|
Subject to Completion
Preliminary Term Sheet
dated September 30, 2022
|
Filed Pursuant to Rule 433
Registration Statement No. 333-261476
(To Prospectus dated December 29, 2021,
Prospectus Supplement dated December 29, 2021 and
Product Supplement STOCK ARN-1 dated February 16, 2022)
|
|
Units
$10 principal amount per unit
CUSIP No.
 |
Pricing Date*
Settlement Date*
Maturity Date*
|
October , 2022
November , 2022
December , 2023
|
|||
|
*Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”)
|
|||||
|
Accelerated Return Notes® Linked to a Basket of
Three Financial Sector Stocks
◾ Maturity of approximately 14 months
◾ 3-to-1 upside exposure to increases in
the Basket, subject to a capped return of [25.50% to 29.50%]
◾ The
Basket will be comprised of the common stocks of The Goldman Sachs Group, Inc., JPMorgan Chase & Co. and Morgan Stanley (the “Basket Stocks”).
◾ 1-to-1 downside exposure to decreases
in the Basket, with up to 100.00% of your investment at risk
◾ All payments occur at maturity and are
subject to the credit risk of The Bank of Nova Scotia
◾ No periodic interest payments
◾ In addition to the underwriting
discount set forth below, the notes include a hedging-related charge of $0.05 per unit. See “Structuring the Notes”
◾ Limited secondary market liquidity,
with no exchange listing
◾ The notes are unsecured debt securities and are not savings accounts or
insured deposits of a bank. The notes are not insured or guaranteed by the Canada Deposit Insurance Corporation (the “CDIC”), the U.S. Federal Deposit Insurance Corporation (the “FDIC”), or any other governmental agency of Canada,
the United States or any other jurisdiction
|
|||||
The notes are being issued by The Bank of Nova Scotia (“BNS”). There are important differences between the notes and a conventional debt security, including different investment risks and
certain additional costs. See “Risk Factors” beginning on page TS-6 of this term sheet, “Additional Risk Factors” on page TS-7 of this term sheet and “Risk Factors” beginning on page PS-6 of product supplement STOCK ARN-1.
The initial estimated value of the notes as of the pricing date is expected to be between $9.05 and $9.41 per unit, which is less than the public offering price listed below.
See “Summary” on the following page, “Risk Factors” beginning on page TS-6 of this term sheet and “Structuring the Notes” on page TS-16 of this term sheet for additional information. The actual value of your notes at any time will reflect many
factors and cannot be predicted with accuracy.
None of the U.S. Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note Prospectus (as
defined below) is truthful or complete. Any representation to the contrary is a criminal offense.
|
Per Unit
|
Total
|
|
|
Public offering price(1)
|
$10.000
|
$
|
|
Underwriting discount(1)
|
$ 0.175
|
$
|
|
Proceeds, before expenses, to BNS
|
$ 9.825
|
$
|
| (1) |
For any purchase of 300,000 units or more in a single transaction by an individual investor or in combined transactions with the investor’s household in this offering, the public offering price and the underwriting discount will be
$9.95 per unit and $0.125 per unit, respectively. See “Supplement to the Plan of Distribution” below.
|
The notes:
|
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
BofA Securities
October , 2022
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Summary
The Accelerated Return Notes® Linked to a Basket of Three Financial Sector Stocks due December , 2023 (the “notes”) are our senior unsecured debt securities. The notes are not guaranteed or
insured by the CDIC or the FDIC, and are not, either directly or indirectly, an obligation of any third party. The notes are not bail-inable debt securities (as defined in the prospectus). The notes will rank
equally with all of our other unsecured senior debt. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of BNS. The notes provide you a leveraged return, subject to a cap, if the
Ending Value of the Market Measure, which is the basket of three financial sector stocks described below (the “Basket”), is greater than the Starting Value. If the Ending Value is equal to the Starting Value, you will receive the principal amount
of your notes. If the Ending Value is less than the Starting Value, you will lose all or a portion of the principal amount of your notes. Any payments on the notes will be calculated based on the $10 principal amount per unit and will depend on
the performance of the Basket, subject to our credit risk. See “Terms of the Notes” below.
The Basket will be comprised of the common stock of each of The Goldman Sachs Group, Inc., JPMorgan Chase & Co. and Morgan Stanley (collectively, the “Basket Stocks”). Each Basket Stock will be
given an approximately equal weight on the pricing date.
The economic terms of the notes (including the Capped Value) are based on our internal funding rate, which is the rate we would pay to borrow funds through the issuance of market-linked notes, and the
economic terms of certain related hedging arrangements. Our internal funding rate is typically lower than the rate we would pay when we issue conventional fixed rate debt securities. This difference in funding rate, as well as the underwriting
discount and the hedging related charge described below, will reduce the economic terms of the notes to you and the initial estimated value of the notes on the pricing date. 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.
On the cover page of this term sheet, we have provided the initial estimated value range for the notes. This range of estimated values was determined by reference to our internal pricing models, which
take into consideration certain factors, such as our internal funding rate on the pricing date and our assumptions about market parameters. For more information about the initial estimated value and the structuring of the notes, see “Structuring
the Notes” on page TS-16.
|
Terms of the Notes
|
|
Issuer:
|
The Bank of Nova Scotia (“BNS”)
|
||
|
Principal
Amount:
|
$10.00 per unit
|
||
|
Term:
|
Approximately 14 months
|
||
|
Market Measure:
|
An approximately equally weighted basket of three financial sector stocks comprised of the common stock of each The Goldman Sachs Group, Inc. (NYSE symbol: “GS”),
JPMorgan Chase & Co. (NYSE symbol: “JPM”), and of Morgan Stanley (NYSE symbol: “MS”) (each, an “Underlying Company”).
|
||
|
Starting Value:
|
The Starting Value will be set to 100.00 on the pricing date.
|
||
|
Ending Value:
|
The value of the Basket on the calculation day, as described under “The Basket” on page TS-9. The scheduled calculation day is subject to postponement in the event of
Market Disruption Events, as described beginning on page PS-21 of product supplement STOCK ARN-1.
|
||
|
Participation
Rate:
|
300.00%
|
||
|
Capped Value:
|
[$12.55 to $12.95] per unit, which represents a return of [25.50% to 29.50%] over the principal amount. The actual Capped Value will be determined on the pricing
date.
|
||
|
Calculation Day:
|
Approximately the fifth scheduled trading day immediately preceding the maturity date.
|
||
|
Price Multiplier:
|
1 for each Basket Stock, subject to adjustment for certain corporate events relating to the Basket Stocks described beginning on page PS-21 of product supplement
STOCK ARN-1.
|
||
|
Fees and
Charges:
|
The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in “Structuring the Notes” on page
TS-16.
|
||
|
Calculation
Agent:
|
BofA Securities, Inc. (“BofAS”)
|
|
Redemption Amount Determination
|
|
On the maturity date, you will receive a cash payment per unit determined as follows:
|
 |
| |
The terms and risks of the notes are contained in this term sheet and in the following:
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
| ◾ |
Product supplement STOCK ARN-1 dated February 16, 2022:
|
| ◾ |
Prospectus supplement dated December 29, 2021:
|
| ◾ |
Prospectus dated December 29, 2021:
|
These documents (together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated above or
obtained from Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) or BofAS by calling 1-800-294-1322. Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering.
Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement
STOCK ARN-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to BNS.
Investor Considerations
|
You may wish to consider an investment in the notes if:
|
| ◾ |
You anticipate that the value of the Basket will increase moderately from the Starting Value to the Ending Value.
|
| ◾ |
You are willing to risk a substantial or entire loss of principal if the value of the Basket decreases from the Starting Value to the Ending Value.
|
| ◾ |
You accept that the return on the notes will be capped.
|
| ◾ |
You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
|
| ◾ |
You are willing to forgo dividends or other benefits of owning shares of the Basket Stocks.
|
| ◾ |
You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness,
our internal funding rate and fees and charges on the notes.
|
|
◾
|
You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount.
|
|
The notes may not be an appropriate investment for you if:
|
| ◾ |
You believe that the value of the Basket will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
|
| ◾ |
You seek principal repayment or preservation of capital.
|
| ◾ |
You seek an uncapped return on your investment.
|
| ◾ |
You seek interest payments or other current income on your investment.
|
| ◾ |
You want to receive dividends or other distributions paid on the Basket Stocks.
|
| ◾ |
You seek an investment for which there will be a liquid secondary market.
|
|
◾
|
You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.
|
|
|
We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Hypothetical Payout Profile and Examples of Payments at
Maturity
The below graph is based on hypothetical numbers and values.
Accelerated Return Notes®
This graph reflects the returns on the notes, based on the Participation Rate of 300% and a hypothetical Capped Value of $12.75 per unit (the midpoint of the Capped Value range of [$12.55 to $12.95]). The
green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the Basket Stocks, excluding dividends.
This graph has been prepared for purposes of illustration only.
|
|
The following table and examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They illustrate the calculation of the Redemption Amount and total rate of return based
on the Starting Value of 100, the Participation Rate of 300%, a hypothetical Capped Value of $12.75 per unit and a range of hypothetical Ending Values. The actual amount you receive and the resulting total rate of
return will depend on the actual Ending Value and Capped Value, and whether you hold the notes to maturity. The following examples do not take into account any tax consequences from investing in the notes.
For recent hypothetical values of the Basket, see “The Basket” section below. For recent actual prices of the Basket Stocks, see “The Basket Stocks” section below. The Ending
Value will not include any income generated by dividends paid on the Basket Stocks, which you would otherwise be entitled to receive if you invested in those stocks directly. In addition, all payments on the notes are subject to issuer credit
risk.
|
Ending Value
|
Percentage Change from the
Starting Value to the Ending Value
|
Redemption Amount per
Unit
|
Total Rate of Return on the
Notes
|
|||
|
0.00
|
-100.00%
|
$0.00
|
-100.00%
|
|||
|
50.00
|
-50.00%
|
$5.00
|
-50.00%
|
|||
|
80.00
|
-20.00%
|
$8.00
|
-20.00%
|
|||
|
90.00
|
-10.00%
|
$9.00
|
-10.00%
|
|||
|
94.00
|
-6.00%
|
$9.40
|
-6.00%
|
|||
|
97.00
|
-3.00%
|
$9.70
|
-3.00%
|
|||
|
100.00(1)
|
0.00%
|
$10.00
|
0.00%
|
|||
|
102.00
|
2.00%
|
$10.60
|
6.00%
|
|||
|
103.00
|
3.00%
|
$10.90
|
9.00%
|
|||
|
105.00
|
5.00%
|
$11.50
|
15.00%
|
|||
|
109.17
|
9.17%
|
$12.75 (2)
|
27.50%
|
|||
|
110.00
|
10.00%
|
$12.75
|
27.50%
|
|||
|
120.00
|
20.00%
|
$12.75
|
27.50%
|
|||
|
130.00
|
30.00%
|
$12.75
|
27.50%
|
|||
|
140.00
|
40.00%
|
$12.75
|
27.50%
|
|||
|
150.00
|
50.00%
|
$12.75
|
27.50%
|
|||
|
160.00
|
60.00%
|
$12.75
|
27.50%
|
| (1) |
The Starting Value will be set to 100.00 on the pricing date.
|
| (2) |
The Redemption Amount per unit cannot exceed the hypothetical Capped Value.
|
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Redemption Amount Calculation Examples
|
Example 1
|
|
|
The Ending Value is 80.00, or 80.00% of the Starting Value:
|
|
|
Starting Value:
|
100.00 |
|
Ending Value:
|
80.00 |
 |
= $8.00 Redemption Amount per unit
|
|
Example 2
|
|
|
The Ending Value is 103.00, or 103.00% of the Starting Value:
|
|
|
Starting Value:
|
100.00 |
|
Ending Value:
|
103.00 |
 |
= $10.90 Redemption Amount per unit
|
|
Example 3
|
|
|
The Ending Value is 130.00, or 130.00% of the Starting Value:
|
|
|
Starting Value:
|
100.00 |
|
Ending Value:
|
130.00 |
 |
= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $12.75 per unit
|
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review
the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-6 of product supplement STOCK ARN-1, page S-2 of the prospectus supplement, and page 7 of the prospectus identified above. We also
urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
Structure-Related Risks
| ◾ |
Depending on the performance of the Basket as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
|
| ◾ |
Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
|
| ◾ |
Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the Basket Stocks.
|
Market Measure-Related Risks
| ◾ |
No Underlying Company will have any obligations relating to the notes, and none of us, MLPF&S or BofAS will perform any due diligence procedures with respect to any Underlying Company in connection with this offering.
|
| ◾ |
Changes in the prices of one or more of the Basket Stocks may be offset by changes in the prices of one or more of the other Basket Stocks.
|
| ◾ |
You will have no rights of a holder of the Basket Stocks, and you will not be entitled to receive any shares of the Basket Stocks or dividends or other distributions by any Underlying Company.
|
| ◾ |
While we, MLPF&S, BofAS or our respective affiliates may from time to time own securities of the Underlying Companies, we, MLPF&S, BofAS and our respective affiliates do not control any Underlying Company, and have not verified
any disclosure made by any Underlying Company.
|
| ◾ |
The Redemption Amount will not be adjusted for all corporate events that could affect a Basket Stock. See “Description of ARNs—Anti-Dilution Adjustments” beginning on page PS-21 of product supplement STOCK ARN-1.
|
Valuation- and Market-Related Risks
| ◾ |
Our initial estimated value of the notes will be lower than the public offering price of the notes. Our initial estimated value of the notes is only an estimate. The public offering price of the notes will exceed our initial estimated
value because it includes costs associated with selling and structuring the notes, as well as hedging our obligations under the notes with a third party, which may include BofAS or one of its affiliates. These costs include the
underwriting discount and an expected hedging related charge, as further described in “Structuring the Notes” on page TS-16.
|
| ◾ |
Our initial estimated value of the notes does not represent future values of the notes and may differ from others’ estimates. Our initial estimated value of the notes is determined by reference to our internal pricing models when the
terms of the notes are set. These pricing models consider certain factors, such as our internal funding rate on the pricing date, the expected term of the notes, market conditions and other relevant factors existing at that time, and our
assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different pricing models and assumptions could provide valuations for the notes that are different from our initial
estimated value. In addition, market conditions and other relevant factors in the future may change, and any of our assumptions may prove to be incorrect. On future dates, the market value of the notes could change significantly based on,
among other things, the performance of the Basket, changes in market conditions, our creditworthiness, interest rate movements and other relevant factors. 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. Our initial estimated value does not
represent a minimum price at which we or any agents would be willing to buy your notes in any secondary market (if any exists) at any time.
|
| ◾ |
Our initial estimated value is not determined by reference to credit spreads or the borrowing rate we would pay for our conventional fixed-rate debt securities. The internal funding rate used in the determination of our initial
estimated value of the notes generally represents a discount from the credit spreads for our conventional fixed-rate debt securities and the borrowing rate we would pay for our conventional fixed-rate debt securities. If we were to use
the interest rate implied by the credit spreads for our conventional fixed-rate debt securities, or the borrowing rate we would pay for our conventional fixed-rate debt securities, we would expect the economic terms of the notes to be
more favorable to you. Consequently, our use of an internal funding rate for the notes would have an adverse effect on the economic terms of the notes, the initial estimated value of the notes on the pricing date, and the price at which
you may be able to sell the notes in any secondary market.
|
| ◾ |
A trading market is not expected to develop for the notes. None of us, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at
any price in any secondary market.
|
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Conflict-Related Risks
| ◾ |
Our business, hedging and trading activities, and those of MLPF&S, BofAS and our respective affiliates (including trades in shares of the Basket Stocks) and any hedging and trading activities we, MLPF&S, BofAS or our respective
affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
|
| ◾ |
There may be potential conflicts of interest involving the calculation agent, which is BofAS. We have the right to appoint and remove the calculation agent.
|
General Credit Risks
| ◾ |
Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your
entire investment.
|
Tax-Related Risks
| ◾ |
The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary of U.S. Federal Income Tax Consequences” below.
|
| ◾ |
The conclusion that no portion of the interest paid or credited or deemed to be paid or credited on a note will be “Participating Debt Interest” subject to Canadian withholding tax is based in part on the current published
administrative position of the CRA. There cannot be any assurance that CRA’s current published administrative practice will not be subject to change, including potential expansion in the current administrative interpretation
of Participating Debt Interest subject to Canadian withholding tax. If, at any time, the interest paid or credited or deemed to be paid or credited on a note is subject to Canadian withholding tax, you will receive an amount that is less
than the Redemption Amount. You should consult your own adviser as to the potential for such withholding and the potential for reduction or refund of part or all of such withholding, including under any bilateral Canadian tax treaty the
benefits of which you may be entitled. For a discussion of the Canadian federal income tax consequences of investing in the notes, see “Summary of Canadian Federal Income Tax Consequences” below, “Canadian Taxation—Debt Securities” on
page 66 of the prospectus and “Supplemental Discussion of Canadian Federal Income Tax Consequences” on page PS-31 of product supplement STOCK ARN-1.
|
Additional Risk Factors
Additional Market Measure-Related Risks
The Basket Stocks are concentrated in one sector.
All of the Basket Stocks are issued by companies in the financial sector. Although an investment in the notes will not give holders any ownership or other direct interests in the Basket Stocks, the return on an
investment in the notes will be subject to certain risks associated with a direct equity investment in companies in the financial services sector. Accordingly, by investing in the notes, you will not benefit from the diversification which could
result from an investment linked to companies that operate in multiple sectors.
Adverse conditions in the financial sector may reduce your return on the notes.
All of the Basket Stocks are issued by companies whose primary lines of business are directly associated with the financial services sector. The profitability of these companies is largely dependent on the
availability and cost of capital funds, and can fluctuate significantly, particularly when market interest rates change. Credit losses resulting from financial difficulties of these companies’ customers can negatively impact the sector. In
addition, adverse international economic, business, or political developments, including with respect to the insurance sector, or to real estate and loans secured by real estate, could have a major effect on the value of the Basket. As a result
of these factors, the value of the notes may be subject to greater volatility and be more adversely affected by economic, political, or regulatory events relating to the financial services sector.
Economic conditions have adversely impacted the stock prices of many companies in the financial services sector, and may do so during the term of the notes.
In the past, international economic conditions have resulted, and may continue to result, in significant losses among many companies that operate in the financial services sector. These conditions have also
resulted, and may continue to result, in a high degree of volatility in the stock prices of financial institutions, and substantial fluctuations in the profitability of these companies. Numerous financial services companies have experienced
substantial decreases in the value of their assets, taken action to raise capital (including the issuance of debt or equity securities), or even ceased operations. Further, companies in the financial services sector have been subject to
unprecedented government actions and regulation, which may limit the scope of their operations and, in turn, result in a decrease in value of these companies. Any of these factors may have an adverse impact on the performance of the Basket. As a
result, the value of the Basket may be adversely affected by economic, political, or regulatory events affecting the financial services sector or one of the sub-sectors of the financial services sector. This in turn could adversely impact the
market value of the notes and decrease the Redemption Amount.
Additional Risk Factors Related to General Credit Considerations
The COVID-19 virus may have an adverse impact on BNS.
On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic. Governments in affected areas have imposed a number of measures designed to contain the outbreak,
including business
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
closures, travel restrictions, quarantines and cancellations of gatherings and events. The spread of COVID-19 has had disruptive effects in countries in which BNS operates and the global economy more widely, as well as causing increased
volatility and declines in financial markets. COVID-19 has materially impacted and continues to materially impact the markets in which BNS operates. If the pandemic is prolonged, or further diseases emerge that give rise to similar effects, the
adverse impact on the global economy could deepen and result in further declines in financial markets. A substantial amount of BNS’s business involves making loans or otherwise committing resources to specific companies, industries or countries.
The COVID-19 pandemic’s impact on such borrowers, industries and countries could have a material adverse effect on BNS’s financial results, businesses, financial condition or liquidity. The COVID-19 pandemic may also result in disruption to BNS’s
key suppliers of goods and services and result in increased unavailability of staff adversely impacting the quality and continuity of service to customers and the reputation of BNS. As a result, the business, results of operations, corporate
reputation and financial condition of BNS could be adversely impacted for a substantial period of time.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
The Basket
The Basket is designed to allow investors to participate in the percentage changes of the Basket Stocks from the Starting Value to the Ending Value. The Basket Stocks are described in the section “The Basket Stocks”
below. Each Basket Stock will be assigned an initial weight on the pricing date, as set forth in the table below.
For more information on the calculation of the value of the Basket, please see the section entitled “Description of ARNs—Basket Market Measures” beginning on page PS-27 of product supplement STOCK ARN-1.
If September 27, 2022 were the pricing date, for each Basket Stock, the Initial Component Weight, the Closing Market Price, the hypothetical Component Ratio and the initial contribution to the Basket value would be as
follows:
|
Basket Stock
|
Bloomberg
Symbol
|
Initial
Component
Weight
|
Closing
Market
Price(1)(2)
|
Hypothetical
Component
Ratio(1)(3)
|
Initial Basket
Value
Contribution
|
|
The Goldman Sachs Group,
Inc.
|
GS
|
33.34%
|
$291.38
|
0.11442103
|
33.34
|
|
JPMorgan Chase & Co.
|
JPM
|
33.33%
|
$105.85
|
0.31487955
|
33.33
|
|
Morgan Stanley
|
MS
|
33.33%
|
$79.48
|
0.41935078
|
33.33
|
|
Starting Value
|
100.00
|
| (1) |
The actual Closing Market Price of each Basket Stock and the resulting actual Component Ratios will be determined on the pricing date and will be set forth in the final term sheet that will be made available in connection with sales of
the notes.
|
| (2) |
These were the Closing Market Prices of the Basket Stocks on September 27, 2022.
|
| (3) |
Each hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket Stock (as a percentage) multiplied by 100.00, and then divided by the Closing Market Price of that Basket Stock on September 27, 2022 and
rounded to eight decimal places.
|
The calculation agent will calculate the Ending Value of the Basket by summing the products of the Closing Market Price for each Basket Stock on the calculation day multiplied by (a) its Price Multiplier on that day
and (b) the Component Ratio applicable to that Basket Stock. The Price Multiplier for each Basket Stock will initially be 1, and is subject to adjustment as described in product supplement STOCK ARN-1. If a Market Disruption Event occurs as to
any Basket Stock on the scheduled calculation day, the Closing Market Price of that Basket Stock will be determined as more fully described in the section entitled “Description of ARNs–Basket Market Measures—Ending Value of the Basket” beginning
on page PS-28 of product supplement STOCK ARN-1.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
While actual historical information on the Basket will not exist before the pricing date, the following graph sets forth the hypothetical historical performance of the Basket from January 1, 2012
through September 27, 2022. The graph is based upon actual daily historical prices of the Basket Stocks, hypothetical Component Ratios based on the Closing Market Prices of the Basket Stocks as of December 31, 2011, and a Basket value of 100.00
as of that date. This hypothetical historical data on the Basket is not necessarily indicative of the future performance of the Basket or what the value of the notes may be. Any hypothetical historical upward or downward trend in the value of the
Basket during any period set forth below is not an indication that the value of the Basket is more or less likely to increase or decrease at any time over the term of the notes.
Hypothetical Historical Performance of the Basket
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
The Basket Stocks
We have derived the following information from publicly available documents. We have not independently verified the accuracy or completeness of the following information.
Because each Basket Stock is registered under the Securities Exchange Act of 1934, each Underlying Company is required to file periodically certain financial and other information specified by the SEC. Information
provided to or filed with the SEC by the Underlying Companies can be located through the SEC’s website at http://www.sec.gov by reference to the applicable CIK number set forth below.
This term sheet relates only to the notes and does not relate to the Basket Stocks or to any other securities of the Underlying Companies. None of us, MLPF&S, BofAS or any of our respective affiliates has
participated or will participate in the preparation of any Underlying Company’s publicly available documents. None of us, MLPF&S, BofAS or any of our respective affiliates has made any due diligence inquiry with respect to any Underlying
Company in connection with the offering of the notes. None of us, MLPF&S, BofAS or any of our respective affiliates makes any representation that the publicly available documents or any other publicly available information regarding any
Underlying Company are accurate or complete. Furthermore, there can be no assurance that all events occurring prior to the date of this term sheet, including events that would affect the accuracy or completeness of these publicly available
documents that would affect the trading price of a Basket Stock, have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events concerning an Underlying Company
could affect the price of its Basket Stock and therefore could affect your return on the notes. The selection of the Basket Stocks is not a recommendation to buy or sell the Basket Stocks.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
The Goldman Sachs Group, Inc.
The Goldman Sachs Group, Inc. (“Goldman Sachs”) is a global investment banking and securities firm specializing in investment banking, trading and principal investments, asset management and
securities services for corporations, governments, financial institutions and high-net worth individuals. Goldman Sachs trades on the New York Stock Exchange under the symbol “GS”. Goldman Sachs’ CIK number is 0000886982.
The following graph shows the daily historical performance of Goldman Sachs on its primary exchange in the period from January 1, 2012 through September 27,
2022. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On September 27, 2022, the Closing Market Price of Goldman Sachs was
$291.38. The graph may have been adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.
Historical Performance of Goldman Sachs
This historical data on Goldman Sachs is not necessarily indicative of the future performance of Goldman Sachs or what the value of the notes may be. Any
historical upward or downward trend in the price per share of Goldman Sachs during any period set forth above is not an indication that the price per share of Goldman Sachs is more or less likely to increase or decrease at any time
over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the prices and trading patterns of Goldman Sachs.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
JPMorgan Chase & Co.
JPMorgan Chase & Co. (“JPMorgan”) provides financial services and retail banking services. JPMorgan provides services such as investment banking, treasury and securities services, asset
management, private banking, card member services, commercial banking, and home finance. JPMorgan serves business enterprises, institutions, and individuals. JPMorgan trades on the NYSE under the symbol “JPM.” JPMorgan’s CIK number is 0000019617.
The following graph shows the daily historical performance of JPMorgan on its primary exchange in the period from January 1, 2012 through September 27, 2022.
We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On September 27, 2022, the Closing Market Price of JPMorgan was $105.85. The
graph may have been adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.
Historical Performance of JPMorgan
This historical data on JPMorgan is not necessarily indicative of the future performance of JPMorgan or what the value of the notes may be. Any historical
upward or downward trend in the price per share of JPMorgan during any period set forth above is not an indication that the price per share of JPMorgan is more or less likely to increase or decrease at any time over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the prices and trading patterns of JPMorgan.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Morgan Stanley
Morgan Stanley (“Morgan Stanley”), a bank holding company, provides financial services. Morgan Stanley operates a securities business which serves individual and institutional investors and
investment banking clients. Morgan Stanley also operates an asset management business. Morgan Stanley trades on the NYSE under the symbol “MS.” Morgan Stanley’s CIK number is 0000895421.
The following graph shows the daily historical performance of Morgan Stanley on its primary exchange in the period from January 1, 2012 through September 27,
2022. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On September 27, 2022, the Closing Market Price of Morgan Stanley was
$79.48. The graph may have been adjusted to reflect certain corporate actions such as stock splits and reverse stock splits.
Historical Performance of Morgan Stanley
This historical data on Morgan Stanley is not necessarily indicative of the future performance of Morgan Stanley or what the value of the notes may be. Any
historical upward or downward trend in the price per share of Morgan Stanley during any period set forth above is not an indication that the price per share of Morgan Stanley is more or less likely to increase or decrease at any time over the
term of the notes.
Before investing in the notes, you should consult publicly available sources for the prices and trading patterns of Morgan Stanley.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Supplement to the Plan of Distribution
Under our distribution agreement with BofAS, BofAS will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.
MLPF&S will purchase the notes from BofAS for resale, and will receive a selling concession in connection with the sale of the notes in an amount up to the full amount of the underwriting discount set forth on the
cover of this term sheet.
We may deliver the notes against payment therefor in New York, New York on a date that is greater than two business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in
the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than two business days from the pricing
date, purchasers who wish to trade the notes more than two business days prior to the settlement date will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are
consenting to MLPF&S and/or one of its affiliates acting as a principal in effecting the transaction for your account.
MLPF&S and BofAS may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these prices will include MLPF&S’s
and BofAS’s trading commissions and mark-ups or mark-downs. MLPF&S and BofAS may act as principal or agent in these market-making transactions; however, neither is obligated to engage in any such transactions. At their discretion, for a
short, undetermined initial period after the issuance of the notes, MLPF&S and BofAS may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes. Any price offered by MLPF&S or
BofAS for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Basket and the remaining term of the notes. However, none of us, MLPF&S, BofAS or any of our respective
affiliates is obligated to purchase your notes at any price or at any time, and we cannot assure you that we, MLPF&S, BofAS or any of our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated
value of the notes.
The value of the notes shown on your account statement produced by MLPF&S will be based on BofAS’s estimate of the value of the notes if BofAS or another of its affiliates were to make a market in the notes, which
it is not obligated to do. That estimate will be based upon the price that BofAS may pay for the notes in light of then-prevailing market conditions, and other considerations, as mentioned above, and will include transaction costs. At certain
times, this price may be higher than or lower than the initial estimated value of the notes.
The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available to investors
in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding BNS or for any purpose other than that described in the immediately preceding
sentence.
An investor’s household, as referenced on the cover of this term sheet, will generally include accounts held by any of the following, as determined by MLPF&S in its
discretion and acting in good faith based upon information then available to MLPF&S:
| ◾ |
the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or
any other family relationship not directly above or below the individual investor;
|
| ◾ |
a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the
investor’s household as described above; and
|
| ◾ |
a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust
generally cannot be aggregated together with any purchases made by a trustee’s personal account.
|
Purchases in retirement accounts will not be considered part of the same household as an individual investor’s personal or other non-retirement account, except for individual retirement accounts (“IRAs”),
simplified employee pension plans (“SEPs”), savings incentive match plan for employees (“SIMPLEs”), and single-participant or owners only accounts (i.e., retirement accounts held by self-employed individuals, business owners or partners with no
employees other than their spouses).
Please contact your Merrill financial advisor if you have any questions about the application of these provisions to your specific circumstances or think you are eligible.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Structuring the Notes
The notes are our unsecured senior debt securities, the return on which is linked to the performance of the Basket. 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. The internal funding rate we use in pricing the market-linked note is typically lower than the rate we would pay when we issue conventional fixed-rate debt
securities of comparable maturity. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked notes, typically results in the initial
estimated value of the notes on the pricing date being less than their public offering price.
At maturity, we are required to pay the Redemption Amount to holders of the notes, which will be calculated based on the performance of the Basket and the $10 per unit principal amount. In order to meet these payment
obligations, 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 BofAS or one of its affiliates. The terms of these hedging arrangements
are determined by seeking bids from market participants, including MLPF&S, BofAS and its affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Basket Stocks, the
tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements will include a hedging related charge of approximately $0.05 per unit, reflecting an estimated profit to be credited to BofAS from these transactions. Since hedging
entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by BofAS or any third party hedge providers.
For further information, see “Risk Factors – Conflict-Related Risks” beginning on page PS-12 and “Use of Proceeds and Hedging” on page PS-17 of product supplement STOCK ARN-1.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Summary of Canadian Federal Income Tax Consequences
An investor should read carefully the description of principal Canadian federal income tax considerations under “Canadian Taxation” in the accompanying prospectus relevant to a holder (as defined on page 65 of the
prospectus) owning debt securities, and the description of principal Canadian federal income tax considerations under “Supplemental Discussion of Canadian Federal Income Tax Consequences” in the product supplement STOCK ARN-1. In addition to the
assumptions, limitations and conditions described therein, such discussion assumes that a Non-Resident Holder is not an entity in respect of which BNS is a “specified entity” as defined in proposals to amend the Income Tax Act (Canada) (the
“Act”) released by the Minister of Finance (Canada) on April 29, 2022 with respect to “hybrid mismatch arrangements”, as defined (the “Hybrid Mismatch Proposals”). In general terms, the Hybrid Mismatch Proposals provide that two entities will be
treated as specified entities in respect of one another if one entity, directly or indirectly, holds a 25% equity interest in the other entity, or a third entity, directly or indirectly, holds a 25% equity interest in both entities.
Such discussion further assumes that no amount paid or payable to a Non-Resident Holder will be the deduction component of a “hybrid mismatch arrangement” under which the payment arises within the meaning of proposed
paragraph 18.4(3)(b) of the Act contained in the Hybrid Mismatch Proposals.
Investors should note that the Hybrid Mismatch Proposals are in consultation form, are highly complex, and there remains significant uncertainty as to their interpretation and application. There can be no assurance
that the Hybrid Mismatch Proposals will be enacted in their current form, or at all.
Summary of U.S. Federal Income Tax Consequences
The following is a general description of certain U.S. federal tax considerations relating to the notes. Prospective purchasers of the notes should consult their tax advisors as to the consequences under the tax laws
of the country of which they are residents for tax purposes and the tax laws of the U.S. of acquiring, holding and disposing of the notes and receiving payments under the notes. This summary is based upon the law as in effect on the date of this
document and is subject to any change in law that may take effect after such date. We urge you to read the more detailed discussion in the “Material U.S. Federal Income Tax Consequences” section beginning on page PS-32 of the product supplement
STOCK ARN-1.
No statutory, regulatory, judicial or administrative authority directly discusses how the notes should be treated for U.S. federal income tax purposes. As a result, the U.S. federal income tax consequences of your
investment in the notes are uncertain. Accordingly, we urge you to consult your tax advisor as to the tax consequences of your investment in the notes (and of having agreed to the required tax treatment of your notes described below) and as to
the application of state, local or other tax laws to your investment in your notes and the possible effects of changes in federal or other tax laws.
Pursuant to the terms of the notes, BNS and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial ruling to the contrary, to characterize your notes as prepaid
derivative contracts with respect to the Basket. If your notes are so treated, you should generally recognize long-term capital gain or loss if you hold your notes for more than one year (and, otherwise, short-term capital gain or loss) upon the
taxable disposition of your notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your notes. The deductibility of capital losses is subject to limitations.
Based on certain factual representations received from us, our special U.S. tax counsel, Fried, Frank, Harris, Shriver & Jacobson LLP, is of the
opinion that it would be reasonable to treat your notes in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the notes, it is possible that your notes could alternatively be
treated for tax purposes as a single contingent payment debt instrument or pursuant to some other characterization, such that the timing and character of your income from the notes could differ materially and adversely from the treatment
described above.
Notice 2008-2. In 2007, the Internal Revenue Service (the “IRS”) released a notice that may affect the taxation of holders of the notes. According to Notice 2008-2, the IRS and
the U.S. Department of the Treasury (the “Treasury”) are actively considering whether a holder of an instrument such as the notes should be required to accrue ordinary income on a current basis. It is not possible to determine what guidance they
will ultimately issue, if any. It is possible, however, that under such guidance, holders of the notes will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The IRS and the Treasury are also
considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether non-U.S. holders of such instruments should be subject to withholding tax on any deemed income
accruals, and whether the special “constructive ownership rules” of Section 1260 of the Code should be applied to such instruments. Both U.S. and non-U.S. holders are urged to consult their tax advisors concerning the significance, and the
potential impact, of the above considerations.
Medicare Tax on Net Investment Income. U.S. holders that are individuals, estates or certain trusts are subject to an additional 3.8% tax on all or a portion of their “net
investment income,” or “undistributed net investment income” in the case of an estate or trust, which may include any income or gain realized with respect to the notes, to the extent of their net investment income or undistributed net investment
income (as the case may be) that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), $125,000 for a married
individual filing a separate return, or the dollar amount at which the highest tax bracket begins for an estate or trust. The 3.8% Medicare tax is determined in a different manner than the regular income tax. U.S. holders should consult their tax
advisors with respect to the 3.8% Medicare tax.
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Specified Foreign Financial Assets. U.S. holders may be subject to reporting obligations with respect to their notes if they do not hold their notes in an account maintained by a financial institution
and the aggregate value of their notes and certain other “specified foreign financial assets” (applying certain attribution rules) exceeds an applicable threshold. Significant penalties can apply if a U.S. holder is required to disclose its notes
and fails to do so.
Backup Withholding and Information Reporting. The proceeds received from a taxable disposition of the notes will be subject to information reporting unless you are an “exempt
recipient” and may also be subject to backup withholding at the rate specified in the Code if you fail to provide certain identifying information (such as an accurate taxpayer number, if you are a U.S. holder) or meet certain other conditions.
Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the required information is furnished to the IRS.
Non-U.S. Holders. If you are a non-U.S. holder, subject to Section 871(m) of the Code and FATCA, discussed below, you should generally not be subject to generally applicable
information reporting and backup withholding requirements with respect to payments on your notes if you comply with certain certification and identification requirements as to your non-U.S. status including providing us (and/or the applicable
withholding agent) a properly executed and fully completed applicable IRS Form W-8. Subject to Section 897 of the Code and Section 871(m) of the Code, discussed below, gain realized from the taxable disposition of a note generally will not be
subject to U.S. tax unless (i) such gain is effectively connected with a trade or business conducted by you in the U.S., (ii) you are a non-resident alien individual and are present in the U.S. for 183 days or more during the taxable year of such
taxable disposition and certain other conditions are satisfied or (iii) you have certain other present or former connections with the U.S.
Section 897. We will not attempt to ascertain whether any Underlying Company would be treated as a “United States real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the
Code. We also have not attempted to determine whether the notes should be treated as “United States real property interests” (“USRPI”) as defined in Section 897 of the Code. If any Underlying Company and/or the notes were so treated, certain
adverse U.S. federal income tax consequences could possibly apply, including subjecting any gain realized by a non-U.S. holder in respect of a note upon a sale, exchange or other taxable disposition of the note to U.S. federal income tax on a net
basis, and the proceeds from such a taxable disposition to a withholding tax. Non-U.S. holders should consult their tax advisors regarding the potential treatment of an Underlying Company for their notes as a USRPHC and/or the notes as USRPI.
Section 871(m). A 30% withholding tax (which may be reduced by an applicable income tax treaty) is imposed under Section 871(m) of the Code on certain “dividend equivalents” paid or deemed paid to a
non-U.S. holder with respect to a “specified equity-linked instrument” that references one or more dividend-paying U.S. equity securities or indices containing U.S. equity securities. The withholding tax can apply even if the instrument does not
provide for payments that reference dividends. Treasury regulations provide that the withholding tax applies to all dividend equivalents paid or deemed paid on specified equity-linked instruments that have a delta of one (“delta-one specified
equity-linked instruments”) issued after 2016 and to all dividend equivalents paid or deemed paid on all other specified equity-linked instruments issued after 2017. However, the IRS has issued guidance that states that the Treasury and the IRS
intend to amend the effective dates of the Treasury regulations to provide that withholding on dividend equivalents paid or deemed paid will not apply to specified equity-linked instruments that are not delta-one specified equity-linked
instruments and are issued before January 1, 2025.
Based on our determination that the notes are not “delta-one” with respect to any Basket Stock or any U.S. stocks comprising any Basket Stock, our special U.S. tax counsel is of the opinion that the notes should not be
delta-one specified equity-linked instruments and thus should not be subject to withholding on dividend equivalents. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Furthermore, the application of
Section 871(m) of the Code will depend on our determinations on the date the terms of the notes are set. If withholding is required, we will not make payments of any additional amounts.
Nevertheless, after the date the terms are set, it is possible that your notes could be deemed to be reissued for tax purposes upon the occurrence of certain events affecting the Basket Stocks or your notes and
following such occurrence your notes could be treated as delta-one specified equity-linked instruments that are subject to withholding on dividend equivalents. It is also possible that withholding tax or other tax under Section 871(m) of the
Code could apply to the notes under these rules if you enter, or have entered, into certain other transactions in respect of the Basket Stocks or your notes. If you enter, or have entered, into other transactions in respect of the Basket Stocks
or your notes, you should consult your tax advisor regarding the application of Section 871(m) of the Code to your notes in the context of your other transactions.
Because of the uncertainty regarding the application of the 30% withholding tax on dividend equivalents to the notes, you are urged to consult your tax advisor regarding the potential application of Section 871(m) of
the Code and the 30% withholding tax to an investment in the notes.
U.S. Federal Estate Tax Treatment of Non-U.S. Holders. A note may be subject to U.S. federal estate tax if an individual non-U.S. holder holds the note at the time of his or her
death. The gross estate of a non-U.S. holder domiciled outside the U.S. includes only property situated in the U.S. Individual non-U.S. holders should consult their tax advisors regarding the U.S. federal estate tax consequences of holding the
notes at death.
FATCA. The Foreign Account Tax Compliance Act (“FATCA”) was enacted on March 18, 2010, and imposes a 30% U.S. withholding tax on “withholdable payments” (i.e., certain
U.S.-source payments, including interest (and original issue discount), dividends, other
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
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) and “passthru payments” (i.e., certain payments
attributable to withholdable payments) made to certain foreign financial institutions (and certain of their affiliates) unless the payee foreign financial institution agrees (or is required), among other things, to disclose the identity of any
U.S. individual with an account at the institution (or the relevant affiliate) and to annually report certain information about such account. FATCA also requires withholding agents making withholdable payments to certain foreign entities that do
not disclose the name, address, and taxpayer identification number of any substantial U.S. owners (or do not certify that they do not have any substantial U.S. owners) to withhold tax at a rate of 30%. Under certain circumstances, a holder may be
eligible for refunds or credits of such taxes.
Pursuant to final and temporary Treasury regulations and other IRS guidance, the withholding and reporting requirements under FATCA will generally apply to certain “withholdable payments”, will not apply to gross
proceeds on a sale or disposition, and will apply to certain foreign passthru payments only to the extent that such payments are made after the date that is two years after final regulations defining the term “foreign passthru payment” are
published. If withholding is required, we (or the applicable paying agent) will not be required to pay additional amounts with respect to the amounts so withheld. Foreign financial institutions and non-financial foreign entities located in
jurisdictions that have an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules.
Investors should consult their own advisors about the application of FATCA, in particular if they may be classified as financial institutions (or if they hold their notes through a foreign entity) under the FATCA
rules.
Proposed Legislation. In 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of notes purchased after the bill was enacted to accrue interest income over the term of
the notes despite the fact that there will be no interest payments over the term of the notes.
Furthermore, in 2013 the House Ways and Means Committee released in draft form certain proposed legislation relating to financial instruments. If it had been enacted, the effect of this legislation generally would have
been to require instruments such as the notes to be marked to market on an annual basis with all gains and losses to be treated as ordinary, subject to certain exceptions.
It is not possible to predict whether any similar or identical bills will be enacted in the future, or whether any such bill would affect the tax treatment of your notes. You are urged to consult your tax advisor
regarding the possible changes in law and their possible impact on the tax treatment of your notes.
Both U.S. and non-U.S. holders should consult their tax advisors regarding the U.S. federal income tax consequences of an investment in the notes, as well as any tax consequences arising under the
laws of any state, local or non-U.S. taxing jurisdiction (including that of BNS).
|
Accelerated Return Notes®
Linked to a Basket of Three Financial Sector Stocks due December , 2023 |
Where You Can Find More Information
We have filed a registration statement (including a product supplement, a prospectus supplement and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus,
including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S or BofAS toll-free at 1-800-294-1322.
“Accelerated Return Notes®” and “ARNs®” are registered service marks of Bank of America Corporation, the parent company of MLPF&S and BofAS.