FWP 1 d530501dfwp.htm FWP FWP

Filed Pursuant to Rule 433

Registration No. 333-180488

Subject to Completion

Preliminary Term Sheet dated May 1, 2013

 

LOGO

The notes are being issued by Bank of America Corporation (“BAC”). There are important differences between the notes and a conventional debt security, including different investment risks and certain additional costs. See “Risk Factors” on page TS-6 of this term sheet and beginning on page S-10 of product supplement ARN-4.

The initial estimated value of the notes as of the pricing date is expected to be between $9.60 and $9.69 per unit, which is less than the public offering price listed below. See “Summary” on the following page, “Risk Factors” on page TS-6 of this term sheet and “Structuring the Notes” on page TS-8 of this term sheet for additional information. The actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.

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 (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.

 

    

Per Unit

       

Total

         

Public offering price (1) (2)

      $10.000           $            

Underwriting discount (1) (2)

      $0.175           $            

Proceeds, before expenses, to BAC

      $9.825           $            

 

  (1) 

For any purchase of 500,000 units or more in a single transaction by an individual investor, the public offering price and the underwriting discount will be $9.950 per unit and $0.125 per unit, respectively.

  (2) 

For any purchase by certain fee-based trusts and discretionary accounts managed by U.S. Trust operating through Bank of America, N.A., the public offering price and underwriting discount will be $9.825 per unit and $0.000 per unit, respectively.

The notes:

 

        Are Not FDIC Insured    Are Not Bank Guaranteed    May Lose Value       

Merrill Lynch & Co.

May     , 2013

 

Units $10 principal amount per unit CUSIP No. Bank of America Pricing Date* May , 2013 Settlement Date* May , 2013 Maturity Date* May , 2014 *Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”) Accelerated Return Notes® Linked to the Common Stock of Apple Inc. Maturity of approximately 12 months 3-to-1 upside exposure to increases in the Underlying Stock, subject to a capped return of [26% to 30%] 1-to-1 downside exposure to decreases in the Underlying Stock, with 100% of your investment at risk All payments occur at maturity and are subject to the credit risk of Bank of America Corporation No periodic interest payments Limited secondary market liquidity, with no exchange listing Enhanced Return

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

Summary

The Accelerated Return Notes® Linked to the Common Stock of Apple Inc., due May     , 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. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of BAC. The notes provide you a leveraged return, subject to a cap, if the Ending Value of the Market Measure, which is the common stock of Apple Inc. (the “Underlying Stock”), is greater than its Starting Value. If the Ending Value is less than the Starting Value, you will lose all or a portion of the principal amount of your notes. Payments on the notes, including the amount you receive at maturity, will be calculated based on the $10 Original Offering Price per unit and will depend on our credit risk and the performance of the Underlying Stock. See “Terms of the Notes” below.

The economic terms of the notes (including the Capped Value) are based on the rate we would pay to borrow funds through the issuance of market-linked notes and the economic terms of certain related hedging arrangements. The implied borrowing rate for market-linked notes is typically lower than the rate we would pay when we issue conventional fixed or floating rate debt securities. This difference in borrowing rate, as well as the underwriting discount and the hedging related charge described below, will reduce the economic terms of the notes to you and the initial estimated value of the notes on the pricing date. Due to these factors, the public offering price you pay to purchase the notes will be greater than the initial estimated value of the notes.

On the cover page of this term sheet, we have provided the initial estimated value range for the notes. This range was determined based on our and our affiliates’ pricing models, which take into consideration our implied borrowing costs and the market prices for the hedging arrangements related to the notes. The initial estimated value of the notes calculated on the pricing date will be set forth in the final term sheet made available to investors in the notes. For more information about the initial estimated value and the structuring of the notes, see “Structuring the Notes” on page TS-8.

 

Terms of the Notes

 

 

Issuer:

 

  

Bank of America Corporation (“BAC”)

 

Original Offering Price:

 

  

$10.00 per unit

 

Term:

 

  

Approximately 12 months

 

Market Measure:

 

  

Common stock of Apple Inc. (the “Underlying Company”) (NASDAQ symbol: “AAPL”).

 

Starting Value:

 

  

The Volume Weighted Average Price on the pricing date

 

Volume Weighted Average Price:

 

  

The volume weighted average price (rounded to two decimal places) shown on page “AAPL” on Bloomberg L.P. for trading in shares of the Underlying Stock taking place from approximately 9:30 a.m. to 4:05 p.m. on all U.S. exchanges.

 

Ending Value:

 

  

The Closing Market Price of the Underlying Stock on the calculation day, multiplied by the Price Multiplier. The calculation day is subject to postponement in the event of Market Disruption Events, as described on page TS-6.

 

Calculation Day:

 

  

The fifth scheduled trading day immediately preceding the maturity date.

 

Capped Value:

 

  

[$12.60 to $13.00] per unit of the notes, which represents a return of [26% to 30%] over the Original Offering Price. The actual Capped Value will be determined on the pricing date.

 

Participation Rate:

 

  

300%

 

Price Multiplier:

 

  

1, subject to adjustment for certain corporate events relating to the Underlying Stock described beginning on page S-33 of product supplement ARN-4.

 

Fees and Charges:

 

  

The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.075 per unit described in “Structuring the Notes” on page TS-8.

 

Calculation Agent:

 

  

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a subsidiary of BAC.

 

Redemption Amount Determination

On the maturity date, you will receive a cash payment per unit determined as follows:

 

LOGO

 

 

 

Accelerated Return Notes®    TS-2

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

The terms and risks of the notes are contained in this term sheet and in the following:

 

  §  

Product supplement ARN-4 dated April 2, 2012:

http://www.sec.gov/Archives/edgar/data/70858/000119312512146655/d326526d424b5.htm

 

  §  

Series L MTN prospectus supplement dated March 30, 2012 and prospectus dated March 30, 2012:

http://www.sec.gov/Archives/edgar/data/70858/000119312512143855/d323958d424b5.htm

These documents (together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated above or obtained from MLPF&S by calling 1-866-500-5408. Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement ARN-4. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to BAC.

Investor Considerations

 

You may wish to consider an investment in the notes if:

 

§  

You anticipate that the Underlying Stock will increase moderately from the Starting Value to the Ending Value.

 

§  

You are willing to risk a loss of principal and return if the Underlying Stock decreases from the Starting Value to the Ending Value.

 

§  

You accept that the return on the notes, if any, will be capped.

 

§  

You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.

 

§  

You are willing to forgo dividends or other benefits of owning shares of the Underlying Stock.

 

§  

You are willing to accept a limited market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness, the implied borrowing rate and fees and charges on the notes.

 

§  

You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.

The notes may not be an appropriate investment for you if:

 

§  

You believe that the Underlying Stock will decrease from the Starting Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.

 

§  

You seek principal protection or preservation of capital.

 

§  

You seek an uncapped return on your investment.

 

§  

You seek interest payments or other current income on your investment.

 

§  

You want to receive dividends or other distributions paid on the Underlying Stock.

 

§  

You seek an investment for which there will be a liquid secondary market.

 

§  

You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.

 

 

We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

 

Accelerated Return Notes®    TS-3

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

Hypothetical Payout Profile and Examples of Payments at Maturity

The below graph is based on hypothetical numbers and values.

 

LOGO  

 

 

This graph reflects the returns on the notes, based on the Participation Rate of 300% and a Capped Value of $12.80, the midpoint of the Capped Value range of [$12.60 to $13.00]. The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the Underlying Stock, excluding dividends.

 

This graph has been prepared for purposes of illustration only.

The following table and examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They illustrate the calculation of the Redemption Amount and total rate of return based on a hypothetical Starting Value of 100, the Participation Rate of 300%, a Capped Value of $12.80 per unit and a range of hypothetical Ending Values. The actual amount you receive and the resulting total rate of return will depend on the actual Starting Value, Ending Value, Capped Value, and whether you hold the notes to maturity. The following examples do not take into account any tax consequences from investing in the notes.

For recent actual prices of the Underlying Stock, see “The Underlying Stock” section below. In addition, all payments on the notes are subject to issuer credit risk.

 

Ending Value

  

Percentage Change from
the Starting

Value to the

Ending Value

  

Redemption
Amount per Unit

  

Total Rate
of Return on
the Notes

    60.00         -40.00 %       $6.00         -40.00 %
    70.00         -30.00 %       $7.00         -30.00 %
    80.00         -20.00 %       $8.00         -20.00 %
    90.00         -10.00 %       $9.00         -10.00 %
    94.00         -6.00 %       $9.40         -6.00 %
    97.00         -3.00 %       $9.70         -3.00 %
    100.00   (1)       0.00 %       $10.00         0.00 %
    105.00         5.00 %       $15.00         15.00 %
    109.00         9.00 %       $12.70         27.00 %
    110.00         10.00 %       $12.80   (2)       28.00 %
    120.00         20.00 %       $12.80         28.00 %
    130.00         30.00 %       $12.80         28.00 %
    140.00         40.00 %       $12.80         28.00 %
    150.00         50.00 %       $12.80         28.00 %
    160.00         60.00 %       $12.80         28.00 %

 

(1) 

The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Underlying Stock.

 

(2) 

The Redemption Amount per unit cannot exceed the hypothetical Capped Value.

 

 

Accelerated Return Notes®    TS-4

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

Redemption Amount Calculation Examples

Example 1

The Ending Value is 80.00, or 80.00% of the Starting Value:

 

Starting Value:   100.00
Ending Value:   80.00

 

$10 ×

   (   80    )   = $8.00 Redemption Amount per unit
    100     

Example 2

The Ending Value is 105.00, or 105.00% of the Starting Value:

 

Starting Value:   100.00
Ending Value:   105.00

 

$10 +

   [   $10 × 300% ×   (   105  –  100   )   ]   = $11.50 Redemption Amount per unit
        100      

Example 3

The Ending Value is 130.00, or 130.00% of the Starting Value:

 

Starting Value:   100.00
Ending Value:   130.00

 

$10 +

   [   $10 × 300% ×   (   130  –  100   )   ]   = $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $12.80 per unit
        100      

 

 

Accelerated Return Notes®    TS-5

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

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-10 of product supplement ARN-4, page S-5 of the MTN prospectus supplement, and page 8 of the prospectus identified above under “Summary.” We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

  §  

Depending on the performance of the Underlying Stock as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.

 

  §  

Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.

 

  §  

Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.

 

  §  

Your investment return, if any, is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the Underlying Stock.

 

  §  

The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit spreads, our implied borrowing rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.

 

  §  

The public offering price you pay for the notes will exceed the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial estimated value. This is due to, among other things, changes in the price of the Underlying Stock, the implied borrowing rate we pay to issue market-linked notes, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as further described in “Structuring the Notes” on page TS-8. These factors, together with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of the notes in complex and unpredictable ways.

 

  §  

The initial estimated value does not represent a minimum or maximum price at which we, MLPF&S or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value of your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlying Stock, our creditworthiness and changes in market conditions.

 

  §  

A trading market is not expected to develop for the notes. Neither we nor MLPF&S is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.

 

  §  

Our business activities as a full service financial institution, including our commercial and investment banking activities, our hedging and trading activities (including trades in shares of the Underlying Stock) and any hedging and trading activities we engage in for our clients’ accounts, may affect the market value of the notes and their return and may create conflicts of interest with you.

 

  §  

The Underlying Company will have no obligations relating to the notes, and neither we nor MLPF&S will perform any due diligence procedures with respect to the Underlying Company in connection with this offering.

 

  §  

You will have no rights of a holder of the Underlying Stock, and you will not be entitled to receive shares of the Underlying Stock or dividends or other distributions by the Underlying Company.

 

  §  

While we or our affiliates may from time to time own securities of the Underlying Company, we do not control the Underlying Company, and are not responsible for any disclosure made by the Underlying Company.

 

  §  

The Redemption Amount will not be adjusted for all corporate events that could affect the Underlying Stock. See “Description of ARNs — Anti-Dilution Adjustments” beginning on page S-33 of product supplement ARN-4.

 

  §  

There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent.

 

  §  

The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page S-45 of product supplement ARN-4.

Additional Terms of the Notes

If the calculation day is not a trading day or if there is a Market Disruption Event on that day, the calculation day will be the immediately succeeding trading day during which no Market Disruption Event shall have occurred or is continuing; provided that the Closing Market Price of the Underlying Stock will be determined (or, if not determinable, estimated) by the calculation agent in a manner which the calculation agent considers commercially reasonable under the circumstances on a date no later than the second scheduled trading day prior to the maturity date, regardless of the occurrence of a Market Disruption Event on that second scheduled trading day.

 

 

Accelerated Return Notes®    TS-6

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

The Underlying Stock

We have derived the following information from publicly available documents published by the Underlying Company. We have not independently verified the accuracy or completeness of the following information. Apple Inc. designs, manufactures, and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals, and networking solutions. The company sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers.

Because the Underlying Stock is registered under the Securities Exchange Act of 1934, the Underlying Company is required to file periodically certain financial and other information specified by the SEC. Information provided to or filed with the SEC by the Underlying Company can be located at the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549 or through the SEC’s web site at http://www.sec.gov by reference to SEC CIK number 320193.

This term sheet relates only to the notes and does not relate to the Underlying Stock or to any other securities of the Underlying Company. Neither we nor any of our affiliates have participated or will participate in the preparation of the Underlying Company’s publicly available documents. Neither we nor any of our affiliates have made any due diligence inquiry with respect to the Underlying Company in connection with the offering of the notes. Neither we nor any of our affiliates make any representation that the publicly available documents or any other publicly available information regarding the Underlying Company are accurate or complete. Furthermore, there can be no assurance that all events occurring prior to the date of this term sheet, including events that would affect the accuracy or completeness of these publicly available documents that would affect the trading price of the Underlying Stock, have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning the Underlying Company could affect the value of the Underlying Stock and therefore could affect your return on the notes. The selection of the Underlying Stock is not a recommendation to buy or sell the Underlying Stock.

The Underlying Stock trades on the NASDAQ Global Select Market under the symbol “AAPL.”

Historical Data

The following table shows the quarterly high and low Closing Market Prices of the shares of the Underlying Stock on its primary exchange from the first quarter of 2008 through April 26, 2013. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. These historical trading prices may have been adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.

 

              High ($)            Low ($)    

2008

   

First Quarter

    194.97    119.15
  

Second Quarter

    189.96    147.14
  

Third Quarter

    179.69    105.26
  

Fourth Quarter

    111.04    80.49

2009

   

First Quarter

    109.87    78.20
  

Second Quarter

    144.67    108.69
  

Third Quarter

    186.15    135.40
  

Fourth Quarter

    211.64    180.76

2010

   

First Quarter

    235.83    192.00
  

Second Quarter

    274.16    235.86
  

Third Quarter

    292.46    240.16
  

Fourth Quarter

    325.47    278.64

2011

   

First Quarter

    363.13    326.72
  

Second Quarter

    353.10    315.32
  

Third Quarter

    413.45    343.23
  

Fourth Quarter

    422.24    363.50

2012

   

First Quarter

    617.62    411.23
  

Second Quarter

    636.23    530.12
  

Third Quarter

    702.10    574.88
  

Fourth Quarter

    671.74    508.97

2013

   

First Quarter

    549.03    420.05
  

Second Quarter (through April 26, 2013)

    435.69    390.50

This historical data on the Underlying Stock is not necessarily indicative of the future performance of the Underlying Stock or what the value of the notes may be. Any historical upward or downward trend in the price per share of the Underlying Stock during any period set forth above is not an indication that the price per share of the Underlying Stock is more or less likely to increase or decrease at any time over the term of the notes.

Before investing in the notes, you should consult publicly available sources for the prices and trading pattern of the Underlying Stock.

 

 

Accelerated Return Notes®    TS-7

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

Supplement to the Plan of Distribution; Conflicts of Interest

Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.

MLPF&S, a broker-dealer subsidiary of BAC, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling agent in the distribution of the notes. Accordingly, offerings of the notes will conform to the requirements of Rule 5121 applicable to FINRA members. MLPF&S may not make sales in this offering to any of its discretionary accounts without the prior written approval of the account holder.

We may deliver the notes against payment therefor in New York, New York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than three business days from the pricing date, purchasers who wish to trade the notes more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.

The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.

MLPF&S will not receive an underwriting discount for notes sold to certain fee-based trusts and fee-based discretionary accounts managed by U.S. Trust operating through Bank of America, N.A.

MLPF&S may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however it is not obligated to engage in any such transactions. At MLPF&S’s discretion, for a short, undetermined initial period after the issuance of the notes, any purchase price paid by MLPF&S in the secondary market may be, in certain circumstances, closer to the amount that you paid for the notes than to the initial estimated value. However, neither we nor any of our affiliates is obligated to purchase your notes at any price, or at a price that exceeds the initial estimated value.

The value of the notes shown on your account statement will be based on MLPF&S’s estimate of the value of the notes if MLPF&S or another of our affiliates were to make a market in the notes, which it is not obligated to do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions, our creditworthiness and transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of the notes.

Structuring the Notes

The notes are our debt securities, the return on which is linked to the performance of the Underlying Stock. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational, funding and liability management costs to us, we typically borrow the funds under these notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate debt security. At the time we commence the offering of our market-linked notes, that rate is generally lower by an amount ranging from 0.25% to 0.50% per annum (equivalent to $0.03 to $0.05 per unit). This generally relatively lower implied borrowing rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked notes, typically results in the initial estimated value of the notes on the pricing date being less than their public offering price.

At maturity, we are required to pay the Redemption Amount to holders of the notes, which will be calculated based on the performance of the Underlying Stock and the $10 per unit Original Offering Price. In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Underlying Stock, the tenor of the note and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.

MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by MLPF&S or any third party hedge providers.

For further information, see “Risk Factors — General Risks Relating to ARNs” beginning on page S-10 and “Use of Proceeds” on page S-22 of product supplement ARN-4.

 

 

Accelerated Return Notes®    TS-8

Accelerated Return Notes®

Linked to the Common Stock of Apple Inc., due May     , 2014

     LOGO        

 

Summary Tax Consequences

You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:

 

  •  

There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.

 

  •  

You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as a single financial contract with respect to the Underlying Stock.

 

  •  

Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning on page 62 of the prospectus) generally will recognize capital gain or loss upon maturity or upon a sale or exchange of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year.

 

  •  

No assurance can be given that the IRS or any court will agree with this characterization and tax treatment.

 

  •  

Withholding and reporting requirements under the legislation enacted on March 18, 2010 (as discussed beginning on page 85 of the prospectus), will generally apply to payments made after December 31, 2013. However, this withholding tax will not be imposed on payments pursuant to obligations outstanding on January 1, 2014. Additionally, withholding due to any payment being treated as a “dividend equivalent” (as discussed beginning on page S-48 of product supplement ARN-4) will begin no earlier than January 1, 2014. Holders are urged to consult with their own tax advisors regarding the possible implications of this recently enacted legislation on their 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. You should review carefully the discussion under the section entitled “U.S. Federal Income Tax Summary” beginning on page S-45 of product supplement ARN-4.

Where You Can Find More Information

We have filed a registration statement (including a product supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S toll-free at 1-866-500-5408.

Market-Linked Investments Classification

 

LOGO

MLPF&S classifies certain market-linked investments (the “Market-Linked Investments”) into categories, each with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.

Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need to be prepared for the possibility that you may lose all or part of your investment.

“Accelerated Return Notes®” and “ARNs®” are our registered service marks.

 

 

Accelerated Return Notes®    TS-9