This pricing supplement, which is not complete and may be
changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying
prospectus supplement and prospectus are not an offer to sell these notes in any country or jurisdiction where such an offer would
not be permitted.
Pricing Supplement No. ___
Preliminary Pricing Supplement - Subject to Completion
(To Prospectus dated March 30, 2012
and Series L Prospectus Supplement dated March 30, 2012)
August 30, 2013
$_____________
20-Year Capped Notes Linked to the Difference between
the 30-Year and the 2-Year U.S. Dollar Constant Maturity Swap Rates, due September 23, 2033
|
·
|
The
notes are senior unsecured debt securities issued by Bank of America Corporation.
All payments due
on the notes, including
the
repayment of principal
and any accrued and unpaid interest
,
will be subject to our credit risk.
|
|
·
|
The
notes will be issued in minimum denominations of $1,000, and whole multiples of $1,000.
|
|
·
|
The
notes are designed for investors who wish to receive quarterly interest income, where, as described below, after the first year
of the notes, the amount of such interest depends on the amount by which the Spread Differential exceeds the Strike (each as defined
below) as of the applicable interest determination date (as defined below).
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|
·
|
Interest
will be paid quarterly on March 23, June 23, September 23, and December 23 of each year, beginning on December 23, 2013.
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|
·
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During
the first four quarterly interest periods, interest on the notes will accrue at the rate of 10.25% per annum.
|
|
·
|
During
each subsequent quarterly interest period beginning on September 23, 2014, interest on the notes will accrue at a rate per annum
equal to the product of (a) 4 and (b) the amount by which the 30-year U.S. Dollar Constant Maturity Swap Rate exceeds the 2-year
U.S. Dollar Constant Maturity Swap Rate on the applicable interest determination date, each expressed as a percentage (such amount,
which may be negative, the “Spread Differential”), minus the Strike. The Strike will be 0.25%. In no event will the
interest rate applicable to any interest period after the first four quarterly interest periods be greater than 10.25% per annum
or less than 0.00% per annum.
|
We
further describe how to determine the interest payable on the notes beginning on page PS-14.
|
·
|
At
maturity, you will receive a cash payment equal to the principal amount of the notes, plus any accrued but unpaid interest.
|
|
·
|
Prior
to maturity, the notes are not redeemable at our option or repayable at your option.
|
|
·
|
The
notes will not be listed on any securities exchange.
|
|
·
|
The
CUSIP number for the notes is 06048WPE4.
|
|
·
|
The
notes will be offered at varying public offering prices related to prevailing market prices. The public offering price will include
accrued interest from September 23, 2013, if settlement occurs after that date.
|
|
·
|
The
initial estimated value of the notes will be less than the public offering price.
As of August 30, 2013 (the date that we
determined the terms of the notes), the initial estimated value of the notes was approximately $856.50 per $1,000 in principal
amount. See “Summary” on page PS-3 of this pricing supplement, “Risk Factors” beginning on page PS-9 of
this pricing supplement and “Structuring the Notes” on page PS-22 of this pricing supplement for additional information.
The actual value of your notes at any time will reflect many factors and cannot be predicted with accuracy.
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|
·
|
The
purchase price of the notes to the selling agent will be [95.50]% of the principal amount of the notes. Under no circumstances
will the price be less than 95.00%.
|
The notes:
Are Not FDIC Insured
|
Are Not Bank Guaranteed
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May Lose Value
|
The notes are unsecured and are not savings
accounts, deposits, or other obligations of a bank. The notes are not guaranteed by Bank of America, N.A. or any other bank, are
not insured by the Federal Deposit Insurance Corporation (the “FDIC”) or any other governmental agency and involve
investment risks. Potential purchasers of the notes should consider the information in “Risk Factors” beginning on
page PS-9 of this pricing supplement, page S-5 of the attached prospectus supplement, and page 8 of the attached prospectus. There
are important differences between the notes and a conventional debt security, including different investment risks and certain
additional costs.
None of the Securities and Exchange
Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of
these notes or passed upon the adequacy or accuracy of this pricing supplement, or the accompanying prospectus supplement or prospectus.
Any representation to the contrary is a criminal offense.
We will deliver the notes in book-entry
form only through The Depository Trust Company on or about September 23, 2013 against payment in immediately available funds.
BofA Merrill Lynch
Selling Agent
TABLE
OF CONTENTS
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Page
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SUMMARY
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PS-3
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RISK FACTORS
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PS-9
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USE OF PROCEEDS
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PS-13
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DESCRIPTION OF THE NOTES
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PS-14
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THE 30-YEAR U.S. DOLLAR CONSTANT MATURITY SWAP RATE (CMS30) and THE 2-YEAR U.S. DOLLAR CONSTANT MATURITY SWAP RATE (CMS2)
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PS-17
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SUPPLEMENTAL PLAN OF DISTRIBUTION—Conflicts of INterest
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PS-21
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STRUCTURING THE NOTES
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PS-22
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U.S. FEDERAL INCOME TAX SUMMARY
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PS-23
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ERISA CONSIDERATIONS
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PS-31
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SUMMARY
This summary includes questions and
answers that highlight selected information from this pricing supplement and the accompanying prospectus supplement and prospectus
to help you understand these notes. You should read carefully the entire pricing supplement, prospectus supplement, and prospectus
to understand fully the terms of the notes, as well as the tax and other considerations important to you in making a decision about
whether to invest in the notes. In particular, you should review carefully the section in this pricing supplement entitled “Risk
Factors,” which highlights a number of risks, to determine whether an investment in the notes is appropriate for you. If
information in this pricing supplement is inconsistent with the prospectus supplement or prospectus, this pricing supplement will
supersede those documents.
Certain capitalized terms used and not
defined in this pricing supplement have the meanings ascribed to them in the prospectus supplement and prospectus.
You are urged to consult with your own
attorneys and business and tax advisors before making a decision to purchase any of the notes.
Payments on the notes depend on our
credit risk and on the performance of the CMS30 relative to the CMS2. The economic terms of the notes are based on the rate we
would pay to borrow funds through the issuance of market-linked notes and the economic terms of certain related hedging arrangements
we enter into. The implied borrowing rate for market-linked notes is typically lower than the rate we would pay when we issue conventional
fixed or floating rate debt securities. This difference in borrowing rate, as well as the underwriting discount and the hedging
related charges described below, will reduce the economic terms of the notes to you and the initial estimated value of the notes.
Due to these factors, the public offering price you pay to purchase the notes will be greater than the initial estimated value
of the notes.
As of August 30, 2013 (the date that
we determined the terms of the notes), the initial estimated value of the notes was approximately $856.50 per $1,000 in principal
amount. The final pricing supplement will set forth the initial estimated value of the notes as of the pricing date. Please note
that the initial estimated value of the notes between the date of this preliminary pricing supplement and the pricing date may
fluctuate substantially, and may be significantly less than $856.50. However, we do not expect the initial estimated value of the
notes at the time that we accept any offer to purchase the notes during that period to be less than $810.00 per $1,000 in principal
amount. For more information about the initial estimated value and the structuring of the notes, see “Risk Factors”
beginning on page PS-9 and “Structuring the Notes” on page PS-22.
The information in this “Summary”
section is qualified in its entirety by the more detailed explanation set forth elsewhere in this pricing supplement and the accompanying
prospectus supplement and prospectus. You should rely only on the information contained in this pricing supplement and the accompanying
prospectus supplement and prospectus. We have not authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on it. Neither we nor the selling agent is making
an offer to sell these notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information
in this pricing supplement, the accompanying prospectus supplement, and prospectus is accurate only as of the date on their respective
front covers.
Unless otherwise indicated or unless
the context requires otherwise, all references in this pricing supplement to “we,” “us,” “our,”
or similar references are to Bank of America Corporation.
What are the notes?
The notes are senior debt securities
issued by Bank of America Corporation, and are not guaranteed or insured by the FDIC or secured by collateral.
The notes will
rank equally with all of our other unsecured senior indebtedness from time to time outstanding, and any payments due on the notes,
including any repayment of principal, will be subject to our credit risk.
The notes will mature on September 23, 2033.
The notes differ from traditional debt
securities in that their return is linked to the performance of the 30-year and 2-year U.S. Dollar Constant Maturity Swap Rates.
The notes are designed for investors who wish to receive quarterly interest income, and are willing to accept that after the first
four quarterly interest periods, the amount of interest payable depends on the amount by which the 30-year U.S. Dollar Constant
Maturity Swap Rate exceeds the 2-year U.S. Dollar Constant Maturity Swap Rate (such amount, which may be negative, the “Spread
Differential”) as of the applicable interest determination date, minus the Strike, as described below. However, in no event
will the interest rate applicable to any interest period after the first four quarterly interest periods be greater than 10.25%
per annum or less than 0.00% per annum. Interest payable on the notes after September 23, 2014 may be more or less than the rate
that we would pay on a conventional fixed-rate or floating-rate debt security with the same maturity, and may be 0.00% per annum.
Investors in the notes should have a
view as to U.S. Dollar Constant Maturity Swap Rates and related interest rate movements, must be willing to forgo guaranteed market
rates of interest for most of the term of their investment in the notes, and must be willing to accept that the interest rate after
the first four quarterly interest periods is capped at 10.25% per annum and may be 0.00% per annum.
Will you receive interest on the notes?
Yes. During the first four quarterly
interest periods, interest on the notes will accrue at the rate of 10.25% per annum; and during subsequent quarterly interest periods,
the amount of interest will depend on the amount by which the Spread Differential exceeds the Strike, determined as of the applicable
interest determination date, as described in this pricing supplement. However, in no event will the interest rate applicable to
any interest period after the first four quarterly interest periods be greater than 10.25% per annum or less than 0.00% per annum.
Interest will be calculated on the basis of a 360-day year of twelve 30-day months.
Will you receive your principal at maturity?
Yes. If you hold the notes until maturity,
you will receive your principal amount and any accrued and unpaid interest on the notes, subject to our credit risk. See “Risk
Factors—Payments on the notes are subject to our credit risk, and changes in our credit ratings are expected to affect the
value of the notes.” However, if you sell the notes prior to maturity, you may find that the market value of the notes may
be less than the principal amount of the notes.
How will the quarterly rate of interest on the notes
be determined?
For each quarterly interest period,
the calculation agent will determine the applicable annualized interest rate as follows:
(a) From and including September
23, 2013 to but excluding September 23, 2014, interest on the notes will accrue at the rate of 10.25% per annum.
(b) During each subsequent
quarterly interest period beginning on September 23, 2014, interest will accrue at a rate per annum equal to:
4 × (CMS30 –
CMS2 – Strike)
In no event will the interest rate applicable
to any interest period after the first four quarterly interest periods be greater than 10.25% per annum or less than 0.00% per
annum.
There can be no assurance that the interest
rate payable on the notes during these quarterly interest periods will be similar to, or greater than, the interest that is payable
on a conventional debt security.
The Strike will be 0.25%.
Each quarterly interest period (other
than the first quarterly interest period) will commence on, and will include, an interest payment date, and will extend to, but
will exclude, the next succeeding
interest payment date. The first quarterly interest period
will commence on, and will include, September 23, 2013, and will extend to, but will exclude, December 23, 2013.
The interest due for each quarterly
interest period will be paid on the following interest payment dates: March 23, June 23, September 23, and December 23 of each
year, beginning on December 23, 2013, and ending on the maturity date.
“CMS30” means the 30-year
U.S. Dollar Constant Maturity Swap Rate, expressed as a percentage, as quoted on the Reuters Screen ISDAFIX3 Page, at 11:00 a.m.,
New York City time, on the applicable interest determination date.
“CMS2” means the 2-year
U.S. Dollar Constant Maturity Swap Rate, expressed as a percentage, as quoted on the Reuters Screen ISDAFIX3 Page, at 11:00 a.m.,
New York City time, on the applicable interest determination date.
The “interest determination date”
for each quarterly interest period after the first four quarterly interest periods will be the second U.S. Government Securities
Business Day (as defined below) prior to the beginning of the applicable quarterly interest period.
A “U.S. Government Securities
Business Day” means any day, other than a Saturday, Sunday, or a day on which the Securities Industry and Financial Markets
Association (or any successor thereto) recommends that the fixed income departments of its members be closed for the entire day
for purposes of trading in U.S. government securities.
Examples:
Below are four examples
of the calculation of the annualized interest rate payable on a quarterly interest payment date after September 23, 2014 for the
notes, based on the Strike of 0.25%. These examples are for purposes of illustration only. The actual annualized interest rate
to be applied in calculating the interest payable on the notes for any quarterly interest period after the first four quarterly
interest periods will depend on the actual levels of CMS30 and CMS2 and the actual Spread Differential (i.e., CMS30 – CMS2)
on the applicable interest determination date.
Example 1:
The
hypothetical
CMS30 is substantially greater than the
hypothetical
CMS2 on the interest determination date, and the hypothetical Spread
Differential is greater than the Strike:
Hypothetical
CMS30:
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6.25%
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Hypothetical
CMS2:
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2.00%
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Strike:
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0.25%
|
4 × (6.25% – 2.00% –
0.25%) = 16.00%
Interest rate payable for
that quarterly interest period = 10.25% per annum
(the interest rate cannot be greater than 10.25% per annum)
Example 2:
The
hypothetical
CMS30 is greater than the
hypothetical
CMS2 on the interest determination date, and the hypothetical Spread Differential
is greater than the Strike:
Hypothetical
CMS30:
|
3.25%
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Hypothetical
CMS2:
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2.35%
|
Strike:
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0.25%
|
4 × (3.25% – 2.35% –
0.25%) = 2.60%
Interest rate payable for that quarterly
interest period = 2.60% per annum
Example 3:
The
hypothetical
CMS30 is greater than the
hypothetical
CMS2 on the interest determination date, but the hypothetical Spread Differential
is less than the Strike:
Hypothetical
CMS30:
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2.40%
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Hypothetical
CMS2:
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2.35%
|
Strike:
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0.25%
|
4 × (2.40% – 2.35% –
0.25%) = - 0.80%
Interest rate payable for that quarterly
interest period = 0.00% per annum
(the interest rate cannot be less than 0.00% per annum)
Example 4:
The
hypothetical
CMS30 is less than the
hypothetical
CMS2 on the interest determination date:
Hypothetical
CMS30:
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3.75%
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Hypothetical
CMS2:
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4.00%
|
Strike:
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0.25%
|
4 × (3.75% – 4.00% –
0.25%) = -2.00%
Interest rate payable for that quarterly interest
period = 0.00% per annum
(the interest rate cannot be less than 0.00% per annum)
Is it possible that I will not receive any interest for
any quarterly interest period after the first four quarterly interest periods?
Yes. After the first four quarterly
interest periods, if the Spread Differential is less than or equal to the Strike on the applicable interest determination date,
you will not receive any interest for that period. This will be the case for an interest period even if the Spread Differential
exceeds the Strike on one or more days after the applicable interest determination date.
After the first four quarterly interest periods, is the
interest rate on the notes limited in any way?
Yes. The interest rate payable on the
notes in all quarterly interest periods after the first four quarterly interest periods will not exceed 10.25% per annum, even
if CMS30 significantly exceeds CMS2 on each interest determination date.
Who will determine the interest rate applicable to each
interest amount?
A calculation agent will make all the
calculations associated with determining each interest payment. We have appointed our subsidiary, Merrill Lynch Capital Services,
Inc. (“MLCS”), to act as calculation agent. See the section entitled “Description of the Notes—Role of
the Calculation Agent.”
What do CMS30 and CMS2 measure?
CMS30 and CMS2 are “constant maturity
swap rates” that measure the fixed rate of interest payable on a hypothetical fixed-for-floating U.S. dollar interest rate
swap transaction with a maturity of 30 years and two years, respectively. In such a hypothetical swap transaction, the fixed rate
of interest, payable semi-annually on the basis of a 360-day year consisting of twelve 30-day months, is exchangeable for a floating
3-month LIBOR-based payment stream that is payable quarterly on the basis of the actual number of days elapsed during a quarterly
period in a 360-day year. “LIBOR” is the London Interbank Offered Rate and is a common rate of interest used in the
swaps industry. See the section entitled “The 30-Year U.S. Dollar Constant Maturity Swap Rate (CMS30) and The 2-Year U.S.
Dollar Constant Maturity Swap Rate (CMS2).” The Spread Differential measures the steepness of the swap rate curve from the
two-year maturity point to the 30-year maturity point on the curve.
What have been the historic levels of CMS30 and CMS2?
We have included a table and a graph
showing the historical month-end and daily spread, respectively, between CMS30 and CMS2 from January 2008 through July 2013, in
the section entitled “The 30-Year U.S. Dollar Constant Maturity Swap Rate (CMS30) and The 2-Year U.S. Dollar Constant Maturity
Swap Rate (CMS2).” We have provided this historical information to help you evaluate the behavior of these rates in various
periods. However, past behavior of these rates is not necessarily indicative of how they will perform in the future.
Who is the selling agent for the notes?
Merrill Lynch, Pierce, Fenner &
Smith Incorporated (“MLPF&S”) is acting as our selling agent in connection with this offering and will be compensated
based on the total principal amount of notes sold. The selling agent is not your fiduciary or advisor solely as a result of the
offering of the notes, and you should not rely upon this pricing supplement, or the accompanying prospectus or prospectus supplement
as investment advice or a recommendation to purchase the notes. You should make your own investment decision regarding the notes
after consulting with your legal, tax, and other advisors.
How are the notes being offered?
We have registered the notes with the
SEC in the U.S. However, we are not registering the notes for public distribution in any jurisdiction other than the U.S. The selling
agent may solicit offers to purchase the notes from non-U.S. investors in reliance on available private placement exemptions. See
the section entitled “Supplemental Plan of Distribution—Selling Restrictions” in the prospectus supplement.
How are the notes treated for U.S. federal income tax
purposes?
We
intend to take the position that the notes will be treated as contingent payment debt instruments for U.S. federal income tax purposes.
Assuming the notes are properly treated as contingent payment debt instruments, you will be required to include income on the notes
over their term based upon a comparable yield.
If
you are a Non-U.S. Holder, payments on the notes generally will not be subject to U.S. federal income or withholding tax, as long
as you provide us with the required completed tax forms.
See
the section entitled “U.S. Federal Income Tax Summary.”
Will the notes be listed on an exchange?
No. The notes will not be listed on
any securities exchange, and a market for them may never develop.
Does ERISA impose any limitations on purchases of the
notes?
Yes. An employee benefit plan subject
to the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974 (commonly referred to as “ERISA”)
or a plan that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended, or the “Code,” including
individual retirement accounts, individual retirement annuities or Keogh plans, or any entity the assets of which are deemed to
be “plan assets” under the ERISA regulations, should not purchase, hold, or dispose of the notes unless that plan or
entity has determined that its purchase, holding, or disposition of the notes will not constitute a non-exempt prohibited transaction
under ERISA or Section 4975 of the Code.
Any plan or entity purchasing the notes
will be deemed to be representing that it has made such determination, or that a prohibited transaction class exemption (“PTCE”)
or other statutory or administrative exemption exists and can be relied upon by such plan or entity. See the section entitled “ERISA
Considerations.”
Are there any risks associated with your investment?
Yes. An investment in the notes is subject
to risk. Please refer to the section entitled “Risk Factors” on the next page of this pricing supplement and page S-5
of the prospectus supplement.
RISK
FACTORS
Your investment in the notes entails
significant risks, many of which differ from those of a conventional security. Your decision to purchase the notes should be made
only after carefully considering the risks of an investment in the notes, including those discussed below, with your advisors in
light of your particular circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about
significant elements of the notes or financial matters in general.
It is possible that after the first
four quarterly interest periods, you may not earn a return on your investment.
The interest payable on the notes during any
quarterly interest period, except for the first four quarterly interest periods, will depend on the amount by which the Spread
Differential exceeds the Strike, determined as of the relevant interest determination date. As a result, you could receive little
or no payment of interest on one or more of the interest payment dates (except for the first four interest payment dates) during
the term of the notes. If the Spread Differential is constantly less than or equal to the Strike on each interest determination
date over the term of the notes, even if the Spread Differential exceeds the Strike during other days during each quarterly interest
period, your return on the notes would be limited to the first four quarterly fixed interest payments.
We have no control over various matters,
including economic, financial and political events, which may affect the levels of CMS30 and CMS2, and thus the Spread Differential.
In recent years, the Spread Differential has been volatile, and such volatility may be expected in the future. However, historical
performance is not necessarily indicative of what may occur in the future. You should have a view as to U.S. Dollar Constant Maturity
Swap Rates and related interest rate movements, and must be willing to forgo guaranteed market rates of interest for most of the
term of the notes, before investing.
Your return is limited by the cap
on the interest rate.
The interest rate applicable to any interest period after the first four quarterly interest periods will
not be greater than 10.25% per annum. Accordingly, if the Spread Differential exceeds the Strike on any interest determination
date during the term of the notes, your return on the notes may not reflect the full extent of that differential. In addition,
the Strike reduces the interest rate based on the Spread Differential applicable to any interest period after the first four quarterly
interest periods.
Your yield may be less than the yield
on a conventional debt security of comparable maturity.
The yield that you receive on the notes may be less than the return
you would earn if you purchased a conventional debt security with the same maturity date. As a result, your investment in the notes
may not reflect the full opportunity cost to you when you consider factors that affect the time value of money.
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.
The notes are our senior unsecured debt securities. As a result, your receipt of all payments of interest and principal on the
notes is dependent upon our ability to repay our obligations on the applicable payment date. This will be the case even if the
difference between CMS30 and CMS2 increases after the pricing date. No assurance can be given as to what our financial condition
will be at any time during the term of the notes or on the maturity date. If we default upon our financial obligations, you may
not receive the amounts payable under the terms of the notes.
Our credit ratings are an assessment
by ratings agencies of our ability to pay our obligations. Consequently, our perceived creditworthiness and actual or anticipated
decreases in our credit ratings or increases in our credit spreads prior to the maturity date of the notes may adversely affect
the market value of the notes. However, because your return on the notes depends upon factors in addition to our ability to pay
our obligations, such as the difference between CMS30 and CMS2 during the term of the notes, an improvement in our credit ratings
will not reduce the other investment risks related to the notes.
You must rely on your own evaluation
of the merits of an investment linked to U.S. Dollar Constant Maturity Swap Rates.
In the ordinary course of their businesses,
we or our affiliates may have expressed views on expected movements in the U.S. Dollar Constant Maturity Swap Rates and related
interest rates, and may do so in the future. These views or reports may be communicated to our clients and clients of our affiliates.
However, these views are subject to change from time to time. Moreover,
other professionals who deal in markets relating to U.S.
Dollar Constant Maturity Swap Rates may at any time have significantly different views from those of ours or our affiliates. For
these reasons, you are encouraged to derive information concerning the U.S. Dollar Constant Maturity Swap Rates and related interest
rates from multiple sources, and you should not rely on the views expressed by us or our affiliates.
Neither the offering of the notes nor
any views which we or our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation
as to the merits of an investment in the notes.
The public offering price you pay
for the notes will exceed their initial estimated value.
The initial estimated value of the notes that is provided in this
preliminary pricing supplement, and that will be provided in the final pricing supplement, are each 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 implied borrowing rate, 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 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 the date of this pricing supplement
will vary based on many factors that cannot be predicted with accuracy, including our creditworthiness and changes in market conditions.
The quoted price of any of our affiliates
for the notes could be higher or lower than the price that you paid for them.
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 their initial estimated value. This
is due to, among other things, changes in the level of market interest rates, the implied borrowing rate we pay to issue market-linked
notes, and the inclusion in the public offering price of the underwriting discount and the hedging related charges, all as further
described in "Structuring the Notes" on page PS-22. 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.
We cannot assure you that a trading
market for your notes will ever develop or be maintained.
We will not list the notes on any securities exchange. We cannot
predict how the notes will trade in any secondary market or whether that market will be liquid or illiquid.
The development of a trading market
for the notes will depend on our financial performance and other factors, including changes in levels of the Spread Differential.
The number of potential buyers of your notes in any secondary market may be limited. We anticipate that the selling agent will
act as a market-maker for the notes, but neither we nor the selling agent is required to do so. There is no assurance that any
party will be willing to purchase your notes at any price in any secondary market. The selling agent may discontinue its market-making
activities as to the notes at any time. To the extent that the selling agent engages in any market-making activities, it may bid
for or offer the notes. Any price at which the selling agent may bid for, offer, purchase, or sell any notes may differ from the
values determined by pricing models that it may use, whether as a result of dealer discounts, mark-ups, or other transaction costs.
These bids, offers, or completed transactions may affect the prices, if any, at which the notes might otherwise trade in the market.
In addition, if at any time the selling
agent were to cease acting as a market-maker as to the notes, it is likely that there would be significantly less liquidity in
the secondary market. In such a case, the price at which the notes could be sold likely would be lower than if an active market
existed.
After the first four quarterly interest
periods, the interest payable on the notes during any quarterly interest period will not reflect changes in the level of the CMS30
relative to the CMS2 other than on the interest determination dates.
After the first four quarterly interest periods, changes
in the level of the CMS30 relative to the CMS2 during the
term of the notes other than on the interest determination dates will not affect the interest payable on the notes. The calculation
agent will calculate the interest payable during any quarterly interest period, except for the first four quarterly interest periods,
based on the difference between the CMS30 and the CMS2 on the interest determination dates. No other levels of the CMS30 and the
CMS2 will be taken into account. As a result, after the first four quarterly interest periods, you will receive no interest payment
for a quarterly interest period even if the CMS30 is greater than the sum of the CMS2 and the Strike at certain times during the
term of the notes before the CMS30 decreases to a level that is less than or equal to the sum of the CMS2 and the Strike as of
the applicable interest determination date.
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 the principal amount of the notes.
Unlike savings accounts, certificates of deposit, and other
similar investment products, you have no right to have your notes redeemed prior to maturity. If you wish to liquidate your investment
in the notes prior to maturity, your only option would be to sell them. At that time, there may be an illiquid market for your
notes or no market at all. Even if you were able to sell your notes, there are many factors outside of our control that may affect
their market value, some of which, but not all, are stated below. Some of these factors are interrelated in complex ways. As a
result, the effect of any one factor may be offset or magnified by the effect of another factor. The following paragraphs describe
the expected impact on the market value of the notes from a change in a specific factor, assuming all other conditions remain constant.
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·
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The difference between CMS30 and CMS2 is expected to affect the market value of the notes.
We expect that the market value of the notes will depend substantially on the amount by which CMS30 exceeds CMS2, and expectations
of the amount by which CMS30 will exceed CMS2 in the future, if at all. In general, the value of the notes will increase when the
difference between CMS30 and CMS2 increases, and the value of the notes will decrease when the difference between CMS30 and CMS2
decreases. The levels of CMS30 and CMS2 may change at rates that are different from one another. If you sell your notes when the
annual interest payable on the notes is less than, or expected to be less than, market interest rates (as compared to traditional
interest-bearing debt securities), you may receive less than the principal amount that would be payable at maturity. Although long-term
interest rates directionally follow short-term interest rates, movements in long-term interest rates generally tend to be smaller
than movements in short-term interest rates. As such, when short-term interest rates rise, the difference between CMS30 and CMS2
tends to narrow (the curve of the spread flattens); conversely, when short-term interest rates fall, the spread widens (the curve
of the spread becomes steeper). Consequently, after the first four quarterly interest periods, the annualized rate of interest
payable on the notes and the market value of the notes may be more likely to decrease in an increasing interest rate
environment than in a declining interest rate environment. In addition, because the interest rate payable on the notes is
capped at 10.25% per annum after the first four quarterly interest periods, we do not expect that the notes will trade in any secondary
market at a price that is greater than a price that reflects the cap.
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·
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Changes in the levels of interest rates may affect the market value of the notes.
The level
of interest rates in the United States may affect the U.S. economy and, in turn, the magnitude of the difference between CMS30
and CMS2. Changes in prevailing interest rates may decrease the difference between CMS30 and CMS2 relative to previous periods,
which would decrease the interest rate on the notes after the first four quarterly interest periods. This, in turn, may decrease
the market value of the notes. Further, the notes are subject to an interest rate cap of 10.25% per annum after the first four
quarterly interest periods, which will limit the potential upside to investors when CMS30 exceeds CMS2. As a result, we anticipate
that the potential for the notes to trade above their par value in the secondary market, if any, is extremely limited—likely
only during the first year of the term of the notes, and in a declining interest rate environment.
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·
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Volatility of the difference between CMS30 and CMS2.
Volatility is the term used to describe
the size and frequency of market fluctuations. During recent periods, the difference between CMS30 and CMS2 has had periods of
volatility, and this volatility may vary during the term of the notes. In addition, an unsettled international environment and
related uncertainties may result in greater market volatility, which may continue over the term of the notes. Increases or
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decreases in the volatility of the difference between
CMS30 and CMS2 may have an adverse impact on the market value of the notes.
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·
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Economic and Other Conditions Generally.
Interest payable on the notes after the first
four quarterly interest periods is expected to be correlated to the difference between long-term interest rates (as represented
by CMS30) and short-term interest rates (as represented by CMS2). Prevailing interest rates may be influenced by a number of factors,
including general economic conditions in the United States, U.S. monetary and fiscal policies, inflation, and other financial,
political, regulatory, and judicial events. These factors interrelate in complex ways, and may disproportionately affect short-term
interest rates relative to long-term interest rates, thereby potentially lowering the difference between CMS30 and CMS2, and consequently
adversely affecting the market value of your notes.
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·
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Our Financial Condition and Creditworthiness.
Our perceived creditworthiness, including
any increases in our credit spreads and any actual or anticipated decreases in our credit ratings, may adversely affect the market
value of the notes. In general, we expect the longer the amount of time that remains until maturity, the more significant the impact
will be on the value of the notes. However, a decrease in our credit spreads or an improvement in our credit ratings will not necessarily
increase the market value of the notes.
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·
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Time to Maturity.
There may be a disparity between the market value of the notes prior
to maturity and their value at maturity. This disparity is often called a time “value,” “premium,” or “discount,”
and reflects expectations concerning the level of the CMS30 relative to the CMS2 prior to the maturity date. As the time to maturity
decreases, this disparity will likely decrease, such that the value of the notes will approach a value that reflects the remaining
interest payments on the notes based on the then-current difference between CMS30 and CMS2.
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Our trading and hedging activities
may create conflicts of interest with you.
We or one or more of our affiliates, including the selling agent, may engage in
trading activities related to one or both of CMS30 and CMS2 that are not for your account or on your behalf. We or one or more
of our affiliates, including the selling agent, also may issue, or our affiliates may underwrite, other financial instruments with
returns linked to CMS30 and/or CMS2. We expect to enter into arrangements to hedge the market risks associated with our obligation
to pay the amounts due under the notes. We may seek competitive terms in entering into the hedging arrangements for the notes,
but are not required to do so, and we may enter into such hedging arrangements with one of our subsidiaries or affiliates. Such
hedging activity is expected to result in a profit to those engaging in the hedging activity, which could be more or less than
initially expected, but which could also result in a loss for the hedging counterparty. These trading and hedging activities may
present a conflict of interest between your interest in the notes and the interests we and our affiliates may have in our proprietary
accounts, in facilitating transactions for our other customers, and in accounts under our management.
There may be potential conflicts of
interest involving the calculation agent. We have the right to appoint and remove the calculation agent.
Our subsidiary, MLCS,
will be the calculation agent for the notes and, as such, will determine the amount of interest to be paid on the notes. Under
some circumstances, these duties could result in a conflict of interest between MLCS’s status as our subsidiary and its responsibilities
as calculation agent. These conflicts could occur, for instance, in connection with judgments that it would be required to make
if one or both of CMS30 and CMS2 are unavailable. See the section entitled “Description of the Notes—Unavailability
of CMS30 and/or CMS2.” The calculation agent will be required to carry out its duties in good faith and using its reasonable
judgment. However, because we expect to control the calculation agent, potential conflicts of interest could arise.
The price at which you purchase the
notes may be different than the price paid by other investors.
In the initial offering, the notes are being offered at variable
prices. The price at which you purchase the notes will depend upon a variety of factors, including the level of the CMS30 relative
to the CMS2, interest rates and other market conditions on the date that you make your purchase, and the broker through which you
purchase your notes. Any price that you pay may be higher or lower than the price at which any other investor may purchase the
notes.
USE
OF PROCEEDS
We will use the net proceeds we receive
from the sale of the notes for the purposes described in the accompanying prospectus under “Use of Proceeds.” In addition,
we expect that we or our affiliates will use a portion of the net proceeds to hedge our obligations under the notes.
DESCRIPTION
OF THE NOTES
General
The notes are part of a series of medium-term
notes entitled “Medium-Term Notes, Series L” issued under the Senior Indenture, as amended and supplemented from time
to time. The Senior Indenture is described more fully in the accompanying prospectus supplement and prospectus. The following description
of the notes supplements the description of the general terms and provisions of the notes and debt securities set forth under the
headings “Description of the Notes” in the prospectus supplement and “Description of Debt Securities” in
the prospectus. These documents should be read in connection with this pricing supplement.
The notes are issued in minimum denominations
of $1,000, and whole multiples of $1,000. The notes will mature on September 23, 2033.
Prior to maturity, the notes are not
redeemable at our option or repayable at your option. The notes are not subject to any sinking fund.
The notes will be issued in book-entry
form only.
Interest
Each interest payment due for a quarterly
interest period will be paid March 23, June 23, September 23, and December 23 of each year, beginning on December 23, 2013, and
ending on the maturity date.
Each quarterly interest period (other
than the first quarterly interest period from, and including, the original date of issuance of the notes to, but excluding, December
23, 2013) will commence on, and will include, an interest payment date, and will extend to, but will exclude, the next succeeding
interest payment date or the maturity date, as applicable. If any interest payment date, including the maturity date of the notes,
falls on a day that is not a business day, no adjustment will be made to the length of the corresponding quarterly interest period;
however, we will make the required payment on the next business day and no additional interest will accrue in respect of the payment
made on the next business day.
A “business day” means any
day other than a day on which banking institutions in New York, New York are authorized or required by law, regulation, or executive
order to close or a day on which transactions in U.S. dollars are not conducted.
The interest rate for each interest
period after the first four quarterly interest periods will be reset on the first day of that interest period, which we refer to
as the “interest reset date.” The calculation agent will determine the applicable interest rate for each interest period
on the interest determination date. Once determined by the calculation agent, the applicable interest rate for each quarterly interest
period will apply from and including the interest reset date, through, but excluding, the next interest reset date (or the maturity
date, as applicable).
Interest is computed on the basis of
a 360-day year of twelve 30-day months. For as long as the notes are held in book-entry only form, the record date for each payment
of interest will be the business day prior to the payment date. If the notes are issued at any time in a form that is other than
book-entry only, the regular record date for an interest payment date will be the last day of the calendar month preceding the
interest payment date.
For each quarterly interest period,
the calculation agent will determine the applicable annualized interest rate as follows:
(a) From and including September
23, 2013 to but excluding September 23, 2014, interest on the notes will accrue at the rate of 10.25% per annum.
(b) During each subsequent
quarterly interest period beginning on September 23, 2014, interest will accrue at a rate per annum equal to:
4 × (CMS30 –
CMS2 – Strike)
In no event will the interest rate applicable
to any interest period after the first four quarterly interest periods be greater than 10.25% per annum or less than 0.00% per
annum.
The Strike will be 0.25%.
“CMS30” means the 30-year
U.S. Dollar Constant Maturity Swap Rate, expressed as a percentage, as quoted on the Reuters Screen ISDAFIX3 Page, at 11:00 a.m.,
New York City time, on the applicable interest determination date.
“CMS2” means the 2-year
U.S. Dollar Constant Maturity Swap Rate, expressed as a percentage, as quoted on the Reuters Screen ISDAFIX3 Page, at 11:00 a.m.,
New York City time, on the applicable interest determination date.
The “interest determination date”
for each quarterly interest period after the first four quarterly interest periods will be the second U.S. Government Securities
Business Day prior to the beginning of the applicable quarterly interest period.
A “U.S. Government Securities
Business Day” means any day, other than a Saturday, Sunday, or a day on which the Securities Industry and Financial Markets
Association (or any successor thereto) recommends that the fixed income departments of its members be closed for the entire day
for purposes of trading in U.S. government securities.
Payment at Maturity
On the maturity date, you will be paid
the principal amount of the notes and any accrued and unpaid interest on the notes, subject to our credit risk. See “Risk
Factors—Payments on the notes are subject to our credit risk, and changes in our credit ratings are expected to affect the
value of the notes” above.
Regardless of the amounts of the interest
payable during each interest period over the term of the notes, you will receive your principal amount at maturity, assuming that
we are otherwise able to pay our debts on the maturity date.
Unavailability of CMS30 and/or CMS2
If, on any interest determination date,
CMS30 and/or CMS2 are not quoted on the Reuters Screen ISDAFIX3 Page, or any page substituted for that page, then CMS30 and CMS2
will be a percentage determined on the basis of the mid-market semi-annual swap rate quotations provided by three banks chosen
by the calculation agent (which may include one of our affiliates) at approximately 11:00 a.m., New York City time, on that date.
For this purpose, the semi-annual swap rate means the mean of the bid and offered rates for the semi-annual fixed leg, calculated
on the basis of a 360-day year consisting of twelve 30-day months, of a fixed-for-floating U.S. dollar interest rate swap transaction
with a term equal to 30 years or two years, as applicable, commencing on the applicable date and in a representative amount with
an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on the actual number of days in a
360-day year, is equivalent to USD-LIBOR-BBA, as quoted on the Reuters Screen LIBOR01 Page at 11:00 a.m., New York City time, with
a designated maturity of three months. The calculation agent will request the principal New York City office of each of the three
banks chosen by it to provide a quotation of its rate. If at least three quotations are provided, the rate for the relevant interest
determination date will be the arithmetic mean of the quotations. If two quotations are provided, the rate for the relevant interest
determination date will be the arithmetic mean of the two quotations. If only one quotation is provided, the rate for the relevant
interest determination date will equal that one quotation. If no quotations are available, then CMS30 and/or CMS2 will be the rates
the calculation agent, in its sole discretion, determines to be fair and reasonable under the circumstances at approximately 11:00
a.m., New York City time, on the relevant interest determination date.
Role of the Calculation Agent
The calculation agent has the sole discretion
to make all determinations regarding the notes, including determinations regarding CMS30, CMS2, the amount of each interest payment,
U.S. Government Securities Business Days, and business days. Absent manifest error, all determinations of the calculation agent
will be final and binding on you and us, without any liability on the part of the calculation agent.
We have initially appointed our subsidiary,
MLCS, as the calculation agent, but we may change the calculation agent at any time without notifying you.
Same-Day Settlement and Payment
The notes will be delivered in book-entry
form only through DTC against payment by purchasers of the notes in immediately available funds. We will make payments of the principal
amount and each interest payment in immediately available funds so long as the notes are maintained in book-entry form.
Events of Default and Rights of Acceleration
If an event of default (as defined in
the Senior Indenture) occurs and is continuing, holders of the notes may accelerate the maturity of the notes, as described under
“Description of Debt Securities— Events of Default and Rights of Acceleration” in the prospectus. Upon an event
of default, you will be entitled to receive only your principal amount, and accrued and unpaid interest, if any, through the acceleration
date. In case of an event of default, the notes will not bear a default interest rate. If a bankruptcy proceeding is commenced
in respect of us, your claim may be limited, under the U.S. Bankruptcy Code, to the original public offering price of the notes.
Listing
The notes will not be listed on any
securities exchange.
THE
30-YEAR U.S. DOLLAR CONSTANT MATURITY SWAP RATE (CMS30) and
THE 2-YEAR U.S. DOLLAR CONSTANT MATURITY SWAP RATE (CMS2)
General
CMS30 and CMS2 are “constant maturity
swap rates” that measure the fixed rate of interest payable on a hypothetical fixed-for-floating U.S. dollar interest rate
swap transaction with a maturity of 30 years and two years, respectively. In such a hypothetical swap transaction, the fixed rate
of interest, payable semi-annually on the basis of a 360-day year consisting of twelve 30-day months, is exchangeable for a floating
3-month LIBOR-based payment stream that is payable quarterly on the basis of the actual number of days elapsed during a quarterly
period in a 360-day year. “LIBOR” is the London Interbank Offered Rate and is a common rate of interest used in the
swaps industry.
Historical Levels of CMS30 and CMS2
The following table sets forth the historical
month-end spread between CMS30 and CMS2 from January 2008 through July 2013. The following graph sets forth the historical daily
spread (expressed in basis points, where 100 basis points equals 1%) between CMS30 and CMS2 over the same time period. This data
is not intended to be indicative of the future performance of the difference between CMS30 and CMS2 or what the value of or return
on the notes may be. Any historical upward or downward trend in the difference between CMS30 and CMS2 during any period set forth
below is not an indication that such difference is more or less likely to increase or decrease in value at any time over the term
of the notes or that these represent what the difference would have been on any hypothetical interest determination date.
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2008
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2009
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2010
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2011
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2012
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2013
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January
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1.8360%
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1.7670%
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3.2950%
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3.5030%
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2.1650%
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2.5900%
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February
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2.3080%
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1.7620%
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3.3520%
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3.4060%
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2.2190%
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2.5510%
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March
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2.1780%
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1.8190%
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3.3210%
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3.3500%
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2.3940%
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2.5670%
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April
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1.6760%
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2.1030%
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3.1300%
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3.3840%
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2.2560%
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2.4530%
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May
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1.6500%
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2.8380%
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2.8150%
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3.3090%
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1.7390%
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2.7690%
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June
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1.3930%
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2.6340%
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2.7500%
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3.3920%
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1.9310%
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2.9480%
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July
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1.5420%
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2.7440%
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2.9900%
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3.2420%
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1.9120%
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3.2150%
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August
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1.4520%
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2.7670%
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2.5160%
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2.6860%
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2.1030%
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September
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1.2330%
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2.6190%
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2.7420%
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2.6500%
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2.1850%
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October
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1.6190%
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2.9230%
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3.1500%
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2.4360%
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2.2290%
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November
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0.9280%
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3.0370%
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3.0340%
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2.0960%
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2.1750%
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December
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1.2510%
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3.1040%
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3.3410%
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1.8710%
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2.3560%
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Movements in CMS30 and CMS2 have historically
been correlated to some extent, but not exactly, to movements in the 30-year Constant Maturity Treasury Rate and 2-year Constant
Maturity Treasury Rate, respectively. The first graph below reflects the month-end CMS30 relative to the month-end 30-year Constant
Maturity Treasury Rate during the period from January 2008 through July 2013; the second graph reflects the month-end CMS2 relative
to the month-end 2-year Constant Maturity Treasury Rate during the same period.
Interest payable on the notes after
the first four quarterly interest periods will be imperfectly correlated to the difference between long-term interest rates (as
measured by CMS30) and short-term interest rates (as measured by CMS2). Although long-term interest rates directionally follow
short-term interest rates, movements in long-term interest rates generally tend to be smaller than movements in short-term interest
rates. As such, when short-term interest rates rise, the difference between CMS30 and CMS2 tends to narrow (the curve of the spread
flattens); conversely, when short-term interest rates fall, the spread widens (the curve of the spread becomes steeper). After
the first four quarterly interest periods, interest payable on the notes will be greater the wider the spread between CMS30 and
CMS2 (assuming the Spread Differential is greater than the Strike), and the steeper the curve of the spread, as of each interest
determination date.
The difference between long-term interest
rates and short-term interest rates is influenced by a number of factors, including (but not limited to) monetary policy, fiscal
policy, inflation, and fundamental demand conditions. These factors interrelate in complex, and sometimes ambiguous, ways. Any
factor which reduces the supply of or increases the demand for money available for borrowing will generally disproportionately
affect short-term interest rates relative to long-term interest rates, thereby potentially lowering the difference between CMS30
and CMS2. For example, monetary policy tightening by the Federal Reserve Bank through open market operations initially generates
high nominal short-term interest rates, while long-term rates typically rise by a smaller amount. As a result, the difference between
short-term interest rates and long-term interest rates typically decreases when contractionary monetary policy shocks occur.
SUPPLEMENTAL
PLAN OF DISTRIBUTION—Conflicts of INterest
Our broker-dealer subsidiary, MLPF&S,
will act as our selling agent in connection with the offering of the notes. The selling agent is a party to the Distribution Agreement
described in the “Supplemental Plan of Distribution” on page S-14 of the accompanying prospectus supplement.
MLPF&S will sell the notes to other
broker-dealers that will participate in the offering and that are not affiliated with us, at an agreed discount to the principal
amount. Each of those broker-dealers may sell the notes to one or more additional broker-dealers. MLPF&S has informed us that
these discounts may vary from dealer to dealer and that not all dealers will purchase or repurchase the notes at the same discount.
The notes will be offered at varying
prices related to prevailing market prices. The purchase price of the notes to the selling agent will be the price set forth on
the cover page of this pricing supplement.
The selling agent is a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, the offering of the notes will conform to the
requirements of FINRA Rule 5121.
The selling agent is not your fiduciary
or advisor solely as a result of the offering of the notes, and you should not rely upon this pricing supplement, or the accompanying
prospectus or prospectus supplement as investment advice or a recommendation to purchase notes. You should make your own investment
decision regarding the notes after consulting with your legal, tax, and other advisors.
We expect that settlement of the notes
will occur on or about September 23, 2013.
If you
place an order to purchase the notes
from MLPF&S, you are consenting to MLPF&S acting
as a principal in effecting the transaction for your account. MLPF&S is acting as an underwriter in connection with this offering
and will receive underwriting compensation from us.
The selling agent and any of our other
broker-dealer affiliates, may use this pricing supplement, and the accompanying prospectus supplement and prospectus for offers
and sales in secondary market transactions and market-making transactions in the notes. However, they are not obligated to engage
in such secondary market transactions and/or market-making transactions. The selling agent may act as principal or agent in these
transactions, and any such sales will be made at prices related to prevailing market conditions at the time of the sale.
At MLPF&S’s discretion, during
an initial undetermined period after the issuance of the notes, any purchase price paid by MLPF&S may be, in certain circumstances,
closer to the amount that you paid for the notes than to their initial estimated value. However, neither we nor any of our affiliates
is obligated to purchase your notes at any price, or at a price that exceeds the initial estimated value.
Any price that MLPF&S may pay to
repurchase the notes will depend upon then prevailing market conditions, our creditworthiness and transaction costs. At certain
times, this price may be higher than or lower than the initial estimated value of the notes.
STRUCTURING THE
NOTES
The notes are our debt securities, the
return on which is linked to the performance of the CMS30 relative to the CMS2. 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 generally relatively lower implied borrowing 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 at the time the terms of the notes are set and on the pricing date being less than their public
offering price.
In order to meet our payment obligations
on the notes, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call
options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are
determined based upon terms provided by MLP&S and its affiliates, and take into account a number of factors, including our
creditworthiness, interest rate movements, the volatility of the CMS30 and the CMS2, the tenor of the notes and 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 hedging related charges, reflecting the costs associated with, and our affiliates’ profit earned
from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces, actual profits
or losses from these hedging transactions may be more or less than this amount.
For further information, see “Risk
Factors” beginning on page PS-9 and “Use of Proceeds” on page PS-13 of this pricing supplement.
U.S.
FEDERAL INCOME TAX SUMMARY
The following summary of the material
U.S. federal income tax considerations of the acquisition, ownership, and disposition of the notes is based upon the advice of
Morrison & Foerster LLP, our tax counsel. The following discussion is not exhaustive of all possible tax considerations. This
summary is based upon the Code, regulations promulgated under the Code by the U.S. Treasury Department (“Treasury”)
(including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of
the Internal Revenue Service (“IRS”), and judicial decisions, all as currently in effect and all of which are subject
to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert,
or that a court would not sustain, a position contrary to any of the tax consequences described below.
This summary is for general information
only, and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular holder
in light of its investment or tax circumstances or to holders subject to special tax rules, such as partnerships, subchapter S
corporations, or other pass-through entities, banks, financial institutions, tax-exempt entities, insurance companies, regulated
investment companies, real estate investment trusts, trusts and estates, dealers in securities or currencies, traders in securities
that have elected to use the mark-to-market method of accounting for their securities, persons holding notes as part of an integrated
investment, including a “straddle,” “hedge,” “constructive sale,” or “conversion transaction,”
persons (other than Non-U.S. Holders, as defined below) whose functional currency for tax purposes is not the U.S. dollar, persons
holding notes in a tax-deferred or tax-advantaged account, and persons subject to the alternative minimum tax provisions of the
Code. This summary does not include any description of the tax laws of any state or local governments, or of any foreign government,
that may be applicable to a particular holder.
This summary is directed solely to holders
that, except as otherwise specifically noted, will purchase the notes upon original issuance and will hold the notes as capital
assets within the meaning of Section 1221 of the Code, which generally means property held for investment. This summary assumes
that the issue price of the notes, as determined for U.S. federal income tax purposes, equals the principal amount thereof.
You should consult your own tax advisor
concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of 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.
As used in this pricing supplement,
the term “U.S. Holder” means a beneficial owner of a note that is for U.S. federal income tax purposes:
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•
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a citizen or resident of the United States;
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•
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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or
under the laws of the United States or of any state of the United States or the District of Columbia;
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•
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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•
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any trust if a court within the United States is able to exercise primary supervision over the administration of the trust
and one or more United States persons have the authority to control all substantial decisions of the trust.
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Notwithstanding the preceding paragraph,
to the extent provided in Treasury regulations, some trusts in existence on August 20, 1996, and treated as United States persons
prior to that date, that elect to continue to be treated as United States persons also are U.S. Holders. As used in this pricing
supplement, the term “Non-U.S. Holder” means a holder that is not a U.S. Holder.
If an entity or arrangement treated
as a partnership for U.S. federal income tax purposes holds a note, the U.S. federal income tax treatment of a partner generally
will depend upon the status of the
partner and the activities of the partnership and, accordingly,
this summary does not apply to partnerships. A partner of a partnership holding a note should consult its own tax advisor regarding
the U.S. federal income tax consequences to the partner of the acquisition, ownership, and disposition by the partnership of a
note.
Tax Characterization of the Notes
There are no statutory provisions, regulations,
published rulings, or judicial decisions addressing the characterization, for U.S. federal income tax purposes, of the notes or
other instruments with terms substantially the same as the notes. However, although the matter is not free from doubt, under current
law, each note should be treated as a debt instrument for U.S. federal income tax purposes and this summary assumes such treatment
is proper and will be respected. We currently intend to treat the notes as debt instruments for U.S. federal income tax purposes
and, where required, intend to file information returns with the IRS in accordance with such treatment, in the absence of any change
or clarification in the law, by regulation or otherwise, requiring a different characterization of the notes. You should be aware,
however, that the IRS is not bound by our characterization of the notes as indebtedness and the IRS could possibly take a different
position as to the proper characterization of the notes for U.S. federal income tax purposes. If the notes are not in fact treated
as debt instruments for U.S. federal income tax purposes, then the U.S. federal income tax treatment of the purchase, ownership,
and disposition of the notes could differ materially from the treatment discussed below. For example, the timing and character
of income, gain, or loss recognized in respect of the notes could differ materially from the timing and character of income, gain,
or loss recognized in respect of the notes had the notes in fact been treated as debt instruments for U.S. federal income tax purposes.
U.S. Holders – Income Tax Considerations
Interest and Original Issue Discount
.
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,” and the balance of this discussion assumes
that this characterization is proper and will be respected. Under this characterization, the notes generally will be subject to
the Treasury regulations governing contingent payment debt instruments. Under those regulations, 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,” both as described below, established by us for determining interest accruals and adjustments with respect
to a note. A U.S. Holder which does not use the “comparable yield” and follow the “projected payment schedule”
to calculate its OID and interest income on a note must timely disclose and justify the use of other estimates to the IRS.
A “comparable yield” with
respect to a note generally is the yield at which we could issue a fixed-rate debt instrument with terms similar to those of the
note (taking into account for this purpose the level of subordination, term, timing of payments, and general market conditions,
but ignoring any adjustments for liquidity or the riskiness of the contingencies with respect to the note). Notwithstanding the
foregoing, a comparable yield must not be less than the applicable U.S. federal rate based on the overall maturity of the note.
A “projected payment schedule”
with respect to a note generally is a series of projected payments, the amount and timing of which would produce a yield to maturity
on that note equal to the comparable yield. This projected payment schedule will consist of the principal amount, the fixed payments
for the initial four quarterly interest periods and a projection for tax purposes of each “contingent payment,” i.e.,
each interest payment other than the fixed payments for the initial four quarterly interest periods.
Based on the comparable yield and the
projected payment schedule of the notes, a U.S. Holder of a note (regardless of accounting method) generally will be required to
accrue as OID the sum of the daily portions of interest on the note for each day in the taxable year on which the holder held the
note, adjusted upward or downward to reflect the difference, if any, between the actual and projected amount of any contingent
payments on the note, as set forth below. The daily portions of interest for a note are determined by allocating to each day in
an accrual period the ratable portion of interest on the note that accrues in the accrual period. The amount of interest on the
note that accrues in an accrual period is the product of the comparable yield on the note (adjusted to reflect the length of the
accrual period) and the adjusted issue price of the note at the beginning of the accrual period. The adjusted issue price of a
note
at the beginning of the first accrual period will equal
its issue price. The issue price of each note in an issue of notes is the first price at which a substantial amount of those notes
has been sold (including any premium paid for those notes and ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers). For any subsequent accrual period, the adjusted issue
price will be (1) the sum of the issue price of the note and any interest previously accrued on the note by a holder (without regard
to any positive or negative adjustments, described below) minus (2) the amount of any projected payments on the note for previous
accrual periods. A U.S. Holder of a note generally will be required to include in income OID in excess of actual cash payments
received for certain taxable years.
A U.S. Holder will be required to recognize
interest income equal to the amount of any positive adjustment for a note for the taxable year in which a contingent payment is
paid (including a payment of interest at maturity). A positive adjustment is the excess of actual payments in respect of contingent
payments over the projected amount of contingent payments. A U.S. Holder also will be required to account for any “negative
adjustment” for a taxable year in which a contingent payment is paid. A negative adjustment is the excess of the projected
amounts of contingent payments over actual payments in respect of the contingent payments. A net negative adjustment is the amount
by which total negative adjustments in a taxable year exceed total positive adjustments in such taxable year. A net negative adjustment
(1) will first reduce the amount of interest for the note that a U.S. Holder would otherwise be required to include in income in
the taxable year, and (2) to the extent of any excess, will result in an ordinary loss equal to that portion of the excess as does
not exceed the excess of (A) the amount of all previous interest inclusions under the note over (B) the total amount of the U.S.
Holder’s net negative adjustments treated as ordinary loss on the note in prior taxable years. A net negative adjustment
is not subject to the 2% floor limitation imposed on miscellaneous deductions under Section 67 of the Code. Any net negative adjustment
in excess of the amounts described above in (1) and (2) will be carried forward to offset future interest income on the note or
to reduce the amount realized on a sale, exchange, or retirement of the note and, in the case of a payment at maturity, should
result in a capital loss. The deductibility of capital losses by a U.S. Holder is subject to limitations.
If a U.S. Holder purchases the notes
for an amount that differs from the notes’ adjusted issue price at the time of the purchase, the holder must determine the
extent to which the difference between the price paid for the notes and their adjusted price is attributable to a change in expectations
as to the projected payment schedule, a change in interest rates, or both, and allocate the difference accordingly.
If a U.S. Holder purchases the notes
for an amount that is less than the adjusted issue price of the notes, such holder must (a) make positive adjustments increasing
the amount of interest that the holder would otherwise accrue and include in income each year to the extent of amounts allocated
to a change in interest rates under the preceding paragraph and (b) make positive adjustments increasing the amount of ordinary
income (or decreasing the amount of ordinary loss) that the holder would otherwise recognize on the maturity of the notes to the
extent of amounts allocated to a change in expectations as to the projected payment schedule under the preceding paragraph. If
a U.S. Holder purchases the notes for an amount that is greater than the adjusted issue price of the notes, the holder must (a)
make negative adjustments decreasing the amount of interest that the holder would otherwise accrue and include in income each year
to the extent of amounts allocated to a change in interest rates under the preceding paragraph and (b) make negative adjustments
decreasing the amount of ordinary income (or increasing the amount of ordinary loss) that the holder would otherwise recognize
on the maturity of the notes to the extent of amounts allocated to a change in expectations as to the projected payment schedule
under the preceding paragraph. Adjustments allocated to the interest amount are not made until the date the daily portion of interest
accrues.
If a contingent payment becomes fixed
(within the meaning of applicable Treasury regulations) more than six months before its due date, a positive or negative adjustment,
as appropriate, is made to reflect the difference between the present value of the amount that is fixed and the present value of
the projected amount. The present value of each amount is determined by discounting the amount from the date the payment is due
to the date the payment becomes fixed, using a discount rate equal to the comparable yield. If all contingent payments on the notes
become fixed, substantially contemporaneously, applicable Treasury regulations provide that, with regard to contingent payments
that become fixed on a day that is more than six months before their due date, U.S. Holders should take into account positive or
negative adjustments in respect of such contingent payments over the period to
which they relate in a reasonable manner. U.S. Holders should
consult their tax advisors as to what would be a “reasonable manner” in their particular situation.
The following table assumes an expected
issue date of September 23, 2013 and maturity date of September 23, 2033 for the notes and is based upon a hypothetical projected
payment schedule and a hypothetical comparable yield equal to 4.9404% per annum (compounded quarterly), that we established for
the notes, and shows the amounts of ordinary income from a note that an initial U.S. Holder that holds the note until maturity
and pays taxes on a calendar year basis should be required to report each calendar year. The following tables are for illustrative
purposes only. The actual tables will be completed on the pricing date and included in the final pricing supplement.
Accrual Period
|
Interest Deemed to
Accrue During Accrual
Period (per $1,000
principal amount of
the Notes)
|
Total Interest Deemed
to Have Accrued from
Original Issue Date
(per $1,000 principal
amount of the Notes)
|
September 23, 2013 through December 31, 2013
|
$13.4343
|
$13.4343
|
January 1, 2014 through December 31, 2014
|
$47.6997
|
$61.1340
|
January 1, 2015 through December 31, 2015
|
$46.7879
|
$107.9219
|
January 1, 2016 through December 31, 2016
|
$46.8779
|
$154.7998
|
January 1, 2017 through December 31, 2017
|
$46.9725
|
$201.7723
|
January 1, 2018 through December 31, 2018
|
$47.0718
|
$248.8442
|
January 1, 2019 through December 31, 2019
|
$47.1762
|
$296.0203
|
January 1, 2020 through December 31, 2020
|
$47.2857
|
$343.3061
|
January 1, 2021 through December 31, 2021
|
$47.4008
|
$390.7069
|
January 1, 2022 through December 31, 2022
|
$47.5217
|
$438.2287
|
January 1, 2023 through December 31, 2023
|
$47.6487
|
$485.8774
|
January 1, 2024 through December 31, 2024
|
$47.7821
|
$533.6594
|
January 1, 2025 through December 31, 2025
|
$47.9221
|
$581.5816
|
January 1, 2026 through December 31, 2026
|
$48.0693
|
$629.6508
|
January 1, 2027 through December 31, 2027
|
$48.2238
|
$677.8746
|
January 1, 2028 through December 31, 2028
|
$48.3861
|
$726.2607
|
January 1, 2029 through December 31, 2029
|
$48.5566
|
$774.8173
|
January 1, 2030 through December 31, 2030
|
$48.7356
|
$823.5529
|
January 1, 2031 through December 31, 2031
|
$48.9237
|
$872.4766
|
January 1, 2032 through December 31, 2032
|
$49.1212
|
$921.5979
|
January 1, 2033 through September 23, 2033
|
$35.8786
|
$957.4765
|
In addition, we have determined the hypothetical
projected payment schedule for the notes as follows:
Taxable Year
|
Payment on
March 23
|
Payment on
June 23
|
Payment on
September 23
|
Payment on
December 23
|
2013
|
NA
|
NA
|
NA
|
$25.6250
|
2014
|
$25.6250
|
$25.6250
|
$25.6250
|
$11.2497
|
2015
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2016
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2017
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2018
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2019
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2020
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2021
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2022
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2023
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2024
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2025
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2026
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2027
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2028
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2029
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2030
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2031
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2032
|
$11.2497
|
$11.2497
|
$11.2497
|
$11.2497
|
2033
|
$11.2497
|
$11.2497
|
$1,011.2497
|
NA
|
You should be aware that these amounts
are not calculated or provided for any purposes other than the determination of a U.S. Holder’s interest accruals and adjustments
with respect to the notes for U.S. federal income tax purposes. By providing the table above and the projected payment schedule,
we make no representations regarding the actual amounts of interest payments on the notes after the first four quarterly interest
periods.
Sale, Exchange, or Retirement
.
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 that holder’s tax basis in the note.
A U.S. Holder’s tax basis in a note generally will equal the cost of that note, increased by the amount of OID previously
accrued by the holder for that note (without regard to any positive or negative adjustments) and reduced
by any projected payments for previous periods on the notes
and, if applicable, increased or decreased by the amount of any positive or negative adjustment that the holder is required to
make with respect to the notes under the rules set forth above addressing purchases of notes for an amount that differs from the
notes’ adjusted issue price at the time of purchase. A U.S. Holder generally will treat any gain as interest income, and
will treat any loss as ordinary loss to the extent of the excess of previous interest inclusions over the total negative adjustments
previously taken into account as ordinary losses, and the balance as long-term or short-term capital loss depending upon the U.S.
Holder’s holding period for the note. The deductibility of capital losses by a U.S. Holder is subject to limitations.
Non-U.S. Holders – Income Tax Considerations
U.S. Federal Income and Withholding
Tax
Under current U.S. federal income tax
law and subject to the discussion below concerning backup withholding, principal and interest payments, including any OID, that
are received from us or our agent and that are not effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States, or a permanent establishment maintained in the United States if certain tax treaties apply,
generally will not be subject to U.S. federal income or withholding tax except as provided below. Interest, including any OID and
any gain realized on the sale, exchange, or retirement of a note, may be subject to a 30% withholding tax (or less under an applicable
treaty, if any) if:
|
•
|
a Non-U.S. Holder actually or constructively owns 10% or more of the total combined voting power of all classes of our stock
entitled to vote;
|
|
•
|
a Non-U.S. Holder is a “controlled foreign corporation” for U.S. federal income tax purposes that is related to
us (directly or indirectly) through stock ownership;
|
|
•
|
a Non-U.S. Holder is a bank extending credit under a loan agreement in the ordinary course of its trade or business;
|
|
•
|
the payments on the notes are determined by reference to the income, profits, changes in the value of property or other attributes
of the debtor or a related party (other than payments that are based on the value of a security or index of securities that are,
and will continue to be, actively traded within the meaning of Section 1092(d) of the Code, and that are not nor will be a “United
States real property interest” as described in Section 897(c)(1) or 897(g) of the Code); or
|
|
•
|
the Non-U.S. Holder does not satisfy the certification requirements described below.
|
A Non-U.S. Holder generally will satisfy
the certification requirements if either: (A) the Non-U.S. Holder certifies to us or our agent, under penalties of perjury, that
it is a non-United States person and provides its name and address (which certification may generally be made on an IRS Form W-8BEN,
or a successor form), or (B) a securities clearing organization, bank, or other financial institution that holds customer securities
in the ordinary course of its trade or business (a “financial institution”) and holds the notes either (i) certifies
to us or our agent under penalties of perjury that either it or another financial institution has received the required statement
from the Non-U.S. Holder certifying that it is a non-United States person and furnishes us with a copy of the statement or (ii)
otherwise complies with applicable U.S. federal income and withholding tax certification requirements.
Payments not meeting the requirements
set forth above and thus subject to withholding of U.S. federal income tax may nevertheless be exempt from withholding (or subject
to withholding at a reduced rate) if the Non-U.S. Holder provides us with a properly executed IRS Form W-8BEN (or successor form)
claiming an exemption from, or reduction in, withholding under the benefit of a tax treaty, or IRS Form W-8ECI (or other applicable
form) stating that income on the notes is not subject to withholding tax because it is effectively connected with the conduct of
a trade or business within the United States as discussed below. To claim benefits under an income tax treaty, a Non-U.S. Holder
must obtain a taxpayer identification number and certify as to its eligibility under the appropriate treaty’s limitations
on benefits article, if applicable. In addition, special rules may apply to claims for treaty benefits made by Non-U.S. Holders
that are entities rather than individuals. A Non-U.S. Holder that is eligible for a reduced rate of
U.S. federal withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.
If a Non-U.S. Holder of a note is engaged
in the conduct of a trade or business within the United States and if interest (including any OID) on the note, or gain realized
on the sale, exchange, or other disposition of the note, is effectively connected with the conduct of such trade or business (and,
if certain tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States),
the Non-U.S. Holder, although exempt from U.S. federal withholding tax (provided that the applicable certification requirements
are satisfied), generally will be subject to U.S. federal income tax on such interest (including any OID) or gain on a net income
basis in the same manner as if it were a U.S. Holder. Non-U.S. Holders should read the material under the heading “—U.S.
Holders – Income Tax Considerations,” for a description of the U.S. federal income tax consequences of acquiring, owning,
and disposing of notes. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits
tax equal to 30% (or such lower rate provided by an applicable U.S. income tax treaty) of a portion of its earnings and profits
for the taxable year that are effectively connected with its conduct of a trade or business in the United States, subject to certain
adjustments.
U.S. Federal Estate Tax
Under current law, a note should generally
not be includible in the estate of a Non-U.S. Holder unless the individual actually or constructively owns 10% or more of the total
combined voting power of all classes of our stock entitled to vote or, at the time of the individual’s death, payments in
respect of that note would have been effectively connected with the conduct by the individual of a trade or business in the United
States.
Backup Withholding and Information Reporting
In general, in the case of a U.S. Holder,
other than certain exempt holders, we and other payors are required to report to the IRS all payments of principal, any premium,
and interest on the notes, and the accrual of OID. In addition, we and other payors generally are required to report to the IRS
any payment of proceeds of the sale of a note before maturity. Additionally, backup withholding generally will apply to any payments,
including payments of OID, if a U.S. Holder fails to provide an accurate taxpayer identification number and certify that the taxpayer
identification number is correct, the U.S. Holder is notified by the IRS that it has failed to report all interest and dividends
required to be shown on its U.S. federal income tax returns or a U.S. Holder does not certify that it has not underreported its
interest and dividend income.
In the case of a Non-U.S. Holder, backup
withholding and information reporting will not apply to payments made if the Non-U.S. Holder provides the required certification
that it is not a United States person, or the Non-U.S. Holder otherwise establishes an exemption, provided that the payor or withholding
agent does not have actual knowledge that the holder is a United States person, or that the conditions of any exemption are not
satisfied.
In addition, payments of the proceeds
from the sale of a note to or through a foreign office of a broker or the foreign office of a custodian, nominee, or other dealer
acting on behalf of a holder generally will not be subject to information reporting or backup withholding. However, if the broker,
custodian, nominee, or other dealer is a United States person, the government of the United States or the government of any state
or political subdivision of any state, or any agency or instrumentality of any of these governmental units, a controlled foreign
corporation for U.S. federal income tax purposes, a foreign partnership that is either engaged in a trade or business within the
United States or whose U.S. partners in the aggregate hold more than 50% of the income or capital interest in the partnership,
a foreign person 50% or more of whose gross income for a certain period is effectively connected with a trade or business within
the United States, or a U.S. branch of a foreign bank or insurance company, information reporting (but not backup withholding)
generally will be required with respect to payments made to a holder unless the broker, custodian, nominee, or other dealer has
documentation of the holder’s foreign status and the broker, custodian, nominee, or other dealer has no actual knowledge
to the contrary.
Payment of the proceeds from a sale
of a note to or through the U.S. office of a broker is subject to information reporting and backup withholding, unless the holder
certifies as to its non-United States person status or otherwise establishes an exemption from information reporting and backup
withholding.
Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against a holder’s U.S. federal income tax liability provided the
required information is furnished to the IRS.
Reportable Transactions
Applicable Treasury regulations require
taxpayers that participate in “reportable transactions” to disclose their participation to the IRS by attaching Form
8886 to their tax returns and to retain a copy of all documents and records related to the transaction. In addition, “material
advisors” with respect to such a transaction may be required to file returns and maintain records, including lists identifying
investors in the transaction, and to furnish those records to the IRS upon demand. A transaction may be a “reportable transaction”
based on any of several criteria, one or more of which may be present with respect to an investment in the notes. Whether an investment
in the notes constitutes a “reportable transaction” for any investor depends on the investor’s particular circumstances.
Investors should consult their own tax advisors concerning any possible disclosure obligation they may have for their investment
in the notes and should be aware that, should any “material advisor” determine that the return filing or investor list
maintenance requirements apply to this transaction, they would be required to comply with these requirements.
Additional Medicare Tax on Unearned Income
Certain U.S. Holders, including individuals,
estates and trusts, will be subject to an additional 3.8% Medicare tax on unearned income. For individual U.S. Holders, the additional
Medicare tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross
income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment
income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such
income. Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents and capital
gains. U.S. Holders are urged to consult their own tax advisors regarding the implications of the additional Medicare tax resulting
from an investment in the notes.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act
(“FATCA”) will impose a 30% U.S. withholding tax on certain U.S. source payments, including interest (and OID), dividends,
other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property
of a type which can produce U.S. source interest or dividends (“Withholdable Payments”), if paid to a foreign financial
institution (including amounts paid to a foreign financial institution on behalf of a holder), unless such institution enters into
an agreement with Treasury to collect and provide to Treasury certain information regarding U.S. financial account holders, including
certain account holders that are foreign entities with U.S. owners, with such institution or otherwise complies with FATCA. FATCA
also generally imposes a withholding tax of 30% on Withholdable Payments made to a non-financial foreign entity unless such entity
provides the withholding agent with a certification that it does not have any substantial U.S. owners or a certification identifying
the direct and indirect substantial U.S. owners of the entity. Under certain circumstances, a holder may be eligible for refunds
or credits of such taxes.
These withholding and reporting requirements
will generally apply to U.S. source periodic payments made after June 30, 2014 and to payments of gross proceeds from a sale or
redemption made after December 31, 2016. If we determine withholding is appropriate with respect to the notes, we will withhold
tax at the applicable statutory rate, and we will not pay any additional amounts in respect of such withholding. However, the withholding
tax will not be imposed on payments pursuant to obligations outstanding as of July 1, 2014. Foreign financial institutions and
non-financial foreign entities located in jurisdictions that have an intergovernmental agreement with the United States governing
FATCA may be subject to different rules. Prospective investors are urged to consult with their own tax advisors regarding the possible
implications of FATCA on their investment in the notes.
ERISA
CONSIDERATIONS
Each fiduciary of a pension, profit-sharing,
or other employee benefit plan subject to ERISA (a “Plan”), should consider the fiduciary standards of ERISA in the
context of the Plan’s particular circumstances before authorizing an investment in the notes. Accordingly, among other factors,
the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would
be consistent with the documents and instruments governing the Plan.
In addition, we and certain of our subsidiaries
and affiliates, including MLPF&S, may be each considered a party in interest within the meaning of ERISA, or a disqualified
person within the meaning of the Code, with respect to many Plans, as well as many individual retirement accounts and Keogh plans
(also “Plans”). Prohibited transactions within the meaning of ERISA or the Code would likely arise, for example, if
the notes are acquired by or with the assets of a Plan with respect to which MLPF&S or any of our other affiliates is a party
in interest, unless the notes are acquired under an exemption from the prohibited transaction rules. A violation of these prohibited
transaction rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or administrative exemption.
Under ERISA and various PTCEs issued
by the U.S. Department of Labor, exemptive relief may be available for direct or indirect prohibited transactions resulting from
the purchase, holding, or disposition of the notes. Those exemptions are PTCE 96-23 (for certain transactions determined by in-house
asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company separate accounts),
PTCE 84-14 (for certain transactions determined by independent qualified asset managers), and the exemption under Section 408(b)(17)
of ERISA and Section 4975(d)(20) of the Code for certain arm’s-length transactions with a person that is a party in interest
solely by reason of providing services to Plans or being an affiliate of such a service provider (the “Service Provider Exemption”).
Because we may be considered a party
in interest with respect to many Plans, the notes may not be purchased, held, or disposed of by any Plan, any entity whose underlying
assets include plan assets by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing plan assets of any Plan, unless such purchase, holding, or disposition is eligible for exemptive relief, including relief
available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or the Service Provider Exemption, or such purchase, holding, or disposition
is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or holder of the
notes will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the notes
that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such notes on behalf of or with plan assets of any
Plan or with any assets of a governmental, church, or foreign plan that is subject to any federal, state, local, or foreign law
that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code or (b) its purchase, holding,
and disposition are eligible for exemptive relief or such purchase, holding, and disposition are not prohibited by ERISA or Section
4975 of the Code (or in the case of a governmental, church, or foreign plan, any substantially similar federal, state, local, or
foreign law).
Further, any person acquiring or holding
the notes on behalf of any plan or with any plan assets shall be deemed to represent on behalf of itself and such plan that (x)
the plan is paying no more than, and is receiving no less than, adequate consideration within the meaning of Section 480(b) (17)
of ERISA in connection with the transaction or any redemption of the notes, (y) neither MLPF&S nor any of its affiliates directly
or indirectly exercises any discretionary authority or control or renders investment advice (as defined above) or otherwise acts
in a fiduciary capacity with respect to the assets of the plan within the meaning of ERISA and (z) in making the foregoing representations
and warranties, such person has applied sound business principles in determining whether fair market value will be paid, and has
made such determination acting in good faith.
The fiduciary investment considerations
summarized above generally apply to employee benefit plans maintained by private-sector employers and to individual retirement
accounts and other arrangements subject to Section 4975 of the Code, but generally do not apply to governmental plans (as defined
in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA), and foreign plans (as described in Section
4(b)(4) of ERISA). However, these other plans may be subject to similar provisions under applicable federal, state, local, foreign,
or other regulations, rules, or laws (“similar
laws”). The fiduciaries of plans subject to similar
laws should also consider the foregoing issues in general terms as well as any further issues arising under the applicable similar
laws.
In addition, any purchaser, that is
a Plan or a Plan Asset Entity or that is acquiring the notes on behalf of a Plan or a Plan Asset Entity, including any fiduciary
purchasing on behalf of a Plan or Plan Asset entity, will be deemed to have represented, in its corporate and its fiduciary capacity,
by its purchase and holding of the notes that (a) none of us, MLPF&S, or any of our respective affiliates is a “fiduciary”
(under Section 3(21) of ERISA, or under any final or proposed regulations thereunder, or with respect to a governmental, church,
or foreign plan under any substantially similar applicable law or regulation) with respect to the acquisition, holding or disposition
of the notes, or as a result of any exercise by us or our affiliates of any rights in connection with the notes, (b) no advice
provided by us or any of our affiliates has formed a primary basis for any investment decision by or on behalf of such purchaser
in connection with the notes and the transactions contemplated with respect to the notes, and (c) such purchaser recognizes and
agrees that any communication from us or any of our affiliates to the purchaser with respect to the notes is not intended by us
or any of our affiliates to be impartial investment advice and is rendered in its capacity as a seller of such notes and not a
fiduciary to such purchaser. Purchasers of the notes have exclusive responsibility for ensuring that their purchase, holding, and
disposition of the notes do not violate the prohibited transaction rules of ERISA or the Code or any similar regulations applicable
to governmental or church plans, as described above.
This discussion is a general summary
of some of the rules which apply to benefit plans and their related investment vehicles. This summary does not include all of the
investment considerations relevant to Plans and other benefit plan investors such as governmental, church, and foreign plans and
should not be construed as legal advice or a legal opinion. Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons
considering purchasing the notes on behalf of or with “plan assets” of any Plan or other benefit plan investor consult
with their legal counsel prior to directing any such purchase.
Bank of America Corp. Leveraged Index Return Notes Linked TO The S&P 500 Index (AMEX:SVW)
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부터 5월(5) 2024 으로 6월(6) 2024
Bank of America Corp. Leveraged Index Return Notes Linked TO The S&P 500 Index (AMEX:SVW)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024