The prices of precious metals, and futures contracts for precious metals, including those of the Index Commodities and Index Components, are subject to volatile price movements over short periods of time and are affected by numerous factors. These include
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December
, 201
7
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economic factors, including the structure of and confidence in the global monetary system, expectations of the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the currency in which the prices of most precious metals are generally quoted), interest rates and precious metal borrowing and lending rates, and global or regional economic, financial, political, regulatory, judicial, or other events. Precious metal prices may also be affected by industry factors such as industrial and jewelry demand, lending, sales and purchases of these metals by the official sector, including central banks and other governmental agencies and multilateral institutions which hold these metals, levels of production, technological changes, and production costs, and short-term changes in supply and demand because of trading activities in the applicable markets. It is not possible to predict the aggregate effect of all or any combination of these factors.
Risks associated with the Index may adversely affect the market price of the notes.
The annual composition of the Index will be calculated in reliance upon historic price, liquidity, and production data that are subject to potential errors in data sources or errors that may affect the weighting of components of the Index. Bloomberg Finance L.P. (collectively with its affiliates, Bloomberg)
and
UBS Securities LLC (collectively with its affiliates, UBS)
may not discover every discrepancy
,
and any discrepancies that require revision will not be applied retroactively. These discrepancies may adversely affect the level of the Index and the market price of the notes.
The
notes are linked to the
Bloomberg
Precious Metals
Subindex
SM
(Bloomberg symbol
BCOMPR
),
an excess return index,
not the
Bloomberg
Precious Metals Total Return Subindex
SM
(Bloomberg symbol
BCOMPRTR
).
The notes are linked to
the
Bloomberg
Precious Metals Subindex
SM
(Bloomberg symbol B
COMPR), an excess return index
, which we refer to in this term sheet as the Index
.
The Index reflects both price movements as well as roll yields. By comparison, the
Bloomberg
Precious Metals Total Return Subindex
SM
includes commodity price movements, a roll-return component, and a U.S. Treasury-bill return component to measure
a
fully collateralized commodity futures investment. Because the notes are linked to the Index and not the
Bloomberg
Precious Metals Total Return Subindex
SM
, the Redemption Amount will not reflect the total return feature.
Trading and other transactions by UBS Securities LLC in the futures contracts comprising the Index and the underlying commodities may
adversely
affect the level of the Index.
UBS
may
actively trade
the Index Commodities
, or
futures contracts
or
options on the Index Commodities
,
on a regular basis as part of its general business for proprietary accounts, for other accounts under management, to facilitate transactions for customers or to hedge obligations under products linked to the Index, related indices or
any
index components
. UBS may also issue or underwrite securities or financial or derivative instruments with returns linked to
or related to the performance of
the Index,
any
related indices or any index components
.
T
hese activities
may
adversely affect the market
value
of the Index
C
omponents
and
the
level
of the Index.
UBS may
receive substantial returns from these activities while the market value of the Index components and the
level of the Index
dec
rease
.
UBS
has
no
obligation to consider your interests
.
The Index
may in the future include contracts that are not
currently included in the Index or contracts that are not
traded on regulated futures exchanges.
The Index
is currently comprised of futures contracts on two precious metals-related physical commodities
,
gold and silver
. Although futures contracts on
platinum
are
currently
not
included in the Index because of
the current
weighting
of platinum not being sufficient for inclusion
,
platinum
is still an Index Commodity and
futures contracts on platinum
may be included in the Index in the future.
In addition, t
he Index was originally based solely on futures contracts traded on regulated futures exchanges (referred to in the
U.S.
as designated contract markets). At present, the Index is comprised exclusively of regulated futures contracts.
H
owever, the Index may in the future include over-the-counter contracts (such as swaps and forward contracts) traded on trading facilities that are subject to lesser degrees of regulation or, in some cases, no substantive regulation. As a result, trading in such contracts and the manner in which prices and volumes are reported by the relevant trading facilities may not be subject to the provisions of and the protections afforded by the U.S. Commodity Exchange Act or other applicable statutes and related regulations that govern trading on regulated U.S. futures exchanges or similar statutes and regulations that govern trading on regulated U.K. futures exchanges. In addition, many electronic trading facilities have only recently initiated trading and do not have significant trading histories. As a result, the trading of contracts on such facilities and the inclusion of such contracts in the Index may be subject to certain risks not presented by U.S. or U.K. exchange-traded futures contracts, including risks related to the liquidity and price histories of the relevant contracts.
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December
, 201
7
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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,
Bloomberg.
Bloomberg
has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of Merrill Lynch discontinuing publication of the Index are discussed in the section entitled Description of ARNs
—
Discontinuance of a Market Measure beginning on page
PS-21
of product supplement
COMM ARN-1
. 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
Bloomberg Commodity Index
SM
(the BCOM)
is based on hypothetical investments in the basket of commodities included in the BCOM
, which are selected by
using the four main principles of economic significance, diversification, continuity, and liquidity.
BCOM uses both liquidity data and U.S.-dollar-weighted production data in determining the relative quantities of the included commodities.
The Index is a sub-index of the
BCOM
,
and
is designed to measure the performance of an investment in the precious
metals-related commodity market
over
time. The commodities that are
eligible for inclusion in the BCOM are assigned to Commodity Groups
.
The Precious Metals Commodity Group consists of gold, silver and platinum. However, the Index is currently
comprised
of futures contracts on only two precious metals-related physical commodities: gold and silver.
The Index is calculated using the same methodology as
BCOM
but with reference only to the contracts included in the
Index
and to their respective weightings within the
Index, and t
he determination of these weights is discussed below.
The calculation of the weightings for gold and silver is ultimately adjusted to reflect only the Commodity Liquidity Percentages (CLPs), as discussed further below.
Platinum is not currently included in the Index for 2016 because its Commodity Index Percentage (the CIP)
(described further below) is less than 0.4%. However, platinum may be included in the future.
Designated Contracts for the Index Commodities
Bloomberg tracks designated contracts for the various commodities that make up
the
BCOM
.
The
BCOM measu
res
what is known as a rolling futures position, which is a position where, on a periodic basis, futures contracts on physical commodities specifying delivery on a nearby date must be sold and longer-dated futures contracts on those physical commodities must be purchased. An investor with a rolling futures position is able to maintain an investment position in the underlying physical commodities without receiving delivery of those commodities. During the roll period, which is the sixth through tenth Index Business Days (as defined below) of each month, the calculation of the
BCOM
is gradually shifted from the use of the nearby dated futures contracts included in the
BCOM
to longer-dated futures contracts (at a rate of 20% per Index Business Day during the roll period).
This methodology applies to the Index as well.
The methodology for determining the composition and weighting of the
BCOM
and for calculating its level is subject to modification by a committee appointed to monitor and amend the procedures related to the
BCOM
(the Index Oversight Committee) at any time.
An Index Business Day means a day on which the sum of the
CIPs
for the BCOM
index commodities
that are open for trading
is greater than 50%.
A futures contract (a Designated Contract) is selected by Bloomberg as the reference contract for the
index commodities
. Bloomberg has historically selected
for each index commodity one
Designated Contract that is traded in North America and denominated in U.S. dollars. It is possible that Bloomberg will in the future select more than one Designated Contra
ct for additional commodities
,
or may select Designated Contracts that are traded outside of the United States or in currencies other than the U.S. Dollar. The termination or replacement of a futures contract on an established exchange occurs infrequently. If a Designated Contract is terminated or replaced, a comparable futures contract would be selected, if available, to replace that Designated Contract.
In this case, the Designated Contract for the Index Commodities of gold
and
silver
is the Commodities Exchange division of the New York Mercantile Exchange (the COMEX) and for platinum is the New York Mercantile Exchange (the NYMEX).
BCOM Index Commodities
|
Designated Contracts
and Price Quotes
|
Exchanges
|
Units
|
Gold
|
Gold
$/troy oz.
|
COMEX
|
100 troy oz.
|
Silver
|
Silver
cents/troy oz.
|
COMEX
|
5,000 troy oz.
|
Platinum
|
Platinum
$/troy oz.
|
NYMEX
|
50 troy oz.
|
Index Commodities
Contract Calendar
The table below lists the
D
esignated
C
ontract months that are to be used to determine the lead future and next future for the Index Commodities for this calculation. Lead
f
uture means the futures contract month designated in the table below under the current month for each Designated Contract. Next
f
uture means the futures contract month designated in the table below set forth in the column next to the current month.
Commodity
|
Jan
|
Feb
|
March
|
Apr
|
May
|
Jun
|
Jul
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
Gold
|
Feb
|
Apr
|
Apr
|
Jun
|
Jun
|
Aug
|
Aug
|
Dec
|
Dec
|
Dec
|
Dec
|
Feb
|
Silver
|
Mar
|
Mar
|
May
|
May
|
Jul
|
Jul
|
Sep
|
Sep
|
Dec
|
Dec
|
Dec
|
Mar
|
Platinum
|
Apr
|
Apr
|
Apr
|
Jul
|
Jul
|
Jul
|
Oct
|
Oct
|
Oct
|
Jan
|
Jan
|
Jan
|
Accelerated Return Notes
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|
Accelerated Return Notes
®
Linked to the
Bloomberg Precious Metals Subindex
SM
, due
December
, 201
7
|
|
Bloomberg Precious Metals SubIndex
SM
Individual Commodity Constituent Weightings
As of August 31, 2016, a
s a sector, the
Index Commodities
comprise
16.67% of the sectors included in the
BCOM
(11.80% gold, 4.87% silver)
, which also includes the sectors energy, agriculture, industrial metals, and livestock.
In the Index, the 2016 actual weightings of the Index Commodities as of August 31, 2016 are as follows:
Commodity Group:
|
Index Commodities:
|
Weightings:
|
Precious Metals
(1)
|
Gold
|
70.79%
|
|
Silver
|
29.21%
|
(1) Note that Platinum is not included in the BCOM for 2016 because its CIP is less than 0.4%.
Bloomberg Commodity Index Fami
l
y
The
BCOM
was created by AIG International Inc. in 1998 and acquired by UBS Securities LLC (collectively with its affiliates, UBS) in May 2009, at which time UBS and Dow Jones & Company, Inc. (Dow Jones) entered into an agreement (the Joint Marketing Agreement) to jointly market the index. The Joint Marketing Agreement with Dow Jones was terminated in 2014 as UBS entered into a Commodity Index License Agreem
ent (the CILA) with Bloomberg.
Under the CILA, Bloomberg, on behalf of UBS, calculates the
BCOM
and its varieties (collectively, the Bloomberg Commodity Index Family)
.
The Bloomberg Commodity Index Family includes
, among other indices,
indices
on an excess return and total return basis
.
The indices were rebranded from the Dow Jones-UBS Commodity Index Family to the Bloomberg Commodity Index Family on July 1, 2014, and their tickers were changed from DJUBS tickers to BCOM tickers. Both sets of tickers were available until July 31, 2014, and
the
DJUBS tickers were discontinued thereafter. Bloomberg
now serve
as the index administrator, and is responsible for the methodology, calculation, distribution and licensing of the indices.
General
The BCOM is
designed to provide a liquid and diversified benchmark for commodities investments. The
BCOM
was established on July 14, 1998. The
BCOM
is currently composed exclusively of regulated futures contracts. A commodity futures contract is an agreement that provides for the purchase and sale of a specified type and quantity of a commodity during a stated delivery month for a fixed price. The 24 commodities that are eligible for inclusion in the
BCOM
(the BCOM Index Commodities) are as follows: aluminum, cocoa, coffee, copper, corn, cotton, crude oil (WTI and Brent), gold, lead, lean hogs, live cattle, natural gas, nickel, platinum, silver, soybean meal, soybean oil, soybeans, sugar, tin, ULS diesel, unleaded gasoline, wheat and zinc. The 20 BCOM Index Commodities currently included in the
BCOM
are as follows: aluminum, coffee, copper, corn, cotton, crude oil (WTI and Brent), gold, lean hogs, live cattle, natural gas, nickel, silver, soybean meal, soybean oil, soybeans, sugar, ULS diesel, unleaded gasolin
e
, wheat (Chicago and KC HRW), and zinc. With the exception of several metals contracts (aluminum, lead, tin, nickel and zinc) that trade on the London Metals Exchange (the LME) and the contract for Brent crude oil, each of the BCOM Index Commodities is the subject of at least one futures contract that trad
es on a U.S. exchange.
Index Oversight and Advisory Committees
Bloomberg established an internal Index Oversight Committee to comply with the 19 Principles for Financial Benchmarks as published by the International Organization of Securities Commissions. The committee consists of senior representatives from various Bloomberg business units. The purpose of the Index Oversight Committee is to discuss and review all aspects of the benchmark process. Additionally, an external advisory committee appointed by the Index Oversight Committee (the Index Advisory Committee) will convene to provide Bloomberg with guidance and feedback from the investment community on index products and processes. The Index Advisory Committee will help set index priorities and d
iscuss potential rules changes.
Annual Reweighting and Rebalancing of the
BCOM
The composition of the
BCOM and the Bloomberg Commodity Index Family
is rebalanc
ed by Bloomberg each year under
the procedures set forth in its methodology under the supervision of the Index Oversight Committee
.
The composition is
approved by the Index Oversight Committee in consultation with the Index Advisory Committee. Once approved by the Index Oversight Committee, the new composition is publicly announced, and takes effect in January immediately following the announcement. The weightings will be determined by the Index Oversight Committee, which has a significant degree of discretion in exercising its supervisory duties with respect to the
BCOM
. Bloomberg will calculate the CIPs for each year in the third or fourth quarter of the previous year under the supervision of the Index Oversight Committee. The results will be publicly announced as promptly as practicable, and takes effect in January of the effective year.
For each commodity designated for potential inclusion in the
BCOM
, liquidity is measured by the
CLP
and
production is measured by the Commodity Production Percentage (CPP).
The CLP for each Designated Contract is determined by taking a five-year average of the product of the trading volume and the historic U.S. dollar value of that Designated Contract, and dividing the result by the sum of such products for all futures contracts selected as a reference contract for a commodity designated for potential inclusion in the
BCOM
. The CPP is determined for each commodity by taking a five-year average of production figures, adjusted by the historic U.S. dollar value of the applicable Designated Contract, and dividing the result by the sum of such products for all the commodities which were designated for potential inclusion in the
BCOM.
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|
The following table outlines the sources from which the production data for each Index Commodity are derived.
Commodity
|
Source
|
Table
|
Gold
|
MYDI
(1)
|
World Mine Production
|
Silver
|
MYDI
|
World Mine Production
|
Platinum
|
MYDI
|
Platinum—Group Metals, World Production
|
(1) U.S. Geological Survey Minerals Yearbook 2012, U.S. Department of the Interior
.
The CLP and CPP are then combined (using a ratio of 2:1) to establish the
CIP
for each commodity. The CIP is then adjusted in accordance with the diversification rules described below in order to determine the commodities which will be included in the B
COM
and their respective percentage weights.
To ensure that no single commodity or commodity sector dominates the
BCOM
, the following diversification rules are applied to the annual reweighting and rebalancing of the
BCOM
as of January of the applicable year:
●
|
No single commodity may constitute more than 15% of the
BCOM
;
|
●
|
No single commodity, together with its derivatives (e.g., crude oil, together with heating oil and unleaded gasoline), may constitute more than 25% of the
BCOM;
|
●
|
No related group of commodities designated as a Commodity Group (e.g., energy, precious metals, livestock or grains) may constitute more than 33% of the
BCOM
; and
|
●
|
No single commodity (e.g., natural gas or silver) may constitute less than 2% of the
BCOM
.
|
The last rule above helps to increase the diversification of the
BCOM
by giving even the smallest commodity within the basket a reasonably significant weight. Commodities with small weights initially may have their weights increased to higher than 2%.
Any commodities with CIPs under 0.4% are eliminated.
In addition
to the above rules, the BCOM is re-balanced annually on a price-percentage basis in order to maintain diversified commodities exposure over time.
According to the index methodology, because reliance on production data for gold and silver understates the relative economic significance of these commodities,
the
CIPs
for gold and silver are
further
adjusted to reflect only the CLPs. The adjustment is made by setting the
Interim Commodity Index Percentage (
ICIP
)
for gold and silver to equal their CLPs. Next, the difference of the ICIP and the CLP for gold and silver is taken and
t
he sum of these
differences is taken. Finally
this difference is equally allocated by adjusting all the other ICIPs except for those affected by the 0.4%
cut
-
off, the 25% sector, the 15% commodity, or 33% group maximums
discussed above
.
On the fourth Index Business Day of the
month of January following the calculation of the CIPs, the CIPs are combined with the settlement prices of all of the De
signated Contracts for that
day to create the Commodity Index Multiplier for each Designated Contract. These CIMs remain in effect throughout the ensuing year. As a result, the observed price percentage of each Designated Contract will float throughout the year until the CIMs are reset the following year based on new CIPs.
Computation of the Bloomberg Commodity Index
SM
Bloomberg calculates the BCOM by applying the impact of the changes to the prices of the Designated Contracts (based on their relative weightings). Once the CIMs are determined as discussed above, the calculation of the BCOM is a mathematical process in which the CIMs for the BCOM Index Commodities are multiplied by the respective prices in U.S. dollars for the applicable Designated Contracts. These products are then summed. The daily percentage change in this sum is then applied to the prior day’s level of the BCOM to calculate the current level.
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, due
December
, 201
7
|
|
The following graph shows the
dai
ly historical performance of the Index in the period from January
1,
2008 through
October 1
8
, 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
October 1
8
, 2016
,
the closing level of the Index was
175.3938
.
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.
License Agreement
We have
entered into a non-exclusive license agreement licensing to us and to certain of our affiliated companies, in exchange for a fee, the right to use the Bloomberg Commodity Index Family, which is owned and published by Bloomberg, in connection with certain products, including the
note
s.
The license agreement provides that the following language must be set forth in this
term sheet
:
Bloomberg
®
, Bloomberg Commodity Index
SM
and Bloomberg Precious Metals Subindex
SM
" are service marks of Bloomberg Finance L.P. and its affiliates (collectively, Bloomberg) and have been licensed for use for certain purposes by us.
The
note
s are not sponsored, endorsed, sold or promoted by Bloomberg, UBS AG, UBS Securities
LLC (UBS Securities)
or any of their subsidiaries or affiliates. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates makes any representation or warranty, express or implied, to the owners of or counterparties to the
note
s or any member of the public regarding the advisability of investing in securities or commodities generally or in the
note
s particularly. The only relationship of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates to the Licensee is the licensing of certain trademarks, trade names and service marks and of the
Index
, which is determined, composed and calculated by Bloomberg in conjunction with UBS Securities without regard to BAC or the
note
s. Bloomberg and UBS Securities have no obligation to take the needs of BAC or the owners of the
note
s into consideration in determining, composing or calculating the
Index
. None of Bloomberg, UBS AG, UBS Securities or any of their respective subsidiaries or affiliates is responsible for or has participated in the determination of the timing of, prices at, or quantities of the
note
s to be issued or in the determination or calculation of the equation by which the
note
s are to be converted into cash. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates shall have any obligation or liability, including, without limitation, to
note
s customers, in connection with the administration, marketing or trading of the
note
s. Notwithstanding the foregoing, UBS AG, UBS Securities and their respective subsidiaries and affiliates may independently issue and/or sponsor financial products unrelated to the
note
s currently being issued by Licensee, but which may be similar to and competitive with the
note
s. In addition, UBS AG, UBS Securities and their subsidiaries and affiliates actively trade commodities, commodity indexes and commodity futures (including the Bloomberg Commodity Index
SM
and the
Index
), as well as swaps, options and derivatives which are linked to the performance of such commodities, commodity indexes and commodity futures. It is possible that this trading activity will affect the
level
of the
Index
and the
note
s.
This
term sheet
relates only to the
note
s and does not relate to the exchange-traded physical commodities underlying any of the
Index
components. Purchasers of the
note
s should not conclude that the inclusion of a futures contract in the
Index
is any form of
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December
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investment
recommendation of the futures contract or the underlying exchange-traded physical commodity by Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates. The information in this
term sheet
regarding the
Bloomberg Commodity
Index
SM
and the
Index
components has been derived solely from publicly available documents. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates has made any due diligence inquiries with respect to the
Bloomberg Commodity
Index
SM
or
Index
components in connection with the
note
s. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates makes any representation that these publicly available documents or any other publicly available information regarding the
Bloomberg Commodity
Index
SM
or
Index
components, including without limitation a description of factors that affect the prices of such components, are accurate or complete.
NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX
OR ANY DATA RELATED THERETO AND NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BAC, OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
INDEX
OR ANY DATA RELATED THERETO. NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
INDEX
OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, TO THE MAXIMUM EXTENT ALLOWED BY LAW, BLOOMBERG, ITS LICENSORS (INCLUDING UBS), AND ITS AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS, SUPPLIERS AND VENDORS SHALL HAVE NO LIABILITY OR RESPONSIBILITY WHATSOEVER FOR ANY INJURY OR DAMAGES—WHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR OTHERWISE—ARISING IN CONNECTION WITH THE NOTES OR THE
INDEX
OR ANY DATA OR VALUES RELATING THERETO—WHETHER ARISING FROM THEIR NEGLIGENCE OR OTHERWISE, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS AMONG BLOOMBERG, UBS SECURITIES AND
BAC,
OTHER THAN UBS AG.
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December
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Supplement to the Plan of Distribution; Conflicts of Interest
Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.
MLPF&S, a broker-dealer subsidiary of BAC, is a member of the Financial Industry Regulatory Authority, Inc. (FINRA) and will participate as selling agent in the distribution of the notes.
Accordingly, offerings of the notes will conform to the requirements of Rule 5121 applicable to FINRA members.
MLPF&S may not make sales in this offering to any of its discretionary accounts without the prior written approval of the account holder.
We may deliver the notes against payment therefor in New York, New York on a date that is greater than three business days following the pricing date.
Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, if the initial settlement of the notes occurs more than three business days from the pricing date, purchasers who wish to trade the notes more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange.
In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units.
If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account
.
MLPF&S
may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices
, and these will
include MLPF&S’s trading commissions and mark-ups.
MLPF&S may act as principal or agent in these market-making transactions; however
,
it is not obligated to engage in any such transactions.
At
MLPF&S’s discretion
,
for a short
,
undetermined
initial period after the issuance of the notes, MLPF&S
may offer to buy the notes
in the secondary market
at a price that may exceed
the
initial estimated value
of the notes. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the
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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the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not directly above or below the individual investor;
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●
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a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the investor’s household as described above;
and
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●
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a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any purchases made by a trustee’s personal account.
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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, 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 Index and the $10 per unit principal amount. In order to meet these payment obligations, at the time we issue the notes, we may
Accelerated Return Notes
®
|
TS-
14
|
Accelerated Return Notes
®
Linked to the
Bloomberg Precious Metals Subindex
SM
, due
December
, 201
7
|
|
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 creditworthines
s, interest rate movements, the
volatility of the Index, the tenor of the notes 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-16
of product supplement
COMM ARN
-1.
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
Index.
|
■
|
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.
|
■
|
No assurance can be given that the IRS or any court will agree with this characterization and tax treatment.
|
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-27
of product supplement
COMM ARN-1
.
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.
Accelerated Return Notes
®
|
TS-
15
|