FACT SHEET SUPPLEMENT DATED MARCH 8, 2007 (To Fact Sheet dated April 3, 2006)

Transcription

1 FACT SHEET SUPPLEMENT DATED MARCH 8, 2007 (To Fact Sheet dated April 3, 2006) The information contained in this Fact Sheet Supplement may not be modified by any oral representation made prior or subsequent to the purchase of your Market Participation Deposits SM. Merrill Lynch Bank USA Market Participation Deposits SM due March 15, 2013 based upon the Dow Jones Industrial Average SM price-weighted index (the Deposits ) ($1,000 principal amount per Deposit) General: The Deposits are certificates of deposit issued by Merrill Lynch Bank USA (the Bank ) that will pay a Supplemental Redemption Amount (as defined herein), if any, representing an interest payment, based upon the percentage change in the Dow Jones Industrial Average SM price-weighted index (the Market Measure ) from the Pricing Date (as defined herein) to the Valuation Date (as defined herein), as described herein. No less than the principal amount of the Deposits will be paid at the stated maturity date. Minimum initial deposit of $10,000 (i.e. ten Deposits of $1,000 per deposit). Initial deposits may be made in excess of $10,000 in increments of $1,000 per Deposit. The Deposits are only insured within the limits and to the extent described herein. No payments will be made prior to the stated maturity date. For purposes of calculating United States Federal income taxes and applying the Final Regulations (as defined in Certain United States Federal Income Tax Considerations contained in the accompanying Fact Sheet), the Bank has determined that the estimated yield for the Deposits will be 4.80% per annum, compounded semi-annually. The estimated yield is determined solely for purposes of applying the Final Regulations to the Deposits, and is not a prediction of what the actual yield will be on the Deposits. The Deposits are transferable only in whole Deposits, each representing $1,000 principal amount. Pricing Date: March 8, Expected settlement date: March 15, The term of the Deposits is 6 years. CUSIP: 59020WB42. Limited Early Withdrawals: Payment at Maturity: Deposit Insurance: Early withdrawal of the principal amount will only be permitted in the event of the death or adjudication of incompetence of the beneficial owner of a Deposit as described herein in the section entitled Terms of the Deposits Limited Early Withdrawals. If you exercise this right of early withdrawal, you will receive only the principal amount of your Deposits notwithstanding any increases in the level of the Market Measure from the date the Deposits were priced for initial sale to the public. No Supplemental Redemption Amount will be payable. At maturity, you will receive a payment equal to the principal amount plus the Supplemental Redemption Amount, if any. The Supplemental Redemption Amount will be based on the percentage increase, if any, in the Market Measure from the Pricing Date to the Valuation Date, subject to postponement as described herein, calculated using the closing level of the Market Measure on March 8, 2013 and is not subject to any upper limit. The Supplemental Redemption Amount may be zero, but will not be less than zero. The principal amount of each Deposit is insured by the Federal Deposit Insurance Corporation (the FDIC ) within the limits and to the extent described in this Fact Sheet Supplement and the accompanying Fact Sheet (generally $100,000 for all accounts held by a depositor in the same ownership capacity with the Bank, with the exception of Qualified Retirement Accounts, as that term is defined in the accompanying Fact Sheet, held by a depositor in the same ownership capacity with the Bank, which shall be insured for up to $250,000 in the aggregate). These deposit insurance limits will be known as the Standard Maximum Deposit Insurance Amount. A depositor purchasing a principal amount of Deposits which, together with other deposits that it maintains at the Bank in the same ownership capacity, is in excess of the Standard Maximum Deposit Insurance Amount should not rely on the availability of deposit insurance with respect to such excess. In addition, the FDIC has taken the position that the Supplemental Redemption Amount, if any, and any secondary market premium paid by a depositor above the $1,000 principal amount on the Deposits are not insured by the FDIC. Before you decide to purchase the Deposits, carefully read this Fact Sheet Supplement and the accompanying Fact Sheet, in particular the sections entitled Special Risk Factors in this Fact Sheet Supplement beginning on page S-9 and Risk Factors in the accompanying Fact Sheet beginning on page 3. Notwithstanding anything to the contrary contained herein, each prospective depositor (and each employee, representative, or other agent of each prospective depositor) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions described in this Fact Sheet Supplement and the accompanying Fact Sheet and all materials of any kind that are provided to the prospective depositor relating to such tax treatment and tax structure (as such terms are defined in United States Treasury Regulation Section ). This authorization of tax disclosure is retroactively effective to the commencement of discussions between the Bank, MLPF&S, the Brokers (as defined below) or their respective representatives and each prospective depositor regarding the transactions contemplated herein. Market Participation Deposits SM is a service mark of Merrill Lynch & Co., Inc. Dow Jones, Dow Jones Industrial Average SM and DJIA SM are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by MLPF&S. The Bank is a sublicensee. The Deposits are not sponsored, endorsed, sold or promoted by Dow Jones.

2 The Deposits are made available through Merrill Lynch, Pierce, Fenner & Smith Incorporated ( MLPF&S ), and certain other broker dealers (each a Broker ). The Deposits offered hereby are time deposit obligations of the Bank, an industrial bank organized under the laws of and domiciled in the State of Utah and a member of the FDIC. The deposits and accounts of the Bank are insured by the FDIC within the limits and to the extent described in this Fact Sheet Supplement and the accompanying Fact Sheet under the section entitled Deposit Insurance. The Deposits offered hereby are obligations of the Bank only and are not obligations of the Brokers, or any other company affiliated with the Bank, including MLPF&S and Merrill Lynch & Co., Inc. Neither the Brokers, Merrill Lynch & Co., Inc. nor any affiliate guarantees the financial condition of the Bank. S-2

3 TABLE OF CONTENTS The Fact Sheet Supplement Page SUMMARY INFORMATION Q&A...S-4 What are the Deposits?...S-4 Can I sell my Deposits?...S-4 Are there any risks associated with my investment?...s-4 Who publishes the Market Measure and what does the Market Measure reflect?...s-4 How has the Market Measure performed historically?...s-5 What will I receive on the stated maturity date of the Deposits?...S-5 Will I be permitted to withdraw my Deposit prior to the stated maturity date?...s-7 Are my Deposits callable by the Bank?...S-7 What will be the value of the Deposits prior to the stated maturity date?...s-7 What about taxes?...s-7 Are the Deposits insured by the Federal Deposit Insurance Corporation?...S-8 SPECIAL RISK FACTORS...S-9 General...S-9 Your return will not reflect the return of owning the component stocks included in the Market Measure...S-9 Your yield may be lower than the yield on other certificates of deposit of comparable maturity...s-9 You must rely on your own evaluation of the merits of an investment linked to the Market Measure...S-9 Consequences of sales of the Deposits prior to the stated maturity date...s-9 Purchases and sales by the Bank and its affiliates may affect your return...s-10 Potential conflicts of interest could arise...s-10 Tax consequences...s-10 TERMS OF THE DEPOSITS...S-11 THE MARKET MEASURE...S-16 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS...S-20 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...S-22 The Fact Sheet Page DESCRIPTION OF THE DEPOSITS... 2 Payment at Maturity... 2 Early Call at the Option of the Bank... 2 Additions and Withdrawals... 3 RISK FACTORS... 3 You may not receive a Supplemental Redemption Amount... 3 You may not have the right to withdraw your funds prior to the stated maturity date of a Deposit... 4 You may be unable to sell your Deposits prior to the stated maturity date... 4 Deposits may be subject to early call at the option of the Bank... 4 Powers of the FDIC as Conservator or Receiver... 4 Your return, if any, may be lower than the return on other available deposits... 5 Fluctuations in exchange rates and other special risks may affect your Deposits... 5 Tax considerations... 5 EVIDENCE OF THE DEPOSITS... 5 DEPOSIT INSURANCE... 6 General... 7 SECONDARY MARKET FEES CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS Circular General Characterization of the Deposits U.S. Holders Unrelated Business Taxable Income Non-U.S. Holders Backup withholding INDEX OF CERTAIN DEFINED TERMS S-3

4 SUMMARY INFORMATION Q&A This summary includes questions and answers that highlight selected information from this Fact Sheet Supplement and the accompanying Fact Sheet to help you understand the Market Participation Deposits due March 15, 2013, based upon the Dow Jones Industrial Average SM price-weighted index (the Deposits ). You should carefully read this Fact Sheet Supplement and the accompanying Fact Sheet to fully understand the terms of the Deposits, the Market Measure, the Supplemental Redemption Amount and the tax and other considerations that are important to you in making a decision about whether to invest in the Deposits. You should carefully review the Special Risk Factors section in this Fact Sheet Supplement and the Risk Factors section in the accompanying Fact Sheet, which highlight certain risks associated with a purchase of the Deposits, to determine whether a purchase of the Deposits is appropriate for you. What are the Deposits? Each Deposit represents a deposit obligation whose principal amount is $1,000 and whose rate of return (interest rate) will be based on the percentage change in the Market Measure calculated as described herein. The Deposits will mature on March 15, The Bank will make no payments on the Deposits until the stated maturity date. Can I sell my Deposits? You may be unable to sell your Deposits prior to the stated maturity date. Therefore, you should not rely on the ability to sell or withdraw your Deposits for any benefits, including achieving trading profits, limiting trading or other losses, realizing income prior to maturity, or having access to proceeds prior to maturity. The Brokers, though not obligated to do so, may maintain a secondary market in the Deposits upon completion of the distribution. In the event you choose to sell a Deposit in the secondary market, you may receive substantially less in sale proceeds than the principal amount of the Deposit. Even if the Brokers maintain a secondary market, it is unlikely that the secondary market value of the Deposits will correlate closely with the level of the Market Measure, particularly during the early years of the Deposits. The Deposits are most suitable for investors who intend to hold Deposits until the stated maturity date. See the section entitled Secondary Market in the accompanying Fact Sheet. You may transfer the Deposits only in whole Deposits. Are there any risks associated with my investment? Yes, the Deposits are subject to certain risks. Please refer to the sections entitled Special Risk Factors in this Fact Sheet Supplement and Risk Factors in the accompanying Fact Sheet. Who publishes the Market Measure and what does the Market Measure reflect? The Dow Jones Industrial Average SM price-weighted index, the Market Measure, is published by Dow Jones & Company, Inc. ( Dow Jones ). A priceweighted index is an index in which a component stock s weight in the Market Measure is based on its price per share rather than the total market capitalization of the issuer of that component stock. The Market Measure is designed to provide an indication of the composite price performance of 30 common stocks of corporations representing a broad cross-section of U.S. industry. The component stocks included in the Market Measure are selected by the editors of The Wall Street Journal (the WSJ ). The corporations represented in the Market Measure tend to be market leaders in their respective industries and their stocks are typically widely held by individuals and institutional investors. The corporations currently represented in the Market Measure are incorporated in the U.S. and its territories and their stocks are traded on the New York Stock Exchange (the NYSE ) and The Nasdaq Stock Market ( Nasdaq ). On March 8, 2007, the market capitalization of the stocks in the Market Measure ranged from approximately $18 billion to $409 billion, with the average market capitalization being approximately $136 billion. The level of the Market Measure is the sum of the primary exchange prices of each of the 30 common stocks included in the Market Measure, divided by a divisor that is designed to provide a meaningful continuity in the level of the Market Measure. Because the Market Measure is priceweighted, stock splits or changes in the component stocks could result in distortions in the Market Measure level. In order to prevent these distortions related to extrinsic factors, the divisor may be changed in accordance with a mathematical formula that reflects adjusted proportions within the Market Measure. The current divisor of the Market Measure is published daily in the WSJ and other publications. In addition, other statistics based on the Market Measure may be found in a variety of publicly available sources. S-4

5 Please note that an investment in the Deposits does not entitle you to any ownership interest in the component stocks included in the Market Measure. How has the Market Measure performed historically? We have included a graph showing the yearend closing level of the Market Measure for each year from 1995 through 2006 and a graph and table showing the month-end closing level of the Market Measure from January 2002 through February 2007 in the section entitled The Market Measure Historical data on the Dow Jones Industrial Average SM price-weighted index in this Fact Sheet Supplement. We have provided this historical information to help you evaluate the behavior of the Market Measure in various economic environments; however, past performance of the Market Measure is not necessarily indicative of how the Market Measure will perform in the future. What will I receive on the stated maturity date of the Deposits? On the stated maturity date you will receive a payment on each Deposit equal to the principal amount plus the Supplemental Redemption Amount, if any. The Deposits are designed for depositors who want the opportunity to participate in possible increases in the Market Measure from the Pricing Date to the Valuation Date and who also want to protect their investment by receiving at least the principal amount of their Deposits on the stated maturity date. Principal Amount The principal amount per Deposit is $1,000. Supplemental Redemption Amount The Supplemental Redemption Amount per Deposit will equal: The Starting Value equals 12,260.70, the closing level of the Market Measure on March 8, 2007, the date the Deposits were priced for initial sale to the public (the Pricing Date ). The Ending Value will equal the closing level of the Market Measure on the Valuation Date (subject to postponement as described below). Valuation Date means March 8, If a Market Disruption Event (as defined herein) occurs on March 8, 2013 or that date is not an Index Business Day, the Valuation Date will be March 11, If March 11, 2013 is not an Index Business Day or is a day on which a Market Disruption Event exists, the Calculation Agent will determine the Ending Value in good faith and using its reasonable judgment. Index Business Day means any day on which the NYSE, the American Stock Exchange ( AMEX ) and the Nasdaq are open for trading and the Market Measure or any successor index is calculated and published. For more specific information about the determination of the Ending Value and the Supplemental Redemption Amount, see the sections entitled Terms of the Deposits in this Fact Sheet Supplement and Description of the Deposits in the accompanying Fact Sheet. You will receive a Supplemental Redemption Amount, representing an interest payment on the Deposits, only if the Ending Value is greater than the Starting Value. If the Ending Value is less than, or equal to, the Starting Value, the Supplemental Redemption Amount will be zero. There will be no periodic payment of interest on the Deposits. At maturity, you will receive the principal amount of your Deposits regardless of whether any Supplemental Redemption Amount is payable. Ending Value - Starting Value $1,000 x Starting Value provided, however, that in no event will the Supplemental Redemption Amount be less than zero. S-5

6 Examples Here are three examples of Supplemental Redemption Amount calculations assuming an investment term equal to that of the Deposits: Example 1 On the Valuation Date, the hypothetical Ending Value is less than the Starting Value: Starting Value: 12, Hypothetical Ending Value: 11, , , Supplement al Redemption Amount (per Deposit) = $1,000 x = $ , (The Supplemental Redemption Amount cannot be less than zero.) Total payment at maturity (per Deposit) = $1,000 + $0 = $1,000 In this example, since the Supplemental Redemption Amount is zero, you would receive only the principal amount. Payment of this amount would result in an Annual Percentage Yield ( APY ) of 0.00%. Example 2 On the Valuation Date, the hypothetical Ending Value is greater than the Starting Value: Starting Value: 12, Hypothetical Ending Value: 13, , , Supplement al Redemption Amount (per Deposit) = $1,000 x = $ , Total payment at maturity (per Deposit) = $1,000 + $100 = $1,100 In this example, payment of the sum of the principal amount and the Supplemental Redemption Amount would result in an APY of 1.59%. Example 3 On the Valuation Date, the hypothetical Ending Value is significantly greater than the Starting Value: Starting Value: 12, Hypothetical Ending Value: 15, , , Supplement al Redemption Amount (per Deposit) = $1,000 x = $ , Total payment at maturity (per Deposit) = $1,000 + $300 = $1,300 In this example, payment of the sum of the principal amount and the Supplemental Redemption Amount would result in an APY of 4.42%. S-6

7 Will I be permitted to withdraw my Deposit prior to the stated maturity date? Withdrawals will only be permitted in the event of the death or adjudication of incompetence of a beneficial owner of a Deposit. The amount payable by the Bank on any Deposits upon such withdrawal will equal the principal amount of the withdrawn Deposits. No Supplemental Redemption Amount will be payable. See the section entitled Terms of the Deposits Limited Early Withdrawals in this Fact Sheet Supplement. Are my Deposits callable by the Bank? No. The Deposits are not callable at the option of the Bank. What will be the value of the Deposits prior to the stated maturity date? In determining the economic terms of the Deposits, and consequently the potential return on the Deposits to you, a number of factors are taken into account. Among these factors are certain costs associated with creating, hedging and offering the Deposits. In structuring the economic terms of the Deposits, the Bank seeks to provide depositors with what the Bank believes to be commercially reasonable terms and to provide MLPF&S with compensation for its services in developing the Deposits. If you sell your Deposits prior to the stated maturity date, you will receive a price determined by market conditions for the Deposits. This price may be influenced by many factors, such as interest rates, volatility and the current level of the Market Measure. In addition, the price, if any, at which you could sell your Deposits in a secondary market transaction is expected to be affected by the factors that the Bank considered in setting the economic terms of the Deposits, namely the placement fees paid in respect of the Deposits, and compensation for developing and hedging the Deposits. Depending on the impact of these factors, you may receive significantly less than the amount you originally deposited if you sell your Deposits before the stated maturity date. In a situation where there is no difference in the level of the Market Measure and the Starting Value and no changes in the market conditions from those existing on the date of this Fact Sheet Supplement, the price, if any, at which you could sell your Deposits in a secondary market transaction is expected to be lower than the amount you originally deposited. This is due to, among other things, the Bank s costs of developing, hedging and distributing the Deposits. Any potential purchasers for your Deposits in the secondary market are unlikely to consider these factors. What about taxes? Although you will not receive any payments until the stated maturity date, under certain final regulations issued by the Treasury Department, you will be required to pay taxes on ordinary income from the Deposits each year based upon an estimated yield and projected payment schedule for the Deposits. The Bank has determined the estimated yield and projected payment schedule, in accordance with the Treasury Department regulations, solely in order for you to calculate the amount of taxes that you will owe each year as a result of owning the Deposits. The estimated yield and projected payment schedule are neither a prediction nor a guarantee of what the amount you receive on the stated maturity date will be, or that any payment on the stated maturity date will even exceed the principal amount of the Deposits. The Bank has determined that the estimated yield for the Deposits will be 4.80% per annum, compounded semi-annually. Based upon the projected payment schedule and the estimated yield, if you pay your taxes on a calendar year basis and if you purchase a Deposit for $1,000 and hold the Deposit until the stated maturity date, you will be required to pay taxes on the following amounts of ordinary income from the Deposit each year: $38.65 in 2007, $50.54 in 2008, $52.91 in 2009, $55.48 in 2010, $58.08 in 2011, $61.10 in 2012 and $12.73 in However, in 2013, the amount of ordinary income that you will be required to pay taxes on from owning each Deposit may be greater or less than $12.73, depending upon the amount you receive on the stated maturity date. Also, if the amount payable on the stated maturity date is less than $1,329.49, you may have a loss which you could deduct against other income you may have in 2013, but under current tax regulations, you would neither be required nor allowed to amend your tax returns for prior years. You should consult your own tax advisor concerning the application of the Treasury Department regulations to your investment in the Deposits. You will receive the estimated yield and the projected payment schedule for your Deposits, as determined by the Bank for purposes of applying the Treasury Department regulations to the Deposits, with your Confirmation. The estimated yield and the projected payment schedule for the Deposits are also set forth in this Fact Sheet Supplement. In addition, the actual projected payment schedule will be available if you submit a written request for such S-7

8 information to Merrill Lynch Bank USA, Attn: Operations Department, 800 Scudders Mill Road, Plainsboro, NJ You should consider the tax consequences of an investment in the Deposits as discussed herein. For further information, see Certain United States Federal Income Tax Considerations in this Fact Sheet Supplement and in the accompanying Fact Sheet. Are the Deposits insured by the Federal Deposit Insurance Corporation? The Deposits are deposit obligations of the Bank, which are insured by the FDIC up to applicable limits set by Federal law and regulation. In general, the principal amount of the Deposits is protected by Federal deposit insurance and backed by the U.S. Government to a maximum amount of $100,000 for all accounts held by you in the same ownership capacity with the Bank, with the exception of Qualified Retirement Accounts, as that term is defined in the accompanying Fact Sheet, held by a depositor in the same ownership capacity with the Bank, which will be insured for up to $250,000 in the aggregate. These deposit insurance limits will be known as the Standard Maximum Deposit Insurance Amount. Any accounts or deposits you maintain directly with the Bank or through any other intermediary in the same ownership capacity as you maintain your Deposits would be aggregated with the Deposits for purposes of the Standard Maximum Deposit Insurance Amount. If you purchase Deposits, the principal amount of which exceed the applicable Standard Maximum Deposit Insurance Amount or which, together with other deposits you maintain at the Bank in the same ownership capacity exceed the applicable Standard Maximum Deposit Insurance Amount, you should not rely on the availability of deposit insurance with respect to such excess. If it is important to you that the entire principal amount of Deposits owned by you be insured by the FDIC, you should ensure that purchasing a Deposit will not bring your aggregate deposits with the Bank, including any deposits held through the Merrill Lynch Cash Management Account bank deposit program, over the Standard Maximum Deposit Insurance Amount. A more detailed summary of FDIC deposit insurance regulations is contained in the accompanying Fact Sheet, but neither the accompanying Fact Sheet nor this Fact Sheet Supplement is intended to be a full restatement of applicable FDIC regulations and interpretations, which may change from time to time. Neither the Bank nor your Broker is responsible for determining the extent of deposit insurance coverage applicable to your Deposits. Please note that the discussions of FDIC insurance in this Fact Sheet Supplement and in the accompanying Fact Sheet are subject in their entirety to the rules, regulations and interpretations of the FDIC and to any changes in Federal deposit insurance coverage or the FDIC rules, regulations and interpretations that may become effective during the term of the Deposits. The FDIC has taken the position that the Supplemental Redemption Amount, if any, and any secondary market premium paid by a depositor above the $1,000 principal amount on the Deposits, are not insured by the FDIC. The extent of, and limitations on, Federal deposit insurance are discussed in this Fact Sheet Supplement and in the section entitled Deposit Insurance and certain other sections in the accompanying Fact Sheet. Except to the extent insured by the FDIC as described herein and in the accompanying Fact Sheet, the Deposits are not otherwise insured by any governmental agency or instrumentality or any other person. In the event that you purchase a Deposit in the secondary market at a premium over the principal amount, that premium would not be insured. Therefore, if insurance payments become necessary for the Bank, you would incur an additional loss of up to the amount of the premium paid for your Deposit. S-8

9 SPECIAL RISK FACTORS General You should compare the features of the Deposits to other available investments before deciding to purchase the Deposits. Due to the uncertainty of the Supplemental Redemption Amount (which could be zero), the return on your investment in the Deposits may be higher or lower than the return available on other deposits available at the Bank or through your Broker. It is suggested that you reach an investment decision only after carefully considering the suitability of the Deposits in light of your particular circumstances. The Supplemental Redemption Amount, if any, payable at maturity will depend on whether the Ending Value exceeds the Starting Value. At maturity, if the Ending Value is equal to or is less than the Starting Value, then you will receive only the principal amount of your Deposit. This will be true even if the level of the Market Measure is greater than the Starting Value at some point during the term of the Deposits but is equal to or less than the Starting Value on the Valuation Date. If the Supplemental Redemption Amount is zero, the Bank will repay you only the principal amount of your Deposit. You should be aware that a purchase of the Deposits involves certain risks that are not associated with other bank deposits. Your return will not reflect the return of owning the component stocks included in the Market Measure The return on your Deposits will not reflect the return you would realize if you actually owned the component stocks included in the Market Measure and received the dividends paid on those stocks because the level of the Market Measure is calculated by reference to the prices of the component stocks without taking into consideration the value of dividends paid on those stocks. Your yield may be lower than the yield on other certificates of deposit of comparable maturity The yield that you will receive on the Deposits may be less than the return you could earn on other investments. Your yield may be less than the yield you would earn if you purchased a traditional interest bearing certificate of deposit with the same maturity. Your investment may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money. You must rely on your own evaluation of the merits of an investment linked to the Market Measure In the ordinary course of their businesses, affiliates of the Bank from time to time express views on expected movements in the U.S. equity markets and these views are sometimes communicated to clients who participate in these markets. However, these views may vary and are subject to change. Consequently, other investment professionals may have different views from those of our affiliates. For these reasons, you are encouraged to derive information regarding the Market Measure from multiple sources and should not rely on the views expressed by affiliates of the Bank. Consequences of sales of the Deposits prior to the stated maturity date The market value of the Deposits may not have a direct relationship with the level of the Market Measure. Also, your Broker cannot provide assurance that you will be able to sell your Deposits prior to maturity. Therefore, you should not rely on the ability to sell your Deposits for any benefits, including achieving trading profits, limiting trading or other losses, realizing income prior to the stated maturity date or having access to proceeds prior to the stated maturity date. Your Broker, though not obligated to do so, may maintain a secondary market in the Deposits upon placement of the Deposits, but may cease to maintain this market at any time. If a secondary market does develop, the market price you may be quoted or receive for your Deposits on a date prior to the stated maturity date will be affected by this and other important factors. The price, if any, your Broker may quote, would reflect any changes in market conditions and other relevant factors. In addition, the price, if any, at which you could sell your Deposits in a secondary market transaction, is expected to be affected by the factors that the Bank considered in setting the economic terms of the Deposits, namely the placement fees paid in respect of the Deposits, and compensation for developing and hedging the Deposits. This quoted price could be higher or lower than the amount you originally deposited. Furthermore, there is no assurance that your Broker or any other party will be willing to buy the Deposits. Assuming there is no difference in the level of the Market Measure compared to the Starting Value and no change in market conditions or any other relevant factors, the price, if any, at which your Broker or another purchaser might be willing to purchase your Deposits in a secondary market transaction, is expected to be lower than S-9

10 the amount you originally deposited. This is due to, among other things, the fact that the principal amount included, and secondary market prices are likely to exclude, placement fees paid with respect to, and the developing and hedging costs associated with, the Deposits. It is therefore unlikely that the secondary market value of the Deposits will correlate closely with the level of the Market Measure, particularly during the early years of the Deposits. Purchases and sales by the Bank and its affiliates may affect your return The Bank, through its affiliates, or the Bank s affiliates may from time to time buy or sell the component stocks included in the Market Measure or futures or options contracts on the Market Measure for the Bank s accounts for business reasons or in connection with hedging the Bank s obligations under the Deposits. These transactions could affect the price of these stocks and, in turn, the level of the Market Measure in a manner that would be adverse to your investment in the Deposits. Any purchases or sales by us, our affiliates or others on our behalf on or before the Pricing Date may temporarily increase or decrease the prices of such component stocks. Temporary increases or decreases in the market prices of the component stocks included in the Market Measure may also occur as a result of the purchasing activities of other market participants. Consequently, the prices of such component stocks may change subsequent to the Pricing Date, affecting the level of the Market Measure and therefore your return on the Deposits. Potential conflicts of interest could arise The Bank or its affiliates may issue other instruments or engage in other transactions whose value is linked, directly or indirectly, to the Market Measure. Such activities could present certain conflicts of interest for the Bank with respect to its obligations under the Deposits. For example, the Bank may issue an instrument linked to the Market Measure that increases in value upon the occurrence of circumstances that would result in a decrease in the value of the Deposits. MLPF&S will serve as the calculation agent (the Calculation Agent ). MLPF&S is a Broker and an affiliate of the Bank. Under certain circumstances, the Calculation Agent s role as an affiliate of the Bank and its responsibilities as Calculation Agent could give rise to conflicts of interest. These conflicts could occur, for instance, in connection with its determination as to whether a level of the Market Measure can be calculated on a particular day, or in connection with judgments that it would be required to make in the event of a discontinuance or unavailability of the Market Measure. See the section entitled Terms of the Deposits Payment at Maturity in this Fact Sheet Supplement. MLPF&S is required to carry out its duties as Calculation Agent in good faith using its reasonable judgment. However, you should be aware that because the Calculation Agent is an affiliate of the Bank, potential conflicts of interest could arise. The Bank expects to enter into arrangements to hedge the market risks associated with the Bank s obligation to pay the amounts due at maturity. The Bank may seek competitive terms in entering into the hedging arrangements for the Deposits, but is not required to do so, and the Bank may enter into such hedging arrangements with one of the Bank s affiliates. Such hedging activity is expected to result in a profit to those engaging in the hedging activity, which could be more or less than initially expected, but which could also result in a loss for the hedging counterparty. Affiliates of the Bank may presently or from time to time engage in business with one or more of the companies included in the Market Measure including extending loans to, or making equity investments in, those companies or providing advisory services to those companies, including merger and acquisition advisory services. In the course of business, affiliates of the Bank may acquire non-public information relating to those companies and, in addition, one or more affiliates of the Bank may publish research reports about those companies. The Bank does not make any representation to any prospective owner of the Deposits regarding any matters whatsoever relating to the companies included in the Market Measure. Any prospective purchaser of the Deposits should undertake an independent investigation of the companies included in the Market Measure as in its judgment is appropriate to make an informed decision regarding an investment in the Deposits. The composition of the Market Measure does not reflect any investment recommendations of the Bank or its affiliates. Tax consequences You should consider the tax consequences of investing in the Deposits. See the sections entitled Certain United States Federal Income Tax Considerations in this Fact Sheet Supplement and in the accompanying Fact Sheet. S-10

11 TERMS OF THE DEPOSITS The following description of the particular terms of the Deposits supplements, and to the extent inconsistent therewith, replaces, the description of the general terms of the Deposits set forth in the accompanying Fact Sheet. The Deposits will entitle you to receive the principal amount deposited plus the Supplemental Redemption Amount, if any, representing an interest payment, on the stated maturity date. If the level of the Market Measure on the Valuation Date is equal to or less than the Starting Value, the Supplemental Redemption Amount will equal zero. In no event, however, will the Supplemental Redemption Amount be less than zero. In such case, depositors holding Deposits to the stated maturity date will be entitled to receive only the original principal amount of each Deposit. For information regarding the calculation of the Supplemental Redemption Amount, the Market Measure and certain tax consequences to any depositors, see the sections entitled Payment at Maturity and The Market Measure in this Fact Sheet Supplement and Certain United States Federal Income Tax Considerations in this Fact Sheet Supplement and in the accompanying Fact Sheet. There will be no periodic payment of interest on the Deposits and there is no assurance that any Supplemental Redemption Amount will be paid on the Deposits. Payment at Maturity General On the stated maturity date, for each Deposit you own, you will be entitled to receive the principal amount plus the Supplemental Redemption Amount, if any, all as provided below. If the Ending Value is not greater than the Starting Value, you will be entitled to receive only the principal amount of your Deposits. Determination of the Supplemental Redemption Amount The Supplemental Redemption Amount (which will represent interest payable on the Deposits) for each Deposit will be determined by the Calculation Agent and will equal: Ending Value Starting Value principal amount (i.e. $1,000) x Starting Value provided, however, that in no event will the Supplemental Redemption Amount be less than zero. The Starting Value equals 12,260.70, the closing level of the Market Measure on the Pricing Date. The Ending Value will equal the closing level of the Market Measure on the Valuation Date. Valuation Date means March 8, If a Market Disruption Event occurs on March 8, 2013 or that date is not an Index Business Day, the Valuation Date will be March 11, If March 11, 2013 is not an Index Business Day or is a day on which a Market Disruption Event exists, the Calculation Agent will determine the Ending Value in good faith and using its reasonable judgment. Index Business Day means any day on which the NYSE, the AMEX and the Nasdaq are open for trading and the Market Measure or any successor index is calculated and published. A Business Day is any day other than a Saturday or Sunday that is neither a legal holiday nor a day on which banking institutions in the State of Utah or The City of New York are authorized by law, regulation or executive order to close. All determinations made by the Calculation Agent, absent a determination of a manifest error, will be conclusive for all purposes and binding on the Bank and the depositors and beneficial owners of the Deposits. S-11

12 Adjustments to the Market Measure; Market Disruption Events If at any time Dow Jones makes a material change in the formula for or the method of calculating the Market Measure or in any other way materially modifies the Market Measure so that the Market Measure does not, in the opinion of the Calculation Agent, fairly represent the level of the Market Measure had those changes or modifications not been made, then, from and after that time, the Calculation Agent will, at the close of business in New York, New York, on each date that the closing level of the Market Measure is to be calculated, make any adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a calculation of a level of a stock index comparable to the Market Measure as if those changes or modifications had not been made, and calculate the closing level with reference to the Market Measure, as so adjusted. For example, if the method of calculating the Market Measure is modified so that the level of the Market Measure is a fraction or a multiple of what it would have been if it had not been modified then the Calculation Agent will adjust the Market Measure in order to arrive at a level of the Market Measure as if it had not been modified. Market Disruption Event means any of the following events, as determined by the Calculation Agent: (A) the suspension of or material limitation on trading, in each case, for more than two hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange on which the stocks included in the Market Measure trade as determined by the Calculation Agent (without taking into account any extended or after-hours trading session), in 20% or more of the stocks which then comprise the Market Measure or any successor index; or (B) the suspension of or material limitation on trading, in each case, 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 the stocks included in the Market Measure 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 the Market Measure, or any successor index. 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 Market Measure, or any successor index, will not constitute a Market Disruption Event; (3) a suspension in trading in futures or options contracts on the Market Measure, or any successor index, 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 index; (4) a suspension of or material limitation on trading on the applicable exchange will not include any time when that exchange is closed for trading under ordinary circumstances; and (5) for the purpose of clause (A) above, any limitations on trading during significant market fluctuations under NYSE Rule 80B, or any applicable rule or regulation enacted or promulgated by the NYSE or any other self regulatory organization or the Securities and Exchange Commission of similar scope as determined by the Calculation Agent, will be considered material. The occurrence of a Market Disruption Event could affect the calculation of the payment at maturity you may receive. See the Section entitled Payment at Maturity in this Fact Sheet Supplement. S-12

13 Discontinuance of the Market Measure If Dow Jones discontinues publication of the Market Measure and Dow Jones or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the Market Measure (a Successor Index ), then, upon the Calculation Agent s notification of that determination to the Bank, the Calculation Agent will substitute the Successor Index as calculated by Dow Jones or any other entity for the Market Measure and calculate the Ending Value as described above under Payment at Maturity. Upon any selection by the Calculation Agent of a Successor Index, the Bank shall cause notice to be given to the depositors. In the event that Dow Jones discontinues publication of the Market Measure and: the Calculation Agent does not select a Successor Index; or the Successor Index is no longer published, the Calculation Agent will compute a substitute level for the Market Measure in accordance with the procedures last used to calculate the Market Measure before any discontinuance. If a Successor Index is selected or the Calculation Agent calculates a level as a substitute for the Market Measure as described below, the Successor Index or level will be used as a substitute for the Market Measure for all purposes, including for purposes of determining whether a Market Disruption Event exists. If Dow Jones discontinues publication of the Market Measure before the first determination of the Ending Value and the Calculation Agent determines that no Successor Index is available at that time, then on each Business Day until the earlier to occur of: the first determination of the Ending Value; and a determination by the Calculation Agent that a Successor Index is available, the Calculation Agent will determine the level that would be used in computing the Ending Value as described in the preceding paragraph. The Calculation Agent will cause notice of each level to be published not less often than once each month in The Wall Street Journal or another newspaper of general circulation and arrange for information with respect to these levels to be made available by telephone. Notwithstanding these alternative arrangements, discontinuance of the publication of the Market Measure may adversely affect any secondary market in the Deposits. Limited Early Withdrawals Withdrawals will be permitted prior to the stated maturity date only in the event of the death of the beneficial owner of a Deposit or the adjudication of incompetence of any such beneficial owner by a court or other administrative body of competent jurisdiction. In such event, provided that prior written notice of such proposed withdrawal has been given to your Broker and the Bank, together with appropriate documentation to support such request, the Bank will permit withdrawal of all Deposits held by such beneficial owner (no partial withdrawals will be permitted). The amount payable by the Bank on any Deposits upon such withdrawal will equal the principal amount only of the withdrawn Deposits. No Supplemental Redemption Amount will be payable. S-13

14 Events of Default and Acceleration The following will be Events of Default with respect to the Deposits: (a) default in the payment of any principal or the Supplemental Redemption Amount, if any, when due; and (b) certain events of bankruptcy, insolvency, reorganization or the appointment of a conservator, receiver or liquidator of the Bank or substantially all of its property. Any depositor, by written notice to the Bank, may declare all amounts of such Deposit due and payable immediately if an Event of Default has occurred and is continuing at the time of such declaration; provided, however, seven calendar days have elapsed since the original issue date of the Deposit. In the event that the Deposits are to be repaid early as a result of an event described in clause (b), above, the amount payable to a beneficial owner of a Deposit upon any acceleration permitted by the Deposits, with respect to each Deposit, will be equal to the principal amount plus the Supplemental Redemption Amount, if any, calculated as though the date of acceleration were the stated maturity date of the Deposits and the Valuation Date was the second Index Business Day prior to such date of acceleration. See Payment at Maturity in this Fact Sheet Supplement. Upon the declaration and notice, the amount payable described above will become immediately due and payable. Any Event of Default with respect to a Deposit may be waived by the depositor. You should be aware that despite any arrangement stated in this Fact Sheet Supplement regarding any payment due on the Deposits in the case an Event of Default as specified in clause (b) of the preceding paragraph occurs, the FDIC could set aside such arrangement. For example, because the Supplemental Redemption Amount is not determined until the stated maturity date of the Deposits, should the FDIC be appointed a conservator or receiver of the Bank, the FDIC may, consistent with past practice, take the position that the return reflected by the Supplemental Redemption Amount was contingent at the time the FDIC was so appointed and that any increase that may have occurred in the Market Measure between the Pricing Date and the date the FDIC sets aside (repudiates) the terms of the Deposits does not provide the basis for a valid claim against the FDIC. S-14