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:
On the maturity date, you will receive a cash payment per unit
determined as follows:
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
The below graph is based on
hypothetical
numbers and
values.
Accelerated Return Notes
®
|
This graph reflects the returns on
the notes, based on the Participation Rate of 300% and a Capped Value of $11.20, the midpoint of the Capped Value range of [$11.00
to $11.40] 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.
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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, Capped Value, and term of
your investment.
The following table is based on a Starting Value of 100, the
Participation Rate of 300%, and a Capped Value of $11.20 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%
|
$6.00
|
-40.00%
|
70.00
|
-30.00%
|
$7.00
|
-30.00%
|
80.00
|
-20.00%
|
$8.00
|
-20.00%
|
90.00
|
-10.00%
|
$9.00
|
-10.00%
|
94.00
|
-6.00%
|
$9.40
|
-6.00%
|
97.00
|
-3.00%
|
$9.70
|
-3.00%
|
100.00
(1)
|
0.00%
|
$10.00
|
0.00%
|
103.00
|
3.00%
|
$10.90
|
9.00%
|
106.00
|
6.00%
|
$11.20
(2)
|
12.00%
|
110.00
|
10.00%
|
$11.20
|
12.00%
|
120.00
|
20.00%
|
$11.20
|
12.00%
|
130.00
|
30.00%
|
$11.20
|
12.00%
|
140.00
|
40.00%
|
$11.20
|
12.00%
|
150.00
|
50.00%
|
$11.20
|
12.00%
|
160.00
|
60.00%
|
$11.20
|
12.00%
|
|
(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 Index.
|
|
(2)
|
The Redemption Amount per unit cannot exceed the
hypothetical
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.
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 102.00, or 102.00% of the Starting Value:
|
Starting Value: 100.00
|
Ending Value: 102.00
|
|
= $10.60
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 $11.20 per unit
|
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.
|
|
|
|
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§
|
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-16 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.
|
|
|
|
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§
|
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.
|
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|
|
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§
|
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 the issuers of these securities.
|
|
|
|
|
§
|
Exchange rate movements may impact the value of the notes.
|
|
§
|
Your return may be affected by factors affecting international securities markets.
|
|
§
|
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.
|
The Index
We have derived all information regarding the Index contained
in this document, including, without limitation, its make-up, method of calculation and changes in its components, from publicly
available information. Such information reflects the policies of, and is subject to change by Nikkei Inc. The Index was developed
by Nikkei Inc. and is calculated, maintained and published by Nikkei Digital Media, Inc., a wholly owned subsidiary of Nikkei Inc.
We have not independently investigated the accuracy or completeness of such information. Nikkei Inc. and Nikkei Digital Media,
Inc. have no obligation to continue to publish, and may discontinue publication of, the Index. The Index is reported by Bloomberg
L.P. under the symbol “NKY”.
The Index is a stock index that measures the composite price
performance of selected Japanese stocks. The Index is based on 225 underlying stocks (the “Nikkei Underlying Stocks”)
trading on the Tokyo Stock Exchange (“TSE”), representing a broad cross-section of Japanese industries. All 225 Nikkei
Underlying Stocks are stocks listed in the First Section of the TSE. Stocks listed in the First Section of the TSE are among the
most actively traded stocks on the TSE. Nikkei Inc. rules require that the 75 most liquid issues (one-third of the component count
of the Index) be included in the Index. Nikkei Inc. first calculated and published the Index in 1970; prior to 1970, the TSE calculated
the Index.
The 225 companies included in the Index are divided into six
sector categories: Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and Transportation and Utilities. These
six sector categories are further divided into 36 industrial classifications as follows:
|
|
·
Technology — Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery, Telecommunications;
|
|
|
·
Financials — Banks, Miscellaneous Finance, Securities, Insurance;
|
|
|
·
Consumer Goods — Marine Products, Food, Retail, Services;
|
|
|
·
Materials — Mining, Textiles, Paper & Pulp, Chemicals, Oil, Rubber, Ceramics, Steel, Nonferrous metals, Trading House;
|
|
|
·
Capital Goods/Others — Construction, Machinery, Shipbuilding, Transportation Equipment, Miscellaneous Manufacturing, Real Estate; and
|
|
|
·
Transportation and Utilities — Railroads & Buses, Trucking, Shipping, Airlines, Warehousing, Electric Power, Gas.
|
Calculation of the Index
The Index is a modified, price-weighted
index (
i.e.
, a Nikkei Underlying Stock’s weight in the Index is based on its price per share rather than the total
market capitalization of the issuer) which is calculated by (i) multiplying the per share price of each Nikkei Underlying
Stock by the corresponding weighting factor for such Nikkei Underlying Stock (a “Weight Factor”), (ii) calculating
the sum of all these products and (iii) dividing such sum by a divisor (the “Divisor”). The Divisor was initially
set at 225 for the date of May 16, 1949 using historical numbers from May 16, 1949, the date on which the TSE was reopened.
The Divisor was 24.966 as of September 28, 2011 and is subject to periodic adjustments as set forth below. Each Weight Factor is
computed by dividing ¥50 by the par value of the relevant Nikkei Underlying Stock, so that the share price of each Nikkei Underlying
Stock when multiplied by its Weight Factor corresponds to a share price based on a uniform par value of ¥50. The stock prices
used in the calculation of the Index are those reported by a primary market for the Nikkei Underlying Stocks (currently the TSE).
The level of the Index is calculated once every 15 seconds during TSE trading hours.
In order to maintain continuity in the
Index in the event of certain changes due to non-market factors affecting the Nikkei Underlying Stocks, such as the addition or
deletion of stocks, substitution of stocks, stock splits or distributions of assets to stockholders, the Divisor is adjusted in
a manner designed to prevent any instantaneous change or discontinuity in the level of the Index. Thereafter, the Divisor remains
at the new value until a further adjustment is necessary as the result of another change. As a result of such change affecting
any Nikkei Underlying Stock, the Divisor is adjusted in such a way that the sum of all share prices immediately after such change
multiplied by the applicable Weight Factor and divided by the new Divisor (
i.e.
, the level of the Index immediately after
such change) will equal the level of the Index immediately prior to the change.
Standards for Listing and Maintenance
A Nikkei Underlying Stock may be deleted
or added by Nikkei Inc. Any stock becoming ineligible for listing in the First Section of the TSE due to any of the following reasons
will be deleted from the Nikkei Underlying Stocks: (i) bankruptcy of the issuer, (ii) merger of the issuer with, or acquisition of the issuer
by, another company, (iii) delisting of such stock, (iv) transfer of such stock to the “Seiri-Post” because
of excess debt of the issuer or because of any other reason or (v) transfer of such stock to the Second Section. In addition,
a
component stock transferred to the “Kanri-Post” (posts for stocks under supervision) is in principle a candidate
for deletion. Nikkei Underlying Stocks with relatively low liquidity, based on trading value and rate of price fluctuation over
the past five years, may be deleted by Nikkei Inc. Upon deletion of a stock from the Nikkei Underlying Stocks, Nikkei Inc. will
select a replacement for such deleted Nikkei Underlying Stock in accordance with certain criteria. In an exceptional case, a newly
listed stock in the First Section of the TSE that is recognized by Nikkei Inc. to be representative of a market may be added to
the Nikkei Underlying Stocks. In such a case, an existing Nikkei Underlying Stock with low trading volume and deemed not to be
representative of a market will be deleted by Nikkei Inc.
A list of the issuers of the Nikkei Underlying Stocks constituting
the Index is available from the Nikkei Economic Electronic Databank System and from the Stock Market Indices Data Book published
by Nikkei Inc. Nikkei Inc. may delete, add or substitute any stock underlying the Index.
The following graph shows the monthly historical performance
of the Index in the period from January 2008 through March 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 April 11, 2013, the
closing level of the Index was 13,549.16.
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 will enter into an agreement with Nikkei Inc. providing us
with a non-exclusive license with the right to use the Index in exchange for a fee. The Index is the intellectual property of Nikkei
Inc. (the “Index Sponsor”), formerly known as Nihon Keizai Shimbum, Inc. "Nikkei", "Nikkei Stock Average",
and "Nikkei 225" are the service marks of Nikkei Inc. Nikkei Inc. reserves all the rights, including copyright, to the
Index.
The notes are not in any way sponsored, endorsed or promoted
by the Index Sponsor. The Index Sponsor does not make any warranty or representation whatsoever, express or implied, either as
to the results to be obtained as to the use of the Index or the figure as which the Index stands at any particular day or otherwise.
The Index is compiled and calculated solely by the Index Sponsor. However, the Index Sponsor shall not be liable to any person
for any error in the Index and the Index Sponsor shall not be under any obligation to advise any person, including a purchaser
or seller of the notes, of any error therein.
In addition, the Index Sponsor gives no assurance regarding
any modification or change in any methodology used in calculating the Index and is under no obligation to continue the calculation,
publication and dissemination of the Index.
Supplement to the Plan of Distribution
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.
MLPF&S will not receive an underwriting discount for notes
sold to certain fee-based trusts and fee-based discretionary accounts managed by U.S. Trust operating through Bank of America,
N.A.
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.
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 pre-paid executory contracts with respect to the Index.
|
|
|
|
|
§
|
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.
|
|
|
|
|
§
|
No assurance can be given that the IRS or any court will agree with this characterization and tax treatment.
|
|
|
|
|
§
|
Withholding and reporting requirements under the legislation enacted on March 18, 2010 (as discussed beginning on page S-48
of the 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. Holders are urged to consult with their own
tax advisors regarding the possible implications of this recently enacted legislation on their investment in the notes.
|
You should consult your own tax advisor concerning the U.S.
federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any tax consequences arising
under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other
tax laws. You should review carefully the discussion under the section entitled “U.S. Federal Income Tax Summary” beginning
on page S-34 of product supplement ARN-2.
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.
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