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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-202354
(To Prospectus dated May 1, 2015,
Prospectus Supplement dated January 20, 2016 and
Product Supplement EQUITY INDICES ARN-1 dated January 22, 2016)
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1,128,131 Units
$10 principal amount per unit
CUSIP No. 06054B438
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Pricing Date
Settlement Date
Maturity Date
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August 25, 2016
September 1, 2016
October 27, 2017
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index
■
Maturity of approximately 14 months
■
3-to-1 upside exposure to increases in the Index, subject to a capped return of 16.38%
■
1-to-1 downside exposure to decreases in the Index, 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
■
In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per un
it. See “Structuring the Notes”
■
Limited secondary market liquidity, with no exchange listing
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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” and “Additional Risk Factors” beginning on page TS-
7
of this term sheet and “Risk Factors” beginning on page PS-6 of product supplement EQUITY INDICES ARN-1.
The initial estimated value of the notes as of the pricing date
is $
9.70
per unit, which is less than the public offering price listed below.
See “Summary” on the following page, “Risk Factors” beginning on page TS-
7
of this term sheet and “Structuring the Notes” on page TS-
1
2
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.
_________________________
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Per Unit
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Total
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Public offering price
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$
10.00
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$
11,281,310.00
|
|
Underwriting discount
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$
0.20
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$
225,626.20
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Proceeds, before expenses, to
BAC
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$
9.80
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$
11,055,683.80
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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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Merrill Lynch & Co.
August 25, 2016
|
Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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|
Summary
The Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October 27, 2017 (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 MSCI Emerging Markets Index (the “Index”), 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 principal amount per unit and will depend on the performance of the Index, subject to our credit risk. See “Terms of the Notes” below.
The
economic terms of the notes (including the
Capped Value
) are based on
our internal funding rate, which is
the rate we would pay to borrow funds through the issuance of market-linked notes and the economic terms of certain related hedging arrangements.
Our internal funding rate
is typically lower than the rate we would pay when we issue conventional fixed or floating rate debt securities. This difference in
funding
rate, as well as the underwriting discount and the hedging related charge described below, reduced 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 is greater than the initial estimated value of the notes.
On the cover page of this term sheet, we have provided the initial estimated value
for the notes. This initial estimated value was determined based on our and our affiliates’ pricing models, which take into consideration our
internal funding rate
and the market prices for the hedging arrangements related to the notes. For more information about the initial estimated value and the
structuring of the notes, see “
Structuring the Notes
”
on page TS-
1
2
.
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Terms of the Notes
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Redemption Amount
Determination
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Issuer:
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Bank of America Corporation (“BAC”)
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On the maturity date, you will receive a cash payment per unit determined as follows:
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Principal Amount
:
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$10.00 per unit
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Term:
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Approximately 14 months
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Market Measure:
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The MSCI Emerging Markets Inde
x (Bloomberg symbol: "MXEF
"), a price return index
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Starting Value:
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898.10
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Ending Value:
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The average of the closing levels of the Market Measure on each scheduled calculation day occurring during the maturity valuation period. The calculation days are subject to postponement in the event of Market Disruption Events, as described on page PS-17 of product supplement EQUITY INDICES ARN-1.
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Participation Rate:
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300%
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Capped Value:
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$11.638 per unit of the notes, which represents a return of 16.38% over the principal amount.
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Maturity Valuation Period
:
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October 18, 2017, October 19, 2017, October 20, 2017, October 23, 2017 and October 24, 2017
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Fees and Charges
:
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The underwriting discount of $0.20 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-
1
2
.
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Calculation Agent
:
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Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a subsidiary of BAC.
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Accelerated Return Notes
®
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TS-
2
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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The terms and risks of the notes are contained in this term sheet and in the following:
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 1-800-294-1322. 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 EQUITY INDICES ARN-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.
Investor Considerations
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You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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■
You anticipate that the Index will increase moderately from the Starting Value to the Ending Value.
■
You are willing to risk a loss of principal and return if the Index decreases from the Starting Value to the Ending Value.
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You accept that the return on the notes will be capped.
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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 the stocks included in the Index.
■
You are willing to accept a limited or no 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, our internal funding 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.
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You believe that the Index will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
■
You seek principal repayment or preservation of capital.
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You seek an uncapped return on your investment.
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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 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.
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We urge you to consu
lt your investment, legal, tax,
accounting, and other advisors before you invest in the notes.
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Accelerated Return Notes
®
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TS-
3
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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Hypothetical Payout Profile and Examples of Payments at Maturity
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Accelerated Return Notes
|
This graph reflects the returns on the notes, based on the Participation Rate of 300% and the Capped Value of $11.638. The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in t
he Index, excluding dividends
.
This graph has been prepared for purposes of illustration only.
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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%, the Capped Value of $11.6
38
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 actua
l Starting Value, Ending 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 levels of the Market Measure, see “The Index” section below. The Index is a price return index and as such 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. In addition, all payments on the notes are subject to issuer credit risk.
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Accelerated Return Notes
®
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TS-
4
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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Ending Value
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Percentage Change from the Starting Value to the Ending Value
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Redemption Amount per Unit
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Total Rate of Return on the Notes
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0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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94.00
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-6.00%
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$9.40
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-6.00%
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97.00
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-3.00%
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$9.70
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-3.00%
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100.00
(1)
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0.00%
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$10.00
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0.00%
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102.00
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2.00%
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$10.60
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6.00%
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103.00
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3.00%
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$10.90
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9.00%
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105.00
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5.00%
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$11.50
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15.00%
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110.00
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10.00%
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$11.638
(2)
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16.38%
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120.00
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20.00%
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$11.638
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16.38%
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130.00
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30.00%
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$11.638
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16.38%
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140.00
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40.00%
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$11.638
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16.38%
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150.00
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50.00%
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$11.638
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16.38%
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160.00
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60.00%
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$11.638
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16.38%
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(1)
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The
hypothetical
Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual Starting Value is
898.10
,
which was the closing level of the Market Measure on the pricing date.
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(2)
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The Redemption Amo
unt per unit cannot exceed the
Capped Value.
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Accelerated Return Notes
®
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TS-
5
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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Redemption Amount Calculation Examples
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Example 1
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The Ending Value is 80.00, or 80.00% of the Starting Value:
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Starting Value:
100.00
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Ending Value:
80.00
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= $8.00
Redemption Amount per unit
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Example 2
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The Ending Value is 103.00, or 103.00% of the Starting Value:
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Starting Value:
100.00
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Ending Value:
103.00
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= $10.90
Redemption Amount per unit
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Example 3
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The Ending Value is 130.00, or 130.00% of the Starting Value:
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Starting Value:
100.00
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Ending Value:
130.00
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= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $11.638 per unit
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Accelerated Return Notes
®
|
TS-
6
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-6 of product supplement EQUITY INDICES ARN-1, page S-5 of the Series L MTN prospectus supplement, and page 9 of the prospectus identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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■
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Depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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■
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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.
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■
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Payments on the notes are subj
ect 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.
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■
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Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks included in the Index.
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■
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The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit spreads, our
internal funding
rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.
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■
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The public offering price you pay for the notes exceeds the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial estimated value. This is due to, among other things, changes in the
level of the Index
,
our internal funding rate
, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as further described in “Structuring the Notes” on page TS-
1
2
. 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.
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■
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The initial estimated value does not represent a minimum or maximum price at which we, MLPF&S or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value of your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the
Index
, our creditworthiness and changes in market conditions.
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■
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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.
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■
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Your return on the notes and the value of the notes may be affected by exchange rate movements and factors affecting the international securities markets.
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■
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Our business activities as a full service financial institution, including our commercial and investment banking activities, our hedging and trading activities (including trades in s
hares
of companies included in the Index) and any hedging and trading activities we engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
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■
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The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
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■
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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 by the issuers of those securities.
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■
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While we or our affiliates may from time to time own securities of companies included in the Index we do not control any company included in the Index, and are not responsible for any disclosure made by any other company.
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■
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There may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right to appoint and remove the calculation agent.
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■
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page PS-24 of product supplement EQUITY INDICES ARN-1.
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Accelerated Return Notes
®
|
TS-
7
|
|
Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
|
|
There are risks associated with emerging markets.
An investment in the notes will involve risks not generally associated with investments which have no emerging market component. In particular,
many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments may be subject to change without review or appeal. Many emerging markets suffer from underdevelopment of capital markets and tax regulation. The risk of expropriation and nationalization remains a thr
eat. Guarding against such risks is made more difficult by low levels of corporate disclosure and unreliability of economic and financial data
.
Market Measure Business Day
The following definition shall supersede and replace the definition of a “Market Measure Business Day”
set forth
in product supplement
EQUITY INDICES ARN-1
.
A “Market Measure Business Day” means a day on which:
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(A)
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the London Stock Exchange, the Hong Kong Stock Exchange, the São Paulo Stock Exchange, and the Korea Stock Exchange (or any successor to the foregoing exch
anges) are open for trading; and
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(B)
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the Index or any successor thereto is calculated and published.
|
|
Accelerated Return Notes
®
|
TS-
8
|
|
Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
|
|
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, and is subject to change by, MSCI
Inc
.
(the “Index sponsor” or “MSCI”).
MSCI, which
licenses
the copyright and all other rights to the Index, has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of MSCI discontinuing publication of the Index are discussed in the section of product supplement EQUITY INDICES ARN-1 on page PS-19 entitled “Description of ARNs - Discontinuance of an Index”. None of us, the calculation agent, or
MLPF&S
accepts any responsibility for the calculation, maintenance, or publication of the Index or any successor index.
The
I
ndex is intended to measure equity market performance in the global emerging markets. The
Index
is a free float—adjusted market capitalization index with a base date of December 31, 1987 and an initial value of 100. The
Index
is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours.
The
Index
has a base value of 100.00 and a base date of December 31, 1987.
As
of
July 29
, 2016, the Index consists of the following 23 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
As of
July 29
, 2016, the five largest country weights were China (
25.32
%), South Korea (
14.82
%), Taiwan (12.
18
%), India (8.4
4
%), and South Africa (7.
62
%) and the five largest sector weights were Financials (26.1
9
%), Information Technology (22.6
2
%), Consumer Discretionary
(
10
.
60
%),
Consumer Staples (8.
1
5
%), and
Industrials
(
6.14
%)
.
The Country Indices
Each country’s index included in an MSCI Index is referred to as a “Country Index.” Under the MSCI methodology, each Country Index is an “MSCI Global Standard Index.”
The components of each MSCI EM Constituent Country Index used to be selected by
the Index sponsor
from among the universe of securities eligible for inclusion in the MSCI EM Constituent Country Index so as to target an 85% free float-adjusted market representation level within each of a number of industry groups, subject to adjustments to (i) provide for sufficient liquidity, (ii) reflect foreign investment restrictions (only those securities that can be held by non-residents of the country corresponding to the relevant MSCI EM Constituent Country Index are included) and (iii) meet certain other investibility criteria. Following a change in
the Index sponsor
’s methodology implemented in May 2008, the 85% target is now measured at the level of the country universe of eligible securities rather than the industry group level—so each MSCI EM Constituent Country Index will seek to include the securities that represent 85% of the free float-adjusted market capitalization of all securities eligible for inclusion—but will still be subject to liquidity, foreign investment restrictions and other investibility adjustments.
The Index sponsor
defines “free float” as total shares excluding shares held by strategic investors such as governments, corporations, controlling shareholders and management, and shares subject to foreign ownership restrictions.
Calculation of the MSCI EM Constituent Country Indices
Each MSCI EM Constituent Country Index is a free float-adjusted market capitalization index that is designed to measure the market performance, including price performance, of the equity securities in that country. Each MSCI EM Constituent Country Index is calculated in the relevant local currency as well as in U.S. dollars, with price, gross and net returns.
Each component is included in the relevant MSCI EM Constituent Country Index at a weight that reflects the ratio of its free float-adjusted market capitalization (
i.e.
, free public float multiplied by price) to the free float-adjusted market capitalization of all the components in that MSCI EM Constituent Country Index.
The Index sponsor
defines the free float of a security as the proportion of shares outstanding that is deemed to be available for purchase in the public equity markets by international investors.
Calculation of the Index
The performance of the Index on any given day represents the weighted performance of all of the components included in all of the MSCI EM Constituent Country Indices. Each component in the Index is included at a weight that reflects the ratio of its free float-adjusted market capitalization (
i.e.
, free public float multiplied by price) to the free float-adjusted market capitalization of all the components
included in all of the MSCI EM Constituent Country Indices.
Maintenance of and Changes to the Index
The Index sponsor
maintains the Index with the objective of reflecting, on a timely basis, the evolution of the underlying equity markets and segments. In maintaining the Index, emphasis is also placed on continuity, continuous investibility of the constituents, replicability, index stability and low turnover in the Index.
As part of the changes to
the Index sponsor
’s methodology which became effective in May 2008, maintenance of the indices falls into three broad categories:
|
●
|
semi-annual reviews, which will occur each May and November and will involve a comprehensive reevaluation of the market, the universe of eligible securities and other factors involved in composing the Index;
|
|
●
|
quarterly reviews, which will occur each February, May, August and November and will focus on significant changes in the market since the last semi-annual review and on including significant new eligible securities (such as IPOs, which were not eligible for earlier inclusion in the Index); and
|
|
Accelerated Return Notes
®
|
TS-
9
|
|
Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
|
|
|
●
|
ongoing event-related changes, which will generally be reflected in the indices at the time of the event and will include changes resulting from mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events.
|
Based on these reviews, additional components may be added, and current components may be removed, at any time.
The Index sponsor
generally announces all changes resulting from semi-annual reviews, quarterly reviews and ongoing events in advance of their implementation, although in exceptional cases they may be announced during market hours for same or next day implementation.
Neither we nor any of our affiliates, or MLPF&S, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the Index.
The Index sponsor
does not guarantee the accuracy or the completeness of the Index or any data included in the Index.
The Index sponsor
assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the Index.
The Index sponsor
disclaims 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.
Prices and Exchange Rates
Prices
The prices used to calculate the Index are the official exchange closing prices or those figures accepted as such.
The Index sponsor
reserves the right to use an alternative pricing source on any given day.
Exchange Rates
The Index sponsor
uses the closing spot rates published by WM / Reuters at 4:00 p.m., London time.
The Index sponsor
uses WM / Reuters rates for all countries for which it provides indices.
In case WM/Reuters does not provide rates for specific markets on given days (for example Christmas Day and New Year’s Day), the previous business day’s rates are normally used.
The Index sponsor
independently monitors the exchange rates on all its indices and may, under exceptional circumstances, elect to use an alternative exchange rate if the WM / Reuters rates are not available, or if
the Index sponsor
determines that the WM / Reuters rates are not reflective of market circumstances for a given currency on a particular day. In such circumstances, an announcement would be sent to clients with the related information. If appropriate,
the Index sponsor
may conduct a consultation with the investment community to gather feedback on the most relevant exchange rate.
The following graph shows the daily historical performance of the Index in the period from January 1, 2008 through August 25, 2016. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On the pricing date, the closing level of the Index was
898.10
.
Historical Performance of the Index
This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth above is not an indication that the level of the Index is more or less likely to increase or decrease at any time over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the levels of the Index.
|
Accelerated Return Notes
®
|
TS-
10
|
|
Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
|
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License Agreement
Our right to use the Index in connection with the notes is subject to a license agreement between MLPF&S and
the Index sponsor
. In connection with that license, please note the following:
THE NOTES ARE NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY MSCI, ANY OF ITS AFFILIATES, ANY OF ITS INFORMATION PROVIDERS, OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING, OR CREATING THE INDEX (COLLECTIVELY, THE “MSCI PARTIES”). THE INDEX IS THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE INDEX ARE SERVICE MARKS OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED TO US FOR USE FOR CERTAIN PURPOSES. THE NOTES HAVE NOT BEEN PASSED ON BY ANY OF THE MSCI PARTIES AS TO THEIR LEGALITY OR SUITABILITY WITH RESPECT TO ANY PERSON OR ENTITY AND NONE OF THE MSCI PARTIES MAKES ANY WARRANTIES OR BEARS ANY LIABILITY WITH RESPECT TO THE NOTES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NONE OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO US OR OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN ANY SECURITIES GENERALLY OR IN THIS OFFERING PARTICULARLY OR THE ABILITY OF THE INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS, AND TRADE NAMES AND OF THE INDEX, WHICH ARE DETERMINED, COMPOSED, AND CALCULATED BY MSCI WITHOUT REGARD TO THE NOTES, TO US, TO THE OWNERS OF THE NOTES, OR TO ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF US OR OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN DETERMINING, COMPOSING, OR CALCULATING THE INDEX. NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS 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 AMOUNT THAT MAY BE PAID AT MATURITY ON THE NOTES. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO US OR TO OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR, OFFERING OF THE NOTES.
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 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.
The notes will not be listed on any securities exchange.
In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units.
If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account
.
MLPF&S
may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices
, and these will
include MLPF&S’s trading commissions and mark-ups.
MLPF&S may act as principal or agent in these market-making transactions; however
,
it is not obligated to engage in any such transactions.
At
MLPF&S’s discretion
,
for a short
,
undetermined
initial period after the issuance of the notes, MLPF&S
may offer to buy the notes
in the secondary market
at a price that may exceed
the
initial estimated value
of the notes. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the
Index
and the remaining term of the notes.
However, neither we nor any of our
affiliates is obligated to purc
hase your notes at any price, or at any time, and we cannot assure you that we or any of our affiliates will purchase your notes
at a price that
equals or
exceeds the
initial estimated value
of the notes.
The value of the notes shown on your account statement
will be based on
MLPF&S’s
estimate of the value of the notes if MLPF&S or another of our affiliates were to make a market in the notes, which it is not obligated t
o do.
That estimate will be based upon the price that MLPF&S may pay
for the notes in light of then-prevailing market conditions
and other considerations, as mentioned above, and will include transaction costs.
At certain times, this price may b
e higher than or lower than the
initial estimated value
of the notes
.
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Accelerated Return Notes
®
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TS-
11
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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Structuring the Notes
The notes are our debt securities, the return on which is linked to the
performance
of the Index. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational, funding and liability management costs to us, we typically borrow the funds under these notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate debt security.
This
rate, which we refer to in this term sheet as our internal funding rate, is typically lower than the rate we would pay when we issue conventional fixed or floating rate debt securities.
This ge
nerally relatively lower internal funding
rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-
linked notes, resulted 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 Index and t
he $10 per unit principal a
mount
.
In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants,
including
MLPF&S and its affiliates
, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Index, the tenor of the note
s
and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.
MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by MLPF&S or any third party hedge providers.
For further information, see “Risk Factors—General Risks Relating to ARNs” beginning on page PS-6 and “Use of Proceeds” on page PS-15 of product supplement EQUITY INDICES ARN-1.
Summary Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
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You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as a single financial contract with respect to the
Index.
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning
on page 99 of the prospectus
) generally will recognize capital gain or loss upon maturity or upon a sale or exchange of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year.
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No assurance can be given that the
IRS
or any court will agree with this characterization and tax treatment.
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You should consult your own tax advisor concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any tax consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in
U.S. federal or other tax laws.
You should review carefully the discussion under the section entitled
“U.S. Federal Income Tax Summary” beginning on page PS-24 of product supplement EQUITY INDICES ARN-1
.
Validity of the Notes
In the opinion of McGuireWoods LLP, as counsel to BAC, when the trustee has made an appropriate entry on Schedule 1 to the Master Registered Global Senior Note, dated May 1, 2015 (the “Master Note”) identifying the notes offered hereby as supplemental obligations thereunder in accordance with the instructions of BAC and the notes have been delivered against payment therefor as contemplated in this Note Prospectus, all in accordance with the provisions of the indenture governing the notes, such notes will be legal, valid and binding obligations of BAC, subject to the effect of applicable bankruptcy, insolvency (including laws related to preferences, fraudulent transfers and equitable subordination), reorganization, moratorium, and other similar laws affecting creditors’ rights generally, and to general principles of equity. This opinion is given as of the date hereof and is limited to the laws of the State of New York and the Delaware General Corporation Law (including the statutory provisions, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the foregoing). In addition, this opinion is subject to the assumption that the trustee’s certificate of authentication of the Master Note has been manually signed by one of the trustee’s authorized officers and to customary assumptions about the trustee’s authorization, execution and delivery of the indenture governing the notes, the validity, binding nature
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Accelerated Return Notes
®
|
TS-
12
|
|
Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due October
27
, 2017
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and enforceability of the indenture governing the notes with respect to the trustee, the legal capacity of natural persons, the genuineness of signatures, the authenticity of all documents submitted to McGuireWoods LLP as originals, the conformity to original documents of all documents submitted to McGuireWoods LLP as copies thereof, the authenticity of the originals of such copies and certain factual matters, all as stated in the letter of McGuireWoods LLP dated February 27, 2015, which has been filed as an exhibit to BAC’s Registration Statement relating to the notes filed with the Securities and Exchange Commission on February 27, 2015.
Where You Can Find More Information
We have filed a registration statement (including a product
suppl
ement, 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 c
alling MLPF&S toll-free at 1-800-294-1322
.
Market-Linked Investments Classification
MLPF&S classifies certain market-linked investments (the “Market-Linked Investments”) into categories, each with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.
Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need to be prepared for the possibility that you may lose all or part of your investment.
“Accelerated Return Notes
®
” and “ARNs
®
” are our registered service marks.
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Accelerated Return Notes
®
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TS-
13
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