CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered |
Amount to be Registered |
Proposed Offering Price Per Unit |
Proposed Maximum Aggregate Offering Price |
Amount of Fee(1) | ||||
| Enhanced Buffer Market-Linked Step Up Notes Linked to the Dow Jones Industrial AverageSM, due March 28, 2014 |
3,883,317 | $10.00 | $38,833,170 | $4,508.53 | ||||
| (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 notes are being offered by Bank of America Corporation (“BAC”). The notes 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 notes involves a number of risks. There are important differences between the notes and a conventional debt security, including different investment risks. See “Risk Factors” on page TS-5 of this term sheet and beginning on page S-8 of product supplement SUN-1. The notes:
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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In connection with this offering, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) 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.
| Per Unit |
Total |
|||||||||
| Public offering price (1) |
$10.000 | $38,833,170.00 | ||||||||
| Underwriting discount (1) |
$0.225 | $873,746.33 | ||||||||
| Proceeds, before expenses, to Bank of America Corporation |
$9.775 | $37,959,423.67 | ||||||||
| (1) | The public offering price and underwriting discount for any purchase of 500,000 units or more in a single transaction by an individual investor will be $9.950 per unit and $0.175 per unit, respectively. |
| Merrill Lynch & Co.
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| |||
| March 24, 2011 |
3,883,317 Units Pricing Date March 24, 2011 Enhanced Buffer Market-Linked Step Up Notes Settlement Date April 1, 2011 Linked to the Dow Jones Industrial AverageSM, Maturity Date March 28, 2014 due March 28, 2014 CUSIP No. 06050R189 $10 principal amount per unit Term Sheet No. 587 Enhanced Buffer Market-Linked Step Up Notes Step Up Payment of 14.15% over the Original Offering Price at maturity if the level of the Dow Jones Industrial AverageSM (the “Index”) is greater than or equal to 90% of the Starting Value (the “Threshold Value”), but does not increase above the Step Up Value 100% participation in any increase in the level of the Index if it increases above the Step Up Value of 114.15% of the Starting Value 1-to-1 downside exposure to decreases in the level of the Index in excess of the Threshold Value, with up to 90% of the principal amount at risk A maturity of approximately three 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
Market Downside Protection
Enhanced Income
Market Access
Market Return
Enhanced Return
Summary
The Enhanced Buffer Market-Linked Step Up Notes Linked to the Dow Jones Industrial AverageSM, due March 28, 2014 (the “notes”) are our senior unsecured debt securities. The notes are not guaranteed or insured by the Federal Deposit Insurance Corporation or secured by collateral. The notes will rank equally with all of our other unsecured and unsubordinated debt, and any payments due on the notes, including any repayment of principal, will be subject to the credit risk of BAC.
The notes provide investors with a Step Up Payment if the Ending Value of the Dow Jones Industrial AverageSM (the “Index”), determined on a calculation day shortly before the maturity date, is greater than or equal to the Threshold Value, but does not increase above the Step Up Value. If the level of the Index increases from the Starting Value to an Ending Value that is above the Step Up Value, investors will participate on a 1-for-1 basis in the increase above the Starting Value. Investors should be of the view that the Ending Value will be greater than the Threshold Value. Investors must be willing to forgo interest payments on the notes and be willing to accept a repayment that will be less, and potentially significantly less, than the Original Offering Price if the Ending Value is less than the Threshold Value. Investors must also be willing to forgo a higher Step Up Payment that would apply to market-linked step up notes in which the Step Up Payment would not be paid if the Ending Value was less than the Starting Value.
Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement SUN-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to BAC.
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Enhanced Buffer Market-Linked Step Up Notes |
TS-2 |
Hypothetical Payout Profile
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This graph reflects the hypothetical returns on the notes at maturity, based on the Step Up Payment of $1.415, the Step Up Value of 114.15% of the Starting Value, and the Threshold Value of 90% of the Starting Value. The green line reflects the hypothetical returns on the notes while the grey dotted line reflects the hypothetical returns of a 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 hypothetical Redemption Amount calculations (rounded to three decimal places) payable at maturity, based upon the Starting Value of 12,170.56, the Threshold Value of 10,953.50, the Step Up Payment of $1.415, and the Step Up Value of 114.15% of the Starting Value:
Example 1 — The hypothetical Ending Value is 80% of the Starting Value and is less than the Threshold Value:
| Starting Value: |
12,170.56 | |||||
| Threshold Value: |
10,953.50 | |||||
| Hypothetical Ending Value: |
9,736.45 |
| Hypothetical Redemption Amount (per unit) = $10 – |
[ | $10 × | ( | 10,953.50 – 9,736.45 | ) | ] | = $9.000 | |||||||||||
| 12,170.56 |
Example 2 — The hypothetical Ending Value is 95% of the Starting Value and is greater than the Threshold Value, but is less than or equal to the Step Up Value:
| Starting Value: |
12,170.56 | |||||
| Threshold Value: |
10,953.50 | |||||
| Hypothetical Ending Value: |
11,562.03 | |||||
| Step Up Value: |
13,892.69 |
Hypothetical Redemption Amount (per unit) = $10.00 + $1.415 = $11.415
In this case, even though the hypothetical Ending Value is less than the Starting Value, because the hypothetical Ending Value is greater than or equal to the Threshold Value but less than or equal to the Step Up Value, the hypothetical Redemption Amount (per unit) will equal $11.415, which is the sum of the Original Offering Price and the Step Up Payment of $1.415.
Example 3 — The hypothetical Ending Value is 105% of the Starting Value and is greater than the Threshold Value, but is less than or equal to the Step Up Value:
| Starting Value: |
12,170.56 | |||||
| Threshold Value: |
10,953.50 | |||||
| Hypothetical Ending Value: |
12,779.09 | |||||
| Step Up Value: |
13,892.69 |
Hypothetical Redemption Amount (per unit) = $10.00 + $1.415 = $11.415
In this case, because the hypothetical Ending Value is greater than or equal to the Threshold Value but less than or equal to the Step Up Value, the hypothetical Redemption Amount (per unit) will equal $11.415, which is the sum of the Original Offering Price and the Step Up Payment of $1.415.
Example 4 — The hypothetical Ending Value is 150% of the Starting Value and is greater than the Step Up Value:
| Starting Value: |
12,170.56 | |||||
| Hypothetical Ending Value: |
18,255.84 | |||||
| Step Up Value: |
13,892.69 |
| Hypothetical Redemption Amount (per unit) = $10 + |
[ | $10 × | ( | 18,255.84 – 12,170.56 | ) | ] | = $15.000 | |||||||||
| 12,170.56 |
|
Enhanced Buffer Market-Linked Step Up Notes |
TS-3 |
The following table illustrates, for the Starting Value of 12,170.56, the Threshold Value of 90% of the Starting Value (rounded to two decimal places), and a range of hypothetical Ending Values:
| § | the percentage change from the Starting Value to the hypothetical Ending Value; |
| § | the hypothetical Redemption Amount per unit of the notes (rounded to three decimal places); and |
| § | the hypothetical total rate of return to holders of the notes. |
The table below is based on the Step Up Payment of $1.415 and the Step Up Value of 114.15% of the Starting Value.
| Hypothetical Ending Value(1) |
Percentage Change from the Starting Value to the |
Hypothetical Amount per Unit |
Hypothetical | |||||||||||||||
| 6,085.28 | -50.00 | % | $6.000 | -40.00 | % | |||||||||||||
| 7,302.34 | -40.00 | % | $7.000 | -30.00 | % | |||||||||||||
| 8,519.39 | -30.00 | % | $8.000 | -20.00 | % | |||||||||||||
| 9,736.45 | -20.00 | % | $9.000 | -10.00 | % | |||||||||||||
| 10,953.50 | (2) | -10.00 | % | $11.415 | (3) | 14.15 | % | |||||||||||
| 11,562.03 | -5.00 | % | $11.415 | 14.15 | % | |||||||||||||
| 11,927.15 | -2.00 | % | $11.415 | 14.15 | % | |||||||||||||
| 12,170.56 | (4) | 0.00 | % | $11.415 | 14.15 | % | ||||||||||||
| 12,413.97 | 2.00 | % | $11.415 | 14.15 | % | |||||||||||||
| 12,779.09 | 5.00 | % | $11.415 | 14.15 | % | |||||||||||||
| 13,387.62 | 10.00 | % | $11.415 | 14.15 | % | |||||||||||||
| 13,892.69 | (5) | 14.15 | % | $11.415 | 14.15 | % | ||||||||||||
| 14,604.67 | 20.00 | % | $12.000 | 20.00 | % | |||||||||||||
| 15,821.73 | 30.00 | % | $13.000 | 30.00 | % | |||||||||||||
| 17,038.78 | 40.00 | % | $14.000 | 40.00 | % | |||||||||||||
| 18,255.84 | 50.00 | % | $15.000 | 50.00 | % | |||||||||||||
| (1) | The Index is a price return index. Accordingly, the Ending Value will not include any income generated by dividends paid on the stocks included in the Index, which you would otherwise be entitled to receive if you invested in those stocks directly. |
| (2) | This is the Threshold Value. |
| (3) | This amount represents the sum of the Original Offering Price and the Step Up Payment. |
| (4) | This is the Starting Value. |
| (5) | This is the Step Up Value. |
The above figures are for purposes of illustration only. The actual Redemption Amount and the resulting total rate of return will depend on the actual Ending Value and the term of your investment.
|
Enhanced Buffer Market-Linked Step Up Notes |
TS-4 |
Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page S-8 of product supplement SUN-1 and page S-4 of 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 notes.
| § | Your investment may result in a loss; there is no guaranteed return of principal. |
| § | Your yield may be less than the yield on a conventional debt security of comparable maturity. |
| § | You must rely on your own evaluation of the merits of an investment linked to the Index. |
| § | In seeking to provide you with what we believe to be commercially reasonable terms for the notes while providing MLPF&S with compensation for its services, we have considered the costs of developing, hedging, and distributing the notes. |
| § | A trading market is not expected to develop for the notes. MLPF&S is not obligated to make a market for, or to repurchase, the notes. |
| § | Payments on the notes are subject to our credit risk, and changes in our credit ratings are expected to affect the value of the notes. |
| § | The Redemption Amount will not be affected by all developments relating to the Index. |
| § | Dow Jones Trademark Holdings, LLC (“Dow Jones”) and CME Group Index Services LLC (“CME Indexes”) may adjust the Index in a way that affects its level, and Dow Jones and CME Indexes have 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 shares of companies included in the Index, except to the extent that our common stock is 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. |
| § | If you attempt to sell the notes 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. |
| § | Purchases and sales by us and our affiliates of shares of companies included in the Index may affect your return. |
| § | Our trading and hedging activities may create conflicts of interest with you. |
| § | Our hedging activities may affect your return on the notes and their market value. |
| § | Our business activities relating to the companies represented by the Index may create conflicts of interest with you. |
| § | 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” and “Certain U.S. Federal Income Taxation Considerations” below and “U.S. Federal Income Tax Summary” beginning on page S-31 of product supplement SUN-1. |
Investor Considerations
|
Enhanced Buffer Market-Linked Step Up Notes |
TS-5 |
Other Provisions
We will 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, 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.
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.
Supplement to the Plan of Distribution
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 FINRA Rule 5121. Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes 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 notes, the notes will be sold in minimum investment amounts of 100 units.
MLPF&S may use this Note Prospectus for offers and sales in secondary market transactions and market-making transactions in the notes but is not obligated to engage in such secondary market transactions and/or market-making transactions. MLPF&S 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.
|
Enhanced Buffer Market-Linked Step Up Notes |
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 Indexes, the marketing name of CME Group Index Services LLC (“CME Indexes”), and is subject to change by Dow Jones Indexes. Dow Jones Indexes has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of Dow Jones Indexes discontinuing publication of the Index are discussed in the section beginning on page S-25 of product supplement SUN-1 entitled “Description of the Notes—Discontinuance of a Market Measure.” None of us, the calculation agent, or the selling agent accepts any responsibility for the calculation, maintenance, or publication of the Index or any successor index.
The “DJIASM” is a product of Dow Jones Indexes, the marketing name and a licensed trademark of CME Indexes and has been licensed for use. “Dow Jones”, “Dow Jones Industrial AverageSM”, “Dow Jones Indexes” and “DJIA” are service marks of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use for certain purposes by us. The notes based on the Dow Jones Industrial AverageSM are not sponsored, endorsed, sold or promoted by Dow Jones, CME Indexes or their respective affiliates and Dow Jones, CME Indexes and their respective affiliates make no representation regarding the advisability of investing in the notes.
Publication of the Index
Unless otherwise stated, all information on the Index provided in this term sheet is derived from Dow Jones Indexes, the marketing name and a licensed trademark of CME Indexes. The Index is a price-weighted index, which means an underlying stock’s weight in the Index is based on its price per share rather than the total market capitalization of the issuer. The Index is designed to provide an indication of the composite performance of 30 common stocks of corporations representing a broad cross-section of U.S. industry. The corporations represented in the Index tend to be market leaders in their respective industries and their stocks are typically widely held by individuals and institutional investors.
The Index is maintained by an Averages Committee comprised of the Managing Editor of The Wall Street Journal, the head of Dow Jones Indexes research and the head of CME Group Inc. research. The Averages Committee was created in March 2010, when Dow Jones Indexes became part of CME Group Index Services, LLC, a joint venture company owned 90% by CME Group Inc. and 10% by Dow Jones & Company. Generally, composition changes occur only after mergers, corporate acquisitions or other dramatic shifts in a component’s core business. When such an event necessitates that one component be replaced, the entire Index is reviewed. As a result, when changes are made they typically involve more than one component. While there are no rules for component selection, a stock typically is added only if it has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the sector(s) covered by the average.
Changes in the composition of the Index are made entirely by the Averages Committee without consultation with the corporations represented in the Index, any stock exchange, any official agency or us. Changes to the common stocks included in the Index tend to be made infrequently, and the underlying stocks of the Index may be changed at any time for any reason. The companies currently represented in the Index are incorporated in the United States and its territories and their stocks are listed on the New York Stock Exchange and NASDAQ.
The Index initially consisted of 12 common stocks and was first published in the WSJ in 1896. The Index was increased to include 20 common stocks in 1916 and to 30 common stocks in 1928. The number of common stocks in the Index has remained at 30 since 1928, and, in an effort to maintain continuity, the constituent corporations represented in the Index have been changed on a relatively infrequent basis.
Computation of the Index
The level of the Index is the sum of the primary exchange prices of each of the 30 component stocks included in the Index, divided by a divisor that is designed to provide a meaningful continuity in the level of the Index. Because the Index is price-weighted, stock splits or changes in the component stocks could result in distortions in the Index level. In order to prevent these distortions related to extrinsic factors, the divisor is periodically changed in accordance with a mathematical formula that reflects adjusted proportions within the Index. The current divisor of the Index is published daily in the WSJ and other publications. In addition, other statistics based on the Index may be found in a variety of publicly available sources.
|
Enhanced Buffer Market-Linked Step Up Notes |
TS-7 |
The following table presents the listing symbol, industry group, price per share, total number of shares outstanding, and market capitalization for each of the component stocks in the Index based on publicly available information on the pricing date.
| Issuer of Component Stock(1) |
Symbol |
Industry |
Price Per |
Shares (in Millions)(2) |
Market |
Component |
||||||||||||
| 3M Co. |
MMM | Diversified Industrials | $92.58 | 711.8060 | 65899.0000 | 5.76 | ||||||||||||
| Alcoa Inc. |
AA | Aluminum | $17.11 | 1062.6890 | 18182.6152 | 1.06 | ||||||||||||
| American Express Co. |
AXP | Consumer Finance | $45.59 | 1202.4090 | 54817.8320 | 2.84 | ||||||||||||
| AT&T Inc. |
T | Fixed Line Telecommunications | $28.54 | 5911.4340 | 168712.3125 | 1.77 | ||||||||||||
| Bank of America |
BAC | Banks | $13.48 | 10121.1540 | 136433.1563 | 0.84 | ||||||||||||
| Boeing Co. |
BA | Aerospace | $72.76 | 736.2950 | 53572.8633 | 4.52 | ||||||||||||
| Caterpillar Inc. |
CAT | Commercial Vehicles & Trucks | $108.37 | 638.8230 | 69229.2188 | 6.74 | ||||||||||||
| Chevron Corp. |
CVX | Integrated Oil & Gas | $105.38 | 2007.4500 | 211545.0313 | 6.55 | ||||||||||||
| Cisco Systems Inc. |
CSCO | Networking Products | $17.36 | 5527.9950 | 95965.9922 | 1.08 | ||||||||||||
| Coca-Cola Co. |
KO | Soft Drinks | $64.69 | 2294.3170 | 148419.3594 | 4.02 | ||||||||||||
| E.I. DuPont De Nemours & Co. |
DD | Commodity Chemicals | $53.68 | 921.6340 | 49473.3125 | 3.34 | ||||||||||||
| Exxon Mobil Corp. |
XOM | Integrated Oil & Gas | $82.73 | 4958.5980 | 410224.8438 | 5.14 | ||||||||||||
| General Electric Co. |
GE | Diversified Industrials | $19.78 | 10618.4890 | 210033.7188 | 1.23 | ||||||||||||
| Hewlett-Packard Co. |
HPQ | Computer Hardware | $43.10 | 2163.9310 | 93265.4297 | 2.68 | ||||||||||||
| Home Depot Inc. |
HD | Home Improvement Retailers | $37.36 | 1622.0700 | 60600.5547 | 2.32 | ||||||||||||
| Intel Corp. |
INTC | Semiconductors | $20.38 | 5488.0000 | 111845.4375 | 1.27 | ||||||||||||
| International Business Machines Corp. |
IBM | Computer Services | $160.04 | 1219.5360 | 195174.5781 | 9.95 | ||||||||||||
| Johnson & Johnson |
JNJ | Pharmaceuticals | $59.03 | 2735.2140 | 161459.6563 | 3.67 | ||||||||||||
| JPMorgan Chase & Co. |
JPM | Banks | $45.73 | 3983.5100 | 182165.9063 | 2.84 | ||||||||||||
| Kraft Foods Inc. Class A |
KFT | Food Products | $31.28 | 1748.9270 | 54706.4453 | 1.95 | ||||||||||||
| McDonald’s Corp. |
MCD | Restaurants & Bars | $74.93 | 1043.2990 | 78174.3906 | 4.66 | ||||||||||||
| Merck & Co. Inc. |
MRK | Pharmaceuticals | $32.72 | 3083.0810 | 100878.4063 | 2.03 | ||||||||||||
| Microsoft Corp. |
MSFT | Software | $25.81 | 8402.3820 | 216865.4688 | 1.61 | ||||||||||||
| Pfizer Inc. |
PFE | Pharmaceuticals | $20.30 | 7995.2200 | 162302.9688 | 1.26 | ||||||||||||
| Procter & Gamble Co. |
PG | Nondurable Household Products | $61.14 | 2800.7840 | 171239.9063 | 3.80 | ||||||||||||
| Travelers Cos. Inc. |
TRV | Insurance | $58.83 | 431.0520 | 25358.8203 | 3.66 | ||||||||||||
| United Technologies Corp. |
UTX | Aerospace | $82.76 | 921.1940 | 76238.0391 | 5.15 | ||||||||||||
| Verizon Communications Inc. |
VZ | Fixed Line Telecommunications | $37.18 | 2828.0720 | 105147.7266 | 2.31 | ||||||||||||
| Wal-Mart Stores Inc. |
WMT | Broadline Retailers | $52.59 | 3561.9940 | 187325.2813 | 3.27 | ||||||||||||
| Walt Disney Co. |
DIS | Broadcasting & Entertainment | $42.86 | 1899.0690 | 81394.1016 | 2.67 | ||||||||||||
| (1) | The inclusion of a component stock in the Index should not be considered a recommendation to buy or sell that stock and neither we nor any of our affiliates make any representation to any purchaser of the notes as to the performance of the Index or any component stock included in the Index. Beneficial owners of the notes will not have any right to the component stocks included in the Index or any dividends paid on those stocks. |
| (2) | Information obtained from Bloomberg Financial Markets. |
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 Index or any successor to the Index. Dow Jones and CME Indexes do not guarantee the accuracy or the completeness of the Index or any data included in the Index. Dow Jones and CME Indexes assume no liability for any errors, omissions, or disruption in the calculation and dissemination of the Index. Dow Jones and CME Indexes disclaim all responsibility for any errors or omissions in the calculation and dissemination of the Index or the manner in which the Index is applied in determining the amount payable on the notes at maturity.
|
Enhanced Buffer Market-Linked Step Up Notes |
TS-8 |
The following graph sets forth the monthly historical performance of the Index in the period from January 2006 through February 2011. This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth below is not an indication that the level of the Index is more or less likely to increase or decrease at any time over the term of the notes. On the pricing date, the closing level of the Index was 12,170.56.
Before investing in the notes, 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
The “DJIASM” is a product of Dow Jones Indexes, the marketing name and a licensed trademark of CME Indexes and has been licensed for use. “Dow Jones”, “Dow Jones Industrial AverageSM”, “Dow Jones Indexes” and “DJIA” are service marks of Dow Jones and have been licensed for use for certain purposes by us. The notes based on the Dow Jones Industrial AverageSM are not sponsored, endorsed, sold or promoted by Dow Jones, CME Indexes or their respective affiliates and Dow Jones, CME Indexes and their respective affiliates make no representation regarding the advisability of investing in the notes.
The only relationship of Dow Jones, CME Indexes, or any of their respective affiliates to us is the licensing of certain trademarks, trade names and service marks of Dow Jones and of the DJIASM, which is determined, composed and calculated by CME Indexes without regard to us or the notes. Dow Jones and CME Indexes have no obligation to take the needs of us or the owners of the notes into consideration in determining, composing, or calculating DJIASM. Dow Jones, CME Indexes, and their respective affiliates are not responsible for and have 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. Dow Jones, CME Indexes, and their respective affiliates have no obligation or liability in connection with the administration, marketing or trading of the notes. 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 DJIASM. It is possible that this trading activity will affect the value of the DJIASM and the notes.
DOW JONES, CME INDEXES, AND THEIR RESPECTIVE AFFILIATES DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DJIASM OR ANY DATA INCLUDED THEREIN AND DOW JONES, CME INDEXES AND THEIR RESPECTIVE AFFILIATES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES, CME INDEXES, AND THEIR RESPECTIVE AFFILIATES MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DJIASM OR ANY DATA INCLUDED THEREIN. DOW JONES, CME INDEXES, AND THEIR RESPECTIVE 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 DJIASM OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES, CME INDEXES, OR THEIR RESPECTIVE AFFILIATES 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 OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN CME INDEXES AND US, OTHER THAN THE LICENSORS OF CME INDEXES.
|
Enhanced Buffer Market-Linked Step Up Notes |
TS-9 |
Summary Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:
| • | 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 single financial contracts linked to the Index that requires you to pay us at inception an amount equal to the purchase price of the notes and that entitles you to receive at maturity an amount in cash linked to the performance of the Index. |
| • | Under this characterization and tax treatment of the notes, upon receipt of a cash payment at maturity or upon a sale or exchange of the notes 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 notes 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 notes. 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” beginning on page S-31 of product supplement SUN-1, which you should carefully review prior to investing in the notes.
General. Although there is no statutory, judicial, or administrative authority directly addressing the characterization of the notes, we intend to treat the notes for all tax purposes as single financial contracts linked to the Index that requires the investor to pay us at inception an amount equal to the purchase price of the notes and that entitles the investor to receive at maturity an amount in cash linked to the performance of the Index. Under the terms of the notes, we and every investor in the notes agree, in the absence of an administrative determination or judicial ruling to the contrary, to treat the notes as described in the preceding sentence. This discussion assumes that the notes constitute single financial contracts linked to the Index for U.S. federal income tax purposes. If the notes do not constitute single financial contracts, 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 notes.
This characterization of the notes is not binding on the Internal Revenue Service (“IRS”) or the courts. No statutory, judicial, or administrative authority directly addresses the characterization of the notes 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 notes 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 SUN-1. 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 notes, including possible alternative characterizations.
Settlement at Maturity or Sale or Exchange Prior to Maturity. Assuming that the notes are properly characterized and treated as single financial contracts linked 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 notes prior to maturity, a U.S. Holder (as defined on page S-32 of product supplement SUN-1) generally will recognize capital gain or loss equal to the difference between the amount realized and the U.S. Holder’s basis in the notes. This capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder held the notes 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 notes. We cannot predict the likelihood of any such legislation or guidance being adopted, or the ultimate impact on the notes. 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 notes. According to the Notice, the IRS and Treasury are considering whether a holder of an instrument such as the notes 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 notes, 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 intend to continue treating the notes 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. We urge you to consult your own tax advisors concerning the impact and the significance of the above considerations.
Additional Medicare Tax on Unearned Income. With respect to taxable years beginning after December 31, 2012, certain U.S. Holders, including individuals, estates, and trusts, will be subject to an additional 3.8% Medicare tax on unearned income. For individual U.S. Holders, the additional Medicare tax applies to the lesser of (i) “net investment income,” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents, and capital gains. U.S. Holders are urged to consult their own tax advisors regarding the implications of the additional Medicare tax resulting from an investment in the notes.
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. See the discussion under the section entitled “U.S. Federal Income Tax Summary” beginning on page S-31 of product supplement SUN-1.
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Enhanced Buffer Market-Linked Step Up Notes |
TS-10 |
Additional Terms
You should read this term sheet, together with the documents listed below, which together contain the terms of the notes and supersede all prior or contemporaneous oral statements as well as any other written materials. You should carefully consider, among other things, the matters set forth under “Risk Factors” in the sections indicated on the cover of this term sheet. The notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
You may access the following documents on the SEC Website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC Website):
| § | Product supplement SUN-1 dated September 22, 2009: |
http://sec.gov/Archives/edgar/data/70858/000119312509195916/d424b5.htm
| § | 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.
Market-Linked Investments Classification
Market-Linked Investments come in four basic categories, each designed to meet a different set of investor risk profiles, time horizons, income requirements, and market views (bullish, bearish, moderate outlook, etc.). The following descriptions of these categories are meant solely for informational purposes and are not intended to represent any particular Market-Linked Investment or guarantee performance. Certain Market-Linked Investments may have overlapping characteristics.
Market Downside Protection Market-Linked Investments combine some of the capital preservation features of traditional bonds with the growth potential of equities and other asset classes. They offer full or partial market downside protection at maturity, while offering market exposure that may provide better returns than comparable fixed-income securities. It is important to note that the market downside protection feature provides investors with protection only at maturity, subject to issuer credit risk. In addition, in exchange for full or partial protection, you forfeit dividends and full exposure to the linked asset’s upside. In some circumstances, this could result in a lower return than with a direct investment in the asset.
These short- to medium-term market-linked notes offer you a way to enhance your income stream, either through variable or fixed-interest coupons, an added payout at maturity based on the performance of the linked asset, or both. In exchange for receiving current income, you will generally forfeit upside potential on the linked asset. Even so, the prospect of higher interest payments and/or an additional payout may equate to a higher return potential than you may be able to find through other fixed-income securities. Enhanced Income Market-Linked Investments generally do not include market downside protection. The degree to which your principal is repaid at maturity is generally determined by the performance of the linked asset. Although enhanced income streams may help offset potential declines in the asset, you can still lose part or all of your original investment.
Market Access notes may offer exposure to certain market sectors, asset classes, and/or strategies that may not even be available through the other three categories of Market-Linked Investments. Subject to certain fees, the returns on Market Access Market-Linked Investments will generally correspond on a one-to-one basis with any increases or decreases in the value of the linked asset, similar to a direct investment. In some instances, they may also provide interim coupon payments. These investments do not include the market downside protection feature and, therefore, your principal remains at risk.
These short- to medium-term investments 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 a degree of 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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Enhanced Buffer Market-Linked Step Up Notes |
TS-11 |