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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Bank of America Corporation | NYSE:BAC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.34 | 0.92% | 37.29 | 810 | 09:16:47 |
Subject to Completion Preliminary Term Sheet dated November 19, 2015 | Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-202354 (To Prospectus dated May 1, 2015, Prospectus Supplement dated May 4, 2015 and Product Supplement EQUITY INDICES MITTS-1 dated May 4, 2015) |
Units $10 principal amount per unit CUSIP No. | Pricing Date* Settlement Date* Maturity Date* | November , 2015 December , 2015 November , 2018 | ||||
*Subject to change based on the actual date the notes are priced for initial sale to the public (the "pricing date") | ||||||
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index ■ Maturity of approximately three years ■ 100% participation in increases in the Index, subject to a capped return of [18% to 28%] ■ If the Index is flat or decreases, 1-to-1 downside exposure to decreases in the Index, with up to 10.00% of your principal at risk ■ All payments occur at maturity and are subject to the credit risk of Bank of America Corporation ■ No periodic interest payments ■ Limited secondary market liquidity, with no exchange listing | ||||||
Per Unit | Total | |
Public offering price(1)(2) | $10.00 | $ |
Underwriting discount(1)(2) | $0.20 | $ |
Proceeds, before expenses, to BAC | $9.80 | $ |
(1) | For any purchase of 500,000 units or more in a single transaction by an individual investor, the public offering price and the underwriting discount will be $9.950 per unit and $0.175 per unit, respectively. |
(2) | For any purchase by certain fee-based trusts and discretionary accounts managed by U.S. Trust operating through Bank of America, N.A., the public offering price and underwriting discount will be $9.80 per unit and $0.20 per unit, respectively. |
Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Terms of the Notes | Redemption Amount Determination | |
Issuer: | Bank of America Corporation (BAC) | On the maturity date, you will receive a cash payment per unit determined as follows: You will receive the greater of (a) the Minimum Redemption Amount per unit of $9.00 and (b) (The Redemption Amount cannot be less than the Minimum Redemption Amount per unit.) |
Principal Amount: | $10.00 per unit | |
Term: | Approximately three years | |
Market Measure: | The EURO STOXX 50® Index (Bloomberg symbol: SX5E), a price return index. | |
Starting Value: | The closing level of the Market Measure on the pricing date | |
Ending Value: | 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 beginning on page PS-19 of product supplement EQUITY INDICES MITTS-1. | |
Minimum Redemption Amount: | $9.00 per unit. If you sell your notes before the maturity date, you may receive less than the Minimum Redemption Amount per unit. | |
Participation Rate: | 100% | |
Capped Value: | [$11.80 to $12.80] per unit of the notes, which represents a return of [18% to 28%] over the principal amount. The actual Capped Value will be determined on the pricing date. | |
Maturity Valuation Period: | Five scheduled calculation days shortly before the maturity date | |
Fees and Charges: | 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-10. | |
Calculation Agent: | Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), a subsidiary of BAC. |
Market Index Target-Term Securities® | TS-2 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
■ | Product supplement EQUITY INDICES MITTS-1 dated May 4, 2015: http://www.sec.gov/Archives/edgar/data/70858/000119312515168304/d919008d424b5.htm |
■ | Series L MTN prospectus supplement dated May 4, 2015 and prospectus dated May 1, 2015: http://www.sec.gov/Archives/edgar/data/70858/000119312515167979/d865347d424b3.htm |
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 are willing to risk a partial loss of principal and return if the Index decreases from the Starting Value to the Ending Value.
■ You accept that the return on the notes will be capped.
■ You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
■ You are willing to forgo dividends or other benefits of owning 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. |
■ 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 100% principal repayment or preservation of capital.
■ You seek a guaranteed return beyond the Minimum Redemption Amount.
■ 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. |
Market Index Target-Term Securities® | TS-3 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Market Index Target-Term Securities® | This graph reflects the returns on the notes, based on the Participation Rate of 100%, the Minimum Redemption Amount of $9.00 and a Capped Value of $12.30 per unit (the midpoint of the Capped Value range of [$11.80 to $12.80]). The blue 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. |
Ending Value | Percentage Change from the Starting Value to the Ending Value | Redemption Amount per Unit | Total Rate of Return on the Notes |
0.00 | -100.00% | $9.00 | -10.00% |
70.00 | -30.00% | $9.00 | -10.00% |
80.00 | -20.00% | $9.00 | -10.00% |
90.00 | -10.00% | $9.00(2) | -10.00% |
95.00 | -5.00% | $9.50 | -5.00% |
100.00(1) | 0.00% | $10.00 | 0.00% |
105.00 | 5.00% | $10.50 | 5.00% |
110.00 | 10.00% | $11.00 | 10.00% |
120.00 | 20.00% | $12.00 | 20.00% |
130.00 | 30.00% | $12.30(3) | 23.00% |
140.00 | 40.00% | $12.30 | 23.00% |
150.00 | 50.00% | $12.30 | 23.00% |
160.00 | 60.00% | $12.30 | 23.00% |
170.00 | 70.00% | $12.30 | 23.00% |
(1) | The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Market Measure. |
(2) | The Redemption Amount per unit will not be less than the Minimum Redemption Amount. |
(3) | The Redemption Amount per unit cannot exceed the hypothetical Capped Value. |
Market Index Target-Term Securities® | TS-4 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Example 1 | |
The Ending Value is 80, or 80% of the Starting Value: | |
Starting Value: 100 | |
Ending Value: 80 | |
= $8.00 Redemption Amount per unit, however, because the Redemption Amount for the notes cannot be less than the Minimum Redemption Amount, the Redemption Amount will be $9.00 per unit. |
Example 2 | |||
The Ending Value is 95, or 95% of the Starting Value: | |||
Starting Value: 100 | |||
Ending Value: 95 | |||
Redemption Amount (per unit) = the greater of (a) | = $9.50 and (b) $9.00 = $9.50 per unit |
Example 3 | |
The Ending Value is 110, or 110% of the Starting Value: | |
Starting Value: 100 | |
Ending Value: 110 | |
= $11.00 Redemption Amount per unit |
Example 4 | |
The Ending Value is 150, or 150% of the Starting Value: | |
Starting Value: 100 | |
Ending Value: 150 | |
= $15.00 Redemption Amount per unit, however because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $12.30 per unit. |
Market Index Target-Term Securities® | TS-5 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
■ | Depending on the performance of the Index as measured shortly before the maturity date, you may not earn a return on your investment, and you may lose up to 10.00% of your principal amount. |
■ | Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity. |
■ | Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment. |
■ | Your investment return 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. |
■ | 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. |
■ | The public offering price you pay for the notes will exceed the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial estimated value. This is due to, among other things, changes in the 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-10. These factors, together with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of the notes in complex and unpredictable ways. |
■ | The initial estimated value does not represent a minimum or maximum price at which we, MLPF&S or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value of your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Index, our creditworthiness and changes in market conditions. |
■ | A trading market is not expected to develop for the notes. Neither we nor MLPF&S is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market. |
■ | 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, including economic, financial, social and political conditions. Specifically, the stocks included in the Index are issued by companies located within the Eurozone. The Eurozone is and has been undergoing severe financial stress, and the political, legal and regulatory ramifications are impossible to predict. Changes within the Eurozone could adversely affect the performance of the Index and, consequently, the value of the notes. |
■ | Our business activities as a full service financial institution, including our commercial and investment banking activities, our hedging and trading activities (including trades in shares of 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. |
■ | The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests. |
■ | You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities. |
■ | While we or our affiliates may from time to time own 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. |
■ | There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent. |
■ | You should consider the U.S. federal income tax consequences of investing in the notes. See Summary Tax Consequences below and U.S. Federal Income Tax Summary beginning on page PS-26 of product supplement EQUITY INDICES MITTS-1. |
Market Index Target-Term Securities® | TS-6 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Market Index Target-Term Securities® | TS-7 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Market Index Target-Term Securities® | TS-8 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
■ | sponsor, endorse, sell, or promote the notes; |
■ | recommend that any person invest in the notes or any other securities; |
■ | have any responsibility or liability for or make any decisions about the timing, amount, or pricing of the notes; |
■ | have any responsibility or liability for the administration, management, or marketing of the notes; or |
■ | consider the needs of the notes or the holders of the notes in determining, composing, or calculating the Index, or have any obligation to do so. |
■ | STOXX does not make any warranty, express or implied, and disclaims any and all warranty concerning: |
■ | the results to be obtained by the notes, the holders of the notes or any other person in connection with the use of the Index and the data included in the Index; |
■ | the accuracy or completeness of the Index and its data; |
■ | the merchantability and the fitness for a particular purpose or use of the Index and its data; |
■ | STOXX will have no liability for any errors, omissions, or interruptions in the Index or its data; and |
■ | Under no circumstances will STOXX be liable for any lost profits or indirect, punitive, special, or consequential damages or losses, even if STOXX knows that they might occur. |
Market Index Target-Term Securities® | TS-9 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Market Index Target-Term Securities® | TS-10 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
■ | There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes. |
■ | We intend to take the position that the notes will be treated as contingent payment debt instruments for U.S. federal income tax purposes, subject to taxation under the noncontingent bond method. No assurance can be given that the Internal Revenue Service or any court will agree with this characterization and tax treatment. |
■ | Under this characterization and tax treatment of the notes, a U.S. Holder will be required to report original issue discount (OID) or interest income based on a comparable yield and a projected payment schedule with respect to a note without regard to cash, if any, received on the notes. |
■ | The following table is based upon a hypothetical projected payment schedule (including a hypothetical Redemption Amount) and a hypothetical comparable yield equal to 1.8493% per annum (compounded semi-annually). The hypothetical comparable yield is our current estimate of the comparable yield based upon market conditions as of the date of this term sheet. It has been determined by us for purposes of illustrating the application of the Code and the Treasury regulations to the notes as if the notes had been issued on December 1, 2015 and were scheduled to mature on November 30, 2018. This tax accrual table is based upon a hypothetical projected payment schedule per $10.00 principal amount of the notes, which would consist of a single payment of $10.5672 at maturity. The following table is for illustrative purposes only, and we make no representations or predictions as to what the actual Redemption Amount will be. The actual projected payment schedule will be completed on the pricing date, and included in the final term sheet. |
Accrual Period | Interest Deemed to Accrue on the Notes During Accrual Period per Unit | Total Interest Deemed to Have Accrued on the Notes as of End of Accrual Period per Unit |
12/1/2015 to 12/31/2015 | $0.0154 | $0.0154 |
1/1/2016 to 12/31/2016 | $0.1861 | $0.2015 |
1/1/2017 to 12/31/2017 | $0.1895 | $0.3910 |
1/1/2018 to 11/30/2018 | $0.1762 | $0.5672 |
■ | Upon a sale, exchange, or retirement of a note prior to maturity, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange, or retirement and the holder’s tax basis in the notes. A U.S. Holder generally will treat any gain as ordinary interest income, and any loss as ordinary up to the amount of previously accrued OID and then as capital loss. At maturity, (i) if the actual Redemption Amount exceeds the projected Redemption Amount, a U.S. Holder must include such excess as interest income, or (ii) if the projected Redemption Amount exceeds the actual Redemption Amount, a U.S. Holder will generally treat such excess first as an offset to previously accrued OID for the taxable year, then as an ordinary loss to the extent of all prior OID inclusions, and thereafter as a capital loss. |
■ | The IRS has announced that withholding under the Foreign Account Tax Compliance Act (as discussed in the prospectus) on payments of gross proceeds from a sale or redemption of the notes will only apply to payments made after December 31, 2018. |
Market Index Target-Term Securities® | TS-11 |
Market Index Target-Term Securities® Linked to the EURO STOXX 50® Index, due November , 2018 |
Market Index Target-Term Securities® | TS-12 |
1 Year Bank of America Chart |
1 Month Bank of America Chart |
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