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Product Supplement No. EQUITY ARN-1
(To Prospectus dated June 18, 2019)
December 29, 2020
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-231751
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Accelerated Return Notes® “ARNs®” Linked to One or More Equity Indices or Exchange Traded Funds
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Accelerated Return Notes® (”ARNs”) are senior unsecured debt securities issued by The Toronto-Dominion Bank (“TD”).
Any payments due on ARNs, including any repayment of principal, will be subject to the credit risk of TD.
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ARNs do not guarantee the return of principal at maturity, and we will not pay interest on ARNs. Instead, the return on ARNs will be based on the performance of an underlying “Market Measure,”
which will be an equity index (an “Index”), an exchange traded fund (“an Underlying Fund”), or a basket of the foregoing.
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ARNs provide an opportunity to earn a multiple (which will be 3 times, unless otherwise set forth in the applicable pricing supplement (which we refer to as a “term sheet”)) of the positive
performance of the Market Measure, up to a specified cap (the “Capped Value”), while exposing you to any negative performance of the Market Measure on a 1-to-1 basis.
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If the value of the Market Measure increases from its Starting Value to its Ending Value (each as defined below), you will receive at maturity a cash payment per unit (the “Redemption Amount”) that
equals the principal amount plus a multiple of that increase, up to the Capped Value.
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If the value of the Market Measure decreases from its Starting Value to its Ending Value, you will be subject to 1-to-1 downside exposure to that decrease. In such case, you may lose all or a significant portion of the principal amount
of your ARNs.
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This product supplement describes the general terms of ARNs, the risk factors to consider before investing, the general manner in which they may be offered and sold, and other relevant information.
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For each offering of ARNs, we will provide you with a term sheet that will describe the specific terms of that offering, including the specific Market Measure, the Capped Value, and certain risk factors. The
applicable term sheet will identify, if applicable, any additions or changes to the terms specified in this product supplement.
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ARNs will be issued in denominations of whole units. Unless otherwise set forth in the applicable term sheet, each unit will have a principal amount of $10. The applicable term sheet may also
set forth a minimum number of units that you must purchase.
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Unless otherwise specified in the applicable term sheet, ARNs will not be listed on a securities exchange or quotation system.
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BofA Securities, Inc. (“BofAS”) and one or more of its affiliates and TD Securities (USA)
LLC (“TDS”) may act as our agents to offer ARNs, and each of BofAS and TDS will act in a principal capacity in such role.
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ARNs are senior unsecured debt securities issued by TD, are not guaranteed or insured by the Canada Deposit Insurance Corporation (the “CDIC”), the
U.S. Federal Deposit Insurance Corporation (the “FDIC”) or any other governmental agency or instrumentality of any jurisdiction, and are not, either directly or indirectly, an obligation of any
third party. ARNs have complex features and investing in ARNs involves risks not associated with an investment in conventional debt securities. Potential purchasers of ARNs should consider the information
in “Risk Factors” beginning on page PS-7 of this product supplement and page 1 of the accompanying prospectus. You may lose all or a significant portion of your investment in ARNs.
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 passed upon the adequacy or accuracy of this product supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
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BofA Securities
TABLE OF CONTENTS
ARNs® and “Accelerated Return Notes®” are registered service marks of Bank of America Corporation, the parent corporation of BofAS.
SUMMARY
The information in this “Summary” section is qualified in its entirety by the more detailed explanation set forth elsewhere in this product supplement and in the accompanying
prospectus, as well as the applicable term sheet. None of us, BofAS or TDS have authorized any other person to provide you with any information different from the information set forth in these documents. If anyone provides you with different
or inconsistent information about ARNs, you should not rely on it.
Key Terms:
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General:
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ARNs are senior unsecured debt securities issued by TD, are not guaranteed or insured by the CDIC or the FDIC, and are not, either directly or indirectly, an obligation of any third
party. As further described in the accompanying prospectus, ARNs rank equally with all of our other senior unsecured debt from time to time outstanding. Any payments due on ARNs, including any repayment
of principal, are subject to our credit risk.
The return on ARNs will be based on the performance of a Market Measure and there is no guaranteed return of principal at maturity. Therefore, you may lose all or a significant portion of
your investment if the value of the Market Measure decreases from the Starting Value to the Ending Value.
Each issue of ARNs will mature on the date set forth in the applicable term sheet. We cannot redeem ARNs at any earlier date, except under the limited circumstances set forth below. We
will not make any payments on ARNs until maturity, and you will not receive any interest payments.
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Market
Measure:
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The Market Measure may consist of one or more of the following:
• Underlying Funds;
• U.S. broad-based Indices;
• U.S. sector or style-based Indices;
• non-U.S. or global Indices; or
• any combination of the above.
The Market Measure may consist of a group, or “Basket,” of the foregoing. We refer to each Index or Underlying Fund included in any Basket as a “Basket Component.” If the Market Measure to which your ARNs are linked is a Basket, the Basket Components will be set forth in the applicable term sheet.
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Market
Measure
Performance:
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The performance of the Market Measure will be measured according to the percentage change of the Market Measure from its Starting Value to its Ending Value.
Unless otherwise specified in the applicable term sheet:
In the case of an Index, the “Starting Value” will be the closing level of the Index on the date when ARNs
are priced for initial sale to the public (the “pricing date”).
In the case of an Underlying Fund, the “Starting Value” will be the Closing Market Price, as defined under “Description of ARNs––Closing Market
Price for Underlying Funds”, of the Underlying Fund on the pricing date.
If the Market Measure consists of a Basket, the Starting Value will be equal to 100. See “Description of ARNs—Basket Market Measures.”
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In the case of an Index, the “Ending Value” will equal the average of the closing levels of the Index on each calculation day during the Maturity
Valuation Period (each as defined below).
In the case of an Underlying Fund, the “Ending Value” will equal the average of the Closing Market Price of the Underlying Fund multiplied by
the Price Multiplier on each calculation day during the Maturity Valuation Period (each as defined below).
If a Market Disruption Event (as defined herein) occurs and is continuing on a scheduled calculation day, or if certain other events occur, the calculation agent will determine the
Ending Value as set forth in the section “Description of ARNs—The Starting Value and the Ending Value—Ending Value.”
If the Market Measure consists of a Basket, the Ending Value will be determined as described in “Description of ARNs—Basket Market Measures—Ending Value of the Basket.”
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Participation
Rate:
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The rate at which investors participate in any increase in the value of the Market Measure, as calculated below. The Participation Rate will be 300% for ARNs, unless otherwise set forth
in the applicable term sheet.
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Capped Value:
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The maximum Redemption Amount. Your investment return is limited to the amount represented by the Capped Value specified in the applicable term sheet. We will determine the applicable
Capped Value on the pricing date of each issue of ARNs.
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Price Multiplier:
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Unless otherwise set forth in the applicable term sheet, the “Price Multiplier” for each Underlying Fund will be 1, and will be subject to
adjustment for certain events relating to an Underlying Fund described below under “Description of ARNs—Anti-Dilution and Discontinuance Adjustments Relating to Underlying Funds.”
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Redemption
Amount at
Maturity:
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At maturity, you will receive a Redemption Amount that is greater than the principal amount if the value of the Market Measure increases from the Starting Value to the Ending Value.
However, in no event will the Redemption Amount exceed the Capped Value. If the value of the Market Measure does not change from the Starting Value to the Ending Value, you will receive a Redemption Amount that equals the principal
amount. If the value of the Market Measure decreases from the Starting Value to the Ending Value, you will be subject to 1-to-1 downside exposure to that decrease, and you will receive a Redemption Amount that is less than the
principal amount.
Any payments due on ARNs, including any repayment of principal, is subject to our credit risk as issuer of ARNs. If we were to default on our obligations, you could
lose some or all of your investment.
The Redemption Amount, denominated in U.S. dollars, will be calculated as follows:
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Principal at
Risk:
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You may lose all or a significant portion of the principal amount of your ARNs. Further, if you sell your ARNs prior to maturity, you may find that the market value per ARN is less
than the price that you paid for your ARNs.
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Maturity
Valuation
Period
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The “Maturity Valuation Period” will be the period consisting of one or more calculation days shortly before the maturity date. The timing and
length of the period will be set forth in the applicable term sheet.
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Calculation
Agent:
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The calculation agent will make all determinations associated with ARNs. Unless otherwise set forth in the applicable term sheet, we (or one of our affiliates) and BofAS (or one of its
affiliates) may act as joint calculation agents for ARNs. Alternatively, we will appoint BofAS or one of its affiliates to act as calculation agent for ARNs. When we refer to a “calculation agent” in this product supplement or in any
term sheet, we are referring to the applicable calculation agent or joint calculation agents, as the case may be. See the section entitled “Description of ARNs—Role of the Calculation Agent.”
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Agents:
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BofAS and one or more of its affiliates and TDS will act as our agents in connection with each offering of ARNs and will receive an underwriting discount based on the number of units of
ARNs sold. See the section entitled “Supplemental Plan of Distribution (Conflicts of Interest)” for additional information. None of the agents is your fiduciary or advisor solely as a result of the making of any offering of ARNs, and
you should not rely upon this product supplement, the applicable term sheet, or the accompanying prospectus as investment advice or a recommendation to purchase ARNs.
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Listing:
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Unless otherwise specified in the applicable term sheet, ARNs will not be listed on a securities exchange or quotation system.
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This product supplement relates only to ARNs and does not relate to any Index or Underlying Fund that comprises the Market Measure described in any term sheet. You should
read carefully the entire accompanying prospectus and this product supplement, together with the applicable term sheet, to understand fully the terms of your ARNs, as well as the tax and other considerations important to you in making a
decision about whether to invest in any ARNs. In particular, you should review carefully the sections in this product supplement and the accompanying prospectus entitled “Risk Factors,” which highlight a number of risks of an investment in
ARNs, to determine whether an investment in ARNs is appropriate for you. If the terms or information described in the applicable term sheet and/or this product supplement are inconsistent with those described in this product supplement and/or
in the accompanying prospectus, as applicable, the following hierarchy will govern: first, the applicable term sheet; second, this product supplement; and last, the accompanying prospectus. You should carefully review the applicable term
sheet to understand the specific terms of your ARNs.
Neither we nor any agent is making an offer to sell ARNs in any jurisdiction where the offer or sale is not permitted. This product supplement and the accompanying prospectus
are not an offer to sell ARNs to anyone, and are not soliciting an offer to buy ARNs from anyone, in any jurisdiction where the offer or sale is not permitted.
Certain capitalized terms used and not defined in this product supplement have the meanings ascribed to them in the accompanying prospectus. Unless otherwise indicated or unless the context
requires otherwise, all references in this product supplement to “we,” “us,” “our,” or similar references are to TD.
You are urged to consult with your own attorneys and business and tax advisors before making a decision to purchase any ARNs.
RISK FACTORS
Your investment in ARNs is subject to investment risks, many of which differ from those of a conventional debt security. Your decision to purchase ARNs should
be made only after carefully considering the risks, including those discussed below, together with the risk information contained in the accompanying prospectus and applicable term sheet, in light of your particular circumstances. ARNs are not an
appropriate investment for you if you are not knowledgeable about the material terms of ARNs or investments in equity or equity-based securities in general.
Structure-Related Risks
Your investment may result in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount on ARNs at
maturity. The return on ARNs will be based on the performance of the Market Measure and if the value of the Market Measure decreases from the Starting Value to the Ending Value, you may lose all or a significant portion of your investment.
Your return on ARNs may be less than the yield on a conventional fixed- or floating-rate debt security of comparable maturity. There will
be no periodic interest payments on ARNs as there would be on a conventional fixed-rate or floating-rate debt security having the same maturity. Any return that you receive on ARNs 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 ARNs may not reflect the full opportunity cost to you when you consider factors, such as inflation, that affect the time value of money.
Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in an
Underlying Fund or the securities or other assets included in Market Measure, as applicable. The appreciation potential of ARNs is limited to the Capped Value. You will not receive a Redemption Amount greater than the Capped Value,
regardless of the appreciation of the Market Measure. In contrast, a direct investment in the Market Measure (or any securities, commodities or other assets represented by the Market Measure (the “Underlying
Constituents”)) would allow you to receive the full benefit of any appreciation in the value of the Market Measure (or those Underlying Constituents).
In addition, unless otherwise set forth in the applicable term sheet and in “Description of ARNs––Anti-Dilution and Discontinuance Adjustments Relating to Underlying Funds” of this
product prospectus supplement, the Ending Value will not reflect the value of dividends paid, or distributions made, on an Underlying Fund or any Underlying Constituents included in the Market Measure, or any other rights associated with those
securities. Thus, any return on the ARNs will not reflect the return you would realize if you actually owned the Market Measure or any of its Underlying Constituents.
Additionally, the Market Measure may consist of one or more Indices or Underlying Funds that include securities traded in a non-U.S. currency and, therefore, are calculated in such
non-U.S. currency. If the value of that currency strengthens against the U.S. dollar during the term of your ARNs, you may not obtain the benefit of that increase, which you would have received if you had owned the securities included those
Indices or held by those Underlying Fund, as applicable.
Payments on ARNs are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of, and any amounts payable
on, ARNs. ARNs are our senior unsecured debt securities, and are not, either directly or indirectly,
an obligation of any third party. As a result, your receipt of the Redemption Amount at maturity is dependent upon our ability to repay our obligations on the maturity date, regardless of whether
the Market Measure increases from the Starting Value to the Ending Value. No assurance can be given as to what our financial condition will be on the maturity date. If we become unable to meet our financial obligations as they become due, you may
not receive any amount payable under the terms of ARNs.
In addition, 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 the spread between the yield on our securities and the yield on U.S. Treasury securities (the “credit spread”) prior to the maturity date may adversely affect
the market value of ARNs. However, because your return on ARNs depends upon factors in addition to our ability to pay our obligations, such as the value of the Market Measure, an improvement in our credit ratings will not reduce the other
investment risks related to ARNs.
Market Measure-Related Risks
You must rely on your own evaluation of the merits of an investment linked to the applicable Market Measure. In the ordinary course of
business, we, the agents, and our or their respective affiliates may have expressed views on expected movements in a Market Measure, any Underlying Constituent included in the Market Measure or any Index underlying an Underlying Fund (an “Underlying Index”), and may do so in the future. These views or reports may be communicated to our clients and clients of these entities. However, these views are subject to change from time to time. Moreover,
other professionals who deal in markets relating to a Market Measure may at any time have significantly different views from our views and the views of these entities. For these reasons, you are encouraged to derive information concerning a Market
Measure and its Underlying Constituents from multiple sources, and you should not rely on our views or the views expressed by these entities.
You will have no rights that a holder of an Underlying Fund or the securities represented by the Market Measure may have, you will have no rights to receive any of
the securities represented by the Market Measure, shares of any Underlying Fund or any Underlying Constituents held by any Underlying Fund, and you will not be entitled to dividends or other distributions by the issuers of these securities. The ARNs are our debt securities. They are not equity instruments, shares of stock or securities of any other issuer. Investing in the ARNs will not make you a holder of shares of any Underlying Fund or any of its
Underlying Constituents or of the securities included in the Market Measure. You will not have any voting rights, any rights to receive dividends or other distributions, any rights against the investment advisor or manager of any Underlying
Fund, Underlying Constituents or any other rights with respect to any Underlying Fund or those Underlying Constituents or those securities. As a result, the return on your ARNs may not reflect the return you would realize if you actually owned
shares of the Underlying Fund or its Underlying Constituents, or those securities and received the dividends paid or other distributions made in connection with them. Additionally, the levels of certain indices reflect only the prices of the
securities included in that Index and do not take into consideration the value of dividends paid on those securities. Your ARNs will be paid in cash and you have no right to receive delivery of shares of any Underlying Fund or any of its
Underlying Constituents or any of these securities.
If the Market Measure to which your ARNs are linked includes equity securities traded on foreign exchanges, your return may be
affected by factors affecting international securities markets. The value of securities traded outside of the U.S. may be adversely affected by a variety of factors relating to the relevant securities markets. Factors which could affect
those markets, and therefore the return on your ARNs, include:
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Market Liquidity and Volatility. The relevant foreign securities markets may be less liquid and/or more volatile than U.S. or other securities markets and may be
affected by market developments in different ways than U.S. or other securities markets.
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Political, Economic, and Other Factors. The prices and performance of securities of companies in foreign countries may be affected by political, economic, financial,
health, pandemic and social factors in those regions. Direct or indirect government intervention to stabilize a particular securities market and cross-shareholdings in companies in the relevant foreign markets may affect prices and the
volume of trading in those markets. In addition, recent or future changes in government, economic, and fiscal policies in the relevant jurisdictions, the possible imposition of, or changes in, currency exchange laws, or other laws or
restrictions, and possible fluctuations in the rate of exchange between currencies, are factors that could negatively affect the relevant securities markets. The relevant foreign economies may differ from the U.S. economy in economic
factors such as growth of gross national product, rate of inflation, capital reinvestment, resources, and self-sufficiency.
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In particular, many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments
may be subject to change without review or appeal, and many emerging markets suffer from underdevelopment of capital markets and tax systems. In addition, in some of these nations, issuers of the relevant securities face the threat of
expropriation of their assets, and/or nationalization of their businesses. The economic and financial data about some of these countries may be unreliable.
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Publicly Available Information. There is generally less publicly available information about foreign companies than about U.S. companies that are subject to the reporting
requirements of the SEC. In addition, accounting, auditing, and financial reporting standards and requirements in foreign countries differ from those applicable to U.S. reporting companies.
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Unless otherwise set forth in the applicable term sheet, we and the agents do not control any company included in any Market Measure and have not
verified any disclosure made by any of those companies. We, the agents, or our or their respective affiliates currently, or in the future, may engage in business with companies included in a Market Measure, and we, the agents, or our or
their respective affiliates may from time to time own securities of companies included in a Market Measure. However, none of us, the agents, or any of our or their respective affiliates has the ability to control the actions of any of these
companies or has undertaken any independent review of, or made any due diligence inquiry with respect to, any of these companies, unless (and only to the extent that) the securities of us, the agents, or our or their respective affiliates are
included in that Market Measure. In addition, unless otherwise set forth in the applicable term sheet, none of us, the agents, or any of our or their respective affiliates is responsible for the calculation
of any Index included in a Market Measure or any Underlying Fund or any Underlying Index. Unless otherwise specified therein, any information in the applicable term sheet regarding the Market Measure is derived from publicly available information.
You should make your own investigation into the Market Measure.
Unless otherwise set forth in the applicable term sheet, none of the Index Publishers, Underlying Fund investment advisers, publishers of an Underlying Index their affiliates, or
any companies included in the Market Measure will be involved in any offering of ARNs or will have any obligation of any sort with respect to ARNs. As a result, none of those companies will have any obligation to take your interests as holders of
ARNs into consideration for any reason, including taking any corporate actions that might adversely affect the value of the securities included in the Market Measure or the market value of, and any amounts payable on, ARNs.
There are liquidity and management risks associated with an Underlying Fund. Although shares of any Underlying Fund to which your ARNs are linked will be listed
for trading on a securities exchange and a number of similar products have been traded on various exchanges for varying periods of time, there is no assurance that an active trading market will continue for the shares of that Underlying Fund or
that there will be liquidity in the trading market.
Underlying Funds are subject to management risk, which is the risk that the investment adviser’s investment strategy, the implementation of which is subject to a number of constraints,
may not produce the intended results.
The respective sponsor, publisher, or investment adviser of an Underlying Fund or an Underlying Index (each, a “Market Measure
Publisher”) may adjust the Underlying Fund or the Underlying Index in a way that affects its value, and they have no obligation to consider your interests. A Market Measure Publisher can change the investment policies of the applicable
Underlying Fund or the policies concerning the calculation of the applicable Underlying Fund’s net asset value, or add, delete, or substitute the Underlying Constituents held by the Underlying Fund or the components included in an Underlying Index,
as the case may be, or make other methodological changes that could change the value of that Underlying Fund or Underlying Index. Additionally, a Market Measure Publisher may alter, discontinue, or suspend calculation or dissemination of the price
of its Underlying Fund, the net asset value of its Underlying Fund, or the level of its Underlying Index, as the case may be. Any of these actions could adversely affect the value of your ARNs. This could also result in the early redemption of your
ARNs. See “Description of ARNs—Anti-Dilution and Discontinuance Adjustments Relating to Underlying Funds—Discontinuance of or Material Change to an Underlying Fund.” The Market Measure Publishers will have no obligation to consider your interests
in calculating or revising any Underlying Fund or Underlying Index.
The performance of an Underlying Fund and the performance of its Underlying Index may vary. If an exchange traded fund is designed to track
the performance of an Underlying Index, the performance of the Underlying Fund and that of its Underlying Index generally will vary due to, for example, transaction costs, management fees, certain corporate actions, and timing variances. Moreover,
it is also possible that the performance of an Underlying Fund may not fully replicate or may, in certain circumstances, diverge significantly from the performance of its Underlying Index. This could be due to, for example, the Underlying Fund not
holding all or substantially all of the Underlying Constituents included in the Underlying Index and/or holding assets that are not included in the Underlying Index, the temporary unavailability of certain securities in the secondary market, the
performance of any derivative instruments held by the Underlying Fund, differences in trading hours between the Underlying Fund (or the Underlying Constituents held by the Underlying Fund) and the Underlying Index, or due to other circumstances.
This variation in performance is called the “tracking error,” and, at times, the tracking error may be significant.
In addition, because the shares of an Underlying Fund are traded on a securities exchange and are subject to market supply and investor demand, the market price of one share of the
Underlying Fund may differ from its net asset value per share; shares of the Underlying Fund may trade at, above, or below its net asset value per share.
For the foregoing reasons, the performance of an Underlying Fund may not match the performance of its Underlying Index over the same period. Because of this variance, the return on
the ARNs to the extent dependent on the performance of the Underlying Fund may not be the same as an investment directly in the Underlying Constituents included in the Underlying Index or the same as a debt security with a return linked to the
performance of the Underlying Index.
Risks associated with the applicable Underlying Index, or Underlying Constituents of an Underlying Fund, will affect the value of
that Underlying Fund and hence, the value of the ARNs. Exchange traded funds are funds which may hold a variety of Underlying Constituents, and which performance may be designed to track the performance of an Underlying Index. While ARNs
are linked to an Underlying Fund and not to its Underlying Constituents or Underlying Index, risks associated with its Underlying Constituents or Underlying Index will affect the share price of that Underlying Fund and hence the value of the ARNs.
Some of the risks that relate to an Underlying Index include those discussed below in this product prospectus supplement in relation to equity based- and commodity-based Underlying Funds, which you should review before investing in the ARNs.
If an Underlying Fund holds Underlying Constituents traded on foreign exchanges, time zone differences may create discrepancies between the values of
those Underlying Constituents and the value of the ARNs. As a result of the time zone difference, if applicable, between the cities where the Underlying Constituents held by an Underlying Fund trade and the cities in which shares of that
Underlying Fund are traded, there may be discrepancies between the values of the relevant Underlying Constituents and the trading prices of that Underlying Fund. In addition, there may be periods when the foreign exchange markets are closed for
trading (for example during holidays in a country other than the United States) that may result in the values of the relevant non-U.S. Underlying Constituents remaining unchanged for multiple Market Measure Business Days in the locations where the
ARNs (or any related Underlying Fund) trade. Conversely, there may be periods in which the foreign exchange markets are open, but the securities markets in which the ARNs (or any related Underlying Fund) trade are closed.
The payment on the ARNs will not be adjusted for all events that could affect an Underlying Fund. The Price Multiplier(s),
the Ending Value, the Redemption Amount, and other terms of the ARNs may be adjusted for the specified events affecting any Underlying Fund, as described in the section entitled “Description of ARNs—Anti-Dilution and Discontinuance Adjustments
Relating to Underlying Funds.” However, these adjustments do not cover all events that could affect the market price of an Underlying Fund. The occurrence of any event that does not require the calculation agent to adjust the applicable Price
Multiplier or the amount paid to you at maturity may adversely affect the Closing Market Price of any Underlying Fund, the Ending Value and the Redemption Amount, and, as a result, the market value of the ARNs.
Risks Relating to Equity-Based Underlying Funds
Unless otherwise set forth in the applicable term sheet, we and the agents do not control any Underlying Fund or any company whose securities are held by an Underlying Fund
and have not verified any disclosure made by any Market Measure Publisher or any other company. We, the agents, and/or our respective affiliates currently, or in the future, may engage in business with the Market Measure Publishers and companies whose securities are held by an Underlying Fund, and we, the agents, and/or our respective affiliates
may from time to time own securities of those companies. However, none of us, the agents, or any of our respective affiliates has the ability to control the actions of any Market Measure Publisher or
any of those companies or has undertaken any independent review of, or made any due diligence inquiry with respect to, any Market Measure Publisher or any of those companies, unless (and only to the extent that) the securities of us, the agents,
and/or our respective affiliates are held by an Underlying Fund. You should make your own investigation into each Underlying Fund.
Publishers, their affiliates, or any companies included in the Market Measure will be involved in any offering of the ARNs or will have any obligation of any sort with respect to the ARNs. As a result, none
of those companies will have any obligation to take your interests as holders of the ARNs into consideration for any reason, including taking any corporate actions that might adversely affect the value of the Underlying Constituents represented by
the Market Measure or the value of the ARNs.
Unless otherwise set forth in the applicable term sheet, none of the money you pay us, the agents and/or our respective affiliates will go to any company whose Underlying
Constituents are included in the Market Measure. In addition, none of the Market Measure
Our business activities and those of the agents relating to any companies whose securities are held by an Underlying Fund or the ARNs may create conflicts of interest
with you. We, the agents, and/or our respective affiliates, at the time of any offering of the ARNs or in the future, may engage in business with any
companies whose securities are held by an Underlying Fund, including making loans to, equity investments in, or providing investment banking, asset management, or other services to those companies, their
affiliates, and their competitors.
In connection with these activities, any of these entities may receive information about those companies that we will not divulge to you or other third parties. We, the agents,
and/or our respective affiliates have published, and in the future may publish, research reports on one or more of these companies. The agents may also publish research reports relating to our or our affiliates’ securities, including the ARNs. This
research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding your ARNs. Any of these activities may affect the value of the Market Measure and,
consequently, the market value of your ARNs. None of us, the agents, or any of our respective affiliates makes any representation to any purchasers of the ARNs regarding any matters whatsoever relating to any companies whose securities are held by
an Underlying Fund. Any prospective purchaser of the ARNs should undertake an independent investigation of those companies to a level that, in its judgment, is appropriate to make an informed decision regarding an investment in the ARNs. The
selection of an Underlying Fund does not reflect any investment recommendations from us, the agents, or our respective affiliates.
No Market Measure Publisher will have any obligations relating to the ARNs. No Market Measure Publisher will have any financial or legal
obligation with respect to the ARNs or any amount to be paid to you, including any obligation to take our needs or the needs of noteholders into consideration for any reason, including taking any actions that might adversely affect the value of any
Underlying Fund or the value of the ARNs. No Market Measure Publisher will receive any of the proceeds from any offering of the ARNs, and no Market Measure Publisher will be responsible for, or participate in, the offering of the ARNs. No Market
Measure Publisher will be responsible for, or participate in, the determination or calculation of the amount receivable by holders of the ARNs.
Neither we nor any agent has made any independent investigation as to the completeness or accuracy of publicly available information regarding any Underlying Fund or as to the
future performance of any Underlying Fund. Any prospective purchaser of the ARNs should undertake such independent investigation of any Underlying Fund as in its judgment is appropriate to make an informed decision with respect to an investment
in the ARNs.
Risks Relating to Commodity-Based Underlying Funds
The prices of commodities held by an Underlying Fund may change unpredictably, affecting the value of your ARNs in unforeseeable ways. Trading in
commodities and futures contracts is speculative and can be extremely volatile. Their market prices may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships; weather; trends in agriculture; trade,
fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; disease, pestilence
and technological developments; changes in interest rates, whether through governmental action or market movements; currency exchange rates; volatility from speculative activities; the development,
availability and/or decrease in price of substitutes; monetary and other governmental policies, action and inaction; macroeconomic or geopolitical and military events, including political instability in some oil-producing countries or other
countries in which the production of particular commodities may be concentrated; and natural or nuclear disasters. These factors may affect the value of an Underlying Fund in varying ways, and different factors may cause the levels and
volatilities of commodity prices to move in inconsistent directions at inconsistent rates. Additionally, certain Underlying Funds may be concentrated in only a few, or even a single industry (e.g., energy). These Underlying Funds are likely to be
more volatile than those that hold a broad base of commodities.
If the liquidity of the components of any Underlying Fund is limited, the ARNs would likely be impaired. Commodities and derivatives
contracts on commodities may be difficult to buy or sell, particularly during adverse market conditions. Reduced liquidity on the calculation days would likely have an adverse effect on the value of any such Underlying Fund and, therefore, on the
return, if any, on your ARNs. Limited liquidity relating to the components of an Underlying Fund may also result in the Market Measure Publisher being unable to determine the value of its Underlying Fund using its normal means. The resulting
discretion by the Market Measure Publisher of an Underlying Fund in determining the value could adversely affect the value of the ARNs.
Suspension or disruptions of market trading in the applicable commodities and related futures contracts may adversely affect the value of your
ARNs. The commodity markets are subject to disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators, and government regulation and intervention. In addition, U.S. futures
exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in futures contract prices that may occur during a single business day. These limits are generally referred to as “daily price fluctuation limits,” and the
maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price.” Once the limit price has been reached in a particular contract, no trades may be made at a different price. Limit prices have
the effect of precluding trading in a particular contract or forcing the liquidation of contracts at disadvantageous times or prices. Any such disruption, or any other force majeure (such as an act of God, fire, flood, severe weather conditions,
act of governmental authority, labor difficulty, pandemic, etc.) could have an adverse effect on the value of or trading in shares of an Underlying Fund and therefore, the value of the ARNs.
Legal and regulatory changes could adversely affect the return on and value of your ARNs. The value of the commodities held by an
Underlying Fund could be adversely affected by new laws or regulations or by the reinterpretation of existing laws or regulations (including, without limitation, those related to taxes and duties on
commodities and futures contracts) by one or more governments, courts, or other official bodies.
In the U.S., the regulation of commodity transactions is subject to ongoing modification by governmental and judicial action. For example, the U.S. Commodity Futures Trading Commission (“CFTC”) has interpreted the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which was enacted in July 2010, to require the CFTC to impose limits
on the size of positions that can be held by market participants in futures contracts and OTC derivatives on certain physical commodities. The CFTC’s rules providing for such position limits have been, and may in the future be, subject to
litigation challenging their validity, the potential final outcome of which cannot be known at this time. While the ultimate scope and effect of any final and implemented position limit rules are not yet known, these limits will likely restrict
the ability of many market participants to trade in the commodities markets to the same extent as they have in the past, including affecting their ability to enter into or
maintain hedge positions in the applicable commodity or futures contracts. These rules and various other legislative and regulatory requirements may, among other things, reduce liquidity, increase
market volatility, and increase costs in these markets. These consequences could adversely affect an Underlying Fund and the value of your ARNs.
In addition, other governmental or regulatory bodies (such as the European Commission) have proposed or may propose in the future legislation or regulations containing restrictions
similar to those contemplated by Dodd-Frank, or other legislation or regulations containing other restrictions that could adversely impact the liquidity of and increase costs of participating in the commodities markets. If such legislation or
regulations are adopted or other legislation or regulations are adopted in the future, they could have an adverse effect on the value of the applicable Underlying Fund and your ARNs.
The ARNs will not be regulated by the CFTC. The ARNs will not be interests in a commodity pool nor will they be regulated by the CFTC as a
commodity pool. Further, we will not be registered with the CFTC as a commodity pool operator. The ARNs will not constitute investments by you or by us on your behalf in futures contracts traded on regulated futures exchanges, which may only be
transacted through a person registered with the CFTC as a “futures commission merchant” (“FCM”). We are not registered with the CFTC as an FCM, and you will not benefit from the CFTC’s or any other non-U.S.
regulatory authority’s regulatory protections for persons who trade in futures contracts or who invest in regulated commodity pools.
An Underlying Fund may include commodities or futures contracts traded on foreign exchanges that are less regulated than U.S.
markets and may involve different and greater risks than trading on U.S. exchanges. An Underlying Fund may own commodities or futures contracts that trade on exchanges located outside the U.S. The regulations of the CFTC do not apply to
trading on foreign exchanges, and trading on foreign exchanges may involve different and greater risks than trading on U.S. exchanges. Certain foreign markets may be more susceptible to disruption than U.S. exchanges due to the lack of a
government-regulated clearinghouse system. Trading on foreign exchanges also involves certain other risks that are not applicable to trading on U.S. exchanges. Those risks include: (a) exchange rate risk relative to the U.S. dollar; (b) exchange
controls; (c) expropriation; (d) burdensome or confiscatory taxation; and (e) moratoriums, and political or diplomatic events. It may also be more costly and difficult for participants in those markets to enforce the laws or regulations of a
foreign country or exchange, and it is possible that the foreign country or exchange may not have laws or regulations which adequately protect the rights and interests of investors in the relevant commodities or contracts. These factors could
reduce the value of the applicable Underlying Fund and the value of your ARNs.
Other Risk Factors Relating to an Index or an Underlying Index
The applicable term sheet may set forth additional risk factors as to an Index or an Underlying Fund that you should review prior to purchasing the ARNs.
Valuation- and Market Related Risks
The initial estimated value of your ARNs will be less than their public offering price. The difference between the public offering price of
your ARNs and the initial estimated value of ARNs (to be specified in the applicable term sheet) will reflect costs and expected profits associated with selling and structuring ARNs, as well as hedging our obligations under the applicable ARNs.
Because hedging our obligations entails risks and may be influenced by market forces beyond our control, this hedging may result in a profit that is more or less than expected, or a loss and the amount of any such profit or loss will not be known
until the applicable maturity date.
The initial estimated value of your ARNs will be based on our internal funding rate. The internal funding rate used in the determination of the initial estimated value of ARNs
generally will represent 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. This discount will be based on, among other things,
our view of the funding value of ARNs as well as the higher issuance, operational and ongoing liability management costs of ARNs in comparison to those costs for our conventional fixed-rate debt, as well as estimated financing costs of any hedge
positions, taking into account regulatory and internal requirements. If 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 were to be used, we would expect the economic terms of ARNs to be more favorable to you. Additionally, assuming all other economic terms are held constant, the use of an internal funding rate for ARNs is expected to increase the
initial estimated value of ARNs and have an adverse effect on the economic terms of ARNs.
The initial estimated value of ARNs will be based on our internal pricing models, which may prove to be inaccurate and may be different from the
pricing models of other financial institutions, including BofAS. The initial estimated value of your ARNs when the terms of ARNs are set on the applicable pricing date will be based on our internal pricing models, which take into account
a number of variables, typically including the expected volatility of the Market Measure, interest rates (forecasted, current and historical rates), price-sensitivity analysis, time to maturity of ARNs and our internal funding rate, and are based
on a number of subjective assumptions, which are not evaluated or verified on an independent basis and may or may not materialize. Further, our pricing models may be different from other financial institutions’ pricing models, including those of
BofAS, and the methodologies used by us to estimate the value of ARNs may not be consistent with those of other financial institutions that may be purchasers or sellers of ARNs in any secondary market. As a result, the secondary market price of
your ARNs, if any, may be materially less than the initial estimated value of ARNs, as set forth in the applicable term sheet, determined by reference to our internal pricing models. In addition, market conditions and other relevant factors in the
future may change and any assumptions may prove to be incorrect.
The initial estimated value of ARNs will not be a prediction of the prices at which you may sell ARNs in the secondary market, if any exists, and
such secondary market prices, if any, will likely be less than the public offering price of ARNs, may be less than the initial estimated value of ARNs and could result in a substantial loss to you. The initial estimated value of ARNs, as
set forth in the applicable term sheet, will not be a prediction of the prices at which BofAS, our or their respective affiliates or third parties may be willing to purchase such ARNs from you in secondary market transactions (if they are willing
to purchase, which they are not obligated to do). The price at which you may be able to sell your ARNs in the secondary market at any time, if any, will be influenced by many factors that cannot be predicted, such as market conditions, and any bid
and ask spread for similar sized trades, and may be substantially less than the initial estimated value of ARNs. Further, as secondary market prices of your ARNs take into account the levels at which our debt securities trade in the secondary
market, and do not take into account our various costs and expected profits associated with selling and structuring ARNs, as well as hedging our obligations under ARNs, secondary market prices of your ARNs will likely be less than the public
offering price of your ARNs. As a result, the price at which BofAS, our or their respective affiliates or third parties may be willing to purchase ARNs from you in secondary market transactions, if any, will likely be less than the price you paid
for your ARNs, and any sale prior to maturity could result in a substantial loss to you.
We cannot assure you that there will be a trading market for your ARNs. If a secondary market exists, we cannot predict how ARNs will trade, or whether
that market will be liquid or illiquid. The development of a trading market for ARNs will depend on various
factors, including our financial performance and changes in the value of the Market Measure. The number of potential buyers of your ARNs in any secondary market may be limited. There is no
assurance that any party will be willing to purchase your ARNs at any price in any secondary market.
We anticipate that one or more of the agents or their affiliates will act as a market-maker for ARNs, but none of them are required to do so and may cease to do so at any time.
Any price at which an agent or its affiliates may bid for, offer, purchase, or sell any ARNs may be higher or lower than the public offering price, and that price 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 transactions may adversely affect the prices, if any, at which those ARNs might otherwise trade in the market. In addition, if at any time any entity were to
cease acting as a market-maker for any issue of ARNs, it is likely that there would be significantly less liquidity in that secondary market. In such case, the price at which those ARNs could be sold likely would be lower than if an active market
existed.
Unless otherwise stated in the applicable term sheet, we will not list ARNs on any securities exchange or quotation system. Even if an application were made to list your ARNs, we
cannot assure you that the application will be approved or that your ARNs will be listed and, if listed, that they will remain listed for their entire term. The listing of ARNs on any securities exchange or quotation system will not necessarily
ensure that a trading market will develop, and if a trading market does develop, that there will be liquidity in the trading market.
The Redemption Amount will not reflect changes in the value of the Market Measure that occur other than during the Maturity Valuation Period.
Changes in the value of the Market Measure during the term of ARNs other than during the Maturity Valuation Period will not be reflected in the calculation of the Redemption Amount. To calculate the Redemption Amount, the calculation agent will
compare only the Ending Value to the Starting Value. No other values of the Market Measure will be taken into account. As a result, even if the value of the Market Measure has increased at certain times during the term of ARNs, you will receive a
Redemption Amount that is less than the principal amount if the Ending Value is less than the Starting Value. In addition, because the Ending Value will equal the average of the closing levels or Closing Market Prices (as multiplied by the Price
Multiplier), as applicable, of the Market Measure on each calculation day during the Maturity Valuation Period, it may be less than the closing level or Closing Market Price of the Market Measure on any particular calculation day.
If your ARNs are linked to a Basket, changes in the values of one or more of the Basket Components may be offset by changes in the values of one or
more of the other Basket Components. The Market Measure of your ARNs may be a Basket. In such case, changes in the values of one or more of the Basket Components may not correlate with changes in
the values of one or more of the other Basket Components. The values of one or more Basket Components may increase, while the values of one or more of the other Basket Components may decrease or not increase as much. Therefore, in calculating the
value of the Market Measure at any time, increases in the value of one Basket Component may be moderated or wholly offset by decreases or lesser increases in the values of one or more of the other Basket Components. If the weightings of the
applicable Basket Components are not equal, adverse changes in the values of the Basket Components which are more heavily weighted would have a greater impact upon the value of the Market Measure and, consequently, the return on your ARNs.
The respective publishers of the applicable Indices may adjust those Indices in a way that affects their levels, and these publishers have no obligation to
consider your interests. Unless otherwise specified in the applicable term sheet, none of us, the agents or our or their respective affiliates have any affiliation with any publisher of an Index to which
your ARNs are linked (each, an “Index Publisher”). Consequently, we have no control over the actions of any Index Publisher. An Index Publisher can add, delete, or
substitute the components included in the applicable index or make other methodological changes that could change its level. A new security included in an Index may perform significantly better or worse than the replaced security, and the
performance will impact the level of the applicable index. Additionally, an Index Publisher may alter, discontinue, or suspend calculation or dissemination of an Index. Any of these actions could adversely affect the value of, and the return on,
your ARNs. No Index Publisher has any obligation to consider your interests in calculating or revising any Index.
Exchange rate movements may adversely impact the market value of, and any amounts payable on, ARNs. If any security or commodity represented
by a Market Measure is traded in a currency other than U.S. dollars and, for purposes of calculating the value of the Market Measure, is converted into U.S. dollars, then the value of the Market Measure will depend, in part, on the relevant
exchange rates. If the value of the U.S. dollar strengthens against the currencies of those Underlying Constituents, the value of the applicable Market Measure may be adversely affected and the Redemption Amount may be reduced. Exchange rate
movements may be particularly impacted by existing and expected rates of inflation and interest rate levels; political, civil or military unrest; the balance of payments between countries; and the extent of governmental surpluses or deficits in the
countries relevant to the applicable index and the United States. All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of those countries and the United States and other countries and
regions important to international trade and finance.
If you attempt to sell your ARNs prior to maturity, their market value, if any, will be affected by various factors that interrelate in complex
ways and may be less than the principal amount. ARNs are not designed to be short-term trading instruments. The limited protection against the risk of losses provided by the Threshold Value, if any, will only apply if you hold your ARNs to
maturity. You have no right to have your ARNs redeemed prior to maturity. If you wish to liquidate your investment in your ARNs prior to maturity, your only option would be to sell them. At that time, there may be an illiquid market for your ARNs
or no market at all. Even if you were able to sell your ARNs, there are many factors outside of our control that may affect their market value, some of which, but not all, are stated below. These factors may interact with each other in complex and
unpredictable ways, and the impact of any one factor may be offset or magnified by the effect of another factor. These factors may interact with each other in complex and unpredictable ways. The following paragraphs describe a specific factor’s
expected impact on the market value of ARNs, assuming all other conditions remain constant.
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Value of the Market Measure. We anticipate that the market value of ARNs prior to maturity generally will depend to a significant extent on the value of the Market
Measure. In general, it is expected that the market value of ARNs will decrease as the value of the Market Measure decreases, and increase as the value of the Market Measure increases. However, as the value of the Market Measure
increases, the market value of ARNs may not increase at the same rate. If you sell your ARNs when the value of the Market Measure is less than, or not sufficiently above, the applicable Starting Value, then you may receive less than the
principal amount of your ARNs.
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In addition, because the Redemption Amount will not exceed the applicable Capped Value, we do not expect that ARNs will trade in any secondary market at a price that is greater than the Capped Value.
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Volatility of the Market Measure. Volatility is the term used to describe the size and frequency of market fluctuations in the Market Measure.
Increases or decreases in the volatility of the Market Measure may have an adverse impact on the market value of
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ARNs. Even if the value of the Market Measure increases after the applicable pricing date, if you are able to sell your ARNs before their maturity date, you may receive
substantially less than the amount that would be payable at maturity based on that value because of the anticipation that the value of the Market Measure will continue to fluctuate until the Ending Value is determined.
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Economic and Other Conditions Generally. The general economic conditions of the capital markets in the United States, as well as geopolitical conditions and other
financial, political, regulatory, and judicial events and related uncertainties that affect stock markets generally, may adversely affect the value of the Market Measure and the market value of ARNs. If the Market Measure includes one or
more Underlying Funds or Indices that have returns that are calculated based upon the prices of Underlying Constituents traded in one or more non-U.S. markets (a “non-U.S. Market Measure”), the value
of your ARNs may also be adversely affected by similar events in the markets of the relevant foreign countries.
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Interest Rates. We expect that changes in interest rates will affect the market value of ARNs. In general, if U.S. interest rates increase, we expect that the market
value of ARNs will decrease. In general, we expect that the longer the amount of time that remains until maturity, the more significant the impact of these changes will be on the value of ARNs. In the case of non-U.S. Market Measures, the
level of interest rates in the relevant foreign countries may also affect their economies and, in turn, the value of the non-U.S. Market Measure, and, thus the market value of ARNs may be adversely affected.
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Dividend Yields. In general, if the cumulative dividend yields on the securities included in the Market Measure increase, we anticipate that the market value of ARNs will
decrease.
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Exchange Rate Movements and Volatility. If the Market Measure of your ARNs includes any non-U.S. Market Measures, changes in, and the volatility of, the exchange rates
between the U.S. dollar and the relevant non-U.S. currency or currencies could have an adverse impact on the value of your ARNs, and the Redemption Amount may depend in part on the relevant exchange rates. In addition, the correlation
between the relevant exchange rate and any applicable non-U.S. Market Measure reflects the extent to which a percentage change in that exchange rate corresponds to a percentage change in the applicable non-U.S. Market Measure, and changes
in these correlations may have an adverse impact on the value of your ARNs.
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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 ARNs. 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 ARNs. However, a decrease in our credit
spreads or an improvement in our credit ratings will not necessarily increase the market value of ARNs.
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Time to Maturity. There may be a disparity between the market value of ARNs prior to maturity and their value at maturity. This disparity is often called a time “value,”
“premium,” or “discount,” and reflects expectations concerning the value of the Market Measure prior to the maturity date. As the time to maturity decreases, this disparity may decrease, such that the value of ARNs will approach the
expected Redemption Amount to be paid at maturity.
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Conflict-Related Risks
Trading and hedging activities by us, the agents, and our or their respective affiliates may affect the market value of, and any amounts payable on, ARNs. We, the agents, and
our or their respective affiliates may buy or sell the Market Measure, any of its Underlying Constituents, futures, options contracts, or exchange-traded instruments on the Market Measure or any of its Underlying Constituents or other listed
over-the-counter derivative instruments whose value is derived from the Market Measure or any of its Underlying Constituents. We, the agents, or our or their respective affiliates may execute such purchases or sales for our own or their own
accounts, for business reasons, or in connection with hedging our obligations under ARNs. These transactions could affect the value of a Market Measure in a manner that could be adverse to your investment in ARNs. On or before the applicable
pricing date, any purchases or sales by us, the agents, and our respective affiliates, or others on our or their behalf (including those for the purpose of hedging some or all of our anticipated exposure in connection with ARNs), may increase the
value of a Market Measure or its component securities. Consequently, the values of that Market Measure or the securities included in that Market Measure may decrease subsequent to the pricing date of an issue of ARNs, adversely affecting the
market value of, and any amounts payable on, ARNs.
We, the agents, or one or more of our or their respective affiliates may also engage in hedging activities that could increase the value of the Market Measure on the applicable
pricing date. In addition, these activities, including the unwinding of a hedge, may decrease the market value of your ARNs prior to maturity, including during the Maturity Valuation Period, and may reduce the Redemption Amount. We, the agents, or
one or more of our or their respective affiliates may purchase or otherwise acquire a long or short position in ARNs, and may hold or resell ARNs. For example, the agents may enter into these transactions in connection with any market making
activities in which they engage. We cannot assure you that these activities will not adversely affect the value of the Market Measure, the market value of your ARNs prior to maturity or the Redemption Amount.
Our trading, hedging and other business activities, and those of the agents or one or more of our respective affiliates, may create conflicts of
interest with you. We, the agents, or one or more of our or their respective affiliates may engage in trading activities related to the Market Measure and any of its Underlying Constituents that are not for your account or on your behalf.
We, the agents, or one or more of our or their respective affiliates also may issue or underwrite other financial instruments with returns based upon the applicable Market Measure. In addition, in the ordinary
course of their business activities, the agents and their affiliates may hold and trade our or our affiliates’ debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account
and for the accounts of their customers. Certain of the agents or their affiliates may also have lending or other capital markets relationships with us. In order to hedge such exposure, the agents may enter into transactions such as the purchase
of credit default swaps or the creation of short positions in our or our affiliates’ securities, including potentially ARNs. Any such positions could adversely affect future trading prices of ARNs. These
trading and other business activities may present a conflict of interest between your interest in ARNs and the interests we, the agents and our or their respective affiliates may have in our proprietary accounts, in facilitating transactions,
including block trades, for our or their other customers, and in accounts under our or their management. These trading and other business activities, if they influence the value of the Market Measure or secondary trading in your ARNs, could be
adverse to your interests as a beneficial owner of ARNs.
We, the agents, and our or their respective affiliates expect to enter into arrangements or adjust or close out existing transactions to hedge our obligations under ARNs. We, the
agents, or our or their respective affiliates also may enter into hedging transactions relating to other securities or instruments that we or they issue, some of which may have returns calculated in a manner related to that of a particular issue of
ARNs. We may enter into such hedging arrangements with one or more of our subsidiaries or affiliates, or with one or more of
the agents or their affiliates. Such a party may enter into additional hedging transactions with other parties relating to ARNs and the applicable Market Measure. This 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 could also result in a loss. We, the agents, and our or their respective affiliates will price these hedging transactions with the intent to realize a profit, regardless
of whether the value of ARNs increases or decreases or whether the Redemption Amount on ARNs is more or less than the principal amount of ARNs. Any profit in connection with such hedging activities will be in addition to any other compensation
that we, the agents, and our or their respective affiliates receive for the sale of ARNs, which creates an additional incentive to sell ARNs to you.
Our business activities and those of the agents relating to the companies included in a Market Measure or ARNs may create conflicts of interest
with you. We, the agents, and our or their respective affiliates, at the time of any offering of ARNs or in the future, may engage in business with the companies included in the Market Measure, including making loans to, equity investments
in, or providing investment banking, asset management, or other services to those companies, their affiliates, and their competitors. In connection with these activities, any of these entities may receive information about those companies that we
will not divulge to you or other third parties. We, the agents, and our or their respective affiliates have published, and in the future may publish, research reports on one or more of these companies. The agents may also publish research reports
relating to our or our affiliates’ securities, including ARNs. This research is modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding your ARNs.
Any of these activities may adversely affect the value of the Market Measure and, consequently, the market value of, and any amount(s) payable on, your ARNs. None of us, the
agents, or any of our or their respective affiliates makes any representation to any purchasers of ARNs regarding any matters whatsoever relating to the issuers of the securities included in a Market Measure. Any prospective purchaser of ARNs
should undertake an independent investigation of the companies included in the Market Measure to a level that, in its judgment, is appropriate to make an informed decision regarding an investment in ARNs. The composition of the Market Measure does
not reflect any investment recommendations from us, the agents, or any of our or their respective affiliates.
There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent.
We expect to appoint BofAS or one of its affiliates as the calculation agent or as joint calculation agent (along with us or one of our affiliates) for ARNs and, as such, we and/or BofAS, as joint calculation agents or calculation agent, will
determine the Starting Value, the Price Multiplier, the Threshold Value, the Ending Value, and the Redemption Amount. Under some circumstances, these duties could result in a conflict of interest between our status as issuer and our
responsibilities as calculation agent. These conflicts could occur, for instance, in connection with the calculation agent’s determination as to whether a Market Disruption Event has occurred, or in connection with judgments that the calculation
agent would be required to make if the publication of an Index is discontinued or an event occurs with respect to an Underlying Fund that requires an adjustment to the terms of your ARNs. See the sections entitled “Description of ARNs—Market
Disruption Events,” “—Adjustments to an Index,” and “— Discontinuance of an Index.” The calculation agent will be required to carry out its duties in good faith and use its reasonable judgment under certain circumstances. However, because we or one
of our affiliates may serve as the calculation agent, potential conflicts of interest could arise. None of us, the agents or any of our respective affiliates will have any obligation to consider your interests as a holder of ARNs in taking any
action that might affect the value of ARNs.
As the calculation agent or joint calculation agents, we (or one of our affiliates) and/or BofAS or one of its affiliates will have discretion in making various determinations that affect your ARNs, such as when a
Market Disruption Event occurs or an Index is discontinued. The exercise of this discretion by the calculation agent could adversely affect the value of your ARNs and may present the calculation agent with a conflict of interest of the kind
described under “—Trading and hedging activities by us, the agents, and our or their respective affiliates may affect the market value of, and any amounts payable on, ARNs” and “—Our trading, hedging and other business activities, and those of
the agents or one or more of our respective affiliates, may create conflicts of interest with you” above.
Tax-Related Risks
Significant Aspects of the Tax Treatment of ARNs Are Uncertain.
Significant aspects of the tax treatment of ARNs are uncertain. There is no direct legal authority as to the proper U.S. federal income tax treatment of ARNs, and we do not plan to
request a ruling from the U.S. Internal Revenue Service (the “IRS”) regarding the tax treatment of ARNs, and the IRS or a court may not agree with the tax treatment described in this product supplement or the applicable term sheet. If the IRS were
successful in asserting an alternative treatment for ARNs, the timing and/or character of income on ARNs could be affected materially and adversely. Please read carefully the section entitled “Material U.S. Federal Income Tax Consequences” herein.
You should consult your tax advisor about your own tax situation.
Further, there exists a risk (and in certain circumstances, a substantial risk) that an investment in ARNs that are linked to shares of an Underlying Fund, PFIC, REIT or other “pass-thru entity” or a
basket that contains Underlying Funds, PFICs, REITs or other “pass-thru entities” could be treated as a “constructive ownership transaction”, which could result in part or all of any long-term capital gain realized by you being recharacterized as
ordinary income (or, in the case of a gold or silver Underlying Fund, subject to a maximum tax rate of 28% applicable to “collectibles”).
In 2007, the IRS released a notice that may affect the taxation of holders of ARNs. According to Notice 2008-2, the IRS and the U.S. Department of the Treasury (the “Treasury”) are
actively considering whether the holder of an instrument such as ARNs 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 ARNs 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 U.S. Internal Revenue Code of 1986, as amended (the “Code”) should be applied to such instruments. Prospective purchasers of ARNs are urged to consult their tax advisors concerning the significance, and the potential impact, of the
above considerations.
Except to the extent otherwise required by law, we intend to treat your ARNs for U.S. federal income tax purposes in accordance with the treatment described under “Material U.S. Federal Income Tax
Consequences” unless and until such time as the Treasury and IRS determine that some other treatment is more appropriate.
Furthermore, in 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of instruments such as ARNs purchased after the bill was enacted to accrue
interest income over the term of ARNs even though there will not be any interest payments over the term of ARNs. Moreover, in 2013, the House Ways and Means
Committee released in draft form certain proposed legislation relating to financial instruments that, if it had been enacted, would have required instruments such as ARNs 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 ARNs. Prospective purchasers of ARNs are urged to consult their tax advisors regarding the draft legislation and its possible impact on you.
For a discussion of the Canadian federal income tax consequences of investing in ARNs, please see “Tax Consequences – Canadian Taxation” in the accompanying prospectus. If you are
not a Non‑resident Holder (as that term is defined in “Tax Consequences – Canadian Taxation” in the accompanying prospectus) or if you acquire ARNs in the secondary market, you should consult your tax advisors as to the consequences of acquiring,
holding and disposing of ARNs and receiving the payments that might be due under ARNs.
Other Risk Factors Relating to the Applicable Market Measure
The accompanying prospectus contains additional risk factors applicable to ARNs under the section entitled “Risk Factors” beginning on page 1. Additionally, the applicable term sheet may set forth
additional risk factors as to the Market Measure. You are urged to review these other risk factors and consult with your advisors about the consequences of an investment in ARNs prior to making an investment decision on ARNs.
USE OF PROCEEDS AND HEDGING
We will use the net proceeds we receive from each sale of ARNs for the purposes we describe in the accompanying prospectus under “Use of Proceeds.” We and/or our affiliates may
also use those proceeds in transactions intended to hedge our obligations under ARNs as described below.
In anticipation of the sale of ARNs, we and/or our affiliates expect to enter into hedging transactions involving purchases of securities or over‑the‑counter derivative instruments
linked to the applicable Market Measure and any component securities of a Market Measure prior to or on the pricing date. From time to time, we and/or our affiliates may enter into additional hedging transactions or unwind those we have entered
into.
We and/or our affiliates may acquire a long or short position in securities similar to ARNs from time to time and may, in our or their sole discretion, hold or resell those similar
securities. We and/or our affiliates may close out our or their hedge on or before the maturity date.
We and/or our affiliates may close out our or their hedge position relating to ARNs on or before any calculation days during the Maturity Valuation period for your ARNs. That step
may involve sales or purchases of the instruments described above. No holder of ARNs will have any rights or interest in our or any affiliate’s hedging activity or any positions we or our affiliates may take in connection with any hedging activity.
The hedging activity discussed above may adversely affect the market value of, and the return on, ARNs from time to time.
DESCRIPTION OF ARNS
General
Each issue of ARNs will be part of a series of medium-term notes entitled “Senior Medium-Term Notes, Series E” that will be issued under the senior indenture, as amended or
supplemented from time to time. The senior indenture is described more fully in the accompanying prospectus. The following description of ARNs supplements and, to the extent it is inconsistent with, supersedes the description of the general terms
and provisions of the notes and debt securities set forth under the heading “Description of the Debt Securities” in the accompanying prospectus. These documents should be read in connection with the applicable term sheet.
Unless otherwise specified in the applicable term sheet, ARNs are not bail-inable debt securities (as defined in the accompanying prospectus) and the applicable discussions in the
accompanying prospectus relating to bail-inable debt securities will not apply to ARNs.
The maturity date of ARNs and the aggregate principal amount of each issue of ARNs will be stated in the applicable term sheet. If the scheduled maturity date is not a business
day, we will make the required payment on the next business day, and no interest will accrue as a result of such delay.
We will not pay interest on ARNs. ARNs do not guarantee the return of principal at maturity. ARNs will be payable only in U.S. dollars.
Prior to the maturity date, ARNs are not redeemable at our option or repayable at the option of any holder. ARNs are not subject to any sinking fund. ARNs are not subject to the
defeasance provisions described in the accompanying prospectus under the caption “Description of the Debt Securities—Discharge, Defeasance and Covenant Defeasance.”
ARNs will be issued only in global form through The Depository Trust Company (“DTC”). We will issue
ARNs in denominations of whole units. Unless otherwise set forth in the applicable term sheet, each unit will have a principal amount of $10. The CUSIP number for each issue of ARNs will be set forth in the applicable term sheet. You may transfer
ARNs only in whole units.
Payment at Maturity
At maturity, subject to our credit risk as issuer of ARNs, you will receive the Redemption Amount, denominated in U.S. dollars. Unless otherwise specified in the applicable term
sheet, the “Redemption Amount” will be calculated as follows:
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If the Ending Value is greater than the Starting Value, then the Redemption Amount will equal:
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The Redemption Amount will not exceed the “Capped Value” set forth in the applicable term sheet.
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If the Ending Value is less than or equal to the Starting Value, then the Redemption Amount will equal:
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The Redemption Amount will not be less than zero.
Your participation in any upside performance of the Market Measure underlying your ARNs will also be impacted by the Participation Rate. The “Participation Rate” will be 300% for ARNs unless otherwise set forth in the applicable term sheet.
Each applicable term sheet will provide examples of Redemption Amounts based on a range of hypothetical Ending Values.
If specified in the applicable term sheet, your ARNs may be “Relative Value ARNs,” the return on which will be
determined based on the relative performance of two or more Indices or Underlying Funds. The specific terms and risks of any Relative Value ARNs will be set forth in the applicable term sheet.
The applicable term sheet will set forth information as to the applicable Market Measure, including information as to the historical values of the Market Measure. However,
historical values of the Market Measure are not indicative of its future performance or the performance of your ARNs.
An investment in ARNs does not entitle you to any ownership interest, including any voting rights, dividends paid, or other distributions made, in the securities of any of the
companies included in a Market Measure.
Unless otherwise specified in the applicable term sheet, a “business day” means (i) for notes linked to a Market Measure consisting of one
or more U.S. broad-based, U.S. sector-based or U.S. style-based equity indices, or U.S. broad-based, U.S. sector-based or U.S. style-based exchange traded fund, any day, other than Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions are authorized or required by law to close in New York City and (ii) for notes linked to a Market Measure consisting of at least one non-U.S. or global equity index or non-U.S. or global exchange traded fund, any day,
other than Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law to close in New York City or Toronto.
The Starting Value and the Ending Value
Starting Value
In the case of an Index, unless otherwise specified in the applicable term sheet, the “Starting Value” will be the closing level of the
Index on the pricing date.
In the case of an Underlying Fund, unless otherwise specified in the term sheet, the “Starting Value” will be the Closing Market Price (as
defined below) of the Underlying Fund on the pricing date.
If the Market Measure consists of a Basket, the Starting Value will be equal to 100. See “—Basket Market Measures” below.
Ending Value
In the case of an Index, unless otherwise specified in the term sheet, the “Ending Value” will equal the average of the closing levels of the Index on each
calculation day during
the Maturity Valuation Period. In the case of an Underlying Fund, the “Ending Value” will equal the average of the Closing Market Prices of the Underlying Fund
multiplied by the Price Multiplier on each calculation day during the Maturity Valuation Period.
The “Maturity Valuation Period” means the period consisting of one or more calculation days shortly before the maturity date. The timing and
length of the period will be set forth in the applicable term sheet.
The “Closing Market Price” for one share of an Underlying Fund (or one unit of any other security for which a Closing Market Price must be
determined) on any Market Measure Business Day means any of the following:
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if the Underlying Fund (or such other security) is listed or admitted to trading on a national securities exchange, the last reported sale price, regular way (or, in the case of the Nasdaq Stock Market, the
official closing price), of the principal trading session on that day on the principal U.S. securities exchange registered under the Securities Exchange Act of 1934, as amended, on which the Underlying Fund (or such other security) is
listed or admitted to trading;
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if the Underlying Fund (or such other security) is not listed or admitted to trading on any national securities exchange but is included in the OTC Bulletin Board, the last reported sale price of the principal
trading session on the OTC Bulletin Board on that day;
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if the closing price of the Underlying Fund (or such other security) cannot be determined as set forth in the two bullet points above, and the Underlying Fund (or such other security) is listed or admitted to
trading on a non-U.S. securities exchange or market, the last reported sale price, regular way, of the principal trading session on that day on the primary non-U.S. securities exchange or market on which the Underlying Fund (or such other
security) is listed or admitted to trading (converted to U.S. dollars using such exchange rate as determined by the calculation agent); or
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if the Closing Market Price cannot be determined as set forth in the prior bullets, the mean, as determined by the calculation agent, of the bid prices for the Underlying Fund (or such other security) obtained
from as many dealers in that security (which may include us, BofAS and/or any of its affiliates), but not exceeding three, as will make the bid prices available to the calculation agent. If no such bid price can be obtained, the Closing
Market Price will be determined (or, if not determinable, estimated) by the calculation agent.
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The initial “Price Multiplier” for each Underlying Fund will be one, unless otherwise set forth in the applicable term sheet. The Price
Multiplier for each Underlying Fund will be subject to adjustment for certain events relating to that Underlying Fund described below under “—Anti-Dilution and Discontinuance Adjustments Relating to Underlying Funds.”
A “calculation day” means any Market Measure Business Day during the Maturity Valuation Period on which a Market Disruption Event has not
occurred.
Unless otherwise specified in the applicable term sheet, as to any Index, a “Market Measure Business Day” means a day on which (1) the New York Stock Exchange
(the “NYSE”) and the Nasdaq Stock Market, or their successors, are open for trading and (2) the Index or any successor is calculated and published. As to any Underlying Fund, the term shall mean a day on
which the securities exchange on which that Underlying Fund has its primary listing is open for trading.
If the calculation agent determines that (i) a Market Disruption Event occurs on a scheduled calculation day during the Maturity Valuation Period or (ii) any scheduled calculation
day is determined by the calculation agent not to be a Market Measure Business Day by reason of an extraordinary event, occurrence, declaration, or otherwise (any such day in either (i) or (ii) being a “non-calculation
day”), the closing level of the Market Measure for the applicable non-calculation day will be the closing level of the Market Measure on the next calculation day that occurs during the Maturity Valuation Period. For example, if the first
and second scheduled calculation days during the Maturity Valuation Period are non-calculation days, then the closing level of the Market Measure on the next calculation day will also be the closing level for the Market Measure on the first and
second scheduled calculation days during the Maturity Valuation Period. If no further scheduled calculation days occur after a non-calculation day, or if every scheduled calculation day after that non-calculation day is also a non-calculation day,
then the closing level of the Market Measure for that non-calculation day and each following non-calculation day, if any, (or for all the scheduled calculation days during the Maturity Valuation Period, if applicable) will be determined (or, if not
determinable, estimated) by the calculation agent on the last scheduled calculation day during the Maturity Valuation Period, regardless of the occurrence of a Market Disruption Event on that last scheduled calculation day, and such day will be
deemed to be the calculation day.
If the Market Measure consists of a Basket, the Starting Value and the Ending Value of the Basket will be determined as described in “—Basket Market Measures” below.
Market Disruption Events
As to any Index, “Market Disruption Event” means one or more of the following events, as determined by the calculation agent:
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange where
the securities included in an Index trade (without taking into account any extended or after-hours trading session), in 20% or more of the securities which then compose the Index or any successor index; or
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange that
trades options contracts or futures contracts related to the Index (without taking into account any extended or after-hours trading session), whether by reason of movements in price otherwise exceeding levels permitted by the relevant
exchange or otherwise, in options contracts or futures contracts related to the Index, or any successor index; or
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For the purpose of determining whether a Market Disruption Event has occurred:
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a limitation on the hours in a Market Measure Business Day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of
the relevant exchange;
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(2)
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a decision to permanently discontinue trading in the relevant futures or options contracts related to the Index, or any successor index, will not constitute a Market Disruption Event;
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a suspension in trading in a futures or options contract on the Index, or any successor index, by a major securities market by reason of (a) a price change violating limits set by that securities market, (b) an
imbalance of orders relating to those contracts, or (c) a disparity in bid and ask quotes relating to those contracts will constitute a suspension of or material limitation on trading in futures or options contracts related to the Index;
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a suspension of or material limitation on trading on the relevant exchange will not include any time when that exchange is closed for trading under ordinary circumstances; and
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if applicable to indices with component securities listed on the NYSE, for the purpose of clause (A) above, any limitations on trading during significant market fluctuations under NYSE Rule 80B, or any applicable
rule or regulation enacted or promulgated by the NYSE or any other self-regulatory organization or the SEC of similar scope as determined by the calculation agent, will be considered “material” if so determined by the calculation agent.
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As to any Underlying Fund, a Market Disruption Event means one or more of the following events, as determined by the calculation agent:
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, of the shares of the
Underlying Fund (or the successor underlying fund, as defined below) on the primary exchange where such shares trade, as determined by the calculation agent (without taking into account any extended or after-hours trading session);
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the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange that
trades options contracts or futures contracts related to the shares of the Underlying Fund (or successor underlying fund) as determined by the calculation agent (without taking into account any extended or after-hours trading session), in
options contracts or futures contracts related to the shares of the Underlying Fund;
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with respect to an Underlying Fund that holds equity securities, the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour
period preceding the close of trading, on the primary exchange where component stocks of the relevant Underlying Index (or the successor underlying index, as defined below) trade, as determined by the calculation agent (without taking into
account any extended or after-hours trading session), in 20% or more of the stocks which then comprise the Underlying Index or any successor underlying index;
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with respect to an Underlying Fund that holds equity securities, the suspension of or material limitation on trading, in each case, for more than two consecutive hours of trading, or during the one-half hour
period preceding the close of trading, on the primary exchange that trades options contracts or futures contracts related to the relevant Underlying Index (or the successor underlying index) as determined by the calculation agent (without
taking into account any extended or after-hours trading session), in options contracts or futures contracts related to the Underlying Index or any successor underlying index; or
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the determination that a scheduled calculation day is not a Market Measure Business Day by reason of an extraordinary event, occurrence, declaration, or otherwise.
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The term sheet will identify, if applicable, any additions or changes to the Market Disruption Events for an Underlying Fund, including a commodity-based Underlying Fund.
For the purpose of determining whether a Market Disruption Event has occurred:
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a limitation on the hours in a Market Measure Business Day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of
the relevant exchange;
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a decision to permanently discontinue trading in the shares of the Underlying Fund (or successor underlying fund) or the relevant futures or options contracts relating to such shares or the relevant Underlying
Index (or any successor underlying index) will not constitute a Market Disruption Event;
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a suspension in trading in a futures or options contract on the shares of the Underlying Fund (or successor underlying fund) or the relevant Underlying Index (or any successor underlying index), by a major
securities market by reason of (a) a price change violating limits set by that securities market, (b) an imbalance of orders relating to those contracts, or (c) a disparity in bid and ask quotes relating to those contracts, will each
constitute a suspension of or material limitation on trading in futures or options contracts relating to the Underlying Fund;
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subject to paragraph (3) above, a suspension of or material limitation on trading on the relevant exchange will not include any time when that exchange is closed for trading under ordinary circumstances; and
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for the purpose of clauses (A) and (C) above, any limitations on trading during significant market fluctuations under NYSE Rule 80B, or any applicable rule or regulation enacted or promulgated by the NYSE or any
other self-regulatory organization or the SEC of similar scope as determined by the calculation agent, will be considered “material” if so determined by the calculation agent.
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Adjustments to an Index
After the applicable pricing date, an Index Publisher may make a material change in the method of calculating an Index or in another way that changes the Index such that it does
not, in the opinion of the calculation agent, fairly represent the level of the Index had those changes or modifications not been made. In this case, the calculation agent will, at the close of business in New York, New York, on each date that the
closing level is to be calculated, make adjustments to the Index. Those adjustments will be made in good faith as necessary to arrive at a calculation of a level of the Index as if those changes or modifications had not been made, and calculate
the closing level of the Index, as so adjusted.
Discontinuance of an Index
After the pricing date, an Index Publisher may discontinue publication of an Index to which an issue of ARNs is linked. The Index Publisher or another entity may then publish a substitute index that
the calculation agent determines to be comparable to the original Index (a “successor index”). If this occurs, the calculation agent will substitute the successor index as calculated by the relevant Index
Publisher or any other entity and calculate the Ending Value as described under “—The Starting Value and the Ending Value” or “—Basket Market Measure,” as applicable. If the calculation agent selects a successor index, the calculation agent will
give written notice of the selection to the trustee, to us and to the holders of ARNs.
If an Index Publisher discontinues publication of the Index before the end of the Maturity Valuation Period and the calculation agent does not select a successor index, then on
each day that would have been a calculation day, until the earlier to occur of:
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the determination of the Ending Value; and
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a determination by the calculation agent that a successor index is available,
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the calculation agent will compute a substitute level for the Index in accordance with the procedures last used to calculate the Index before any discontinuance. The calculation agent will make
available to holders of ARNs information regarding those levels by means of Bloomberg L.P., Thomson Reuters, a website, or any other means selected by the calculation agent.
If a successor index is selected or the calculation agent calculates a level as a substitute as to any Index, the successor index or level will be used as a substitute for all
purposes, including for the purpose of determining whether a Market Disruption Event exists.
Notwithstanding these alternative arrangements, any modification or discontinuance of the publication of any Index to which your ARNs are linked may adversely affect trading in
ARNs.
Anti-Dilution and Discontinuance Adjustments Relating to Underlying Funds
As to any Underlying Fund, the calculation agent may adjust the Price Multiplier (and as a result, the
Ending Value), and any other terms of the ARNs (such as the Starting Value), if an event described below occurs after the pricing date and on or before the final calculation day during the Maturity Valuation Period and if the calculation agent
determines that such an event has a diluting or concentrative effect on the theoretical value of the shares of the applicable Underlying Fund or successor underlying fund.
The Price Multiplier resulting from any of the adjustments specified below will be rounded to the eighth decimal place with five one-billionths being rounded upward. No adjustments
to the Price Multiplier will be required unless the adjustment would require a change of at least 0.1% in the Price Multiplier then in effect. Any adjustment that would require a change of less than 0.1% in the Price Multiplier which is not
applied at the time of the event may be reflected at the time of any subsequent adjustment that would require a change of the Price Multiplier. The required adjustments specified below do not cover all events that could affect an Underlying Fund.
No adjustments to the Price Multiplier for any Underlying Fund or any other terms of the ARNs will be required other than those specified below. However, the
calculation agent may make additional adjustments or adjustments that differ from those described herein to the Price Multiplier or any other terms of the ARNs to reflect changes to an Underlying Fund if the calculation agent determines that the
adjustment is appropriate.
The calculation agent will be solely responsible for the determination of any adjustments to the Price Multiplier for any Underlying Fund or any other terms of
the ARNs and of any related determinations with respect to any distributions of stock, other securities or other property or assets, including cash, in connection with any event described below.
Following an event that results in an adjustment to the Price Multiplier for any Underlying Fund or any of the other terms
of the ARNs, the calculation agent may (but is not required to) provide holders of the ARNs with information about that adjustment as it deems appropriate, depending on the nature of the adjustment. Upon written request by any holder
of the ARNs, the calculation agent will provide that holder with information about such adjustment.
Anti-Dilution Adjustments
The calculation agent may adjust the Price Multiplier for any Underlying Fund and other terms of the ARNs, and hence the Ending Value, as a result of certain events related to an
Underlying Fund, which include, but are not limited to, the following:
Share Splits and Reverse Share Splits. If an Underlying Fund is subject to a share split or reverse share split, then once such split has
become effective, the Price Multiplier for that Underlying Fund will be adjusted such that the new Price Multiplier will equal the product of:
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the prior Price Multiplier; and
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the number of shares that a holder of one share of the Underlying Fund before the effective date of the share split or reverse share split would have owned immediately following the applicable effective date.
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For example, a two-for-one share split would ordinarily change a Price Multiplier of one into a Price Multiplier of two. In contrast, a one-for-two reverse share split would
ordinarily change a Price Multiplier of one into a Price Multiplier of one-half.
Share Dividends. If an Underlying Fund is subject to a share dividend (i.e., an
issuance of additional shares of Underlying Fund) that is given ratably to all holders of the Underlying Fund, then, once the dividend has become effective and the Underlying Fund is trading ex-dividend, the Price Multiplier for that Underlying
Fund will be adjusted on the ex-dividend date such that the new Price Multiplier will equal the prior Price Multiplier plus the product of:
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the prior Price Multiplier; and
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the number of additional shares issued in the share dividend with respect to one share of the Underlying Fund;
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provided that no adjustment will be made for a share dividend for which the number of shares of the Underlying Fund paid or distributed is based on a fixed cash equivalent value,
unless such distribution is an Extraordinary Dividend (as defined below).
For example, a share dividend of one new share for each share held would ordinarily change a Price Multiplier of one into a Price Multiplier of two.
Extraordinary Dividends. There will be no adjustments to the Price Multiplier of an Underlying Fund to reflect any cash dividends or cash
distributions paid with respect to that Underlying Fund other than Extraordinary Dividends, as described below, and distributions described under the sections entitled “—Other Distributions” and “—Reorganization Events” below.
An “Extraordinary Dividend” means, with respect to a cash dividend or other distribution with respect to an Underlying Fund, a dividend or
other distribution that the calculation agent determines is not declared or otherwise made according to the relevant Underlying Fund’s then existing policy or practice of paying such dividends on a quarterly or other regular basis. If an
Extraordinary Dividend occurs, the Price Multiplier for that Underlying Fund will be adjusted on the ex-dividend date so that the new Price Multiplier will equal the product of:
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the prior Price Multiplier; and
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a fraction, the numerator of which is the Closing Market Price per share of the Underlying Fund on the Market Measure Business Day preceding the ex-dividend date and the denominator of which is the amount by
which the Closing Market Price per share of the Underlying Fund on that preceding Market Measure Business Day exceeds the Extraordinary Dividend Amount.
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The “Extraordinary Dividend Amount” with respect to an Extraordinary Dividend will equal:
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in the case of cash dividends or other distributions that are paid as regular dividends, the amount per share of the applicable Underlying Fund of that Extraordinary Dividend minus the amount per share of the
immediately preceding non-Extraordinary Dividend for that share; or
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in the case of cash dividends or other distributions that are not paid as regular dividends, the amount per share of the applicable Underlying Fund of that Extraordinary Dividend.
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To the extent an Extraordinary Dividend is not paid in cash, the value of the non-cash component will be determined by the calculation agent. A distribution on the applicable Underlying Fund described under the sections entitled “—Other Distributions” and “—Reorganization Events” below that also constitutes an Extraordinary Dividend will only cause an
adjustment under those respective sections.
Other Distributions. If an Underlying Fund, after the pricing date, declares or makes a distribution to all holders of the shares of the
applicable Underlying Fund of any class of its securities (other than shares of the applicable Underlying Fund), evidences of its indebtedness or other non-cash assets, including, but not limited to, transferable rights and warrants, then, in each
of these cases, once the distribution has become effective and the shares are trading ex-dividend, the Price Multiplier for such Underlying Fund will be adjusted such that the new Price Multiplier will equal the product of:
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the prior Price Multiplier; and
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a fraction, the numerator of which will be the Current Market Price per share of the applicable Underlying Fund, and the denominator of which will be the Current Market Price per share of the applicable
Underlying Fund, less the fair market value, as determined by the calculation agent, as of the time the adjustment is effected of the portion of the capital stock, evidences of indebtedness, rights or warrants, or other non-cash assets so
distributed or issued applicable to one share of the applicable Underlying Fund.
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The “Current Market Price” of any Underlying Fund means the arithmetic average of the Closing Market Prices of one share of such Underlying
Fund for the five Market Measure Business Days prior to the Market Measure Business Day immediately preceding the ex-dividend date of the distribution requiring an adjustment to the Price Multiplier.
“Ex-dividend date” means the first Market Measure Business Day on which transactions in the shares of any Underlying Fund trade on the
relevant exchange without the right to receive that cash dividend or other cash distribution.
The “fair market value” of any such distribution means the value of such distributions on the ex-dividend date for such distribution, as determined by the
calculation agent. If such distribution consists of property traded on the ex-dividend date on a U.S. national securities
exchange, the fair market value will equal the Closing Market Price of such distributed property on such ex-dividend date.
Reorganization Events
If after the pricing date and on or prior to the final calculation day during the Maturity Valuation Period, as to any Underlying Fund, the Underlying Fund, or its successor, has
been subject to a merger, combination, consolidation, or statutory exchange of securities with another exchange traded fund, and the Underlying Fund is not the surviving entity, then, on or after the date of such event, the calculation agent shall
make an adjustment to the Price Multiplier for such Underlying Fund or any other terms of the ARNs as the calculation agent determines appropriate to account for the economic effect on the ARNs of that event (including adjustments to account for
changes in volatility, expected dividends, stock loan rate, or liquidity relevant to the Underlying Fund or to the ARNs), and determine the effective date of that adjustment. If the calculation agent determines that no adjustment that it could
make will produce a commercially reasonable result, then the calculation agent may deem the Underlying Fund to be de-listed, liquidated, discontinued, or otherwise terminated, the treatment of which is described below under “—Discontinuance of or
Material Change to an Underlying Fund.”
Discontinuance of or Material Change to an Underlying Fund
If shares of an Underlying Fund are de-listed from its primary securities exchange (or any other relevant exchange), liquidated, or otherwise terminated, the calculation agent will
substitute an exchange traded fund that the calculation agent determines is comparable to the discontinued Underlying Fund (that exchange traded fund being referred to herein as a “successor underlying fund”).
In that event, the calculation agent will adjust the applicable Price Multiplier, as necessary, such that the successor underlying fund closely replicates the performance of the Underlying Fund.
If an Underlying Fund (or a successor underlying fund) is de-listed, liquidated, or otherwise terminated and the calculation agent determines that no adequate substitute for the
Underlying Fund (or a successor underlying fund) is available, then the calculation agent will calculate the Closing Market Price of that Underlying Fund (or a successor underlying fund) by a computation methodology that the calculation agent
determines will as closely as reasonably possible replicate that Underlying Fund (or a successor underlying fund). If the calculation agent determines that no such computation methodology will produce a commercially reasonable result, then the
calculation agent may cause the maturity date of the ARNs to be accelerated as described below.
If a successor underlying fund is selected or the calculation agent calculates the Closing Market Price by a computation methodology that the calculation agent determines will as
closely as reasonably possible replicate the Underlying Fund (or a successor underlying fund), that successor underlying fund or substitute computation methodology, as applicable, will be substituted for the Underlying Fund (or that successor
underlying fund) for all purposes of the ARNs.
If at any time:
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an Underlying Index (or the underlying index related to a successor underlying fund) is discontinued or ceases to be published and (i) the Market Measure Publisher of the Underlying Index or another entity
does not publish a successor or substitute underlying index that the calculation agent determines to be comparable to the Underlying Index (a “successor underlying index”) or (ii) the Market
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Measure Publisher of the Underlying Fund does not announce that the Underlying Fund will track the successor underlying index; or
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an Underlying Fund (or a successor underlying fund) in any way is modified (including, but not limited to, a material change in the investment policies, objectives or methodology of the Underlying Fund, or a
material change to the related Underlying Index) so that the Underlying Fund does not, in the opinion of the calculation agent, fairly represent the price per share of that Underlying Fund (or that successor underlying fund) had those
changes or modifications not been made;
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then, from and after that time, the calculation agent will make those calculations and adjustments that, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a
Closing Market Price of that Underlying Fund (or that successor underlying fund) as if those changes or modifications had not been made. The calculation agent also may determine that no adjustment is required. If the calculation agent determines
that no such calculation or adjustment will produce a commercially reasonable result, then the calculation agent may cause the maturity date of the ARNs to be accelerated as described below.
The calculation agent will be solely responsible for the method of calculating the Closing Market Price of the Underlying Fund (or any successor underlying fund) and of any related
determinations and calculations, and its determinations and calculations with respect thereto will be conclusive in the absence of manifest error.
Notwithstanding these alternative arrangements, any modification or discontinuance of the Underlying Fund or the related Underlying Index may adversely affect trading in the ARNs.
If the calculation agent determines that no adjustment that it could make will produce a commercially reasonable result, then the calculation agent may cause the ARNs to be
accelerated to the fifth business day (the “date of acceleration”) following the date of that determination and the amount payable to you will be calculated as though the date of acceleration were the stated
maturity date of the ARNs and as if the final calculation day during the Maturity Valuation Period were five Market Measure Business day prior to the date of acceleration. In addition, the ARNs will not bear a default interest rate.
Basket Market Measures
If the Market Measure to which your ARNs are linked is a Basket, the Basket Components will be set forth in the applicable term sheet. We will assign each Basket Component a
weighting (the “Initial Component Weight”) so that each Basket Component represents a percentage of the Starting Value of the Basket on the pricing date. We may assign the Basket Components equal Initial
Component Weights, or we may assign the Basket Components unequal Initial Component Weights. The Initial Component Weight for each Basket Component will be stated in the applicable term sheet.
Determination of the Component Ratio for Each Basket Component
The “Starting Value” of the Basket will be equal to 100. We will set a fixed factor (the “Component Ratio”)
for each Basket Component on the pricing date, based upon the weighting of that Basket Component. The Component Ratio for each Basket Component will equal:
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the Initial Component Weight (expressed as a percentage) for that Basket Component, multiplied by 100; divided by
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the closing level or Closing Market Price, as applicable, of that Basket Component on the pricing date.
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Each Component Ratio will be rounded to eight decimal places.
The Component Ratios will be calculated in this way so that the Starting Value of the Basket will equal 100 on the pricing date. The Component Ratios will not be revised
subsequent to their determination on the pricing date, except that the calculation agent may in its good faith judgment adjust the Component Ratio of any Basket Component in the event that Basket Component is materially changed or modified in a
manner that does not, in the opinion of the calculation agent, fairly represent the value of that Basket Component had those material changes or modifications not been made.
The following table is for illustration purposes only, and does not reflect the actual composition, Initial Component Weights, or Component Ratios, which will be set forth in the
applicable term sheet.
Example: The hypothetical Basket Components are Underlying Fund ABC, Index XYZ, and Index RST, with their Initial Component Weights being
50.00%, 25.00% and 25.00%, respectively, on a hypothetical pricing date:
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Basket Component
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Initial
Component
Weight
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Hypothetical
Closing
Level or
Closing Market
Price(1)
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Hypothetical
Component
Ratio(2)
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Initial Basket
Value
Contribution
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Underlying Fund ABC
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50.00%
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$500.00
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0.10000000
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50.00
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Index XYZ
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25.00%
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2,420.00
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0.01033058
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25.00
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Index RST
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25.00%
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1,014.00
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0.02465483
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25.00
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Starting Value
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100.00
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This column sets forth the hypothetical closing level or Closing Market Price, as applicable, of each Basket Component on the hypothetical
pricing date.
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The hypothetical Component Ratio for each Basket Component equals its Initial Component Weight (expressed as a percentage) multiplied by 100, and then divided by the
hypothetical closing level or Closing Market Price, as applicable, of that Basket Component on the hypothetical pricing date, with the result rounded to eight decimal places.
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Unless otherwise stated in the term sheet, if a Market Disruption Event occurs on the pricing date as to any Basket Component, or the pricing date is determined by the calculation agent not to be a Market Measure
Business Day for any Basket Component by reason of an extraordinary event, occurrence, declaration or otherwise, the calculation agent will establish the closing level or Closing Market Price, as applicable, of that Basket Component (the “Basket Component Closing Level”), and thus its Component Ratio, based on the closing level or Closing Market Price, as applicable, of that Basket Component on the first
Market Measure Business Day following the pricing date on which no Market Disruption Event occurs for that Basket Component. In the event that a Market Disruption Event or non-Market measure Business Day occurs for that Basket Component on the
pricing date and on each day to and including the second scheduled Market Measure Business Day following the pricing date, the calculation agent (not later than the close of business in New York, New York on the second scheduled Market Measure
Business Day following the pricing date) will estimate the Basket Component Closing Level, and thus the applicable Component Ratio. The final term sheet will provide the Basket Component Closing Level, a brief statement of the facts relating to
the establishment of the Basket Component Closing Level (including the applicable Market Disruption Event(s)), and the applicable Component Ratio.
For purposes of determining whether a Market Disruption Event has occurred as to any Basket Component, “Market Disruption Event” will have the meaning stated
above in “—Market Disruption Events.”
Ending Value of the Basket
The calculation agent will calculate the value of the Basket for a calculation day by summing the products of the closing levels or Closing Market Prices, as applicable, of each
Basket Component on that calculation day (multiplied by its Price Multiplier on that day, if applicable) and the Component Ratio for each Basket Component. The value of the Basket will vary based on the increase or decrease in the value of each
Basket Component. Any increase in the value of a Basket Component (assuming no change in the value of the other Basket Component or Basket Components) will result in an increase in the value of the Basket. Conversely, any decrease in the value of
a Basket Component (assuming no change in the value of the other Basket Component or Basket Components) will result in a decrease in the value of the Basket.
The “Ending Value” of the Basket will equal the average value of the Basket on each calculation day during the Maturity Valuation Period.
Unless otherwise specified in the applicable term sheet, if, for any Basket Component (an “Affected Basket Component”), the calculation
agent determines that (i) a Market Disruption Event occurs on a scheduled calculation day during the Maturity Valuation Period or (ii) any scheduled calculation day is determined by the calculation agent not to be a Market Measure Business Day by
reason of an extraordinary event, occurrence, declaration, or otherwise (any such day in either (i) or (ii) being a “non-calculation day”), the calculation agent will determine the closing levels or Closing
Market Prices, as applicable, of the Basket Components for that non-calculation day, and as a result, the Ending Value, as follows:
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The closing level or Closing Market Price, as applicable, of each Basket Component that is not an Affected Basket Component will be its closing level or Closing Market Price, as applicable, on such
non-calculation day.
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The closing level or Closing Market Price, as applicable, of each Basket Component that is an Affected Basket Component for the applicable non-calculation day will be determined in the same manner as
described in the fifth paragraph of subsection “—The Starting Value and the Ending Value—Ending Value,” provided that references to “Market Measure” will be references to “Basket Component.”
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Role of the Calculation Agent
The calculation agent has the sole discretion to make all determinations regarding ARNs as described in this product supplement, including determinations regarding the Starting
Value, the Ending Value, the Market Measure, the Price Multiplier, the Redemption Amount, any Market Disruption Events, a successor index, Market Measure Business Days, business days, calculation days, non-calculation days, and determinations
related to any adjustments to, or the discontinuance of, any Index or Underlying Fund. Absent manifest error, all determinations of the calculation agent will be conclusive for all purposes and final and binding on you and us, without any
liability on the part of the calculation agent.
We expect to appoint BofAS (or one of its affiliates) and us (or one of our affiliates) as the joint calculation agents for each issue of ARNs. Alternatively, we may appoint BofAS
(or one of its affiliates) as calculation agent for ARNs. When we refer to a “calculation agent” in this product supplement or in any term sheet, we are referring to the applicable calculation agent or joint calculation agents, as the case may be.
However, in either case, we may change the calculation agent at any time without notifying you. The identity of the calculation agent will be set forth in the applicable term sheet.
Same-Day Settlement and Payment
ARNs will be delivered in book-entry form only through DTC against payment by purchasers of ARNs in immediately available funds. We will pay the Redemption Amount in immediately
available funds so long as ARNs are maintained in book-entry form.
Events of Default and Acceleration
Events of default are defined in the senior indenture. If such an event occurs and is continuing, unless otherwise stated in the applicable term sheet, the amount payable to a
holder of ARNs upon any acceleration permitted under the senior indenture will be equal to the Redemption Amount described under the caption “—Payment at Maturity,” determined as if ARNs matured on the date of acceleration, and as if the final
calculation day of the Maturity Valuation Period were the fifth Market Measure Business Day prior to the date of acceleration. If a bankruptcy proceeding is commenced in respect of us, your claim may be limited under applicable bankruptcy law. In
case of a default in payment of ARNs, whether at their maturity or upon acceleration, they will not bear a default interest rate. For additional discussion of these matters, please see the discussion in the accompanying prospectus under the heading
“Description of the Debt Securities—Terms Specific to Senior Debt Securities—Events of Default”.
If the maturity date of ARNs is accelerated because of an event of default, we will, or will cause the calculation agent to, provide written notice to the trustee at its New York
office, on which notice the trustee may conclusively rely, and to the depositary, of the cash amount due with respect to ARNs as promptly as possible and in no event later than two business days after the date of acceleration.
Listing
Unless otherwise specified in the applicable term sheet, ARNs will not be listed on a securities exchange or quotation system.
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
TDS and BofAS and one or more of its affiliates may act as our agents for any offering of ARNs, and TDS and BofAS will each act in a principal capacity in such role, unless
otherwise specified in the applicable term sheet. Each agent will be a party to the distribution agreement described in the section “Plan of Distribution (Conflicts of Interest)” in the accompanying prospectus.
Each agent will receive an underwriting discount that is a percentage of the aggregate principal amount of ARNs sold through its efforts, which will be set forth in the applicable
term sheet. Each agent may resell any ARN it purchases as principal to other brokers or dealers at a discount, which may include all or part of the discount that agent received from us. Additionally, unless otherwise specified in the applicable
term sheet, TDS will provide services to TD in connection with the offer and sale of ARNs, and TD will reimburse TDS for certain related expenses and pay TDS a fee in connection with its role in the offer and sale of ARNs.
You must have an account with the applicable agent in order to purchase ARNs. None of the agents is acting as your fiduciary or advisor solely as a result of the making of any
offering of ARNs, and you should not rely upon this product supplement, the applicable term sheet, or the accompanying prospectus as investment advice or a recommendation to purchase any ARNs. You should make your own investment decision regarding
ARNs after consulting with your legal, tax, and other advisors.
BofAS and its affiliates may use this product supplement and the accompanying prospectus, together with the applicable term sheet, in market-making transactions for any ARNs after
their initial sale solely for the purpose of providing investors with the description of the terms of ARNs that were made available to investors in connection with the initial distribution of ARNs. Secondary market investors should not, and will
not be authorized to rely on these documents for information regarding TD or for any purpose other than that described in the immediately preceding sentence.
Conflict of Interest
TDS is an affiliate of TD and, as such, has a “conflict of interest” in this offering within the meaning of Financial Industry Regulatory Authority, Inc. (“FINRA”) Rule 5121.
Additionally, TD will receive the net proceeds from the initial public offering of the notes, thus creating an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, this offering of the notes will be conducted in
compliance with the provisions of FINRA Rule 5121 and TDS is not permitted to sell the notes to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.
Selling Restrictions
European Economic Area and United Kingdom
None of the applicable pricing supplement, this product supplement or the accompanying prospectus is a prospectus for the purposes of the Prospectus Regulation (as defined below).
The applicable pricing supplement, this product supplement and the accompanying prospectus have been prepared on the basis that any offer of ARNs in the European Economic Area (the “EEA”) or in the United Kingdom will only be made to a legal entity
which is a qualified investor under the Prospectus Regulation (“Qualified Investors”). Accordingly any person making or intending to make an offer in the EEA or in the United Kingdom of ARNs which are the subject of the offering contemplated in the
applicable pricing supplement, this product supplement and the accompanying prospectus may only do so with respect to Qualified Investors. Neither TD nor the agents have authorized, nor do they authorize, the making of any offer of notes other than
to Qualified Investors. The expression “Prospectus Regulation” means Regulation (EU) 2017/1129, as may be amended.
PROHIBITION OF SALES TO EEA AND UNITED KINGDOM RETAIL INVESTORS – ARNs are not intended to be offered, sold or otherwise made available to
and should not be offered, sold or otherwise made available to any retail investor in the EEA or in the United Kingdom. For these purposes: (a) a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11)
of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97, as amended or superseded (the “Insurance Distribution Directive”), where that customer would not qualify as a
professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation; and (b) the expression “offer” includes the communication in any form and by any means of
sufficient information on the terms of the offer and ARNs to be offered so as to enable an investor to decide to purchase or subscribe for ARNs. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the
“PRIIPs Regulation”) for offering or selling ARNs or otherwise making them available to retail investors in the EEA or in the United Kingdom has been prepared and therefore offering or selling ARNs or otherwise making them available to any retail
investor in the EEA or in the United Kingdom may be unlawful under the PRIIPs Regulation.
United Kingdom
BofAS and TDS have represented and agreed, and each further dealer appointed under the program will be required to represent and agree, that:
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(a) |
in relation to any ARNs which have a maturity of less than one year, (i) it is a person whose ordinary activities involve it in acquiring, holding, managing, or disposing of investments (as principal or as agent)
for the purposes of its business and (ii) it has not offered or sold and will not offer or sell any ARNs other than to persons whose ordinary activities involve them in acquiring, holding, managing, or disposing of investments (as principal
or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage, or dispose of investments (as principal or as agent) for the purposes of their businesses where the issue of ARNs would
otherwise constitute a contravention of section 19 of the Financial Services and Markets Act 2000 (the “FSMA”) by TD;
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(b) |
it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the
FSMA) received by it in connection with the issue or sale of any ARNs in circumstances in which section 21(1) of the FSMA does not apply to TD; and
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it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to ARNs in, from or otherwise involving the United Kingdom.
SUPPLEMENTAL DISCUSSION OF CANADIAN TAX CONSEQUENCES
An investor should read carefully the description of the principal Canadian federal income tax considerations relevant to a Non-resident Holder owning ARNs under “Tax Consequences – Canadian Taxation”
in the accompanying prospectus. The applicable term sheet may describe the principal Canadian federal income tax considerations relevant to a Non-resident Holder owning ARNs which shall, to the extent so described or to the extent inconsistent with
the accompanying prospectus, replace or modify the description in the accompanying prospectus.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The U.S. federal income tax consequences of an investment in ARNs are uncertain. There are no
statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of how certain securities such as ARNs should be treated for U.S. federal income tax purposes and we do
not plan to request a ruling from the IRS. The following is a general description of certain material U.S. federal income tax consequences of the ownership and disposition of ARNs and does not purport to be a complete analysis of all tax
considerations relating to ARNs. This summary is based upon the Code, final, temporary and proposed Treasury regulations, rulings and decisions, in each case, as available and in effect as of the date of this document, all of which are subject to
change, possibly with retroactive effect. Tax consequences under state, local and non-U.S. laws are not addressed herein. The applicable term sheet will contain a further discussion of the U.S. federal income tax consequences applicable to that
offering of ARNs, which may differ from the discussion herein. The summary of the U.S. federal income tax consequences contained in the applicable term sheet supersedes the following summary to the extent it is inconsistent with this discussion.
Prospective purchasers of ARNs are urged to read the discussion below in connection with the discussion in the applicable term sheet relating to their ARNs and to consult their tax advisors as to the consequences under the tax laws of the country
of which they are resident for tax purposes and the federal, state, and local tax laws of the U.S. of acquiring, holding and disposing of, and receiving payments under, ARNs.
The discussion below assumes that an investor in ARNs will be subject to a significant risk that it will lose a significant amount of its
investment in ARNs. If an investor in ARNs is not subject to a significant risk that it will lose a significant amount of its investments in ARNs, the U.S. federal income tax treatment of those ARNs may differ substantially from that described in
the discussion below and such treatment will be described in the applicable term sheet. The discussion below also assumes that ARNs will not provide for interest payments. If ARNs provide for interest payments, the U.S. federal income tax treatment
of the coupon will be described in the applicable term sheet.
This discussion applies to you only if you acquire your ARNs upon initial issuance and hold your ARNs as capital assets within the meaning of
Section 1221 of the Code for U.S. federal income tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to special rules, such as:
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a dealer in securities or currencies,
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a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings,
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a financial institution or a bank,
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a regulated investment company (a “RIC”), a real estate investment trust (a “REIT”) or common trust fund,
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a life insurance company,
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a tax-exempt organization or an investor holding ARNs in a tax-advantaged account (such as an “Individual Retirement Account” or “Roth IRA”),
as defined in Section 408 or 408A of the Code, respectively,
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a person that owns ARNs as part of a hedging transaction, straddle, synthetic security, conversion transaction, or other integrated transaction, or enters into a
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“constructive sale” with respect to ARNs or a “wash sale” with respect to ARNs or the Market Measure,
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a former citizen of the U.S., or
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a U.S. holder (as defined below) whose functional currency for tax purposes is not the U.S. dollar.
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Except as discussed under “— Non-U.S. Holders” below, this discussion is only applicable to U.S. holders.
For purposes of this summary, a U.S. holder is a beneficial owner of a ARN that is: (i) an individual who is a citizen or a resident of the
U.S. for U.S. federal income tax purposes; (ii) a domestic corporation or other entity that is treated as a corporation for U.S. federal income tax purposes and is created or organized in or under the laws of the U.S. or any political subdivision
thereof; (iii) an estate whose income is subject to U.S. federal income tax regardless of its source; or (iv) a trust if a court within the U.S. is able to exercise primary supervision over its administration, and one or more U.S. persons for U.S.
federal income tax purposes have the authority to control all substantial decisions of the trust.
An individual may, subject to certain exceptions, be deemed to be a resident of the U.S. by reason of being present in the U.S. for at least
31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second preceding year).
If a partnership, or any entity treated as a partnership for U.S. federal income tax purposes, holds ARNs, the U.S. federal income tax
treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding ARNs should consult its tax advisor with regard to the U.S. federal income tax treatment of an
investment in ARNs.
U.S. Federal Income Tax Treatment
Unless otherwise specified in the applicable term sheet, we intend to treat ARNs as prepaid derivative contracts with respect to the Market Measure for U.S. federal income tax
purposes and pursuant to the terms of ARNs, the Bank and you agree, in the absence of a statutory or regulatory change or an administrative determination or judicial ruling to the contrary, to treat ARNs in accordance with this characterization.
If ARNs are so treated, you should generally not accrue any income with respect to ARNs during the term of ARNs until taxable disposition of
ARNs and you should generally recognize gain or loss upon such taxable disposition in an amount equal to the difference between the amount you receive at such time and your tax basis in ARNs. In general, your tax basis in your ARNs will be equal to
the amount you paid for your ARNs. Such recognized gain or loss should generally be long-term capital gain or loss if you have held your ARNs for more than one year (otherwise, such gain or loss should be short-term capital gain or loss if held for
one year or less). The deductibility of capital losses is subject to limitations.
It is possible that the IRS could assert that your holding period in respect of your ARNs should end on the date on which the amount you are entitled to
receive upon maturity of your ARNs is determined (generally the final calculation day of the Maturity Valuation Period), even though you will not receive any amounts from the Bank in respect of your ARNs prior to the maturity date of your ARNs. In
this case, you may be treated as having a holding period in respect of your ARNs ending prior to the maturity date for your ARNs, and such holding period may be
treated as less than one year even if you receive cash on the maturity date of your ARNs at a time that is more than one year after the beginning of your
holding period.
Unless otherwise specified in the applicable term sheet, we expect our special U.S. tax counsel, Cadwalader, Wickersham & Taft LLP, would
be able to opine that it would be reasonable to treat your ARNs in the manner described above.
Notice 2008-2
In 2007, the IRS released a notice that may affect the taxation of holders of ARNs. According to Notice 2008-2, the IRS and the Treasury are
actively considering whether the holder of an instrument, such as ARNs, 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 such ARNs would ultimately be required to accrue current income 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” under
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 potential impact of the
above considerations.
Except to the extent otherwise required by law, we intend to treat your ARNs for U.S. federal income tax purposes in accordance with the
treatment described above unless and until such time as the Treasury and IRS determine that some other treatment is more appropriate.
Section 1260
If the ARN references an Underlying Fund or a component security of a Market Measure that is treated as equity in a RIC (or a “trust”) such as certain
Underlying Funds, a REIT, a PFIC, a partnership (including a master limited partnership), or other “pass-thru entity” for purposes of Section 1260 of the Code, it is possible that the "constructive ownership" rules of Section 1260 of the Code may
apply, in which case the tax consequences of a taxable disposition of the ARNs could be materially and adversely affected. Under the “constructive ownership” rules, if an investment in the ARNs is treated as a “constructive ownership transaction”,
any long-term capital gain recognized by a U.S. holder in respect of such ARNs will be recharacterized as ordinary income to the extent such gain exceeds the amount of “net underlying long-term capital gain” (as defined in Section 1260 of the Code)
of the U.S. holder (the “Excess Gain”). In addition, an interest charge would also apply to any deemed underpayment of tax in respect of any “Excess Gain” to the extent such gain would have resulted in a gross income inclusion for the U.S. holder
in taxable years prior to the taxable year of the taxable disposition of the ARNs (assuming such income accrued such that the amount in each successor year is equal to the income in the prior year increased at a constant rate equal to the
applicable federal rate as of the date of the taxable disposition). In the case of ARNs referencing a pass-thru entity containing gold and/or silver, if Section 1260 of the Code were to apply to the ARNs, any long-term capital gain recognized with
respect to the ARNs that is not recharacterized as ordinary income would be subject to tax at a special 28% maximum rate that is applicable to “collectibles”. There exists a risk that an investment in ARNs that are linked to shares of an Underlying
Fund, PFIC, REIT, RIC or other “pass-thru” entity or to a Basket or Market Measure that contains shares of an Underlying Fund, PFIC, REIT, RIC or other “pass-thru entity” could be treated as a “constructive ownership transaction”. Furthermore,
depending on the precise terms of a particular offering of ARNs that reference an Underlying Fund, PFIC, REIT or other “pass-thru entity”, the risk may be substantial that an investment in such ARNs would be treated as a “constructive ownership
transaction”, and that all or a portion of any long-term capital gain recognized with respect to such ARNs could be recharacterized as ordinary income and subject to an interest charge (or, in
the case of an pass-thru entity containing gold and/or silver, subject to a special 28% maximum rate that is applicable to “collectibles”).
If such treatment applies, it is not clear to what extent any long-term capital gain recognized by a U.S. holder in respect of a ARN would be
recharacterized as ordinary income and subject to the interest charge described above, in part because it is not clear how the “net underlying long-term capital gain” would be computed in respect of an ARN. Under Section 1260 of the Code, the net
underlying long-term capital gain is generally the net long-term capital gain a taxpayer would have recognized by investing in the underlying “pass-thru entity” at the inception of the constructive ownership transaction and selling on the date the
constructive ownership transaction is closed out (i.e. at maturity or earlier disposition). It is possible that because the U.S. holder does not share in distributions made on the Market Measure or component securities of a Market Measure, these
distributions could be excluded from the calculation of the amount and character of gain, if any, that would have been realized had the U.S. holder held the Market Measure or component securities of a Market Measure directly and that the
application of constructive ownership rules may not recharacterize adversely a significant portion of the long-term capital gain recognized with respect to the ARNs. However, it is also possible that all or a portion of the gain with respect to the
ARNs could be treated as “Excess Gain” if, for example, where a pass-thru entity is the sole Market Measure, the “net underlying long-term capital gain” could equal the amount of long-term capital gain a U.S. holder would have recognized if on the
issue date of the ARNs the holder had invested the principal amount of the ARNs in shares of the Market Measure that is treated as a “pass-thru entity” and sold those shares for their fair market value on the date of a taxable disposition of the
ARNs. In addition, all or a portion of the gain recognized with respect to the ARNs could be “Excess Gain” for ARNs purchased for an amount that is less than the principal amount of the ARNs or if the return on the ARNs is adjusted to take into
account any extraordinary dividends that are paid on the shares of the Market Measure. Furthermore, unless otherwise established by clear and convincing evidence, the “net underlying long-term capital gain” is treated as zero. Accordingly, it is
possible that all or a portion of any gain on the taxable disposition of ARNs after one year could be treated as “Excess Gain” from a “constructive ownership transaction”, which gain would be recharacterized as ordinary income, and subject to an
interest charge (or, in the case of an Underlying Fund containing gold and/or silver, subject to the tax rate applicable to “collectibles”).
Because the application of the constructive ownership rules to the ARNs is unclear, holders are urged to consult their tax advisors regarding
the potential application of those rules to an investment in the ARNs.
Section 1297
We will not attempt to ascertain whether the issuer of any Market Measure or any component security of a Market Measure, as applicable, would
be treated as a PFIC. In general, if a U.S. taxpayer holds an interest in a PFIC, such U.S. taxpayer is required to report any gain on disposition of an interest in such PFIC as ordinary income, rather than as capital gain, and the taxpayer is
subject to tax on such gain in the year such gain is recognized at the highest ordinary income tax rate and for a non-deductible interest charge at the federal underpayment rate as if the gain had been earned ratably over each day in such
taxpayer’s holding period and such tax liabilities had been due with respect to each prior year in the taxpayer’s holding periods. In the event that any component security of a Market Measure is treated as a PFIC, the application of the PFIC rules
to ARNs would be unclear, and it is possible that U.S. holders of ARNs could be subject to the PFIC rules to the extent that ARNs directly or indirectly references shares in one or more PFICs. Accordingly, U.S. holders should consult their tax
advisors regarding the potential application of the PFIC rules to an investment in ARNs.
Alternative Treatments
Because of the absence of authority regarding the appropriate tax characterization of your ARNs, it is possible that the IRS could seek to
characterize your ARNs in a manner that results in tax consequences to you that are materially different from those described above and could materially and adversely affect the timing and/or character of income or loss with respect to ARNs.
Contingent Payment Debt Instrument. If ARNs have a term greater than one year, it is possible that
ARNs could be treated as a debt instrument subject to the special tax rules governing contingent payment debt instruments. If ARNs are so treated, you would be required to accrue interest income over the term of your ARNs based upon the yield at
which we would issue a non-contingent fixed-rate debt instrument with other terms and conditions similar to your ARNs. You would recognize gain or loss upon the taxable disposition of your ARNs in an amount equal to the difference, if any, between
the amount you receive at such time and your adjusted basis in your ARNs. In general, your adjusted basis in your ARNs would be equal to the amount you paid for your ARNs, increased by the amount of interest you previously accrued with respect to
your ARNs. Any gain you recognize upon the taxable disposition of your ARNs would be ordinary income and any loss recognized by you at such time would be ordinary loss to the extent of interest you included in income in the current or previous
taxable years in respect of your ARNs, and thereafter, would be capital loss.
Contingent Short-Term Debt Instrument. Similarly, if ARNs have a term of one year or less, it is
possible that ARNs could be treated as contingent short-term debt instruments. However, there are no specific rules that govern contingent short-term debt instruments and, therefore, if ARNs were characterized as contingent short-term debt
instruments, the U.S. federal income tax treatment of ARNs would not be entirely clear. U.S. holders should consult their tax advisors as to the tax consequences of such characterization.
Other Alternative Treatments. The IRS could also possibly assert that (i) you should be treated as
owning the Market Measure, any Basket Components or the component securities of a Market Measure, (ii) any gain or loss that you recognize upon the taxable disposition of ARNs should be treated as ordinary gain or loss or short-term capital gain or
loss, (iii) you should be required to accrue interest income over the term of your ARNs, (iv) you should be required to include in ordinary income an amount equal to any increase in the Market Measure, any Basket Components or any component
security of a Market Measure that is attributable to ordinary income that is realized in respect of the Market Measure, any Basket Components or any component security of a Market Measure, such as interest, dividends or net-rental income or (v) you
should be required to recognize taxable gain upon a rollover, rebalancing or change, if any, of the Market Measure or any Basket Component. U.S. holders should consult their tax advisors as to the tax consequences of such characterization and any
possible alternative characterizations of their ARNs for U.S. federal income tax purposes.
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 ARNs, 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 advisors with
respect to the consequences of the 3.8% Medicare tax.
Information Reporting with respect to Specified Foreign Financial Assets
U.S. holders may be subject to reporting obligations with respect to their ARNs if they do not hold their ARNs in an account maintained by a
financial institution and the aggregate value of their ARNs 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 ARNs and fails to do so.
Treasury Regulations Requiring Disclosure of Reportable Transactions
Treasury regulations require U.S. taxpayers to report certain transactions (“Reportable Transactions”)
on IRS Form 8886. An investment in ARNs or a sale of ARNs generally should not be treated as a Reportable Transaction under current law, but it is possible that future legislation, regulations or administrative rulings could cause an investment in
ARNs or a sale of ARNs to be treated as a Reportable Transaction. U.S. holders should consult their tax advisors regarding any tax filing and reporting obligations that may apply in connection with acquiring, owning or disposing of ARNs.
Backup Withholding and Information Reporting
The proceeds received from a taxable disposition of ARNs will be subject to information reporting unless a holder is an “exempt recipient” and may also be subject to backup
withholding at the rate specified in the Code if such holder fails to provide certain identifying information (such as an accurate taxpayer number in the case of a U.S. holder) or meet certain other conditions. A non-U.S. holder that provides a
properly executed and fully completed applicable IRS Form W-8, will generally establish an exemption from backup withholding.
Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against the applicable holder’s
U.S. federal income tax liability, provided the required information is furnished to the IRS.
Non-U.S. Holders
For purposes of this summary, a “non-U.S. holder” is a beneficial owner of a ARN that is: (i) a nonresident alien
individual for U.S. federal income tax purposes; (ii) a foreign corporation for U.S. federal income tax purposes; or (iii) an estate or trust whose income is not subject to U.S. federal income tax on a net income basis.
Subject to the discussion below with respect to Section 871(m) of the Code and FATCA, if you are a non-U.S. holder, you should generally not
be subject to U.S. withholding tax with respect to payments on your ARNs or to generally applicable information reporting and backup withholding requirements with respect to payments on your ARNs 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 fully completed and validly executed applicable IRS Form W-8. Subject to Section 897 of the Code and Section 871(m) of the
Code (each as discussed below), gain realized on the taxable disposition of ARNs by a non-U.S. holder will generally not be subject to federal income tax, unless:
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the gain with respect to ARNs is effectively connected with a trade or business conducted by the non-U.S. holder in the U.S.;
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the non-U.S. holder is a nonresident alien individual who holds ARNs as a capital asset and is present in the U.S. for more than 182 days in the taxable year of such taxable disposition and certain other
conditions are satisfied; or
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the non-U.S. holder has certain other present or former connections with the U.S.
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If the gain realized on the taxable disposition of ARNs by the non-U.S. holder is described in any of the three preceding bullet points, the
non-U.S. holder may be subject to U.S. federal income tax with respect to the gain except to the extent that an income tax treaty reduces or eliminates the tax and the appropriate documentation is provided.
Section 897. We will not attempt to ascertain whether the issuer of a Market Measure or any
component security of a Market Measure, as applicable, would be treated as a “United States real property holding corporation” (“USRPHC”) within the meaning of Section 897 of the Code. We will also not
attempt to determine whether ARNs should be treated as “United States real property interests” (“USRPI”) as defined in Section 897 of the Code. If any such entity were treated as a USRPHC or ARNs were treated
as USRPI, certain adverse U.S. federal income tax consequences could possibly apply, including subjecting any gain to a non-U.S. holder in respect of a ARN upon a taxable disposition of the ARN to U.S. federal income tax on a net basis, and the
proceeds from such a taxable disposition to a 15% withholding tax. Non-U.S. holders should consult their tax advisors regarding the potential treatment of any such entity as a USRPHC and ARNs 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 2018. 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, 2023. Accordingly, non-U.S. holders of ARNs that are not delta-one
specified equity-linked instruments and that issued before January 1, 2023 should not be subject to tax under Section 871(m). However, it is possible that such withholding tax could apply to ARNs under these rules if the non-U.S. holder enters into
certain subsequent transactions in respect of the Market Measure. For ARNs issued on or after January 1, 2023, the applicable term sheet will indicate whether withholding applies to such ARN under Section 871(m). If withholding is required, we (or
the applicable paying agent) would be entitled to withhold such taxes without being required to pay any additional amounts with respect to amounts so withheld. Non-U.S. holders should consult with their tax advisors regarding the application of
Section 871(m) and the regulations thereunder in respect of their acquisition and ownership of ARNs.
U.S. Federal Estate Tax Treatment of Non-U.S. Holders. ARNs may be subject to U.S. federal estate
tax if an individual non-U.S. holder holds ARNs 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 ARNs at death.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (“FATCA”) generally 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 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 generally 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.
Holders should consult their tax advisors about the application of FATCA, in particular if they may be classified as financial institutions (or if they hold their ARNs 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 ARNs purchased after the bill was enacted to accrue interest income over
the term of ARNs despite the fact that there will be no interest payments over the term of ARNs. Furthermore, in 2013, the House Ways and Means Committee released in draft form certain proposed legislation relating to financial instruments that, if
it had been enacted, would have required instruments such as ARNs 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 impossible to predict whether any similar or identical bills will be enacted in the future or whether any such bills would affect the
tax treatment of your ARNs. Prospective purchasers of ARNs are urged to consult their tax advisors regarding any possible changes in law and whether any such change may adversely affect the tax treatment
of their ARNs.
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 ARNs, as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction (including that of TD and those of the issuers of a Market Measure and/or any of the component securities of a Market Measure, as applicable).
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan (each, an “employee benefit plan”) subject to
Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), should consider the fiduciary standards of ERISA in the context of the employee benefit plan’s particular
circumstances before authorizing an investment in ARNs. 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 employee benefit plan, and whether the investment would involve a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit (i) employee benefit plans which are subject to Title I of ERISA, (ii) “plans” defined in Section
4975 of the Code (including individual retirement accounts and “Keogh”)) which are subject to Section 4975 of the Code and (iii) entities whose underlying assets are considered to include “plan assets” of any employee benefit plan subject to Title
I of ERISA or plan subject to Section 4975 of the Code (each of the foregoing described in clauses (i), (ii) and (iii) referred to herein as an “ERISA plan”), from engaging in certain transactions involving
“plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code (“parties in interest”) with respect to the ERISA plan. A violation of these prohibited
transaction rules may result in civil penalties or other liabilities under ERISA and/or an excise tax under Section 4975 of the Code for those persons, unless exemptive relief is available under an applicable statutory, regulatory or administrative
exemption. In addition, the fiduciary of the ERISA plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and Section 4975 of the Code.
The acquisition, holding or, if applicable, exchange, of ARNs by an ERISA plan with respect to which we or certain of our affiliates is or becomes a party in
interest may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, unless the ARN is acquired and held pursuant to and in accordance with an applicable exemption. In this regard, the U.S. Department of Labor has
issued prohibited transaction class exemptions, or “PTCEs,” that may provide exemptive relief if required for direct or indirect prohibited transactions that may arise from the purchase or holding of an ARN.
These exemptions include, without limitation:
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PTCE 84-14, an exemption for certain transactions determined or effected by independent qualified professional asset managers;
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PTCE 90-1, an exemption for certain transactions involving insurance company pooled separate accounts;
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PTCE 91-38, an exemption for certain transactions involving bank collective investment funds;
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PTCE 95-60, an exemption for transactions involving certain insurance company general accounts; and
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PTCE 96-23, an exemption for plan asset transactions managed by in-house asset managers.
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In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide statutory exemptive relief for certain arm’s length transactions with a person that is a party
in interest solely by reason of providing services to ERISA plans or being related to such a service provider. Under these provisions, the purchase and sale of an ARN should not constitute a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code, provided that neither the issuer of the ARN nor any of its affiliates have or exercise any discretionary authority
or control or render any investment advice with respect to the assets of any ERISA plan involved in the transaction, and provided further that the ERISA plan pays no more and
receives no less than “adequate consideration” in connection with the transaction. Each of the above-noted exemptions contains conditions and limitations on its application. Fiduciaries of ERISA plans considering acquiring and/or holding an ARN in
reliance of these or any other exemption should carefully review the exemption to assure it is applicable. There can be no assurance that all of the conditions of any such exemptions will be satisfied, and ARNs should not be purchased or held by
any person investing “plan assets” of any ERISA plan unless such purchase and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code.
Certain employee benefit plans and arrangements including those that are 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) (collectively referred to herein as “non-ERISA arrangements”) are not subject to the fiduciary responsibility or prohibited transaction provisions of
Title I of ERISA or Section 4975 of the Code but may be subject to similar provisions under other applicable federal, state, local, non-U.S. or other regulations, rules or laws (collectively, “similar laws”).
Accordingly, by acceptance of an ARN or any interest therein, each purchaser and holder of ARNs or any interest therein will be deemed to have represented by
its purchase and holding of ARNs that either (1) it is not an ERISA plan and is not purchasing any ARNs or interest therein on behalf of or with “plan assets” of any ERISA plan or (2) the purchase and holding of ARNs or any interest therein will
not constitute a non-exempt prohibited transaction under Title I of ERISA or Section 4975 of the Code. In addition, any purchaser or holder of ARNs or any interest therein which is a non-ERISA arrangement will be deemed to have represented by its
purchase or holding of ARNs that its purchase and holding will not violate any applicable similar law.
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 ARNs on behalf of or with “plan assets” of any ERISA plan or non-ERISA arrangement consult with their counsel regarding the availability of exemptive relief under any of the
exemptions listed above or some other basis on which such purchase and holding is not prohibited, or the potential consequences of any purchase, holding or exchange under similar laws, as applicable.
Each purchaser and holder of ARNs has exclusive responsibility for ensuring that its purchase and holding of ARNs does not violate the fiduciary or prohibited transaction rules of
Title I of ERISA, Section 4975 of the Code or any applicable similar laws. Neither this discussion nor anything provided in this product supplement is, or is intended to be, investment advice directed at any ERISA plan or non-ERISA arrangement or
relevant ERISA plan or non-ERISA arrangement fiduciary, and such purchasers of any of our ARNs should consult and rely on their own counsel and advisers as to whether an investment in our ARNs is suitable for the ERISA plan or non-ERISA
arrangement. The sale of ARNs to any ERISA plan or non-ERISA arrangement is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments
by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular plan.
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