Market Measure Business Day
The following definition shall supersede and replace the definition of a “Market Measure Business Day” set forth in
product
supplement EQUITY INDICES SUN-1 dated November 28, 2016
:
A “Market Measure Business Day” means a day on which:
|
|
(A)
|
each of the New York Stock Exchange and NASDAQ Stock Market, Inc. (as to the S&P 500
®
Index), and the Eurex (as to the EURO STOXX 50
®
Index) (or any successor to the foregoing exchanges) are open for trading; and
|
|
|
(B)
|
the Basket Components or any successors thereto are calculated and published.
|
|
Market-Linked Step Up Notes
|
TS-
7
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
The Basket
The Basket is designed to allow investors to participate in the percentage changes in the levels of the Basket Components from the Starting Value to the Ending Value of the Basket. The Basket Components are described in the section “The Basket Components” below. Each Basket Component will be assigned an initial weight on the pricing date, as set forth in the table below.
For more information on the calculation of the value of the Basket, please see the section entitled “Description of the Notes
—
Basket Market Measures" beginning on page PS-
2
3
of product supplement EQUITY INDICES SUN-1.
If June 2, 2017 were the pricing date
,
for each Basket Component, the Initial Component Weight, the closing level, the hypothetical Component Ratio and the initial contribution to the Basket value would be as follows:
|
Basket Component
|
|
Bloomberg Symbol
|
|
Initial Component Weight
|
|
Closing Level
(1)(2)
|
|
Hypothetical Component Ratio
(1)(3)
|
|
Initial Basket Value Contribution
|
|
S&P 500
®
Index
|
|
SPX
|
|
70.00
|
|
2,439.07
|
|
0.02869946
|
|
70.00
|
|
EURO STOXX 50
®
Index
|
|
SX5E
|
|
30.00
|
|
3,591.82
|
|
0.00835231
|
|
30.00
|
|
|
|
|
|
|
|
|
|
Starting Value
|
|
100.00
|
|
(1)
|
The actual closing level of each Basket Component and the resulting actual Component Ratios will be determined on the pricing date, subject to adjustment as more fully described in the section entitled “Description of the Notes
—
Basket Market Measures
—
Determination of the Component Ratio for Each Basket Component
”
beginning on page PS-
2
3
of product supplement
EQUITY INDICES
SUN-
1
if a Market Disruption Event occurs on the pricing date as to any Basket Component.
|
|
(2)
|
These were the closing levels of the Basket Components on June 2, 2017.
|
|
(3)
|
Each hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket Component (as a percentage) multiplied by 100, and then divided by the closing level of that Basket Component on June 2, 2017 and rounded to eight decimal places.
|
The calculation agent will calculate the value of the Basket
by summing the products of the closing level for each Basket Component on
the
calculation day and the Component Ratio applicable to such Basket Component. If a Market Disruption Event occurs as to any Basket Component on
the
scheduled calculation day, the closing level of that Basket Component will be determined as more fully described beginning on page PS-
2
4
of product supplement EQUITY INDICES SUN-1 in the section “Description of the Notes
—
Basket Market Measures
—
Observation Level or Ending Value of the Basket.
”
|
Market-Linked Step Up Notes
|
TS-
8
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
While actual historical
information on the Basket will not exist before the pricing date, the following graph sets forth the hypothetical historical performance of the Basket from January 1, 2008 through June 2, 2017. The graph is based upon actual daily historical levels of the Basket Components, hypothetical Component Ratios
based on the closing levels of the Basket Components
as of December 31, 2007, and a Basket value of 100.00 as of that date. This hypothetical historical data on the Basket is not necessarily indicative of the future performance of the Basket or what the value of the notes may be. Any
hypothetical
historical upward or downward trend in the value of the
Basket during any period set forth below is not an indication that the value of the Basket is more or less likely to increase or decrease at any time over the term of the notes.
Hypothetical
Historical Performance of the Basket
|
Market-Linked Step Up Notes
|
TS-
9
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
The Basket Components
All disclosures contained in this term sheet regarding the Basket Components, including, without limitation, their make-up, method of calculation, and changes in their components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by,
S&P Dow Jones Indices LLC
and STOXX Limited (
the
“
index sponsors
”)
. The index sponsors, which license the copyright and all other rights to the Basket Components, have no obligation to continue to publish, and may discontinue publication of, the Basket Components. The consequences of the index sponsors discontinuing publication of the Basket Components are discussed in the section entitled
“Description of the Notes
—
Discontinuance of an Index” on page PS-22 of product supplement EQUITY INDICES SUN-1
.
None of us,
BAC,
the calculation agent
,
or MLPF&S accepts
any responsibility for the calculation, maintenance or publication of
the
Basket Components
or
any successor
ind
ices
.
The S&P 500
®
Index
The
S&P 500
®
Index
(the “SPX”)
is intended to provide an indication of the pattern of common stock price movement. The calculation of the level of
the SPX
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.
The SPX
sponsor chooses companies for inclusion in
the SPX
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 the
i
ndex sponsor uses as an assumed model for the composition of the total market. Relevant criteria employed by the
i
ndex sponsor 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 company’s 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.
Eleven
main groups of companies constitute
the SPX
, with the approximate percentage of the market capitalization of
the SPX
included in each group as of
May
31, 2017 indicated in parentheses: Consumer Discretionary (12.
5
%); Consumer Staples (9.
4
%); Energy (
6
.
0
%); Financials (1
3
.
7
%); Health Care (13.
9
%); Industrials (10.2%); Information Technology (2
3
.
2
%); Materials (2.
8
%);
Real Estate (2.
9
%);
Telecommunication Services (2.
2
%); and Utilities (
3
.
3
%). The i
ndex sponsor
may from time to time, in its sole discretion, add companies to, or delete companies from,
the SPX
to achieve the objectives stated above.
The
i
ndex sponsor calculates
the SPX
by reference to the prices of the constituent stocks of
the SPX
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 SPX
constituent stocks and received the dividends paid on those stocks.
Computation of
the SPX
While the
i
ndex sponsor currently employs the following methodology to calculate
the SPX
, no assurance can be given that
t
he
i
ndex sponsor will not modify or change this methodology in a manner that may affect the Redemption Amount.
Historically, the market value of any component stock of
the SPX
was calculated as the product of the market price per share and the number of then outstanding shares of such component stock. In March 2005, the
i
ndex sponsor began shifting
the SPX
halfway from a market capitalization weighted formula to a float-adjusted formula, before moving
the SPX
to full float adjustment on September 16, 2005. The
i
ndex sponsor’s criteria for selecting stocks for
the SPX
did not change with the shift to float adjustment. However, the adjustment affects each company’s weight in
the SPX
.
Under float adjustment, the share counts used in calculating
the SPX
reflect only those shares that are available to investors, not all of a company’s outstanding shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for purposes of calculating
the SPX
. Generally, these “control holders” will include officers and directors, private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily be considered part of the float.
Treasury stock, stock options, restricted shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight factor (“IWF”) is calculated by dividing the available float shares by the total shares outstanding. As of September 21, 2012, available float shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds 5% of the company’s shares, the
i
ndex sponsor would assign that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s
|
Market-Linked Step Up Notes
|
TS-
10
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
shares and another control group holds 20% of the company’s shares, the
i
ndex sponsor would assign an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control. For companies with multiple classes of stock, the
i
ndex sponsor calculates the weighted average IWF for each stock using the proportion of the total company market capitalization of each share class as weights.
The
SPX
is calculated using a base-weighted aggregate methodology. The level of
the SPX
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 level 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 level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the daily calculation of
the SPX
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 SPX
, it serves as a link to the original base period level of
the SPX
. The index divisor keeps
the SPX
comparable over time and is the manipulation point for all adjustments to
the SPX
, which is index maintenance.
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 SPX
, and do not require index divisor adjustments.
To prevent the level of
the SPX
from changing due to corporate actions, corporate actions which affect the total market value of
the SPX
require an index divisor adjustment. By adjusting the index divisor for the change in market value, the level of
the SPX
remains constant and does not reflect the corporate actions of individual companies in
the SPX
. Index divisor adjustments are made after the close of trading and after the calculation of the
SPX
closing level.
Changes in a company’s shares outstanding of 5.00% or more due to mergers, acquisitions, public offerings, 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, private placements, redemptions, exercise of options, warrants, conversion of preferred stock, notes, debt, equity participation units, at-the-market offerings, or other recapitalizations) are made weekly and are announced on
Fridays
for implementation after the close of trading on the following
Friday
. Changes of less than 5.00% due to a company's acquisition of another company in
the SPX
are made as soon as reasonably possible. All other 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 to five days prior.
Changes in IWFs of more than five 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 when IWFs are reviewed.
|
Market-Linked Step Up Notes
|
TS-
11
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
The following graph shows the
daily
historical performance of the S&P 500
®
Index in the period from January 1, 2008 through June 2, 2017. 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 June 2, 2017, the closing level of the S&P 500
®
Index was 2,439.07.
Historical Performance of the S&P 500
®
Index
This historical data on the
S
PX
is not necessarily indicative of the future performance of the S
PX
or what the value of the notes may be. Any historical upward or downward trend in the level of the
S
PX
during any period set forth above is not an indication that the level of the
S
PX
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 of the
SPX
.
|
Market-Linked Step Up Notes
|
TS-
12
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
License Agreement
S&P
®
is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P Dow Jones Indices LLC. “Standard & Poor’s
®
,” “S&P 500
®
” and “S&P
®
” are trademarks of S&P. These trademarks have been sublicensed for certain purposes by our
affiliate
, MLPF&S.
The SPX
is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by
MLPF&S
.
The notes are
not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices make 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 SPX
to track general market performance. S&P Dow Jones Indices’ only relationship to
MLPF&S
with respect to
the SPX
is the licensing of
the SPX
and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its third party licensors.
The SPX
is determined, composed and calculated by S&P Dow Jones Indices without regard to
us, MLP
F
&S,
or the
notes
. S&P Dow Jones Indices have no obligation to take our needs
, BAC’s needs
or the needs of
MLPF&S
or holders of
the notes
into consideration in determining, composing or calculating
the SPX
. S&P Dow Jones Indices are
not responsible for and have not participated in the determination of the prices, and amount of
the notes
or the timing of the issuance or sale of
the notes
or in the determination or calculation of the equation by which
the notes
are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration, marketing or trading of
the notes
. There is no assurance that investment products based on
the SPX
will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security or futures contract within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial products unrelated to
the notes
currently being issued by
us
, but which may be similar to and competitive with
the notes.
In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of
the SPX
.
It is possible that this trading activity will affect the value of
the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF
THE SPX
OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US,
BAC,
MLPF&S,
HOLDERS OF THE
NOTES
, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE SPX
OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIB
I
LITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND
MLPF&S,
OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
|
Market-Linked Step Up Notes
|
TS-
13
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
The EURO STOXX 50
®
Index
The
EURO STOXX 50
®
Index
(the “SX5E”)
was created by
STOXX Limited
(“STOXX”)
,
which is part of the Deutsche Börse Group.
Publication of
the SX5E
began in February 1998, based on an initial Index level of 1,000 at December 31, 1991. On March 1, 2010, STOXX announced the removal of the “Dow Jones” prefix from all of its indices, including
the SX5E
.
Index Composition and Maintenance
For each of the 19 EURO STOXX regional supersector indices, the stocks are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until the coverage is close to, but still less than, 60% of the free-float market capitalization of the c
orresponding supersector index.
If the next highest-ranked stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current stocks in
the SX5E
are then added to the selection list. All of the stocks on the selection list are then ranked in terms of free-float market capitalization to produce the final index selection list. The largest 40 stocks on the selection list are selected; the remaining 10 stocks are selected from the largest remaining current stocks ranked between 41 and 60; if the number of stocks selected is still below 50, then the largest remaining stocks are selected until there are 50 stocks. In exceptional cases, STOXX’s management board can add stocks to and remove them from the selection list.
The SX5E
components are subject to a capped maximum index weight of 10%, which is applied on a quarterly basis
.
The composition of
the SX5E
is reviewed annually, based on the closing stock data on t
he last trading day in August.
Changes in the composition of
the SX5E
are made to ensure that
the SX5E
includes the 50 market sector leaders from within the EURO STOXX
®
Index.
The free float factors for each component stock used to calculate
the SX5E
, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the next quarterly review.
The SX5E
is
subject to a “fast exit rule.”
The SX5E
components are monitored for any changes based on the monthly selection list ranking. A stock is deleted from
the SX5E
if: (a) it ranks 75 or below on the monthly selection list and (b) it has been ranked 75 or below for a consecutive period of two months in the monthly selection list. The highest-ranked stock that is not an index component will replace it. Changes will
be implemented on the close of the fifth trading day of the month, and are effective the next trading day.
The SX5E
is also subject to a “fast entry rule.” All stocks on the latest selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition on a quarterly basis. A stock is added, if (a) it qualifies for the latest STOXX blue-chip se
lection list generated end of February, May, August or November and (b) it ranks within the “lower buffer” on this selection list.
The SX5E
is also reviewed on an ongoing basis. Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect
the SX5E
composition are immediately reviewed. Any changes are announced, implemented, and effective in line with the type of corporate action and the magnitude of the effect.
Index Calculation
The SX5E
is calculated with the “Laspeyres formula,” which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating
the SX5E
value can be expressed as follows:
The “free float market capitalization of the
i
ndex” is equal to the sum of the product of the closing price, number of shares outstanding, free float factor, and weighting cap factor, for each component stock as of the time
the SX5E
is being calculated.
The SX5E
is also subject to a divisor, which is adjusted to maintain the continuity of
the index
values across changes due to corporate actions, such as the deletion and addition of stocks, the substitution of stocks, stock dividends, and stock splits.
Neither we nor any of our affiliates, including the selling agent, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in,
the SX5E
or any successor to
the SX5E
. STOXX does not guarantee the accuracy or the completeness of
the SX5E
or any data included in
the SX5E
. STOXX assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of
the SX5E
. STOXX disclaims all responsibility for any errors or omissions in the calculation and dissemination of
the SX5E
or the manner in which
the SX5E
is applied in determining the amount payable on the notes at maturity.
|
Market-Linked Step Up Notes
|
TS-
14
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
The following graph shows the
daily
historical performance of the EURO STOXX 50
®
Index in the period from January 1, 2008 through June 2, 2017. 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 June 2, 2017, the closing level of the EURO STOXX 50
®
Index was 3,591.82.
Historical Performance of the EURO STOXX 50
®
Index
This historical data on the
SX5E
is not necessarily indicative of the future performance of the
SX5E
or what the value of the notes may be. Any historical upward or downward trend in the level of the
SX5E
during any period set forth above is not an indication that the level of the
SX5E
i
s 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 of the
SX5E
.
|
Market-Linked Step Up Notes
|
TS-
15
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
License Agreement
One of our subsidiaries has entered into a non-exclusive license agreement with STOXX providing for the license to it and certain of its affiliated companies, including us, of the right to use indices owned and published by STOXX (including the Index) in connection with certain securities, including the notes.
The license agreement requires that the following language be stated in this term sheet:
“STOXX Limited, Deutsche Borse Group and their licensors, research partners or data providers have no relationship to us other than the licensing of the EURO STOXX 50
®
Index and the related trademarks for use in connection with the notes.
STOXX, Deutsche Borse Group and their licensors, research partners or data providers do
not
:
|
●
|
sponsor, endorse, sell or promote the notes.
|
|
●
|
recommend that any person invest in the notes or any other securities.
|
|
●
|
have any responsibility or liability for or make any decisions about the timing, amount or pricing of the notes.
|
|
●
|
have any responsibility or liability for the administration, management or marketing of the notes.
|
|
●
|
consider the needs of the notes or the owners of the notes in determining, composing or calculating the Index or have any obligation to do so.
|
STOXX, Deutsche Borse Group and their licensors, research partners or data providers give no warranty, and exclude any liability (whether in negligence or otherwise), in connection with the notes or their performance.
STOXX does not assume any contractual relationship with the purchasers of the notes or any other third parties.
Specifically,
|
●
|
STOXX, Deutsche Borse Group and their licensors, research partners or data providers do not give any warranty, express or implied, and exclude any liability about:
|
-
The results to be obtained by the notes, the owner of the notes or any other person in connection with the use of the Index and the data included in the Index;
-
The accuracy, timeliness, and completeness of the Index and its data;
-
The merchantability and the fitness for a particular purpose or use of the Index and its data;
-
The performance of the notes generally.
|
●
|
STOXX, Deutsche Borse Group and their licensors, research partners or data providers give no warranty and exclude any liability, for any errors, omissions or interruptions in the Index or its data;
|
|
●
|
Under no circumstances will STOXX, Deutsche Borse Group or their licensors, research partners or data providers be liable (whether in negligence or otherwise) for any lost profits or indirect, punitive, special or consequential damages or losses, arising as a result of such errors, omissions or interruptions in the Index or its data or generally in relation to the notes, even in circumstances where STOXX, Deutsche Borse Group or their licensors, research partners or data providers are aware that such loss or damage may occur.
|
The licensing agreement discussed above is solely for our benefit and that of STOXX and not for the benefit of the owners of the notes or any other third parties.”
|
Market-Linked Step Up Notes
|
TS-
16
|
|
Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
|
|
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
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&S’s 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&S’s 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
Basket
and the remaining term of the notes.
However, neither we nor any of our
affiliates is obligated to purc
hase 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&S’s
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 t
o 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 b
e higher than or lower than the
initial estimated value
of the notes
.
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the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not directly above or below the individual investor;
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a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the investor’s household as described above;
and
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a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any purchases made by a trustee’s personal account.
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Market-Linked Step Up Notes
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TS-
17
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Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
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The notes are our debt securities, the return on which is linked to the
performance
of the Basket.
The related guarantees are BAC’s obligations.
As is the case for all of our
and BAC’s respective
debt securities, including our market-linked notes, the economic terms of the notes reflect our
and BAC’s
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
and BAC, BAC
typically borrow
s
the funds under these
types of
notes at a rate that is more favorable to
BAC
than the rate that
it
might pay for a conventional fixed or floating rate debt security.
This
rate, which we refer to in this term sheet as BAC’s internal funding rate, is typically lower than the rate BAC would pay when it issues conventional fixed or floating rate debt securities.
This ge
nerally 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
.
At maturity, we are required to pay the Redemption Amount to holders of the notes, which will be calculated based on the
performance
of the Basket and the $10 per unit
p
rincipal
a
mount
.
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
our other
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
and BAC’s
creditworthiness, interest rate movements, the volatility of the Basket Components, the tenor of the note
s
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 Factors—General Risks Relating to the Notes” beginning on page PS-7 and “Use of Proceeds” on page PS-
1
7
of product supplement EQUITY INDICES SUN-1.
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 single financial contract with respect to the
Basket.
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning
on page
50
of the prospectus
) generally will recognize capital gain or loss upon maturity or upon a sale or exchange 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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U.S. Treasury regulations provide that withholding on “dividend equivalent” payments (as discussed in the product supplement), if any, will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2018.
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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
(including the opinion of our counsel, Morrison & Foerster LLP)
under the section entitled
“U.S. Federal Income Tax Summary” beginning on page PS-28 of product supplement EQUITY INDICES SUN-1
.
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Market-Linked Step Up Notes
|
TS-
18
|
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Market-Linked Step Up Notes
Linked to a Global Equity Basket, due June , 2021
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