Final Term Sheet No. 260
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 Offering Price
Per Unit |
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Proposed Maximum Aggregate Offering Price |
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Amount of Registration Fee(1) |
Capped Leveraged Index Return Notes® Linked to the Dow Jones U.S. Real Estate IndexSM, due February 24, 2012 |
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1,323,000 |
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$10.00 |
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$13,230,000 |
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$943.30 |
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(1) |
Calculated in accordance with Rule 457(r) of the Securities Act of 1933. |
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-158663
The LIRNs are being offered by Bank of America Corporation (BAC). The LIRNs will have the terms specified
in this term sheet as supplemented by the documents indicated below under Additional Terms (together the Note Prospectus). Investing in the LIRNs involves a number of risks. There are important differences between the
LIRNs and a conventional debt security, including different investment risks. See Risk Factors and Additional Risk Factor on page TS-5 of this term sheet and beginning on page S-10 of product supplement LIRN-2. LIRNs:
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Are Not
FDIC Insured |
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Are Not Bank
Guaranteed |
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May
Lose Value |
In connection with
this offering, each of Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and its broker-dealer affiliate First Republic Securities Company, LLC (First Republic) is acting in its capacity as principal
for your account.
None of the Securities and Exchange Commission (the SEC), any state securities commission, or any other
regulatory body has approved or disapproved of these securities or determined if this Note Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Per Unit |
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Total |
Public offering price(1) |
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$ |
10.00 |
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$ |
13,230,000 |
Underwriting discount(1) |
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$ |
0.20 |
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$ |
264,600 |
Proceeds, before expenses, to Bank of America Corporation |
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$ |
9.80 |
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$ |
12,965,400 |
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(1) |
The public offering price and underwriting discount for any purchase of 500,000 or more units in a single transaction by an individual investor will be $9.95 per
unit and $0.15 per unit, respectively. |
Merrill Lynch & Co.
February 24, 2010
1,323,000 Units
Capped Leveraged Index Return Notes®
Linked to the Dow Jones U.S. Real Estate IndexSM,
due February 24, 2012
$10 principal amount per unit
Term Sheet No. 260
Pricing Date February 24, 2010
Settlement Date March 4, 2010
Maturity Date February 24,
2012 CUSIP No. 06052H288
Capped Leveraged Index Return Notes®
200% leveraged upside exposure to increases in the level of the Dow Jones U.S. Real Estate IndexSM (the Index), subject to
a cap of 37%
1-to-1 downside exposure to decreases in the level of the Index in excess of the Threshold Value, with up
to 85% of the principal amount at risk
A maturity of approximately 2 years
Payment of the Redemption Amount at maturity is subject to the credit risk of Bank of America Corporation
No periodic interest payments
No listing on any securities exchange
This debt is not guaranteed under the Federal Deposit
Insurance Corporations Temporary Liquidity Guarantee Program
STRUCTURED INVESTMENTS
PRINCIPAL PROTECTION
ENHANCED INCOME
MARKET PARTICIPATION
ENHANCED PARTICIPATION
Bank of America
Summary
The Capped Leveraged Index Return Notes® Linked to the Dow Jones U.S. Real Estate Index
SM, due February 24, 2012 (the LIRNs) are our senior
unsecured debt securities and are not guaranteed or insured by the Federal Deposit Insurance Corporation or secured by collateral. The LIRNs will rank equally with all of our other unsecured and unsubordinated debt, and any payments due on the
LIRNs, including any repayment of principal, will be subject to the credit risk of BAC. The LIRNs provide a leveraged return for investors, subject to a cap, if the level of the Dow Jones U.S. Real Estate IndexSM (the Index) increases moderately from the Starting Value of the Index,
determined on the pricing date, to the Ending Value of the Index, determined during the Maturity Valuation Period. Investors must be willing to forgo interest payments on the LIRNs and be willing to accept a return that is capped or a repayment that
is less, and potentially significantly less, than the Original Offering Price.
Capitalized terms used but not defined in this term sheet have the
meanings set forth in product supplement LIRN-2. Unless otherwise indicated or unless the context requires otherwise, all references in this document to we, us, our, or similar references are to BAC.
Terms of the LIRNs
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Issuer: |
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Bank of America Corporation (BAC) |
Original Offering
Price: |
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$10 per unit |
Term: |
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Approximately 2 years |
Market Measure: |
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The Dow Jones U.S. Real Estate IndexSM (Bloomberg symbol:
DJUSRE). |
Starting Value: |
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176.87 |
Ending Value: |
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The average of the closing levels of the Index on each scheduled calculation day during the Maturity Valuation 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. |
Threshold Value: |
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150.34, which is 85% of the Starting Value, rounded to two decimal places. |
Capped Value: |
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$13.70 per unit of the LIRNs, which represents a return of 37% over the Original Offering Price. |
Participation
Rate: |
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200% |
Downside Leverage Factor:
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100% |
Maturity Valuation Period:
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February 14, 2012, February 15, 2012, February 16, 2012, February 17, 2012, and February 21, 2012. |
Calculation
Agent: |
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MLPF&S, a subsidiary of BAC |
Determining the Redemption Amount for the LIRNs
On the maturity date, you will receive a cash payment per unit (the Redemption Amount) calculated as follows:
TS-2
Hypothetical Payout Profile
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This graph reflects the hypothetical returns on the LIRNs at maturity, based upon the Participation Rate of 200%, the Threshold Value of
150.34, which is 85% of the Starting Value, and the Capped Value of $13.70 (a 37% return). The green line reflects the hypothetical returns on the LIRNs, while the dotted grey 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. |
Hypothetical Redemption Amounts
Examples
Set forth below are four examples of Redemption Amount calculations (rounded to two decimal places) payable at maturity, based upon the Participation Rate of 200%, the Downside Leverage Factor of 100%, the Starting
Value of 176.87, the Threshold Value of 150.34, and the Capped Value of $13.70 (per unit).
Example 1The hypothetical Ending Value
is 70% of the Starting Value and is less than the Threshold Value:
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Starting Value: |
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176.87 |
Hypothetical Ending Value: |
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123.81 |
Threshold Value: |
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150.34 |
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$10 |
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[ |
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$10 × |
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( |
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150.34 123.81 |
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× |
100 |
% |
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] |
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= $8.50 |
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176.87 |
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Redemption Amount (per unit) = $8.50
Example 2The hypothetical Ending Value is 95% of the Starting Value and is greater than the Threshold Value:
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Starting Value: |
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176.87 |
Hypothetical Ending Value: |
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168.03 |
Threshold Value: |
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150.34 |
Redemption Amount (per unit) = $10.00
If the Ending Value is less than or equal to the Starting Value but is greater than or equal to the Threshold Value, the Redemption Amount will equal the Original
Offering Price.
Example 3The hypothetical Ending Value is 104% of the Starting Value:
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Starting Value: |
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176.87 |
Hypothetical Ending Value: |
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183.94 |
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$10 + |
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$10 × 200% × |
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183.94 176.87 |
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) |
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] |
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= $10.80 |
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176.87 |
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Redemption Amount (per unit) = $10.80
Example 4The hypothetical Ending Value is 150% of the Starting Value:
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Starting Value: |
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176.87 |
Hypothetical Ending Value: |
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265.31 |
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$10 + |
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[ |
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$10 × 200% × |
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265.31 176.87 |
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= $20.00 |
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176.87 |
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Redemption Amount (per unit) = $13.70 (The Redemption Amount cannot be greater than the Capped
Value.)
TS-3
The following table illustrates, for the Starting Value of 176.87, the Threshold Value of 150.34, which is 85% of
the Starting Value (rounded to two decimal places), 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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the hypothetical Redemption Amount per unit of the LIRNs (rounded to two decimal places); |
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the total rate of return to holders of the LIRNs; |
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the pretax annualized rate of return to holders of the LIRNs; 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 4.35% per annum. |
The table below is based on the Participation Rate of 200%, the Downside Leverage Factor of 100%, and
the Capped Value of $13.70.
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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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Hypothetical Redemption Amount per Unit |
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Total Rate of Return on the
LIRNs |
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Pretax Annualized Rate of Return on the
LIRNs(1) |
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Pretax Annualized Rate of Return of the Stocks Included in the Index(1)(2) |
106.12 |
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-40.00% |
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$7.50 |
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-25.00% |
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-14.07% |
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-19.94% |
123.81 |
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-30.00% |
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$8.50 |
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-15.00% |
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-8.07% |
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-12.94% |
141.50 |
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-20.00% |
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$9.50 |
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-5.00% |
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-2.58% |
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-6.65% |
150.34(3) |
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-15.00% |
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$10.00 |
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0.00% |
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0.00% |
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-3.72% |
159.18 |
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-10.00% |
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$10.00 |
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0.00% |
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0.00% |
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-0.92% |
169.80 |
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-4.00% |
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$10.00 |
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0.00% |
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0.00% |
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2.29% |
173.33 |
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-2.00% |
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$10.00 |
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0.00% |
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0.00% |
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3.33% |
176.87(4) |
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0.00% |
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$10.00 |
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0.00% |
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0.00% |
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4.35% |
180.41 |
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2.00% |
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$10.40 |
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4.00% |
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2.00% |
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5.36% |
183.94 |
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4.00% |
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$10.80 |
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8.00% |
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3.94% |
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6.35% |
194.56 |
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10.00% |
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$12.00 |
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20.00% |
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9.46% |
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9.24% |
212.24 |
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20.00% |
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$13.70(5) |
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37.00% |
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16.62% |
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13.81% |
229.93 |
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30.00% |
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$13.70 |
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37.00% |
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16.62% |
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18.11% |
247.62 |
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40.00% |
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$13.70 |
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37.00% |
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16.62% |
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22.16% |
265.31 |
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50.00% |
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$13.70 |
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37.00% |
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16.62% |
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26.00% |
(1) |
The annualized rates of return specified in this column are calculated on a semi-annual bond equivalent basis and assume an investment term from March 4, 2010 to
February 24, 2012, the term of the LIRNs. |
(2) |
This rate of return assumes: |
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(a) |
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) |
a constant dividend yield of 4.35% per annum, and that dividends are not reinvested; and |
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(c) |
no transaction fees or expenses. |
(3) |
This is the Threshold Value. |
(4) |
This is the Starting Value. |
(5) |
The Redemption Amount per unit of the LIRNs cannot exceed the Capped Value of $13.70. |
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 the term of your
investment.
TS-4
Risk Factors
There are important differences between the LIRNs and a conventional debt security. An investment in the LIRNs involves significant risks, including those listed below. You should carefully review the more
detailed explanation of risks relating to the LIRNs in the Risk Factors sections included in product supplement LIRN-2 and the MTN prospectus supplement identified below under Additional Terms. We also urge you to consult
your investment, legal, tax, accounting, and other advisors before you invest in the LIRNs.
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Your investment may result in a loss; there is no guaranteed return of principal. |
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Your yield may be less than the yield on a conventional debt security of comparable maturity. |
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Your investment return, if any, is limited to the return represented by the Capped Value. |
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Your investment return, if any, may be less than a comparable investment directly in the stocks included in the Index. |
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You must rely on your own evaluation of the merits of an investment linked to the Index. |
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In seeking to provide you with what we believe to be commercially reasonable terms for the LIRNs while providing the selling agents with compensation for their
services, we have considered the costs of developing, hedging, and distributing the LIRNs. |
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A trading market for the LIRNs is not expected to develop. |
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The Redemption Amount will not be affected by all developments relating to the Index. |
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Dow Jones & Company, Inc. (Dow Jones) may adjust the Index in a way that affects its level, and Dow Jones has no obligation to consider your
interests. |
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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 of the issuers of those securities. |
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While we or our affiliates may from time to time own shares 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. |
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If you attempt to sell the LIRNs prior to maturity, their market value, if any, will be affected by various factors that interrelate in complex ways, and their
market value may be less than their Original Offering Price. |
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Payments on the LIRNs are subject to our credit risk, and changes in our credit ratings are expected to affect the value of the LIRNs.
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Purchases and sales by us and our affiliates of shares of companies included in the Index may affect your return. |
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Our trading and hedging activities may create conflicts of interest with you. |
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Our hedging activities may affect your return on the LIRNs and their market value. |
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Our business activities relating to the companies represented by the Index may create conflicts of interest with you. |
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There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent.
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The U.S. federal income tax consequences of the LIRNs are uncertain, and may be adverse to a holder of the LIRNs. See Summary Tax Consequences and
Certain U.S. Federal Income Taxation Considerations below and U.S. Federal Income Tax Summary in product supplement LIRN-2. |
Additional Risk Factor
The stocks included in the Index are concentrated in one industry.
All of the stocks included in the Index are issued by companies involved directly or indirectly in the U.S. real estate industry. As a result, the
stocks that will determine the performance of the Index and hence, the value of the LIRNs, are concentrated in one industry. Although an investment in the LIRNs will not give you any ownership or other direct interests in these stocks, the return on
an investment in the LIRNs will be subject to certain risks associated with direct equity investments in the real estate industry.
TS-5
Investor Considerations
You may wish to consider an investment in the LIRNs if:
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You anticipate that the level of the Index will increase moderately from the Starting Value to the Ending Value. |
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You accept that your investment will 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 LIRNs will not exceed the return represented by the Capped Value. |
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You are willing to forgo interest payments on the LIRNs, such as fixed or floating rate interest paid on traditional interest bearing debt securities.
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You seek 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 a trading market is not expected to develop for the LIRNs. You understand that secondary market prices for the LIRNs, if any, will
be affected by various factors, including our actual and perceived creditworthiness. |
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You are willing to make an investment, the payments on which depend on our creditworthiness, as the issuer of the LIRNs. |
The LIRNs may not be an appropriate investment for you if:
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You anticipate that the level of the Index will decrease from the Starting Value to the Ending Value or that the level of the Index will not increase
sufficiently over the term of the LIRNs to provide you with your desired return. |
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You seek 100% principal protection or preservation of capital. |
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You seek a return on your investment that will not be capped at 37% over the Original Offering Price. |
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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 seek assurances that there will be a liquid market if and when you want to sell the LIRNs prior to maturity. |
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You are unwilling or are unable to assume the credit risk associated with us, as the issuer of the LIRNs. |
Other Provisions
We will deliver the LIRNs 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, purchasers who wish to trade the
LIRNs more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
If you place an order to purchase the LIRNs, you are consenting to each of MLPF&S and its broker-dealer affiliate First Republic acting as a principal in effecting the transaction for your account.
Supplement to the Plan of Distribution
MLPF&S
and First Republic, each a broker-dealer subsidiary of BAC, are members of the Financial Industry Regulatory Authority, Inc. (formerly the National Association of Securities Dealers, Inc. (the NASD)) and will participate as selling
agents in the distribution of the LIRNs. Accordingly, offerings of the LIRNs will conform to the requirements of NASD Rule 2720. Under our distribution agreement with the selling agents, MLPF&S will purchase the LIRNs from us on the issue date
as principal at the purchase price indicated on the cover of this term sheet, less the indicated underwriting discount. In the original offering of the LIRNs, the LIRNs will be sold in minimum investment amounts of 100 units.
MLPF&S and First Republic may use this Note Prospectus for offers and sales in secondary market transactions and market-making transactions in the LIRNs but are
not obligated to engage in such secondary market transactions and/or market-making transactions. MLPF&S and First Republic may act as principal or agent in these transactions, and any such sales will be made at prices related to prevailing
market prices at the time of the sale.
TS-6
The Index
All disclosures contained in this term sheet regarding the Index, including, without limitation, its make-up, method of calculation, and changes in its components have been derived from publicly available sources. The information reflects
the policies of Dow Jones, and is subject to change by Dow Jones. Dow Jones has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of Dow Jones discontinuing publication of the Index are discussed
in the section of product supplement LIRN-2 entitled Description of LIRNsDiscontinuance of a Market Measure. None of us, the calculation agent, or any of the selling agents accepts any responsibility for the calculation,
maintenance, or publication of the Index or any successor index.
Dow Jones, Dow Jones U.S. Real Estate IndexSM, and Dow Jones U.S. IndexSM are service marks of Dow Jones and have been licensed
for use for certain purposes by us. LIRNs based on the Dow Jones U.S. Real Estate IndexSM are not sponsored, endorsed, sold, or promoted by Dow Jones, and Dow Jones makes no
representation regarding the advisability of investing in the LIRNs.
The Index is a float-adjusted market capitalization-weighted real-time index that
provides a broad measure of the performance of the real estate sector of the U.S. securities market. Component companies consist of Real Estate Investment Trusts (REITs) and other companies that invest directly or indirectly in real
estate through development, management, or ownership, including property agencies. REIT prices are used as proxies for market valuations of U.S. commercial property such as hotels, office buildings, industrial sites, shopping centers, and apartment
complexes, as well as markers for changing trends in leasing rates and movements in real estate valuations.
The Index is a subset
of the Dow Jones U.S. IndexSM, a broad-based measure of the U.S. stock market, which aims to represent the top 95% of U.S. traded companies based on float-adjusted market
capitalization, excluding the smallest and least-liquid stocks. The value of the Dow Jones U.S. IndexSM was set to 100 on the base date of December 31, 1991. The Dow
Jones U.S. IndexSM is part of the Dow Jones Global Indexes, which is a benchmark family of indices that follows stocks from 51 countries (as of September 21, 2009). It
is a market capitalization-weighted index, adjusted for free-float shares and calculated on a price and total return basis.
Composition and
Maintenance
Defining the Index Universe: Index component candidates must trade on a major U.S. stock exchange and must be common shares or
other securities that have the characteristics of common equities. All classes of common shares, both fully and partially paid, are eligible. Fixed-dividend shares and securities such as convertible notes, warrants, rights, mutual funds, unit
investment trusts, closed-end fund shares, and shares in limited partnerships are not eligible. Temporary issues arising from corporate actions, such as when-issued shares, are considered on a case-by-case basis when necessary to
maintain continuity in a companys index membership. REITs also are eligible. Multiple classes of shares are included if each issue, on its own merit, meets the other eligibility criteria. Securities that have had more than ten nontrading days
during the past quarter are excluded.
Stock Selection: The Index universe is sorted by float-adjusted market capitalization
and the stocks in the top 95% are selected as components of the Dow Jones U.S. IndexSM, skipping stocks that fall within the bottom 1% of the universe by free-float market
capitalization. To be included in the Index, the issuer of each component security must be classified in the Real Estate supersector of industry classifications as maintained by the Industry Classification Benchmark (ICB).
Review Process: The Index is reviewed by Dow Jones on a quarterly basis. Shares outstanding totals for component stocks are updated during each quarterly
review. If the number of outstanding shares for an Index component changes by more than 10% due to a corporate action, the shares total will be adjusted immediately after the close of trading on the date of such event. Whenever possible, Dow Jones
will announce any such change at least two business days prior to its implementation. Changes in shares outstanding due to stock dividends, splits, and other corporate actions also are adjusted immediately after the close of trading on the day they
become effective. Quarterly reviews are implemented during March, June, September, and December. Both component changes and share changes become effective at the opening on the first Monday after the third Friday of the review month. Changes to the
Index are implemented after the official closing levels have been established. All adjustments are made before the start of the next trading day. Constituent changes that result from a periodic review will be announced at least two business days
prior to the implementation date.
In addition to the scheduled quarterly reviews, the Index is reviewed on an ongoing basis. Changes in Index
composition and related weight adjustments are necessary whenever there are extraordinary events such as delistings, bankruptcies, mergers, or takeovers involving index components. In these cases, each event will be taken into account as soon as it
is effective. Whenever possible, the changes in the Index components will be announced at least two business days prior to their implementation date. In the event that a component no longer meets the eligibility requirements, it will be removed from
the Index.
Background on the ICB
ICB, a joint
classification system launched by FTSE Group and Dow Jones Indexes, is a detailed and comprehensive structure for sector and industry analysis, facilitating the comparison of companies across four levels of classification and national boundaries.
The system allocates companies to the subsector whose definition most closely describes the nature of each companys business. The nature of a companys business is determined by its source of revenue or where it constitutes the majority
of revenue. ICB classifies the component stocks into groups of 10 industries, 19 supersectors, 41 sectors, and 114 subsectors (as of March 1, 2008). The Real Estate supersector is composed of two sectors, the Real Estate Investment &
Services sector and the Real Estate Investment Trusts sector, both of which contain subsectors. The Real Estate Investment & Services sector consists of the Real Estate Holding & Development subsector, which consists of companies
that invest directly or indirectly in real estate through development, investment, or ownership, excluding REITs, and the Real Estate Services subsector, which includes companies that provide services to real estate companies but do not own
properties themselves. The Real Estate Investment Trusts sector consists of the following subsectors: Industrial & Office REITs, Retail REITs, Residential REITs, Diversified REITs, Specialty REITs, Mortgage REITs, and Hotel &
Lodging REITs.
TS-7
The following graph sets forth the monthly historical performance of the Index in the period from January
2005 through January 2010. This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value of the LIRNs 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 level of the Index is more or less likely to increase or decrease at any time over the term of the LIRNs. On the pricing date, the closing level of the Index was 176.87.
Before investing in the LIRNs, you should consult publicly available sources for the levels and trading pattern of the Index. The
generally unsettled international environment and related uncertainties, including the risk of terrorism, may result in the Index and financial markets generally exhibiting greater volatility than in earlier periods.
License Agreement
We have entered into a
non-exclusive license agreement with Dow Jones providing for the license to us and certain of our affiliated or subsidiary companies, in exchange for a fee, of the right to use indices owned and published by Dow Jones (including the Dow Jones U.S.
Real Estate IndexSM) in connection with certain securities, including the LIRNs.
The license agreement between us and Dow Jones requires that the following language be stated in this term sheet:
The
LIRNs are not sponsored, endorsed, sold, or promoted by Dow Jones. Dow Jones makes no representation or warranty, express or implied, to the owners of the LIRNs or any member of the public regarding the advisability of investing in securities
generally or in the LIRNs particularly. Dow Jones only relationship to us is in the licensing of certain trademarks, trade names, and service marks of Dow Jones and of the Dow Jones U.S. Real Estate IndexSM, which is determined, composed, and calculated by Dow Jones without regard to us or the LIRNs. Dow Jones has no obligation to take our needs or the needs of holders of the
LIRNs into consideration in determining, composing, or calculating the Dow Jones U.S. Real Estate IndexSM. Dow Jones is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the LIRNs to be issued or in the determination or calculation of the amount to be paid on the LIRNs. Dow Jones has no obligation or liability in connection with the administration,
marketing, or trading of the LIRNs.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES U.S. REAL
ESTATE INDEXSM OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, OWNERS OF LIRNS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES U.S. REAL ESTATE INDEXSM OR ANY DATA INCLUDED
THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES U.S. REAL ESTATE INDEXSM OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL, OR
CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OR ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND US.
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Summary Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the LIRNs, including the following:
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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 LIRNs for all tax
purposes as a single financial contract with respect to the Index that requires you to pay us at inception an amount equal to the purchase price of the LIRNs and that entitles you to receive at maturity an amount in cash based upon the performance
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Under this characterization and tax treatment of the LIRNs, upon receipt of a cash payment at maturity or upon a sale or exchange of the LIRNs prior to maturity,
you generally will recognize capital gain or loss. This capital gain or loss generally will be long-term capital gain or loss if you held the LIRNs for more than one year. |
Certain U.S. Federal Income Taxation Considerations
Set forth below is a summary of certain U.S. federal income tax considerations relating to an investment in the LIRNs. The following summary is not complete and is qualified in its entirety by the discussion under the section entitled
U.S. Federal Income Tax Summary in product supplement LIRN-2, which you should carefully review prior to investing in the LIRNs.
General. Although there is no statutory, judicial, or administrative authority directly addressing the characterization of the LIRNs, we intend to treat the LIRNs for all tax purposes as a single financial
contract with respect to the Index that requires the investor to pay us at inception an amount equal to the purchase price of the LIRNs and that entitles the investor to receive at maturity an amount in cash based upon the performance of the Index.
Under the terms of the LIRNs, we and every investor in the LIRNs agree, in the absence of an administrative determination or judicial ruling to the contrary, to treat the LIRNs as described in the preceding sentence. This discussion assumes that the
LIRNs constitute a single financial contract with respect to the Index for U.S. federal income tax purposes. If the LIRNs did not constitute a single financial contract, the tax consequences described below would be materially different. The
discussion in this section also assumes that there is a significant possibility of a significant loss of principal on an investment in the LIRNs.
This
characterization of the LIRNs is not binding on the Internal Revenue Service (IRS) or the courts. No statutory, judicial, or administrative authority directly addresses the characterization of the LIRNs or any similar instruments for
U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper characterization and treatment. Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences
of an investment in the LIRNs are not certain, and no assurance can be given that the IRS or any court will agree with the characterization and tax treatment described in product supplement LIRN-2. Accordingly, you are urged to consult your tax
advisor regarding all aspects of the U.S. federal income tax consequences of an investment in the LIRNs, including possible alternative characterizations.
Settlement At Maturity or Sale or Exchange Prior to Maturity. Assuming that the LIRNs are properly characterized and treated as single financial contracts with respect to the Index for U.S. federal income tax
purposes, upon receipt of a cash payment at maturity or upon a sale or exchange of the LIRNs prior to maturity, a U.S. Holder (as defined in product supplement LIRN-2) generally will recognize capital gain or loss equal to the difference between the
amount realized and the U.S. Holders basis in the LIRNs. This capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder held the LIRNs for more than one year. The deductibility of capital losses is subject to
limitations.
Possible Future Tax Law Changes. From time to time, there may be legislative proposals or interpretive
guidance addressing the tax treatment of financial instruments such as the LIRNs. We cannot predict the likelihood of any such legislation or guidance being adopted, or the ultimate impact on the LIRNs. For example, on December 7, 2007, the IRS
released Notice 2008-2 (Notice) seeking comments from the public on the taxation of financial instruments currently taxed as prepaid forward contracts. This Notice addresses instruments such as the LIRNs. According to the
Notice, the IRS and Treasury are considering whether a holder of an instrument such as the LIRNs should be required to accrue ordinary income on a current basis, regardless of whether any payments are made prior to maturity. It is not possible to
determine what guidance the IRS and Treasury will ultimately issue, if any. Any such future guidance may affect the amount, timing, and character of income, gain, or loss in respect of the LIRNs, possibly with retroactive effect. The IRS and
Treasury are also considering additional issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders of such instruments should be subject to withholding tax on any deemed
income accruals, whether Section 1260 of the Internal Revenue Code of 1986, as amended, concerning certain constructive ownership transactions, generally applies or should generally apply to such instruments, and whether any of
these determinations depend on the nature of the underlying asset. We urge you to consult your own tax advisors concerning the impact and the significance of the above considerations. We intend to continue treating the LIRNs for U.S. federal income
tax purposes in the manner described herein unless and until such time as we determine, or the IRS or Treasury determines, that some other treatment is more appropriate.
You should consult your own tax advisor concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the LIRNs, 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. See the discussion under the section entitled U.S. Federal Income Tax Summary in product supplement LIRN-2.
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Additional Terms
You should read this term sheet, together with the documents listed below, which together contain the terms of the LIRNs 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 and Additional Risk Factor in the sections indicated on the cover of this term sheet. The LIRNs involve risks not
associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the LIRNs.
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 April 21, 2009: |
http://www.sec.gov/Archives/edgar/data/70858/000095014409003415/g18702p2e424b5.htm
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Series L MTN prospectus supplement dated April 21, 2009 and prospectus dated April 20, 2009: |
http://www.sec.gov/Archives/edgar/data/70858/000095014409003387/g18667b5e424b5.htm
Our Central Index Key, or CIK, on the
SEC Website is 70858.
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 product supplement, the prospectus supplement, and 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 the Note Prospectus if you so request by calling MLPF&S toll-free at 1-866-500-5408.
Structured Investments Classification
MLPF&S classifies certain structured investments (the Structured Investments), including the LIRNs, 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 against decreases in the value of the underlying market measure (or increases in the value of an underlying
market measure for bearish Structured Investments), 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 generally do not 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 investments generally do not include the principal protection feature.
The classification of Structured Investments is meant solely for informational purposes and is not intended to fully describe any particular Structured Investment nor guarantee any particular performance.
Leveraged Index Return Notes® and
LIRNs® are our registered service marks.
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