the Select Sector Index by a number called the index divisor.

The Index Compilation Agent at any time may determine that a Component Stock which has been assigned to one Select Sector Index has undergone such a transformation in the composition of its business that it should be removed from that Select Sector Index and assigned to a different Select Sector Index. In the event that the Index Compilation Agent notifies ISG that a Component Stock’s Select Sector Index assignment should be changed, the AMEX will disseminate notice of the change following its standard procedure for announcing index changes and will implement the change in the affected Select Sector Indexes on a date no less than one week after the initial dissemination of information on the sector change to the maximum extent practicable. It is not anticipated that Component Stocks will change sectors frequently.

Component Stocks removed from and added to the S&P 500 Index will be deleted from and added to the appropriate Select Sector Index on the same schedule used by S&P for additions and deletions from the S&P 500 Index insofar as practicable.

 

Merrill Lynch Long Short NotesSM   TS-8


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The Long Component — The Consumer Staples Select Sector Index

The Consumer Staples Index (IXR) is a modified market capitalization-based index intended to track the movements of companies that are components of the S&P 500 Index and are involved in the development or production of consumer products. Consumer staples include cosmetic and personal care, pharmaceuticals, soft drinks, tobacco, and food products. The Consumer Staples Select Sector Index, which serves as the benchmark for the Consumer Staples Select Sector SPDR Fund (XLP), was established with a value of 250.00 on June 30, 1998.

The following graph sets forth the historical performance of the Consumer Staples Select Sector Index in the period from January 2003 through January 2008. This historical data on the Consumer Staples Select Sector Index is not necessarily indicative of the future performance of the Consumer Staples Select Sector Index or what the value of the Notes may be. Any historical upward or downward trend in the level of the Consumer Staples Select Sector Index during any period set forth below is not an indication that the Index is more or less likely to increase or decrease at any time over the term of the Notes. On the Pricing Date, the closing level of the Consumer Staples Select Sector Index was 278.33.

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Merrill Lynch Long Short NotesSM   TS-9


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The Short Component — The Consumer Discretionary Select Sector Index

The Consumer Discretionary Select Sector Index (IXY) is a modified market capitalization-based index intended to track the movements of companies that are components of the S&P 500 Index and are involved in the development or production of cyclical products or the transportation industry. Cyclical and transportation products include building materials, retailers, appliances, housewares, air transportation, automotive manufacturing, shipping, and trucking; The Consumer Discretionary Select Sector Index, which serves as the benchmark for the Consumer Discretionary Select Sector SPDR Fund (XLY), was established with a value of 250.00 on June 30, 1998.

The following graph sets forth the historical performance of the Consumer Discretionary Select Sector Index in the period from January 2003 through January 2008. This historical data on the Consumer Discretionary Select Sector Index is not necessarily indicative of the future performance of the Consumer Discretionary Select Sector Index or what the value of the Notes may be. Any historical upward or downward trend in the level of the Consumer Discretionary Select Sector Index during any period set forth below is not an indication that the Index is more or less likely to increase or decrease at any time over the term of the Notes. On the Pricing Date, the closing level of the Consumer Discretionary Select Sector Index was 328.73.

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Merrill Lynch Long Short NotesSM   TS-10


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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 to the discussion under the section entitled “United States Federal Income Taxation” in the accompanying product supplement LS-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 cash-settled financial contract linked to the level of the Composite Index. 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 cash-settled financial contracts linked to the level of the Composite Index, upon the receipt of cash on the maturity date of the Notes, a U.S. Holder (as defined in the accompanying product supplement LS-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 cash-settled financial contracts linked to the level of the Composite Index, 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.

Early Redemption of the Notes. Assuming that the Notes are properly characterized and treated as cash-settled financial contracts linked to the level of the Composite Index, upon an early redemption of the Notes, a U.S. Holder will recognize gain or loss. The amount of that 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. Any such gain or loss will be treated as capital gain or loss. Any such capital gain or loss will be short-term or long-term capital gain or loss, depending upon the U.S. Holder’s holding period for the Notes as of the date of such early redemption. The deductibility of capital losses is subject to certain limitations.

Possible Future Tax Law Changes. On December 7, 2007, the IRS released a notice that could possibly affect the taxation of holders of the Notes. According to the notice, the IRS and the U.S. Department of the Treasury (the “Treasury Department”) are actively considering, among other things, whether the holder of an instrument having terms similar (but not identical) to the Notes should be required to accrue either ordinary income or capital gain on a current basis, and they are seeking comments on the subject. It is not possible to determine what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of instruments having terms similar to the Notes will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The IRS and the Treasury Department are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, whether the tax treatment of such instruments should vary depending upon whether or not such instruments are traded on a securities exchange, whether such instruments should be treated as indebtedness, whether the tax treatment of such instruments should vary depending upon the nature of the underlying asset, and whether the special “constructive ownership rules” contained in Section 1260 of the Internal Revenue Code of 1986, as amended might be applied to such instruments. Holders are urged to consult their tax advisors concerning the significance, and the potential impact, if any, of the above considerations to their investment in the Notes. ML&Co. intends to continue to treat the Notes for U.S. federal income tax purposes in accordance with the treatment described herein unless and until such time as the Treasury Department and IRS determine that some other treatment is more appropriate.

Circular 230 Legend. The foregoing discussion of United States federal income tax matters contained in this term sheet (a) was not intended or written to be legal or tax advice to any person and was not intended or written to be used, and it cannot be used, by any person for the purpose of avoiding any tax-related penalties that may be imposed on such person, and (b) was written to support the promotion or marketing of the Notes by Merrill Lynch. Each person considering an investment in the Notes should seek advice based on its particular circumstances from an independent tax advisor.

Notwithstanding anything to the contrary contained herein, each prospective investor (and each employee, representative, or other agent of each prospective investor) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Notes and all materials of any kind that are provided to the prospective investor relating to such tax treatment and tax structure (as such terms are defined in Treasury Regulation Section 1.6011-4). This authorization of tax disclosure is retroactively effective to the commencement of discussions between Merrill Lynch or its representatives and each prospective investor regarding an investment in the Notes.

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 LS-1.

 

Merrill Lynch Long Short NotesSM   TS-11


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Experts

The consolidated financial statements incorporated by reference in this term sheet from Merrill Lynch & Co., Inc.’s Annual Report on Form 10 K for the year ended December 28, 2007 and the effectiveness of Merrill Lynch and Co., Inc. and subsidiaries’ internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, incorporated herein by reference (which reports (1) expressed an unqualified opinion on the consolidated financial statements and included an explanatory paragraph regarding the changes in accounting methods in 2007 relating to 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 in 2006 for share-based payments to conform to Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” and included an explanatory paragraph relating to the restatement discussed in Note 20 to the consolidated financial statements and (2) expressed an unqualified opinion on the effectiveness of internal control over financial reporting). Such consolidated financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

 

Merrill Lynch Long Short NotesSM   TS-12


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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 LS-1 dated October 31, 2007:

http://www.sec.gov/Archives/edgar/data//65100/000119312507231279/d424b2.htm

 

  Ÿ  

Index supplement I-1 dated June 6, 2007:

http://www.sec.gov/Archives/edgar/data/65100/000119312507130785/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.

 

Merrill Lynch Long Short NotesSM   TS-13