UPDATED CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities To Be Registered
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Amount To Be
Registered
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Proposed Maximum
Aggregate
Price Per Unit
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Proposed Maximum
Aggregate
Offering Price
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Amount
of
Registration
Fee
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Notes
offered hereby
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$16,725,000
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100%
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$16,725,000
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$933.26 (1)
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(1)
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The registration fee is calculated in accordance with Rule 457(r) under the Securities Act. $7,805.12 of the registration fees paid in respect of the securities covered by the registration
statement of which the pricing supplement is a part remain unused. $933.26 of that amount is being offset against the registration fee for this offering and $6,871.86 remains available for future registration fees.
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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-156118
The terms of the Notes are as specified in this term sheet and in the documents indicated herein under Additional
Note Terms. Investing in the Notes involves a number of risks. There are important differences between the Notes and a conventional debt security, including different investment risks.
See
Risk Factors
on page TS-5 of this term sheet and beginning on page P-4 of product supplement LIRN-2.
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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In connection with this offering, each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
First Republic Securities Company, LLC, a broker-dealer affiliate of Merrill Lynch, will act as principal in selling the Notes to investors.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this term sheet or the Note Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Per Unit
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Total
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Public offering price (1)
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$10.00
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$16,725,000
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Underwriting discount (1)
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$.20
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$334,500
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Proceeds, before expenses, to SEK
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$9.80
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$16,390,500
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(1)
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The public offering price and underwriting discount for any purchase of 500,000 units or more in a single transaction by an individual investor will be $9.95 per unit and
$.15 per unit, respectively.
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Merrill Lynch & Co.
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Banc of America Investment Services, Inc.
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August 26, 2009
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1,672,500 Units
Capped Leveraged Index Return Notes®
Linked to the S&P 500® Index Due August 26, 2011
$10 principal amount per unit
Pricing Supplement/Term Sheet No. 69
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Pricing Date
Settlement Date
Maturity Date
CUSIP No.
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August 26, 2009
September 4, 2009
August 26, 2011
01019M785
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Aktiebolaget Svensk Exportkredit (Publ) (Swedish Export Credit Corporation)
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Capped Leveraged Index Return Notes®
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200% leveraged upside exposure to increases in the level of the S&P 500® Index (the Index), subject to a
cap of 25.42%
A maturity of approximately 24 months
1-to-1 downside exposure to decreases in the level of the Index in excess of a Threshold Value with up to 90% of the principal amount at risk
Payment at maturity is subject to the credit risk of SEK No periodic interest payments
Application may be made to list on NYSE Arca under the symbol SOG
The Notes are not guaranteed under the Federal Deposit Insurance Corporations Temporary Liquidity Guarantee Program
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Summary
The Capped Leveraged Index Return Notes
®
Linked to the S&P 500
®
Index Due August 26, 2011 (the Notes) are senior, unsecured debt securities of Aktiebolaget Svensk Exportkredit (Publ) (Swedish Export Credit
Corporation) and are not guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or secured by collateral.
The Notes will rank equally with all of SEKs other unsecured and unsubordinated debt, and any payments
due on the Notes, including any repayment of principal, will be subject to the credit risk of SEK.
The Notes provide a leveraged return for investors, subject to a cap, if the level of the S&P 500
®
Index (the Index) increases moderately from the Starting Value of the Index, determined on August 26, 2009, the date the Notes were priced for
initial sale to the public (the Pricing Date), to the Ending Value of the Index, determined on the Calculation Days shortly prior to the maturity date of the Notes. Investors must be willing to forego interest payments on the Notes and
be willing to accept a return that is capped or a repayment that may be less, and potentially significantly less, than the Original Offering Price of the Notes.
Capitalized terms used but not defined in this term sheet have the meaning set forth in product supplement LIRN-2. References in this term sheet to SEK, we, us and our are to Aktiebolaget Svensk
Exportkredit (Publ) (Swedish Export Credit Corporation), and references to Merrill Lynch are to Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Terms of the Notes
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Issuer:
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Aktiebolaget Svensk Exportkredit (Publ) (Swedish Export Credit Corporation)
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Original Offering Price:
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$10 per unit
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Term:
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Approximately 24 months
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Market Measure:
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S&P 500
®
Index (Index symbol SPX)
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Starting Value:
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1,028.12
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Ending Value:
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The average of the closing levels of the Index on each scheduled Calculation Day during the Calculation Period. If it is determined that a scheduled Calculation Day
is not a Market Measure Business Day, or if a Market Disruption Event occurs on a scheduled Calculation Day, the Ending Value will be determined as more fully described in product supplement LIRN-2.
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Threshold Value:
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925.31 (90% of the Starting Value, rounded to two decimal places)
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Capped Value:
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Represents a return of 25.42% over the $10 Original Offering Price (or $12.542 per unit).
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Calculation Period:
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August 17, 2011, August 18, 2011, August 19, 2011, August 22, 2011 and August 23, 2011.
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Participation Rate:
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200%
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Downside
Leverage Factor:
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100%
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Calculation Agent:
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Merrill Lynch, Pierce, Fenner & Smith Incorporated
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Determining Payment at Maturity for the Notes
TS-2
Hypothetical Payout Profile
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This graph reflects the hypothetical returns on the Notes, including the Participation Rate of 200% and the Capped Value of 25.42%. The green line reflects the hypothetical returns
on the Notes, while the gray line reflects the return of a hypothetical direct investment in the stocks included in the Index, 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.
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Hypothetical Payments at Maturity
Set forth below are four examples of payment at maturity calculations (rounded to three decimal places), including the Starting Value of 1,028.12 and the Capped Value of $12.542.
Example 1
The hypothetical Ending Value is equal to 70% of the Starting Value and less than the Threshold Value:
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Starting Value:
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1,028.12
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Hypothetical Ending Value:
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719.68
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Threshold Value:
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925.31
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$10 +
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[
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$10 ×
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(
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719.68 925.31
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)
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× 100%
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]
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= $8.000
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1,028.12
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Payment at maturity (per unit) = $8.000
Example 2
The hypothetical Ending Value is equal to 95% of the Starting Value and greater than the Threshold Value:
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Starting Value:
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1,028.12
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Hypothetical Ending Value:
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976.71
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Threshold Value:
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925.31
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Payment at maturity (per unit) = $10.000
If the Ending Value is less than the Starting Value but is greater than or equal to the Threshold Value, the payment at maturity (per unit) will be equal to the $10 Original Offering Price.
Example 3
The hypothetical Ending Value is equal to 104% of the Starting Value:
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Starting Value:
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1,028.12
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Hypothetical Ending Value:
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1,069.24
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$10 +
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[
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$10 ×
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(
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1,069.24 1,028.12
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× 200%
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= $10.800
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1,028.12
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Payment at maturity (per unit) = $10.800
Example 4
The hypothetical Ending Value is equal to 150% of the Starting Value:
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Starting Value:
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1,028.12
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Hypothetical Ending Value:
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1,542.18
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$10 +
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[
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$10 ×
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(
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1,542.18 1,028.12
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)
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× 200%
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]
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= $20.000
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1,028.12
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Payment at maturity (per unit) = $12.542 (Payment at maturity (per unit) cannot be greater than the Capped Value)
TS-3
The following table illustrates, for the Starting Value of 1,028.12, the Threshold Value of 925.31 and a range of hypothetical
Ending Values of the Index:
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the percentage change from the Starting Value to the hypothetical Ending Value;
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§
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the total amount payable on the maturity date per unit (rounded to three decimal places);
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§
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the total rate of return to holders of the Notes;
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§
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the pretax annualized rate of return to holders of the Notes; and
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the pretax annualized rate of return of a hypothetical direct investment in the stocks included in the Index, which includes an assumed aggregate dividend yield of
2.58% per annum, as more fully described below.
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The table below reflects the Participation Rate of 200% and the Capped Value of $12.542.
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Hypothetical
Ending Value
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Percentage change
from the
Starting Value
to the hypothetical
Ending Value
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Total amount
payable on the
maturity date
per unit
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Total
rate of
return on
the Notes
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Pretax
annualized
rate of
return
on
the Notes (1)
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Pretax annualized rate of
return of the
stocks
included in the Index (1)(2)
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514.06
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-50.00%
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$6.000
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-40.00%
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-24.23%
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-28.78%
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616.87
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-40.00%
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$7.000
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-30.00%
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-17.25%
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-21.12%
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719.68
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-30.00%
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$8.000
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-20.00%
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-10.97%
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-14.32%
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822.50
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-20.00%
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$9.000
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-10.00%
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-5.26%
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-8.18%
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925.31 (3)
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-10.00%
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$10.000
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0.00%
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0.00%
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-2.58%
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987.00
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-4.00%
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$10.000
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0.00%
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0.00%
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0.57%
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1,007.56
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-2.00%
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$10.000
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0.00%
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0.00%
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1.59%
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1,028.12 (4)
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0.00%
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$10.000
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0.00%
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0.00%
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2.59%
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1,048.68
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2.00%
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$10.400
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4.00%
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1.99%
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3.58%
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1,069.24
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4.00%
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$10.800
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8.00%
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3.93%
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4.55%
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1,130.93
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10.00%
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$12.000
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20.00%
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9.43%
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7.39%
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1,233.74
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20.00%
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$12.542 (5)
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25.42%
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11.79%
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11.89%
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1,336.56
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30.00%
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$12.542
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25.42%
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11.79%
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16.13%
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1,439.37
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40.00%
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$12.542
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25.42%
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11.79%
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20.13%
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1,542.18
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50.00%
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$12.542
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25.42%
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11.79%
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23.92%
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(1)
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The annualized rates of return specified in this column are calculated on a semiannual bond equivalent basis and assume an investment term from September 4, 2009 to August 26, 2011,
the term of the Notes.
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(2)
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This rate of return assumes:
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(a)
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a percentage change in the aggregate price of the stocks included in the Index that equals the percentage change in the level of the Index from the Starting Value to the relevant hypothetical
Ending Value;
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(b)
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a constant dividend yield of 2.58% per annum, paid quarterly from the date of initial delivery of the Notes, applied to the level of the Index at the end of each quarter assuming this
value increases or decreases linearly from the Starting Value to the applicable hypothetical Ending Value; and
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(c)
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no transaction fees or expenses.
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(3)
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This is the Threshold Value.
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(4)
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This is the Starting Value.
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(5)
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The total amount payable on the maturity date per unit cannot exceed the Capped Value of $12.542.
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The above figures are for purposes of illustration only. The actual amount you receive and the resulting total and pretax annualized rates of return will depend on the actual Ending Value and term of your investment.
TS-4
Risk Factors
There are important differences between the Notes and a conventional debt security. An investment in the Notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks
relating to the Notes in the Risk Factors section included in the product supplement and the Risks Associated with Foreign Currency Notes and Indexed Notes section included in the prospectus supplement identified below under
Additional Note Terms, as well as the explanation of certain risks related to SEK contained in Item 3 of our Annual Report on Form 20-F for the fiscal year ended December 31, 2008, which was filed with the SEC on May 20,
2009 and is incorporated by reference herein. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.
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Your investment may result in a loss.
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Your yield may be lower than the yield on other debt securities of comparable maturity.
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§
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Your return is limited and may not reflect the return on a direct investment in the stocks included in the Index.
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You must rely on your own evaluation regarding the merits of an investment linked to the Index.
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You will not have the right to receive cash dividends or exercise ownership rights with respect to the stocks included in the Index.
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In seeking to provide investors with what we believe to be commercially reasonable terms for the Notes while providing Merrill Lynch 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.
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§
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The publisher of the Index may adjust the Index in a way that affects its level, and such publisher has no obligation to consider your interests.
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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.
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Payments on the Notes are subject to SEKs credit risk, and changes to SEKs credit ratings are expected to affect the value of the Notes.
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§
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Purchases and sales by Merrill Lynch and its affiliates may affect your return.
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Merrill Lynch or its affiliates may do business with underlying companies.
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Tax consequences are uncertain. See Summary Tax Consequences and Certain U.S. Federal Income Taxation Considerations below and Certain U.S.
Federal Income Taxation Considerations in product supplement LIRN-2.
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In addition to these risk factors, it is important to bear in mind that
the Notes are senior debt securities of SEK and are not guaranteed or insured by the FDIC or secured by collateral, nor are they obligations of, or guaranteed by, the Kingdom of Sweden. The Notes will rank equally with all of SEKs unsecured
and unsubordinated debt, and any payments due on the Notes, including any repayment of principal, will be subject to the credit risk of SEK.
Investor Considerations
You may wish to consider an investment in the Notes if:
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You anticipate that the Index will appreciate moderately from the Starting Value to the Ending Value.
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You accept that your investment may result in a loss, which could be significant, if the level of the Index decreases from the Starting Value to an Ending Value that is less
than the Threshold Value.
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You accept that the return on the Notes will not exceed the Capped Value.
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You are willing to forego interest payments on the Notes, such as fixed or floating rate interest paid on traditional interest bearing debt securities.
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You want exposure to the Index with no expectation of dividends or other benefits of owning the stocks included in the Index.
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You are willing to accept that there is no assurance that the Notes will be listed or remain listed on NYSE Arca. You understand that any listing does not ensure that a
trading market will develop for the Notes or that there will be liquidity in any trading market. You understand that secondary market prices for the Notes, if any, will be affected by various factors, including the actual and perceived
creditworthiness of SEK.
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You are willing to make an investment, the payments on which depend on the creditworthiness of SEK, as the issuer of the Notes.
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The Notes may not be appropriate investments for you if:
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You anticipate that the Index will depreciate from the Starting Value to the Ending Value or that the Index will not appreciate sufficiently over the term of the Notes to
provide you with your desired return.
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You are seeking 100% principal protection or preservation of capital.
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You seek a return on your investment that will not be capped at 25.42%.
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You seek interest payments or other current income on your investment.
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You want to receive dividends or other distributions paid on the stocks included in the Index.
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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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You are not willing or are unable to assume the credit risk associated with SEK, as the issuer of the Notes.
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TS-5
Recent Developments
On
July 6, 2009, Standard & Poors Ratings Services placed our long-term rating on CreditWatch with negative implications, revising it from AA+/Stable to AA+/Watch Neg.
Other Provisions
We will 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, 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.
In the original offering, the Notes will be sold in minimum investment amounts of 100 units.
If you place an order to purchase the Notes, you are consenting to each of Merrill Lynch and/or its broker-dealer affiliate First Republic Securities Company, LLC acting as a principal in effecting the transaction for your account.
Merrill Lynch, First Republic Securities Company, LLC and Banc of America Investment Services, Inc. may use the Note Prospectus for offers and sales in secondary
market transactions and market-making transactions in the Notes but are not obligated to engage in such secondary market transactions and/or market-making transactions. The distribution of the Note Prospectus in connection with such offers or sales
will be solely for the purpose of providing investors with the description of the terms of the Notes that was made available to investors in connection with the initial offering of the Notes. Secondary market investors should not, and will not be
authorized to, rely on the Note Prospectus for information regarding the issuer or for any purpose other than that described in the immediately preceding sentence. Each of Merrill Lynch, First Republic Securities Company, LLC and Banc of America
Investment Services, Inc. may act as principal or agent in these transactions, and any such sales will be made at prices related to prevailing market prices.
Supplement to the Plan of Distribution
Subject to certain conditions, we have agreed to sell 938,358 units of Notes to Merrill Lynch and 734,142
units of Notes to Banc of America Securities LLC. Merrill Lynch and Banc of America Securities LLC have agreed, severally and not jointly, to purchase such Notes; provided that none of the Notes will be sold unless all of the Notes are purchased.
Each of Merrill Lynch and Banc of America Securities LLC has severally agreed to purchase the specified units of Notes for the purchase price indicated on the cover of this Term Sheet and have advised us that it will initially offer all or part of
the Notes directly to the public on a fixed price basis at the offering prices set forth on the cover of this Term Sheet. Each of Merrill Lynch and Banc of America Securities LLC may offer the Notes to dealers, including affiliates that are dealers
(including First Republic Securities Company, LLC and Banc of America Investment Services, Inc.), at that price less a concession not in excess of the underwriting discount set forth on the cover of this Term Sheet. After the initial public
offering, the public offering price and concession may be changed. In the event of a default by Banc of America Securities LLC, our agreement with Banc of America Securities LLC and Merrill Lynch provides that Merrill Lynch will assume the
obligation to purchase the Notes initially allotted to Banc of America Securities LLC. In the event of a default by Merrill Lynch, our agreement with Banc of America Securities LLC and Merrill Lynch will terminate and no Notes will be offered or
sold.
The Index
All disclosure contained in this term sheet
regarding the Index, including, without limitation, its make-up, method of calculation and changes in its components has been derived from publicly available sources. The information reflects the policies of, and is subject to change by,
Standard & Poors Financial Services LLC. (Standard & Poors or S&P). SEK and Merrill Lynch have not independently verified and make no representation as to the accuracy or completeness of such
information. Standard and Poors which owns the copyright and all other rights to the Index, has no obligation to continue to publish, and may discontinue publication of, the Index. None of SEK, the Calculation Agent and Merrill Lynch accepts
any responsibility for the calculation, maintenance or publication of the Index or any successor index.
Standard & Poors
500
®
and S&P 500
®
are trademarks of Standard & Poors
Financial Services LLC and have been licensed for use by Merrill Lynch, Pierce, Fenner & Smith Incorporated and SEK is an authorized sublicensee. The Notes are not sponsored, endorsed, sold or promoted by Standard & Poors and
Standard a& Poors makes no representation regarding the advisability of investing in the Notes.
The Index is intended to provide an indication of the
pattern of common stock price movement. The calculation of the level of the Index is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular time compared to the aggregate average market
value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943. As of July 31, 2009, 411 companies or 80.7% of the market capitalization of the Index traded on the New York Stock Exchange; 89 companies
or 19.3% of the market
TS-6
capitalization of the Index traded on The Nasdaq Stock Market; and no companies traded on the NYSE Alternext U.S. stock exchange (formerly known as the American Stock
Exchange). As of July 31, 2009, the aggregate market value of the companies included in the Index represented approximately 77% of the aggregate market value of stocks included in the Standard & Poors Stock Guide Database of
domestic common stocks traded in the U.S., excluding American depositary receipts, limited partnerships and mutual funds.
Standard & Poors chooses
companies for inclusion in the Index with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of its Stock Guide Database of over 10,000 companies,
which Standard & Poors uses as an assumed model for the composition of the total market. Relevant criteria employed by Standard & Poors include the viability of the particular company, the extent to which that company
represents the industry group to which it is assigned, the extent to which the market price of that companys common stock generally is responsive to changes in the affairs of the respective industry and the market value and trading activity of
the common stock of that company. Ten main groups of companies comprise the Index, with the approximate percentage of the market capitalization of the Index included in each group as of July 31, 2009 indicated in parentheses: Consumer
Discretionary (9.1%); Consumer Staples (11.8%); Energy (12.0%); Financials (13.9%); Health Care (13.7%); Industrials (10.0%); Information Technology (18.7%); Materials (3.4%); Telecommunication Services (3.4%) and Utilities (3.9%).
Standard & Poors may from time to time, in its sole discretion, add companies to, or delete companies from, the Index to achieve the objectives stated above.
Standard & Poors calculates the Index by reference to the prices of the constituent stocks of the Index without taking account of the value of dividends paid on those stocks. As a result, the return on the notes will not
reflect the return you would realize if you actually owned the Index constituent stocks and received the dividends paid on those stocks.
Computation of the Index
While Standard & Poors currently employs the following methodology to calculate the Index, no assurance can be given that Standard &
Poors will not modify or change this methodology in a manner that may affect the amount an investor receives on the maturity date of the Notes.
Historically,
the market value of any component stock of the Index was calculated as the product of the market price per share and the number of the then outstanding shares of such component stock. In March 2005, Standard & Poors began shifting the
Index half way from a market capitalization weighted formula to a float-adjusted formula, before moving the Index to full float adjustment on September 16, 2005. Standard & Poors criteria for selecting stocks for the Index did
not change by the shift to float adjustment. However, the adjustment affects each companys weight in the Index.
Under float adjustment, the share counts used
in calculating the Index reflect only those shares that are available to investors, not all of a companys outstanding shares. Standard and Poors defines three groups of shareholders whose holdings are subject to float adjustment:
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holdings by other publicly traded corporations, venture capital firms, private equity firms, strategic partners, or leveraged buyout groups;
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holdings by government entities, including all levels of government in the U.S. or foreign countries; and
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holdings by current or former officers and directors of the company, founders of the company, or family trusts of officers, directors, or founders, as well as holdings of
trusts, foundations, pension funds, employee stock ownership plans, or other investment vehicles associated with and controlled by the company.
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However, treasury stock, stock options, restricted shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. In cases where holdings in a group exceed 10% of the outstanding
shares of a company, the holdings of that group are excluded from the float-adjusted count of shares to be used in the Index calculation. Mutual funds, investment advisory firms, pension funds, or foundations not associated with the company and
investment funds in insurance companies, shares of a U.S. company traded in Canada as exchangeable shares, shares that trust beneficiaries may buy or sell without difficulty or significant additional expense beyond typical brokerage
fees, and, if a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class if such shares are convertible by shareholders without undue delay and cost, are also part of the float.
For each stock, an investable weight factor (IWF) is calculated by dividing the available float shares, defined as the total shares outstanding less shares held in one
or more of the three groups listed above where the group holdings exceed 10% of the outstanding shares, by the total shares outstanding. The float-adjusted index is then calculated by dividing (w) the sum of the IWF multiplied by both the price
and the total shares outstanding for each stock by the index divisor. For companies with multiple classes of stock, Standard & Poors calculates the weighted average IWF for each stock using the proportion of the total company market
capitalization of each share class as weights.
The Index is calculated using a base-weighted aggregate methodology: the level of the Index reflects the total market
value of all 500 component stocks relative to the base period of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. The actual total
market value of the component stocks during the base period of the years 1941 through 1943 has been set to an indexed value of 10. This is often indicated by the notation 1941-43 = 10. In practice, the daily calculation of the Index is computed by
dividing the total market value of the component stocks by the index divisor. By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the Index, it serves as a link to the original base period
level of the Index. The index divisor keeps the Index comparable over time and is the manipulation point for all adjustments to the Index.
TS-7
Index Maintenance
Index maintenance
includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits
and stock dividends, require changes in the common shares outstanding and the stock prices of the companies in the Index, and do not require index divisor adjustments.
To prevent the value of the Index from changing due to corporate actions, corporate actions which affect the total market value of the Index require an index divisor adjustment. By adjusting the index divisor for the change in market value,
the level of the Index remains constant and does not reflect the corporate actions of individual companies in the Index. Index divisor adjustments are made after the close of trading and after the calculation of the Index closing level.
Changes in a companys shares outstanding of 5.00% or more due to mergers, acquisitions, public offerings, private placements, tender offers, Dutch auctions, or exchange
offers are made as soon as reasonably possible. All other changes of 5.00% or more (due to, for example, company stock repurchases, redemptions, exercise of options, warrants, subscription rights, conversion of preferred stock, notes, debt, equity
participation units, or other recapitalizations) are made weekly and are announced on Tuesdays for implementation after the close of trading on Wednesday. Changes of less than 5.00% are accumulated and made quarterly on the third Friday of March,
June, September, and December, and are usually announced two days prior.
Changes in IWFs of more than ten percentage points caused by corporate actions (such as
merger and acquisition activity, restructurings, or spinoffs) will be made as soon as reasonably possible. Other changes in IWFs will be made annually, in September, when IWFs are reviewed.
The following graph sets forth the monthly historical performance of the Index in the period from January 2004 through July 2009. This historical data on the Index is not
necessarily indicative of the future performance of the Index or what the value of the Notes may be. Any historical upward or downward trend in the level of the 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 Index was 1,028.12.
Before investing in the Notes, you should consult publicly available sources for the values and trading pattern of the Index. The
generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in financial markets generally and the Index exhibiting greater volatility than in earlier periods.
TS-8
License Agreement
Standard & Poors does not guarantee the accuracy and/or the completeness of the Index or any data included in the Index. Standard & Poors shall have no liability for any errors, omissions, or interruptions in
the Index. Standard & Poors makes no warranty, express or implied, as to results to be obtained by the Calculation Agent, the holders of the Notes or any other person or entity from the use of the Index or any data included in the
Index in connection with the rights licensed under the license agreement described in this term sheet or for any other use. Standard & Poors makes no express or implied warranties, and hereby expressly disclaims all warranties of
merchantability or fitness for a particular purpose with respect to the Index or any data included in the Index. Without limiting any of the above information, in no event shall Standard & Poors have any liability for any special,
punitive, indirect or consequential damages; including lost profits, even if notified of the possibility of these damages.
Standard & Poors and
Merrill Lynch have entered into a non-exclusive license agreement providing for the license to Merrill Lynch, in exchange for a fee, of the right to use the Index in connection with this offering, and SEK is an authorized sublicensee of Merrill
Lynch. The license agreement between Standard & Poors and Merrill Lynch provides that the following language must be stated in this term sheet:
The Notes are not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the holders of the Notes or any member of the public regarding the advisability of
investing in securities generally or in the Notes particularly or the ability of the S&P 500
®
Index to track general stock market performance. S&Ps only
relationship to Merrill Lynch (other than transactions entered into in the ordinary course of business) is the licensing of certain trademarks and trade names of S&P and of the S&P 500
®
Index which is determined, composed and calculated by S&P without regard to SEK, Merrill Lynch or the Notes. S&P has no obligation to take the needs of SEK, Merrill
Lynch or the needs of the holders of the Notes into consideration in determining, composing or calculating the S&P 500
®
Index. S&P is not responsible for and has
not participated in the determination of the timing of the sale of the Notes, prices at which the Notes are to initially be sold, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are
to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Notes.
Summary Tax Consequences
You should consider the United States federal income tax consequences of an investment in the Notes, including the
following:
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We intend to take the position that the Notes will be treated for U.S. federal income tax purposes as prepaid forward contracts, subject to a floor, to purchase the Index
and, by purchasing a Note, you will be deemed to have agreed to that treatment.
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Under the treatment agreed to above, the gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the U.S. holder held the
Note more than one year immediately before the disposition.
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You should refer to the product supplement related to this offering for
additional information relating to U.S. federal income tax and should consult your own tax advisors to determine tax consequences particular to your situation.
Certain U.S. Federal Income Taxation Considerations
Below is a summary of certain U.S. federal income tax considerations for U.S. investors
(U.S. Holders) that are initial holders of the Notes and that hold the Notes as capital assets. The following summary is not complete and is qualified in its entirety by the discussions under the sections entitled Certain U.S.
Federal Income Taxation Considerations in the accompanying product supplement LIRN-2, which you should carefully review prior to investing in the Notes.
General.
We intend to take the position that the Notes will be treated for U.S. federal income tax purposes as prepaid forward contracts, subject to a floor, to purchase the Index and, by purchasing a Note, you
will be deemed to have agreed to that treatment. The remainder of this discussion assumes that the Notes will be so treated. We also will take the position that at the time of issuance of your Note you deposit irrevocably with us a fixed amount of
cash equal to the purchase price of your Note to assure the fulfillment of your purchase obligation, which deposit will be non-interest bearing and will be unconditionally and irrevocably applied at the maturity date to satisfy that obligation at
the maturity date. Although you will be obligated to treat the purchase price as a deposit for U.S. federal income tax purposes, the cash proceeds that we will receive from the offering will not be segregated by us during the term of your Note, but
instead will be commingled with our other assets.
No statutory, administrative or judicial authority directly addresses the treatment of holders of Notes for U.S.
federal income tax purposes. As a result, no assurance can be given that the IRS or a court will agree with the tax consequences described in this discussion. A differing treatment from that assumed herein could adversely affect the amount, timing
and character of income, gain or loss in respect of an investment in the Notes. Prospective investors are urged to consult their own tax advisors with respect to the U.S. federal income tax consequences of the purchase, ownership and disposition of
the Notes in light of their own particular circumstances, as well as the effect of any state, local or foreign tax laws.
Sale, exchange or other taxable
disposition of Notes.
A U.S. holders initial tax basis in the Notes should be the price at which the U.S. holder purchased the Notes. Upon the sale, exchange or other disposition of Notes in a taxable disposition, a
U.S. holder should generally recognize gain or loss equal to the difference between the proceeds received (including amounts received at maturity) and the U.S. holders adjusted tax basis in the
TS-9
Note. Under the treatment agreed to above, the gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the U.S.
holder held the Note more than one year immediately before the disposition. Long-term capital gains of individuals are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Regulatory and Legislative Developments Related to Taxation of Prepaid Forward Contracts.
On December 7, 2007, the IRS and U.S. Treasury
Department issued a notice requesting public comments on a comprehensive set of tax policy issues raised by prepaid forward contracts, including several different approaches under which U.S. holders of prepaid forward contracts could be required to
recognize ordinary income on a current basis, or could be treated as owning directly the assets subject to the prepaid forward contract. Although it is currently uncertain what future guidance will result from the notice, the notice leaves open the
possibility that such guidance could have retroactive application. In addition, on December 19, 2007, legislation was introduced for consideration in the United States Congress that, if enacted into law, would require current accrual of
interest income on prepaid derivative contracts with a term of more than one year (which would include financial instruments similar to the Notes) acquired after the date of the legislations enactment. The legislation also would implement
special income accrual rules for publicly traded prepaid derivative contracts. The schedule for consideration of this legislation and the outcome of the legislative process currently is uncertain.
The IRS and U.S. Treasury Department previously issued proposed regulations that would require current accrual of income with respect to contingent nonperiodic payments made under
certain notional principal contracts. The preamble to the proposed regulations states that the wait and see method of tax accounting does not properly reflect the economic accrual of income on such contracts, and requires current accrual
of income with respect to some contracts already in existence at the time the proposed regulations were released. While the proposed regulations do not apply to derivative financial instruments other than notional principal contracts, the preamble
to the proposed regulations expresses the view that similar timing issues exist in the case of prepaid forward contracts. If the IRS published future guidance requiring current accrual of income with respect to contingent payments on prepaid forward
contracts, it is possible that you could be required to accrue income over the term of 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 Certain U.S. Federal Income Taxation Considerations in the accompanying product supplement LIRN-2.
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):
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Product supplement LIRN-2, dated December 23, 2008:
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http://www.sec.gov/Archives/edgar/data/352960/000119312508259305/d424b3.htm
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Prospectus and prospectus supplement, each dated December 15, 2008:
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http://www.sec.gov/Archives/edgar/data/352960/000110465908076407/a08-30087_1f3asr.htm
Our Central Index Key, or CIK, on the SEC Website is 352960.
We have 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 we have filed with the SEC for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC Website at
www.sec.gov
. Alternatively, we, any agent or any dealer participating in this offering, will arrange to send you these documents or the Note
Prospectus if you so request by calling toll-free 1-866-500-5408.
TS-10
Structured Investments Classification
Merrill Lynch classifies certain of the Structured Investments it offers (Structured Investments), including the Notes, into four categories, each with different investment characteristics. The description below is
intended to briefly describe the four categories of Structured Investments offered: Principal Protection, Enhanced Income, Market Participation and Enhanced Participation. A Structured Investment may, however, combine characteristics that are
relevant to one or more of the other categories. As such, a category should not be relied upon as a description of any particular Structured Investment.
Principal Protection:
Principal Protected Structured Investments offer full or partial principal protection at maturity, while offering market exposure and the opportunity for a better return than may be available from
comparable fixed income securities. Principal protection may not be achieved if the investment is sold prior to maturity.
Enhanced Income:
Structured
Investments offering enhanced income may offer an enhanced income stream through interim fixed or variable coupon payments. However, in exchange for receiving current income, investors may forfeit upside potential on the underlying asset. These
investments generally do not include the principal protection feature.
Market Participation:
Market Participation Structured Investments can offer
investors exposure to specific market sectors, asset classes and/or strategies that may not be readily available through traditional investment alternatives. Returns obtained from these investments are tied to the performance of the underlying
asset. As such, subject to certain fees, the returns will generally reflect any increases or decreases in the value of such assets. These investments are not structured to include the principal protection feature.
Enhanced Participation:
Enhanced Participation Structured Investments may offer investors the potential to receive better than market returns on the performance of
the underlying asset. Some structures may offer leverage in exchange for a capped or limited upside potential and also in exchange for downside risk. These underlying investments are not structured to include the principal protection
feature.
The classification of Structured Investments is meant solely for informational purposes and is not intended to describe fully any particular
Structured Investment, including the Notes, nor guarantee any particular performance.
Leveraged Index Return Notes
®
and LIRNs
®
are registered service marks of Merrill Lynch & Co.,
Inc.
TS-11
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