Neither the Securities and Exchange
Commission (the “SEC”) nor any state securities commission has approved or disapproved of the notes or passed
upon the accuracy or the adequacy of this document, the accompanying product supplement, prospectus or prospectus supplement.
Any representation to the contrary is a criminal offense.
The terms and risks of the notes are contained in this term
sheet and the documents listed below (together, the “Note Prospectus”). The documents have been filed as part of a
registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated below or obtained from
MLPF&S by calling 1-866-500-5408:
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
Investor Considerations
You may wish to consider an investment in the notes if:
|
The notes may not be an appropriate investment for you if:
|
§
You
anticipate that the Index will increase moderately from the Starting Value to the Ending Value.
§
You
accept that your investment will result in a loss, which could be significant, if the Index decreases from the Starting Value to
the Ending Value.
§
You
accept that the return on the notes, if any, will be capped.
§
You
are willing to forgo the interest payments that are paid on traditional 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 that a secondary market is not expected to develop for the notes, and understand that the market prices for
the notes, if any, may be less than the Original Offering Price and will be affected by various factors, including our actual and
perceived creditworthiness, and the fees charged, as described on page TS-2.
§
You
are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
|
§
You
believe that the Index will decrease from the Starting Value or that it will not increase sufficiently over the term of the notes
to provide you with your desired return.
§
You
seek 100% return of principal at maturity.
§
You
seek an uncapped return on your investment.
§
You
seek interest payments or other current income on your investment.
§
You
want to receive dividends or other distributions paid on the stocks included in the Index.
§
You
seek an investment for which there will be a liquid secondary market.
§
You
are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
|
We urge you to consult your investment, legal, tax, accounting,
and other advisors before you invest in the notes.
Hypothetical Payout Profile
Accelerated Return Notes
®
|
This graph reflects the returns on
the notes, based on the Participation Rate of 300% and the Capped Value of $11.571 per unit. 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 the Index, excluding
dividends.
This graph has been prepared for
purposes of illustration only.
|
Accelerated Return Notes
®
|
TS-
3
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
Hypothetical Payments at Maturity
The following table and examples are for purposes of illustration
only. They are based on
hypothetical
values and show
hypothetical
returns on the notes.
The actual amount you
receive and the resulting total rate of return will depend on the actual Starting Value, Ending Value, and term of your investment.
The following table is based on a Starting Value of 100, the
Participation Rate of 300%, and the Capped Value of $11.571 per unit. It illustrates the effect of a range of Ending Values on
the Redemption Amount per unit of the notes and the total rate of return to holders of the notes. The following examples do not
take into account any tax consequences from investing in the notes.
Ending Value
|
|
Percentage Change from
the Starting Value to the
Ending Value
|
|
Redemption Amount per Unit
|
|
Total Rate of Return on the
Notes
|
60.00
|
|
-40.00%
|
|
$6.000
|
|
-40.000%
|
70.00
|
|
-30.00%
|
|
$7.000
|
|
-30.000%
|
80.00
|
|
-20.00%
|
|
$8.000
|
|
-20.000%
|
90.00
|
|
-10.00%
|
|
$9.000
|
|
-10.000%
|
94.00
|
|
-6.00%
|
|
$9.400
|
|
-6.000%
|
97.00
|
|
-3.00%
|
|
$9.700
|
|
-3.000%
|
100.00
(1)
|
|
0.00%
|
|
$10.000
|
|
0.000%
|
103.00
|
|
3.00%
|
|
$10.900
|
|
9.000%
|
106.00
|
|
6.00%
|
|
$11.571
(2)
|
|
15.710%
|
110.00
|
|
10.00%
|
|
$11.571
|
|
15.710%
|
120.00
|
|
20.00%
|
|
$11.571
|
|
15.710%
|
130.00
|
|
30.00%
|
|
$11.571
|
|
15.710%
|
140.00
|
|
40.00%
|
|
$11.571
|
|
15.710%
|
150.00
|
|
50.00%
|
|
$11.571
|
|
15.710%
|
160.00
|
|
60.00%
|
|
$11.571
|
|
15.710%
|
|
(1)
|
The
hypothetical
Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual
Starting Value will be determined after the expiration of the Starting Value Determination Period, and will be less than or equal
to 1,654.41, which was the closing level of the Index on the pricing date.
|
|
(2)
|
The Redemption Amount per unit cannot exceed the Capped Value.
|
For recent actual levels of the Index, 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.
Accelerated Return Notes
®
|
TS-
4
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
Redemption Amount Calculation Examples
Example 1
|
The Ending Value is 80.00, or 80.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 80.00
|
|
= $8.00
Redemption Amount per unit
|
Example 2
|
The Ending Value is 103.00, or 103.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 103.00
|
|
= $10.90
Redemption Amount per unit
|
Example 3
|
The Ending Value is 130.00, or 130.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 130.00
|
|
= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $11.571 per unit
|
Accelerated Return Notes
®
|
TS-
5
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
Risk Factors
We urge you to read the section “Risk Factors”
in the product supplement and in the accompanying prospectus supplement. Investing in the notes is not equivalent to investing
directly in the Index. You should understand the risks of investing in the notes and should reach an investment decision only after
careful consideration, with your advisers, with respect to the notes in light of your particular financial and other circumstances
and the information set forth in this term sheet and the accompanying product supplement, prospectus supplement and prospectus.
In addition to the risks in the product supplement identified
below, you should review “Risk Factors” in the accompanying prospectus supplement, including the explanation of risks
relating to the notes described in the section “— Risks Relating to All Note Issuances.”
|
§
|
Your investment may result in a loss; there is no guaranteed return of principal.
|
|
§
|
Your yield may be less than the yield on a conventional debt security of comparable maturity.
|
|
§
|
Payments on the notes are subject to our credit risk.
|
|
§
|
Your return, if any, is limited to the return represented by the Capped Value.
|
|
§
|
Your investment return may be less than a comparable investment directly in the Index, or the components included in the Index.
|
|
§
|
You must rely on your own evaluation of the merits of an investment linked to the Index.
|
|
§
|
Commissions, fees and hedging costs as described on page TS-13 may affect the price at which you will be able to sell the notes
in secondary market transactions.
|
|
§
|
We cannot assure you that a trading market for your notes will ever develop or be maintained. MLPF&S is not obligated to
make a market for, or to repurchase, the notes.
|
|
§
|
The Redemption Amount will not reflect changes in the value of the Index prior to the Maturity Valuation Period.
|
|
§
|
The publisher of the Index may adjust the Index in a way that affects its value, and the Index publisher has no obligation
to consider your interests.
|
|
§
|
If you attempt to sell the notes prior to maturity, their market value, if any, will be affected by various factors that interrelate
in complex ways and their market value may be less than their Original Offering Price.
|
|
§
|
Purchases and sales by us, MLPF&S and our respective affiliates of the securities represented by the Index may affect your
return.
|
|
§
|
Our trading and hedging activities, and those of MLPF&S, may create conflicts of interest with you.
|
|
§
|
Our hedging activities, and those of MLPF&S, may affect your return on the notes and their market value.
|
|
§
|
There may be potential conflicts of interest involving the calculation agent. We may appoint and remove the calculation agent.
|
|
§
|
The notes are not insured by any governmental agency of the United States or any other jurisdiction.
|
|
§
|
You will have no rights as a security holder, you will have no rights to receive any of the securities represented by the Index
and you will not be entitled to receive dividends or other distributions by issuers of these securities.
|
|
§
|
Except to the extent that the common stock of Bank of America Corporation (the parent company of MLPF&S) is included in
the Index, we and MLPF&S do not control any company included in the Index and are not responsible for any disclosure made by
any other company.
|
|
§
|
Our business activities and those of MLPF&S relating to the companies represented by the Index may create conflicts of
interest with you.
|
|
§
|
The U.S. federal income tax consequences of the notes are uncertain and may be adverse to a holder of the notes. See “Summary
Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page S-34 of product supplement ARN-2.
|
Accelerated Return Notes
®
|
TS-
6
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
Additional Risk Factor
The Starting Value will be determined after the pricing date
of the notes.
The Starting Value of the Index will be determined based on
the lowest closing level of the Index during the Starting Value Determination Period. The Starting Value Determination Period will,
as described above, end on a day that is approximately two months after the pricing date for the notes. As a result, the Starting
Value will not be determined, and neither you nor we (nor MLPF&S or any of our respective affiliates) can be certain of what
the Starting Value will be, until after the pricing date and the settlement date of the notes.
Other Terms of the Notes
Occurrence of a Market Disruption Event during the Starting
Value Determination Period
If a Market Disruption Event occurs on any Market Measure Business
Day during the Starting Value Determination Period (any such day being a “Market Disruption Day”), the calculation
agent will establish the closing level of the Index for such Market Disruption Day as follows:
|
§
|
The closing level of the Index for the applicable Market Disruption Day will be disregarded, except as set forth below.
|
|
§
|
Notwithstanding the foregoing, if a Market Disruption Event occurs for three or more consecutive
scheduled Market Measure Business Days during the Starting Value Determination Period, then, on the second Market Measure Business
Day on which no Market Disruption Event occurs following such Market Disruption Days, the closing level of the Index for each such
Market Disruption Day will be determined (or, if not determinable, estimated) by the calculation agent in a manner which the calculation
agent considers commercially reasonable under the circumstances.
|
|
§
|
If a Market Disruption Event occurs on the final date of the Starting Value Determination Period, then the closing level of
the Index for that day will be the closing level of the Index on the first scheduled Market Measure Business Day thereafter, provided
that no Market Disruption Event occurs or is continuing on that day. If a Market Disruption Event occurs on the final date of the
Starting Value Determination Period and on the first two scheduled Market Measure Business Days thereafter, the calculation agent
will determine or, if not determinable, estimate the closing level of the Index as of that final date on the second scheduled Market
Measure Business Day after that final date.
|
Accelerated Return Notes
®
|
TS-
7
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
The Index
We have derived all information relating to the S&P 500
®
Index including, without limitation, its make-up, performance, method of calculation and changes in its components, from publicly
available sources. That information reflects the policies of and is subject to change by S&P Dow Jones Indices LLP
(the “Index sponsor”). The Index sponsor is under no obligation to continue to publish, and may discontinue or suspend
the publication of the Index at any time.
The Index Sponsor Publishes the Index
The Index is intended to provide an indication of the pattern
of common stock price movement. The calculation of the level of the Index, discussed below in further detail, is based
on the relative value of the aggregate Market Value (as defined below) of the common stocks of 500 companies as of a particular
time compared to the aggregate average Market Value of the common stocks of 500 similar companies during the base period of the
years 1941 through 1943. The Index sponsor chooses companies for inclusion in the Index with the aim of achieving a
distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of
the Standard & Poor’s Stock Guide Database, which the Index sponsor uses as an assumed model for the composition of the
total market. The Index sponsor may from time to time in its sole discretion, add companies to or delete companies from,
the Index to achieve these objectives.
Relevant criteria employed by the Index sponsor include the
viability of the particular company, the extent to which that company represents the industry group to which it is assigned, the
extent to which the market price of that company’s common stock is generally responsive to changes in the affairs of the
respective industry and the market value and trading activity of the common stock of that company. Ten main industry
groups comprise the Index: Information Technology, Financials, Consumer Staples, Health Care, Energy, Industrials, Consumer
Discretionary, Utilities, Materials and Telecommunication Services. Changes in the Index are reported daily in the financial
pages of many major newspapers, on Bloomberg Professional
®
service under the symbol “SPX” and on the
Index sponsor’s website. Information contained in the Index sponsor’s website is not incorporated by reference
in, and should not be considered a part of, this document.
The Index does not reflect the payment of dividends on the stocks
included in the Index and therefore the payment on the notes will not produce the same return you would receive if you were able
to purchase such underlying stocks and hold them until the maturity date or earlier call.
Computation of the Index
Prior to March 2005, the Market Value of a component stock was
calculated as the product of the market price per share and the total number of outstanding shares of the component stock. In
March 2004, the Index sponsor announced that it would transition the Index to float adjusted market capitalization weights. The
transition began in March 2005 and was completed in September 2005. The Index sponsor’s criteria for selecting stock
for the Index was not changed by the shift to float adjustment. However, the adjustment affects each company’s
weight in the Index (i.e., its Market Value). Currently, the Index sponsor calculates the Index based on the total float-adjusted
market capitalization of each component stock, where each stock’s weight in the Index is proportional to its float-adjusted
Market Value.
Under float adjustment, the share counts used in calculating
the Index reflect only those shares that are available to investors, not all of a company’s outstanding shares. Float adjustment
excludes shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing more than
5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for purposes
of calculating the Index. Generally, these “control holders” will include officers and directors, private equity, venture
capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of
restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes
of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls
a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks,
pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds
of insurance companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily
be considered part of the float.
Treasury stock, stock options, restricted shares, equity participation
units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares of a U.S. company
traded in Canada as “exchangeable shares,” are normally part of the float unless those shares form a control block.
If a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight factor (“IWF”)
is calculated by dividing the available float shares by the total shares outstanding. As of September 21, 2012, available float
shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum
threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and
no other control group holds 5% of the company’s shares, the Index sponsor would assign that company an IWF of 1.00, as no
control group meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares
and another control group holds 20% of the company’s shares, the Index sponsor would assign an IWF of 0.77, reflecting the
fact that 23% of the company’s outstanding shares are considered to be held for control. For companies with multiple classes
of stock,
Accelerated Return Notes
®
|
TS-
8
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
the Index sponsor calculates the weighted average IWF for each
stock using the proportion of the total company market capitalization of each share class as weights.
As of the date of this term sheet, the Index is also calculated
using a base-weighted aggregate methodology: the level of the Index reflects the total Market Value of all the component
stocks relative to the Index base period of 1941-43. The daily calculation of the Index is computed by dividing the
Market Value of the Index component stocks by a Divisor, which is adjusted from time to time as discussed below.
The simplest capitalization weighted index can be thought of
as a portfolio consisting of all available shares of the stocks in the index. While this might track this portfolio’s
value in dollar terms, it would probably yield an unwieldy number in the trillions. Therefore, the actual number used
in the Index is scaled to a more easily handled number, currently in the thousands, by dividing the portfolio Market Value by the
Divisor.
Ongoing maintenance of the Index includes monitoring and completing
the adjustments for additions and deletions of the constituent companies, share changes, stock splits, stock dividends and stock
price adjustments due to company restructurings or spin-offs. Continuity in the level of the Index is maintained by
adjusting the Divisor for all changes in the Index constituents’ share capital after the base period of 1941-43 with the
level of the Index as of the base period set at 10. Some corporate actions, such as stock splits and stock dividends
do not require Divisor adjustments because following a stock split or stock dividend, both the stock price and number of shares
outstanding are adjusted by the Index sponsor so that there is no change in the Market Value of the component stock. All
stock split and dividend adjustments are made after the close of trading on the day before the ex-date.
To prevent the level of the Index from changing due to corporate
actions, all corporate actions which affect the total Market Value of the Index also require a Divisor adjustment. By
adjusting the Divisor for the change in total Market Value, the level of the Index remains constant. This helps maintain
the level of the Index as an accurate barometer of stock market performance and ensures that the movement of the Index does not
reflect the corporate actions of individual companies in the Index. All Divisor adjustments are made after the close
of trading and after the calculation of the closing levels of the Index. As noted in the preceding paragraph,
some corporate actions, such as stock splits and stock dividends, require simple changes in the common shares outstanding and the
stock prices of the companies in the Index and do not require Divisor adjustments.The table below summarizes the types of Index
maintenance adjustments and indicates whether or not a Divisor adjustment is required.
Type of Corporate Action
|
|
Comments
|
|
Divisor Adjustment
|
|
|
|
|
|
Company added/deleted
|
|
Net change in market value determines Divisor adjustment.
|
|
Yes
|
|
|
|
|
|
Change in shares outstanding
|
|
Any combination of secondary issuance, share repurchase or buy back—share counts revised to reflect change.
|
|
Yes
|
|
|
|
|
|
Stock split
|
|
Share count revised to reflect new count. Divisor adjustment is not required since the share count and price changes are offsetting.
|
|
No
|
|
|
|
|
|
Spin-off
|
|
If spun-off company is not being added to the index, the divisor adjustment reflects the decline in Index Market Value (i.e., the value of the spun-off unit).
|
|
Yes
|
|
|
|
|
|
Spin-off
|
|
Spun-off company added to the Index, no company removed from the Index.
|
|
No
|
|
|
|
|
|
Spin-off
|
|
Spun-off company added to the Index, another company removed to keep number of names fixed. Divisor adjustment reflects deletion.
|
|
Yes
|
Accelerated Return Notes
®
|
TS-
9
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
Change in IWF
|
|
Increasing (decreasing) the IWF increases (decreases) the total market value of the index. The Divisor change reflects the change in market value caused by the change to an IWF.
|
|
Yes
|
|
|
|
|
|
Special dividend
|
|
When a company pays a special dividend the share price is assumed to drop by the amount of the dividend; the divisor adjustment reflects this drop in Index Market Value.
|
|
Yes
|
|
|
|
|
|
Rights offering
|
|
Each shareholder receives the right to buy a proportional number of additional shares at a set (often discounted) price. The calculation assumes that the offering is fully subscribed. Divisor adjustment reflects increase in market cap measured as the shares issued multiplied by the price paid.
|
|
Yes
|
Each of the corporate events exemplified in the table requiring
an adjustment to the Divisor has the effect of altering the Market Value of the component stock and consequently of altering the
aggregate Market Value of the Index component stocks (the “Post-Event Aggregate Market Value”). In order
that the level of the Index (the “Pre-Event Index Value”) not be affected by the altered Market Value (whether increase
or decrease) of the affected component stock, a new Divisor (“New Divisor”) is derived as follows:
Post-Event Aggregate Market Value
|
=
|
Pre-Event Index Value
|
New Divisor
|
|
|
|
New Divisor
|
=
|
Post-Event Aggregate Market Value
|
Pre-Event Index Value
|
Another large part of the Index maintenance process involves
tracking the changes in the number of shares outstanding of each of the companies whose stocks are included in the Index. Four
times a year, on a Friday close to the end of each calendar quarter, the share totals of companies in the Index are updated as
required by any changes in the number of shares outstanding and then the Index Divisor is adjusted accordingly. In addition,
changes in a company’s shares outstanding of 5% or more due to mergers, acquisitions, public offerings, private placements,
tender offers, Dutch auctions or exchange offers are made as soon as reasonably possible. Other changes of 5% or more
(due to, for example, company stock repurchases, redemptions, exercise of options, warrants, conversion of preferred stock, notes,
debt, equity participations or other recapitalizations) are made weekly, and are announced on Wednesdays for implementation after
the close of trading on the following Wednesday. If a 5% or more change causes a company’s IWF to change by 5
percentage points or more (for example from 0.80 to 0.85), the IWF will be updated at the same time as the share change, except
IWF changes resulting from partial tender offers will be considered on a case-by-case basis. Changes to an IWF of less
than 5 percentage points are implemented at the next IWF review, which occurs annually. In the case of certain rights
issuances, in which the number of rights issued and/or terms of their exercise are deemed substantial, a price adjustment and share
increase may be implemented immediately.
Accelerated Return Notes
®
|
TS-
10
|
Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
|
|
The following graph shows the monthly historical performance
of the Index in the period from January 2008 through April 2013. We obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On the pricing date, the closing
level of the Index was 1,654.41.
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
S&P
®
is a registered trademark of Standard
& Poor’s Financial Services LLC (“S&P”) and Dow Jones
®
is a registered trademark of Dow
Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P Dow Jones
Indices LLC. “Standard & Poor’s
®
”, “S&P 500
®
” and “S&P
®
”
are trademarks of S&P. These trademarks have been sublicensed for certain purposes by us. The Index is a product of S&P
Dow Jones Indices LLC and/or its affiliates and has been licensed for use by us.
The notes are not sponsored, endorsed, sold or promoted by S&P
Dow Jones Indices LLC, Dow Jones, S&P or any of their respective affiliates (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders of the notes or any member of
the public regarding the advisability of investing in securities generally or in the notes particularly or the ability of the Index
to track general market performance. S&P Dow Jones Indices’ only relationship to us with respect to the Index is
the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its third
party licensors. The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to us or the
notes. S&P Dow Jones Indices have no obligation to take our needs or the needs of holders of the notes into consideration
in determining, composing or calculating the Index. S&P Dow Jones Indices are not responsible for and have not participated
in the determination of the prices, and amount of the notes or the timing of the issuance or sale of the notes or in the determination
or calculation of the equation by which the notes are to be converted into cash. S&P Dow Jones Indices have no obligation
or liability in connection with the administration, marketing or trading of the notes. There is no assurance that investment
products based on the Index will accurately track index performance or provide positive investment returns. S&P Dow Jones
Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security or futures contract within an index
is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, nor is it considered
to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or
sponsor financial products unrelated to the notes currently being issued by us, but which may be similar to and competitive with
the notes. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance
of the Index. It is possible that this trading activity will affect the value of the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY,
TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO,
ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES
Accelerated Return Notes
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Accelerated
Return Notes
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Linked to the S&P 500
®
Index,
due May 29, 2015
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INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR
ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US,
HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL,
EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND US, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
Accelerated Return Notes
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Accelerated
Return Notes
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Linked to the S&P 500
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Index,
due May 29, 2015
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Supplement
to the Plan of Distribution
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. MLPF&S may act as principal
or agent in these market-making transactions; however it is not obligated to engage in any such transactions.
The distribution of the Note Prospectus in connection with these
offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made
available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized
to, rely on the Note Prospectus for information regarding HSBC or for any purpose other than that described in the immediately
preceding sentence.
Role of MLPF&S
MLPF&S will participate as selling agent in the distribution
of the notes. 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. In connection with hedging
our obligations under the notes, we will enter into a hedge transaction with an affiliate of MLPF&S, which will include a charge
of up to $0.075 per unit, representing an estimated profit credited to MLPF&S through the hedge transaction. The public offering
price you pay for the notes includes this charge and the underwriting discount. This charge and fee reduce the economic terms of
the notes. In arranging the hedge transaction for the notes, MLPF&S seeks bids from market participants, which could include
one of our affiliates. Additional profits and losses may be realized by the hedge providers from these hedging transactions. For
further information regarding how these fees and hedging costs may affect the price at which you will be able to sell the notes
in secondary market transaction and conflicts of interest, see "Risk Factors—General Risks Relating to ARNs” beginning
on page S-9 and “Use of Proceeds” on page S-19 of product supplement ARN-2.
Accelerated Return Notes
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13
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Accelerated
Return Notes
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Linked to the S&P 500
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Index,
due May 29, 2015
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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 pre-paid executory contracts with respect to the Index.
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§
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined in product supplement ARN-2) 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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Withholding and reporting requirements under the legislation enacted on March 18, 2010 (as discussed beginning on page S-48
of the accompanying prospectus supplement), will generally apply to payments made after December 31, 2013. However, this withholding
tax will not be imposed on payments pursuant to obligations outstanding on January 1, 2014. Additionally, withholding due to any
payment being treated as a “dividend equivalent” (as discussed beginning on page S-47 of the accompanying prospectus
supplement) will begin no earlier than January 1, 2014. Holders are urged to consult with their own tax advisors regarding the
possible implications of this recently enacted legislation on their investment in the notes.
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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 S-34 of product supplement ARN-2.
Validity of the Notes
In the opinion of Morrison & Foerster LLP, as counsel to
the Issuer, when the notes offered by this term sheet have been executed and delivered by the Issuer and authenticated by the trustee
pursuant to the Senior Indenture referred to in the prospectus supplement dated March 22, 2012, and issued and paid for as contemplated
herein, such notes will be valid, binding and enforceable obligations of the Issuer, entitled to the benefits of the Senior Indenture,
subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness
and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the
lack of bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York, the Maryland
General Corporation Law (including the statutory provisions, all applicable provisions of the Maryland Constitution and the reported
judicial decisions interpreting the foregoing) and the federal laws of the United States of America. This opinion is subject to
customary assumptions about the trustee’s authorization, execution and delivery of the Senior Indenture and the genuineness
of signatures and to such counsel’s reliance on the Issuer and other sources as to certain factual matters, all as stated
in the legal opinion dated July 27, 2012, which has been filed as Exhibit 5.1 to the Issuer’s Current Report on Form
8-K dated July 27, 2012.
Accelerated Return Notes
®
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TS-
14
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Accelerated
Return Notes
®
Linked to the S&P 500
®
Index,
due May 29, 2015
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Where You Can Find More Information
We have filed a registration statement (including a product
supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this term sheet relates. Before you
invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC,
for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC
website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these
documents if you so request by calling MLPF&S toll-free at 1-866-500-5408.
Market-Linked Investments Classification
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 registered service marks of Bank of America Corporation, the parent company of MLPF&S.
Accelerated Return Notes
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