Example 3
The Ending Value is 130.00, or
130.00% of the Starting Value:
|
|
|
|
|
Starting Value:
|
|
100.00
|
|
|
Step Up Value:
|
|
127.00
|
|
|
Ending Value:
|
|
130.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
$10 +
|
|
[
|
|
$10 ×
|
|
(
|
|
130 100
|
|
)
|
|
]
|
|
= $13.00
|
|
Redemption Amount per unit
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-6
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
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 sections beginning on page PS-7 of product supplement EQUITY INDICES SUN-1, page S-5 of the MTN prospectus supplement,
and page 8 of the prospectus identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
|
§
|
|
Depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
|
|
§
|
|
Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
|
|
§
|
|
Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations,
you may lose your entire investment.
|
|
§
|
|
If the notes are called, your investment return is limited to the return represented by the Call Premium.
|
|
§
|
|
Your investment return, if any, may be less than a comparable investment directly in the stocks included in the Index.
|
|
§
|
|
The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates pricing models. These pricing models consider certain assumptions
and variables, including our credit spreads, our internal funding rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes.
These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.
|
|
§
|
|
The public offering price you pay for the notes will exceed the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower
than the initial estimated value. This is due to, among other things, changes in the level of the Index, our internal funding rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as
further described in Structuring the Notes on page TS-13. These factors, together with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in
any secondary market and will affect the value of the notes in complex and unpredictable ways.
|
|
§
|
|
The initial estimated value does not represent a minimum or maximum price at which we, MLPF&S or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The
value of your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Index, our creditworthiness and changes in market conditions.
|
|
§
|
|
A trading market is not expected to develop for the notes. Neither we nor MLPF&S is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your
notes at any price in any secondary market.
|
|
§
|
|
Our business activities as a full service financial institution, including our commercial and investment banking activities, our hedging and trading activities (including trades in shares of companies included in the
Index) and any hedging and trading activities we engage in for our clients accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
|
|
§
|
|
The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
|
|
§
|
|
You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.
|
|
§
|
|
While we or our affiliates may from time to time own securities of companies included in the Index we do not control any company included in the Index, and are not responsible for any disclosure made by any other
company.
|
|
§
|
|
There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent.
|
|
§
|
|
The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See Summary Tax Consequences below and U.S. Federal Income Tax Summary beginning
on page PS-25 of product supplement EQUITY INDICES SUN-1.
|
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-7
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
Additional Risk Factors
The stocks included in the Index are concentrated in one sector.
All of the
stocks included in the Index are issued by companies whose primary lines of business are directly associated with the U.S. housing construction sector. As a result, the stocks that will determine the performance of the notes are concentrated in one
sector. Although an investment in the notes will not give holders any ownership or other direct interests in the stocks underlying the Index, the return on an investment in the notes will be subject to certain risks associated with a direct equity
investment in companies in the U.S. housing construction sector. Accordingly, by investing in the notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in multiple sectors.
A limited number of Index Components may affect its level and the Index is not necessarily representative of the U.S. housing construction industry.
As of June 30, 2014, the top three Index Components constituted 32.98% of the total weight of the Index and the top six Index Components constituted 57.07% of the
total weight of the Index. Any reduction in the market price of those securities is likely to have a substantial adverse impact on the level of the Index and the value of the notes.
While the stocks comprising the Index are common stocks of companies generally considered to be involved in various segments of the U.S. housing construction industry,
the stocks underlying the Index and the Index may not necessarily follow the price movements of the entire industry generally. If the stocks underlying the Index decline in value, the Index will decline in value even if common stock prices in the
U.S. housing construction industry generally increase in value.
The housing construction industry is significantly affected by general and local economic
conditions and real estate markets as well as by weather conditions, natural disasters, and geopolitical events, any of which could adversely affect the performance of the companies included in the Index.
The housing construction industry is cyclical and has from time to time experienced significant difficulties. The prices of the equity securities included in the Index
and, in turn, the level of the Index will be affected by a number of factors that may affect the value of the notes, including:
|
§
|
|
employment levels and job growth;
|
|
§
|
|
the availability of financing for home buyers;
|
|
§
|
|
housing demand and real estate values;
|
|
§
|
|
the availability of suitable undeveloped land;
|
|
§
|
|
raw material and labor shortages and price fluctuations;
|
|
§
|
|
federal, state, and local laws and regulations concerning the development of land, housing construction, home sales, consumer financing, and environmental protection;
|
|
§
|
|
competition among companies which engage in the housing construction business; and
|
|
§
|
|
the supply of homes and other housing alternatives.
|
In addition, weather conditions and natural disasters such as
hurricanes, tornadoes, earthquakes, floods, and fires can harm the housing construction business. Geopolitical events, such as armed conflict and related market disruptions could also have a significant impact on the housing construction business.
These factors described above could cause a change in the housing construction industry generally or regionally and could cause the value of the equity securities
included in the Index and the level of the Index to decrease or remain flat during the term of the notes.
There is no direct correlation between the value of the
notes or the level of the Index and residential housing prices.
There is no direct linkage between the level of the Index and residential housing prices in
specific regions or residential housing prices in general. While residential housing prices may be one factor that could affect the prices of the stocks included in the Index and, consequently, the Redemption Amount, the Index and the notes are not
directly linked to movements of residential housing prices and may be affected by factors unrelated to those movements.
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-8
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
The Index
We have obtained all information regarding the Index contained in this term sheet, including its make-up, method of calculation, and changes in its components, from
information prepared by NASDAQ OMX (the Index sponsor). That information reflects the policies of, and is subject to change by NASDAQ OMX. NASDAQ OMX, 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 us, the calculation agent, or MLPF&S accepts any responsibility for the calculation, maintenance or publication of the Index or any successor index.
Nasdaq
®
, OMX
®
, NASDAQ OMX
®
, PHLX
®
, PHLX Housing Sector
SM
Index, and HGX
SM
are registered trademarks or service marks of Nasdaq OMX and have been licensed for use. The notes have not been passed on by NASDAQ OMX as to their legality or suitability and are not
sponsored, endorsed, sold, or promoted by NASDAQ OMX or its affiliates.
NASDAQ OMX OR ITS AFFILIATES MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE NOTES AND MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE
NOTES.
The Index is designed to measure the performance of a set of companies whose primary lines of business are directly associated with the U.S. housing
construction market. The Index is currently composed of 19 members. See Composition of the Index. The Index is published by NASDAQ OMX. The Index began on January 2, 2002 at a base value of 250.00.
The Index is monitored or benchmarked against the value at which it was initially set. The Index will reflect the U.S. housing construction industry only to the extent
that the underlying issues are representative of the industry. NASDAQ OMX will adjust the composition of the Index due to mergers of component issuers, because issuers no longer reflect the particular Index group, or to improve the Indexs
correlation to the U.S. housing construction industry, as described in more detail below.
General
The Index is a modified market capitalization-weighted index, in which the value of the Index equals the aggregate value of the Index share weights, also known as the
Index Shares, of each of the securities included in the Index (the Index Securities), multiplied by each such Index Securitys last sale price, and divided by the divisor of the Index. The divisor serves the purpose of
scaling the aggregate Index value to a lower order of magnitude, which is more desirable for Index reporting purposes. If trading in an Index Security is halted while the applicable market is open, the most recent last sale price for that security
is used for all Index computations until trading resumes. If trading is halted before the market is open, the previous days last sale price is used.
The
formula for the Index value is:
Aggregate Adjusted Market Value
Divisor
where the Divisor is:
(Market Value after Adjustments/Market Value before Adjustments) × Divisor before Adjustments
The Index is ordinarily calculated without regard to cash dividends on the Index Securities.
The Index is calculated during the trading day and is disseminated once per second from 9:30:01 a.m. to 5:16:00 p.m., east coast time. The closing value of the Index may
change up until 5:15:00 p.m. east coast time due to corrections to the last sale price of the Index Securities.
Eligibility
Index eligibility is limited to specific types of securities. The security types eligible for the Index include domestic or foreign common stocks, ordinary shares, shares
of beneficial interest or limited partnership interests, and tracking stocks. Security types not included in the Index are American Depository Receipts, closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights,
warrants, units, and other derivative securities.
Initial Security Eligibility Criteria
To be included in the Index, a security must meet the following criteria:
|
§
|
|
the security must be listed on the New York Stock Exchange, the Nasdaq Stock Market, or NYSE Amex Equities U.S.;
|
|
§
|
|
the issuer of the security must be classified, as reasonably determined by NASDAQ OMX, as a company whose primary business is associated with the U.S. housing construction market under certain Industry Classification
Benchmark codes, which are products of FTSE International Limited and are licensed for use by the Index Sponsor;
|
|
§
|
|
only one class of security per issuer is allowed;
|
|
§
|
|
the security must have a market capitalization of at least $100 million;
|
|
§
|
|
the security must have traded at least 1.5 million shares in each of the last six months;
|
|
§
|
|
the security must have listed options on a recognized options market in the U.S. or be eligible for listed-options trading on a recognized options market in the U.S.;
|
|
§
|
|
the security may not be issued by an issuer currently in bankruptcy proceedings;
|
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-9
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
|
§
|
|
the issuer of the security may not have entered into a definitive agreement or other arrangement which would likely result in the security no longer being eligible for the Index;
|
|
§
|
|
the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn; and
|
|
§
|
|
the issuer of the security must have seasoned on a recognized market for at least six months; in the case of spin-offs, the operating history of the spin-off will be considered.
|
Component Replacement Criteria
In the event that an Index Security no longer
meets the continued security eligibility criteria described below, it will be replaced with a security that meets all of the initial security eligibility criteria and additional criteria which follows. Securities eligible for inclusion will be
ranked descending by market value, current price, and percentage price change over the previous six months. The security with the highest overall ranking will be added to the Index (if multiple securities have the same rank, the security with the
largest market capitalization will rank higher), provided that the Index then meets the following criteria:
|
§
|
|
no single Index Security is greater than 20% of the weight of the Index, and the top five Index Securities do not constitute more than 55% of the weight of the Index; and
|
|
§
|
|
no more than 15% of the weight of the Index is composed of non-U.S. component securities that are not subject to comprehensive surveillance agreements.
|
In the event that the highest ranking security does not permit the Index to meet the above criteria, the next highest ranking security will be selected and the Index
criteria will again be applied to determine eligibility. The process will continue until a qualifying replacement security is selected.
Continued Security
Eligibility Criteria
To be eligible for continued inclusion in the Index, an Index Security must meet the following criteria:
|
§
|
|
the security must be listed on the New York Stock Exchange, the Nasdaq Stock Market, or NYSE Amex Equities U.S.;
|
|
§
|
|
the issuer of the security must be classified, as reasonably determined by NASDAQ OMX, as a company whose primary business is associated with the U.S. housing sector;
|
|
§
|
|
the security must have a market capitalization of at least $60 million;
|
|
§
|
|
the security may not be issued by an issuer currently in bankruptcy proceedings; and
|
|
§
|
|
the issuer of the security may not have annual financial statements with an audit opinion that is currently withdrawn.
|
Continued Index Eligibility Criteria
In addition to the security eligibility
criteria, the Index as a whole must meet the following criteria on a continual basis unless otherwise noted:
|
§
|
|
no single Index Security is greater than 25% of the weight of the Index, and the top five Index Securities do not constitute more than 60% of the weight of the Index (measured semi-annually on the first trading day in
January and July);
|
|
§
|
|
no more than 18% of the weight of the Index is composed of non-U.S. Index Securities that are not subject to comprehensive surveillance agreements;
|
|
§
|
|
the total number of Index Securities has not increased or decreased by 33 1/3% of the Index and in no event will be less than nine;
|
|
§
|
|
Index Securities representing at least 95% of the weight of the Index have a market capitalization of at least $75 million;
|
|
§
|
|
Index Securities representing at least 92% of the weight of the Index and at least 82% of the total number of Index Securities meet the security options eligibility rules;
|
|
§
|
|
Index Securities must have trading volume of at least 600,000 shares for each of the last six months, except that for each of the lowest weighted Index Securities that in the aggregate account for no more than 5% of the
weight of the Index, trading volume must be at least 500,000 shares for each of the last six months; and
|
|
§
|
|
the lesser of the five highest weighted Index Securities or the highest weighted Index Securities that in the aggregate represent at least 30% of the total number of Index Securities each have had an average monthly
trading volume of at least 1,250,000 shares over the past six months.
|
In the event the Index does not meet the criteria, the Index composition will be
adjusted to ensure that the Index meets the criteria. Index Securities that contribute to the Index not meeting the eligibility criteria may be removed. Index Securities may be added and/or replaced according to the component replacement rules to
ensure compliance with these criteria. If removed, the security will, in ordinary circumstances, be removed at its last sale price. If the security is halted from trading on its primary listing market, however, and the official closing price cannot
be readily determined, NASDAQ OMX may, at its discretion, remove the security at a zero price. If the security is removed at a zero price, it will be applied to the Index after the close of market but before the dissemination of the official closing
value of the Index (ordinarily at 5:16 p.m.).
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-10
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
Index Maintenance
If a
corporate event occurs as to any Index Security, such as a stock dividend, stock split, spin-off or rights issuance, the Index Shares and/or the price of the Index Security will be adjusted on the ex-date. If the change in total shares outstanding
arising from other corporate actions is greater than or equal to 10%, the adjustment in the Index Shares and/or the price of the Index Security will be made as soon as practicable. Otherwise, if the change in total shares outstanding is less than
10%, then all such changes are accumulated and made effective on a quarterly basis after the close of trading on the third Friday in each of March, June, September, and December. The Index Shares are derived from the Index Securitys total
shares outstanding. The Index Shares are adjusted by the same percentage amount by which the total shares outstanding have changed.
In the event of a special cash
dividend, NASDAQ OMX will determine on an individual basis whether to make a change to the price of an Index Security in accordance with its Index dividend policy. If NASDAQ OMX determines that a change will be made, it will become effective on the
ex-date, and advance notification will be made.
In the event of a change in the Index Shares, a change in an Index Security, or a change to the price of an Index
Security due to spin-offs, rights issuances, or special cash dividends, the divisor is ordinarily adjusted to ensure that there is no discontinuity in the value of the Index, which might otherwise be caused by any such change. All changes are
announced in advance and will be reflected in the Index prior to market open on the applicable effective date.
Index Rebalancing
The Index uses a modified market capitalization-weighting methodology. Each quarter, the Index is rebalanced so that the maximum weight of any Index Security will not
exceed 15% and no more than two Index Securities will be at the cap. Under those circumstances, any Index Security that is then in excess of 8% will be capped at 8%. The aggregate amount by which all Index Securities over 15% and 8% is reduced will
be redistributed proportionally across the remaining Index Securities. After redistribution, if any other Index Security then exceeds 8%, the Index Security is set to 8% of the Index and the redistribution is repeated to derive the final weights.
The modified market capitalization-weighted methodology is applied to the capitalization of each Index Security, using the last sale price of the Index Security at
the close of trading on the first Friday in March, June, September, and December and after applying quarterly changes to the total shares outstanding. Index Shares are then calculated by multiplying the weight of the Index Security by the new market
value of the Index and dividing the modified market capitalization for each Index Security by its corresponding last sale price. The changes become effective after trading on the third Friday in March, June, September, and December.
Composition of the Index
As of June 30, 2014, the Index
was composed of the following nineteen stocks:
|
|
|
Company
|
|
Percentage of Index Weighting
|
Weyerhaeuser Company
|
|
15.29%
|
Fidelity National Financial Inc.
|
|
9.60%
|
Vulcan Materials Company
|
|
8.10%
|
Masco Corporation
|
|
8.07%
|
DR Horton Inc
|
|
8.04%
|
PulteGroup Inc.
|
|
7.98%
|
Lennar Corporation
|
|
7.95%
|
Toll Brothers Inc.
|
|
7.21%
|
Owens Corning
|
|
5.01%
|
Lennox International, Inc.
|
|
4.84%
|
Armstrong World Industries, Inc.
|
|
3.46%
|
Radian Group, Inc.
|
|
3.11%
|
Standard Pacific Corp
|
|
2.64%
|
The Ryland Group, Inc.
|
|
2.03%
|
KB Home
|
|
1.86%
|
Meritage Homes Corporation
|
|
1.81%
|
MDC Holdings, Inc.
|
|
1.63%
|
Hovnanian Enterprises, Inc.
|
|
0.74%
|
M/I Homes, Inc.
|
|
0.65%
|
*
|
Rounded to two decimal places.
|
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-11
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
The following graph shows the monthly historical performance of the Index in the period from January 2008 through
June 2014. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 17, 2014, the closing level of the Index was 197.65.
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 above is not an indication that the level of the Index is more or less likely to increase or decrease at any time over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the Index.
License Agreement
NASDAQ OMX and MLPF&S have entered into a non-exclusive
license agreement providing for the license to MLPF&S, in exchange for a fee, of the right to use the Index, which is owned and published by NASDAQ OMX in connection with the notes. We are an authorized affiliate of MLPF&S. The license
agreement between NASDAQ OMX and MLPF&S provides that the following language must be stated in this term sheet:
The notes are not sponsored,
endorsed, sold, or promoted by NASDAQ OMX or its affiliates. NASDAQ OMX or its affiliates have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to the notes. NASDAQ OMX or its
affiliates 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 Index to
track general stock market performance. NASDAQ OMX or its affiliates only relationship to MLPF&S and to us is the licensing of the Nasdaq
®
, OMX
®
, PHLX Housing Sector
SM
, and HGX
SM
registered trademarks, service marks, and certain trade
names of NASDAQ OMX and the use of the Index, which is determined, composed, and calculated by NASDAQ OMX or its affiliates without regard to MLPF&S, us, or the notes. NASDAQ OMX or its affiliates has no obligation to take the needs of
MLPF&S, our needs, or the needs of the holders of the notes into consideration in determining, composing, or calculating the Index. NASDAQ OMX or its affiliates is not responsible for and has not participated in the determination of the timing
of, prices at, 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. NASDAQ OMX or its affiliates has no obligation or liability in connection with the
administration, purchase, sale, marketing, promotion, or trading of the notes.
NASDAQ OMX OR ITS AFFILIATES DOES NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE INDEX OR ANY DATA INCLUDED THEREIN. NASDAQ OMX OR ITS AFFILIATES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY
DATA INCLUDED THEREIN. NASDAQ OMX OR ITS AFFILIATES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL NASDAQ OMX OR ITS AFFILIATES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
|
|
|
Autocallable Market-Linked Step Up Notes
|
|
TS-12
|
|
|
|
|
|
Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
|
|
|
|
|
Supplement to the Plan of Distribution; Conflicts of Interest
Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term
sheet, less the indicated underwriting discount.
MLPF&S, a broker-dealer subsidiary of BAC, is a member of the Financial Industry Regulatory Authority, Inc.
(FINRA) and will participate as selling agent in the distribution of the notes. Accordingly, offerings of the notes will conform to the requirements of Rule 5121 applicable to FINRA members. MLPF&S may not make sales in this offering
to any of its discretionary accounts without the prior written approval of the account holder.
We may deliver the notes against payment therefor in New York, New
York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties
to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than three business days from the pricing date, purchasers who wish to trade the 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.
The notes will not be listed on any securities exchange.
In the original offering of the notes, 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 MLPF&S acting as a principal in effecting the transaction for your
account.
MLPF&S will not receive an underwriting discount for notes sold to certain fee-based trusts and fee-based discretionary accounts managed by U.S. Trust
operating through Bank of America, N.A.
MLPF&S may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing
market prices or at negotiated prices, and these will include MLPF&Ss trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such
transactions. At MLPF&Ss discretion, for a short, undetermined initial period after the issuance of the notes, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the
notes. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Index and the remaining term of the notes. However, neither we nor any of our
affiliates is obligated to purchase your notes at any price, or at any time, and we cannot assure you that we or any of our affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.
The value of the notes shown on your account statement will be based on MLPF&Ss estimate of the value of the notes if MLPF&S or another of our affiliates
were to make a market in the notes, which it is not obligated to do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions and other considerations, as mentioned above, and
will include transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of the notes.
Structuring the Notes
The notes are our debt
securities, the return on which is linked to the performance of the Index. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time
of pricing. In addition, because market-linked notes result in increased operational, funding and liability management costs to us, we typically borrow the funds under these notes at a rate that is more favorable to us than the rate that we might
pay for a conventional fixed or floating rate debt security. This rate, which we refer to in this term sheet as our internal funding rate, is typically lower than the rate we would pay when we issue conventional fixed or floating rate debt
securities. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked notes, typically results in the initial estimated value of the
notes on the pricing date being less than their public offering price.
Payments on the notes, including the amount you receive at maturity or upon an automatic
call, will be calculated based on the $10 per unit principal amount and will depend on the performance of the Index. In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements
(which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates,
and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Index, the tenor of the note and the tenor of the hedging arrangements. The economic terms of the notes and their initial
estimated value depend in part on the terms of these hedging arrangements.
MLPF&S has advised us that the hedging arrangements will include a hedging related
charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these
hedging arrangements may be realized by MLPF&S or any third party hedge providers.
For further information, see Risk FactorsGeneral Risks Relating
to the Notes beginning on page PS-7 and Use of Proceeds on page PS-15 of product supplement EQUITY INDICES SUN-1.
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Autocallable Market-Linked Step Up Notes
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TS-13
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Autocallable Market-Linked Step Up Notes
Linked to the PHLX Housing Sector
SM
Index, due August
, 2016
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Summary Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
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You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as a callable single financial contract with respect to
the Index.
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning on page 62 of the prospectus) generally will recognize capital gain or loss upon maturity or upon a sale, exchange, or
redemption of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year.
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No assurance can be given that the IRS or any court will agree with this characterization and tax treatment.
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Under newly proposed Treasury regulations, a dividend equivalent payment (as discussed in the product supplement) includes payments (including deemed payments) that are contingent upon or determined by
reference to actual or estimated U.S. source dividends with respect to certain equity-linked instruments, whether explicitly stated or implicitly taken into account in computing one or more of the terms of such instrument. If enacted in their
current form, the regulations will impose a withholding tax on payments made on the notes on or after January 1, 2016 that are treated as dividend equivalents. However, the Treasury Department and Internal Revenue Service have announced that
they intend to limit this withholding to equity-linked instruments issued on or after the date that is 90 days after the date of publication in the Federal Register of final regulations addressing dividend equivalent withholding.
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You should consult your own tax advisor concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any
tax consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws. You should review carefully the discussion under the section entitled U.S.
Federal Income Tax Summary beginning on page PS-25 of product supplement EQUITY INDICES SUN-1.
Where You Can Find More Information
We have filed a registration statement (including a product supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this
term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents 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 if you so request by calling MLPF&S toll-free at
1-866-500-5408.
Market-Linked Investments Classification
MLPF&S classifies certain market-linked investments (the Market-Linked Investments) into categories, each with
different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.
Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking on a
similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive
better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need
to be prepared for the possibility that you may lose all or part of your investment.
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Autocallable Market-Linked Step Up Notes
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TS-14
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