This pricing supplement, which is not complete and may
be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus are not an offer to sell these notes in any country or jurisdiction where
such an offer would not be permitted.
Linked to the Least Performing
of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors® Semiconductor ETF
|
•
|
Approximate
2 year term if not called prior to maturity.
|
|
•
|
Payments
on the Notes will depend on the individual performance of the SPDR® S&P® Oil & Gas Exploration & Production
ETF and the VanEck Vectors® Semiconductor ETF (each an “Underlying”).
|
|
•
|
Contingent
coupons payable quarterly if the closing price of
each
Underlying on the applicable Observation Date is greater than or
equal to 60% of its Starting Value. The coupon per Note will equal (i) the
product
of $28.125
times
the number of
Contingent Payment Dates that have occurred up to the relevant Contingent Payment Date (inclusive of the relevant Contingent Payment
Date)
minus
(ii) the
sum
of all Contingent Coupon Payments previously paid.
|
|
•
|
Beginning
in September 2019, automatically callable quarterly for an amount equal to the principal amount plus the relevant contingent coupon
if the closing price of
each
Underlying is greater than or equal to its Starting Value on any Observation Date (other than
the final Observation Date).
|
|
•
|
Assuming
the Notes are not called prior to maturity, if
either
Underlying declines by more than 40% from its Starting Value, at maturity
the investor will receive a 1:1 downside, with up to 100% of the principal at risk; otherwise, investors will receive the principal
amount and, if payable, the applicable contingent coupon.
|
|
•
|
All
payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”) and Bank of America Corporation
(“BAC” or the “Guarantor”).
|
|
•
|
The
Notes are expected to price on June 18, 2019, expected to issue on June 21, 2019 and expected to mature on June 23, 2021. The Notes
will not be listed on any securities exchange.
|
The initial estimated value
of the Notes as of the pricing date is expected to be between $945 and $965 per Note, which is less than the public offering price
listed below.
The actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy. See
“Risk Factors” beginning on page PS-8 of this pricing supplement and “Structuring the Notes” on page PS-23
of this pricing supplement for additional information. Potential purchasers of the Notes should consider the information in “Risk
Factors” beginning on page PS-8 of this pricing supplement, page PS-5 of the accompanying product supplement, page S-4 of
the accompanying prospectus supplement, and page 7 of the accompanying prospectus. None of the Securities and Exchange Commission
(the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities
or determined if this Note Prospectus (as defined on Page PS-28) is truthful or complete. Any representation to the contrary is
a criminal offense.
|
Public offering price
(1)
|
Underwriting discount
(1)
|
Proceeds, before expenses, to BofA Finance
|
Per Note
|
$1,000
|
$27.50
|
$972.50
|
Total
|
|
|
|
|
(1)
|
Certain dealers who purchase
the notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions.
|
The
public offering price for investors purchasing the notes in these fee-based advisory accounts may be as low as $972.50 per note.
The Notes and the related
guarantee:
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
Selling Agent
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Terms of the Notes
The Contingent
Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production
ETF and the VanEck Vectors® Semiconductor ETF (the “Notes”) provide a quarterly Contingent Coupon Payment on the
applicable Contingent Payment Date if, on any quarterly Observation Date, the Observation Value of
each
Underlying is greater
than or equal to its Coupon Barrier. The quarterly Contingent Coupon Payment per $1,000 in principal amount for any Coupon Payment
Date will be equal to (i) the
product
of $28.125
times
the number of Contingent Payment Dates that have occurred
up to the relevant Contingent Payment Date (inclusive of the relevant Contingent Payment Date)
minus
(ii) the
sum
of all Contingent Coupon Payments previously paid. Beginning in September 2019, if the Observation Value of
each
Underlying
is greater than or equal to its Starting Value on any Observation Date (other than the final Observation Date), the notes will
be automatically called, in whole but not in part, at 100% of the principal amount, together with the relevant Contingent Coupon
Payment. No further amounts will be payable following an Automatic Call. If the Notes are not automatically called and the Least
Performing Underlying declines by more than 40% from its Starting Value, there is full exposure to declines in the Least Performing
Underlying, and you will lose a significant portion or all of your investment in the Notes. Otherwise, at maturity you will receive
the principal amount and, if payable, the final Contingent Coupon Payment. The Notes are not traditional debt securities and it
is possible that the Notes will not pay any Contingent Coupon Payments, and you may lose a significant portion or all of your principal
amount at maturity. Any payments on the Notes will be calculated based on the $1,000 principal amount per Note and will depend
on the performance of the Underlyings, subject to our and BAC’s credit risk.
Issuer:
|
BofA Finance
|
Guarantor:
|
BAC
|
Denominations:
|
The Notes will be issued in minimum denominations of $1,000 and whole multiples of $1,000 in excess thereof.
|
Term:
|
Approximately 2 years, unless previously automatically called.
|
Underlyings:
|
The SPDR® S&P® Oil & Gas Exploration & Production ETF (Bloomberg symbol: “XOP”) and the VanEck Vectors® Semiconductor ETF (Bloomberg symbol: “SMH”)
|
Pricing Date*:
|
June 18, 2019
|
Issue Date*:
|
June 21, 2019
|
Valuation Date*:
|
June 18, 2021, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” of the accompanying product supplement. If the Valuation Date is not a business day, the Valuation Date will be postponed to the next business day.
|
Maturity Date*:
|
June 23, 2021
|
Starting Value:
|
With respect to each Underlying, its Closing Market Price on the pricing date.
|
Observation Value:
|
With respect to each Underlying, its Closing Market Price on the applicable Observation Date, multiplied by its Price Multiplier.
|
Ending Value:
|
With respect to each Underlying, its Closing Market Price on the Valuation Date, multiplied by its Price Multiplier, as determined by the Calculation Agent.
|
Price Multiplier
|
With respect to each Underlying, 1, subject to adjustment for certain events as described in “Description of the Notes—Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-23 of product supplement EQUITY-1.
|
Coupon Barrier:
|
With respect to each Underlying, 60% of its Starting Value.
|
Threshold Value:
|
With respect to each Underlying, 60% of its Starting Value.
|
Contingent Coupon Payment:
|
If, on any quarterly Observation Date, the Observation Value of
each
Underlying is greater than or equal to its Coupon Barrier, we will pay a Contingent Coupon Payment per $1,000 in principal amount on the applicable Contingent Payment Date equal to (i) the
product
of $28.125
times
the number of Contingent Payment Dates that have occurred up to the relevant Contingent Payment Date (inclusive of the relevant Contingent Payment Date)
minus
(ii) the
sum
of all Contingent Coupon Payments previously paid..
|
Automatic Call:
|
Beginning in September 2019, all (but not less than all) of the Notes will be automatically called if the Observation Value of
each
Underlying is greater than or equal to its Starting Value on any Observation Date (other than the final Observation Date). If the Notes are automatically called, the Early Redemption Amount will be paid on the applicable Contingent Payment Date. No further amounts will be payable following an Automatic Call.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
2
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Early Redemption Amount:
|
For each $1,000 principal amount of Notes, $1,000 plus the applicable Contingent Coupon Payment.
|
Redemption Amount:
|
If the Notes have
not been automatically called prior to maturity, the Redemption Amount per $1,000 principal amount of Notes will be:
a)
If the Ending Value of the Least Performing Underlying
is greater than or equal to its Threshold Value:
$1,000; plus,
if the Ending Value of the Least Performing Underlying is greater than or equal to its Coupon Barrier, the final Contingent Coupon
Payment.
b)
If the Ending Value of the Least Performing Underlying
is less than its Threshold Value:
$1,000 + ($1,000
x Underlying Return of the Least Performing Underlying)
In this case,
the Redemption Amount will be less than 60% of the principal amount and could be zero.
|
Observation Dates*:
|
As set forth on page PS-4.
|
Contingent Payment Dates*:
|
As set forth on page PS-4.
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
Selling Agent:
|
BofAS.
|
CUSIP:
|
09709TRZ6
|
Underlying Return:
|
|
Least Performing Underlying:
|
The Underlying with the lowest Underlying Return.
|
Events of Default and Acceleration:
|
If an Event of Default, as defined in the senior indenture and in the section entitled
“
Events of Default and Rights of Acceleration
”
beginning on page 35 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption
“—
Redemption Amount,
”
above, calculated as though the date of acceleration were the maturity date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. The calculation agent shall pro-rate the period of time elapsed between the issue date of the Notes and the date of acceleration.
In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate.
|
*Subject to change.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
3
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Observation Dates and Contingent Payment Dates
Observation Dates*
|
|
Contingent Payment Dates**
|
September 18, 2019
|
|
September 23, 2019
|
December 18, 2019
|
|
December 23, 2019
|
March 18, 2020
|
|
March 23, 2020
|
June 18, 2020
|
|
June 23, 2020
|
September 18, 2020
|
|
September 23, 2020
|
December 18 2020
|
|
December 23, 2020
|
March 18, 2021
|
|
March 23, 2021
|
June 18, 2021 (the “Valuation Date”)
|
|
June 23, 2021 (the “Maturity Date”)
|
* The Observation Dates are subject to postponement as
set forth in “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates”
on page PS-19 of the accompanying product supplement. If an Observation Date is not a business day, such Observation Date will
be postponed to the next business day.
** Postponement of a quarterly Observation Date will
not cause the postponement of the Contingent Payment Date relating to such Observation Date.
Any payments on the Notes depend on the credit risk of BofA Finance, as issuer, and BAC, as guarantor, and on the performance of
the Underlyings. The economic terms of the Notes are based on BAC’s internal funding rate, which is the rate it would pay
to borrow funds through the issuance of market-linked notes, and the economic terms of certain related hedging arrangements BAC’s
affiliates enter into. BAC’s internal funding rate is typically lower than the rate it would pay when it issues conventional
fixed or floating rate debt securities. This difference in funding rate, as well as the underwriting discount and the hedging related
charges described below (see “Risk Factors” beginning on page PS-8), will reduce the economic terms of the Notes to
you and the initial estimated value of the Notes. Due to these factors, the public offering price you pay to purchase the Notes
will be greater than the initial estimated value of the Notes as of the pricing date.
The initial
estimated value range of the Notes as of the date of this pricing supplement is set forth on the cover page of this pricing supplement.
The final pricing supplement will set forth the initial estimated value of the Notes as of the pricing date. For more information
about the initial estimated value and the structuring of the Notes, see “Risk Factors” beginning on page PS-8 and “Structuring
the Notes” on page PS-23.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
4
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Contingent Coupon Payment and Redemption
Amount Determination
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
5
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Total Contingent Coupon Payment Examples
The
table below illustrates the hypothetical total Contingent Coupon Payments per $1,000 in principal amount over the term of the Notes,
based on a Contingent Coupon Payment of $28.125 per note, depending on how many Contingent Coupon Payments are payable prior to
an Automatic Call or maturity. Depending on the performance of the Underlyings, you may not receive any Contingent Coupon Payments
during the term of the Notes.
Hypothetical Table 1:
This
table assumes that you receive a Contingent Coupon Payment on each Contingent Payment Date. Since you receive a Contingent Coupon
Payment on each Contingent Payment Date, the Contingent Coupon Payment on each Contingent Payment Date will be equal to $28.125
per Note.
Number of Contingent Coupon Payment
s
|
Total Contingent Coupon Payment
s
|
0
|
$0.00
|
2
|
$56.25
|
4
|
$112.50
|
6
|
$168.75
|
8
|
$225.00
|
Hypothetical Table 2:
This table assumes that you receive
no Contingent Coupon Payments until the last possible Contingent Payment Date (i.e., the maturity date). Under these circumstances
you would receive your first Contingent Coupon Payment on the maturity date of $225.00 (the product of (i) $28.125 times 8 Contingent
Payment Dates that have occurred (inclusive of the relevant Contingent Payment Date) minus (ii) $0.00).
Number of Contingent Coupon Payments
|
Total Contingent Coupon Payments
|
1
(1)
|
$225.00
|
This
includes a single Contingent Coupon Payment of $225.00 paid at maturity, calculated as described above.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
6
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Hypothetical Payout Profile and Examples
of Payments at Maturity
Contingent Income Auto-Callable
Yield Notes® Table
The
following table is for purposes of illustration only. It assumes the Notes have not been automatically called prior to maturity
and is based on
hypothetical
values and shows
hypothetical
returns on the Notes. The table illustrates the calculation
of the Redemption Amount and total return based on a hypothetical Starting Value of 100, a hypothetical Coupon Barrier of 60 for
the Least Performing Underlying, a hypothetical Threshold Value of 60 for the Least Performing Underlying, a Contingent Coupon
Payment of $28.125 per Note and a range of hypothetical Ending Values of the Least Performing Underlying.
The actual amount
you receive and the resulting total return will depend on the actual Starting Values, Coupon Barriers, Threshold Values, Observation
Values and Ending Values of the Underlyings, whether the Notes are automatically called prior to maturity, and whether you hold
the Notes to maturity.
The following examples do not take into account any tax consequences from investing in the Notes.
The
table below also assumes that all Contingent Coupon Payments were paid on each Contingent Payment Date prior to maturity.
For recent
actual prices of the Underlyings, see “The Underlyings” section below. The Ending Value of each Underlying will not
include any income generated by dividends paid on the stocks represented by that Underlying, which you would otherwise be entitled
to receive if you invested in those stocks directly. In addition, all payments on the Notes are subject to issuer and guarantor
credit risk.
Ending Value of the
Least Performing Underlying
|
Underlying Return of the
Least Performing Underlying
|
Redemption
Amount per Note
|
Return
on the Notes
(1)
|
160.00
|
60.00%
|
$1,028.125
(2)
|
2.8125%
|
150.00
|
50.00%
|
$1,028.125
|
2.8125%
|
140.00
|
40.00%
|
$1,028.125
|
2.8125%
|
130.00
|
30.00%
|
$1,028.125
|
2.8125%
|
120.00
|
20.00%
|
$1,028.125
|
2.8125%
|
110.00
|
10.00%
|
$1,028.125
|
2.8125%
|
105.00
|
5.00%
|
$1,028.125
|
2.8125%
|
102.00
|
2.00%
|
$1,028.125
|
2.8125%
|
100.00
(3)
|
0.00%
|
$1,028.125
|
2.8125%
|
90.00
|
-10.00%
|
$1,028.125
|
2.8125%
|
80.00
|
-20.00%
|
$1,028.125
|
2.8125%
|
70.00
|
-30.00%
|
$1,028.125
|
2.8125%
|
60.00
(4)
|
-40.00%
|
$1,028.125
|
2.8125%
|
59.99
|
-40.01%
|
$599.90
|
-40.01%
|
50.00
|
-50.00%
|
$500.00
|
-50.00%
|
0.00
|
-100.00%
|
$0.00
|
-100.00%
|
|
(1)
|
The “Return on the
Notes” is calculated based on the Redemption Amount and potential final Contingent Coupon Payment, not including any Contingent
Coupon Payments paid prior to maturity.
|
|
(2)
|
This amount represents
the sum of the principal amount and the final Contingent Coupon Payment.
|
|
(3)
|
The hypothetical Starting
Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent the actual Starting
Value for any Underlying.
|
|
(4)
|
This is the
hypothetical
Coupon Barrier and
Threshold Value of the Least Performing Underlying.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
7
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Risk Factors
Your investment in the Notes
entails significant risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes
should be made only after carefully considering the risks of an investment in the Notes, including those discussed below, with
your advisors in light of your particular circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable
about significant elements of the Notes or financial matters in general. You should carefully review the more detailed explanation
of risks relating to the Notes in the “Risk Factors” sections beginning on page PS-5 of the accompanying product supplement
EQUITY-1, page S-4 of the accompanying prospectus supplement and page 7 of the accompanying prospectus, each as identified on page
PS-28 below.
|
•
|
Your
investment may result in a loss; there is no guaranteed return of principal.
There is no fixed principal repayment amount on
the Notes at maturity. If the Notes are not called and the Ending Value of
any
Underlying is less than its Threshold Value,
you will lose 1% of the principal amount for each 1% that the Ending Value of the Least Performing Underlying is less than its
Starting Value. In that case, you will lose a significant portion or all of your investment in the Notes.
|
|
•
|
Your
return on the Notes is limited to the return represented by the Contingent Coupon Payments, if any, over the term of the Notes.
Your return on the Notes is limited to the Contingent Coupon Payments paid over the term of the Notes, regardless of the extent
to which the Ending Value of any Underlying exceeds its Starting Value. Similarly, the amount payable at maturity or upon an Automatic
Call will never exceed the sum of the principal amount and the applicable Contingent Coupon Payment, regardless of the extent to
which the Observation Value of any Underlying exceeds its Starting Value. In contrast, a direct investment in the securities included
in one or more of the Underlyings would allow you to receive the benefit of any appreciation in their prices. Thus, any return
on the Notes will not reflect the return you would realize if you actually owned those securities and received the dividends paid
or distributions made on them.
|
|
•
|
The
Notes are subject to a potential Automatic Call, which would limit your ability to receive the Contingent Coupon Payments over
the full term of the Notes.
The Notes are subject to a potential Automatic Call. Beginning in September 2019, the Notes will
be automatically called if, on any Observation Date (other than the final Observation Date) the Observation Value of each Underlying
is greater than or equal to its Starting Value. If the Notes are automatically called, you will be entitled to receive the principal
amount and the Contingent Coupon Payment with respect to the applicable Observation Date. In this case, you will lose the opportunity
to continue to receive Contingent Coupon Payments after the date of the Automatic Call. If the Notes are called prior to the maturity
date, you may be unable to invest in other securities with a similar level of risk that could provide a return that is similar
to the Notes.
|
|
•
|
You
may not receive any Contingent Coupon Payments.
The Notes do not provide for any regular fixed coupon payments. Investors in
the Notes will not necessarily receive any Contingent Coupon Payments on the Notes. If the Observation Value of any Underlying
is less than its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment applicable to that Observation
Date. If the Observation Value of any Underlying is less than its Coupon Barrier on all the Observation Dates during the term of
the Notes, you will not receive any Contingent Coupon Payment during the term of the Notes, and will not receive a positive return
on the Notes.
|
|
•
|
Your return
on the Notes may be less than the yield on a conventional debt security of comparable maturity.
Any return that you receive
on the Notes may be less than the return you would earn if you purchased a conventional debt security with the same maturity date.
As a result, your investment in the Notes may not reflect the full opportunity cost to you when you consider factors, such as inflation,
that affect the time value of money. In addition, if interest rates increase during the term of the Notes, the Contingent Coupon
Payment (if any) may be less than the yield on a conventional debt security of comparable maturity.
|
|
•
|
Any
payments on the Notes are subject to the credit risk of BofA Finance and the Guarantor, and actual or perceived changes in BofA
Finance or the Guarantor’s creditworthiness are expected to affect the value of the Notes
. The Notes are our senior unsecured
debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed
by any entity other than the Guarantor. As a result, your receipt of the Early Redemption Amount or the Redemption Amount at maturity,
as applicable, will be dependent upon our ability and the ability of the Guarantor to repay our respective obligations under the
Notes on the applicable Contingent Payment Date or maturity date, regardless of the Ending Value of the Least Performing Underlying
as compared to its Starting Value.
|
|
•
|
We
are a finance subsidiary and, as such, will have limited assets and operations.
We are a finance subsidiary of BAC and will
have no assets, operations or revenues other than those related to the issuance, administration and repayment of our debt securities
that are guaranteed by the Guarantor. As a finance subsidiary, to meet our obligations under the Notes, we are dependent upon payment
or contribution of funds and/or repayment of outstanding loans from the Guarantor and/or its other subsidiaries. Therefore, our
ability to make payments on the Notes may be limited.
|
|
•
|
The
public offering price you pay for the Notes will exceed their initial estimated value.
The range of initial estimated values
of the Notes that is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the
pricing date that will be provided in the final pricing supplement, are each estimates only, determined as of a particular point
in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and
variables, including our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms
on hedging transactions, expectations on interest rates, dividends and
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
8
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
volatility,
price-sensitivity analysis, and the expected term of the Notes. These pricing models rely in part on certain forecasts about
future events, which may prove to be incorrect. The initial estimated value does not represent a minimum or maximum price at which
we, the Guarantor, BofAS or any of our other affiliates would be willing to purchase your Notes in any secondary market (if any
exists) at any time. The value of your Notes at any time after the pricing date will vary based on many factors that cannot be
predicted with accuracy, including our and the Guarantor’s creditworthiness and changes in market conditions. If you attempt
to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial
estimated value. This is due to, among other things, changes in the price of the Underlying, the Guarantor’s internal funding
rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charges, all as further
described in "Structuring the Notes" below. These factors, together with various credit, market and economic factors
over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market
and will affect the value of the Notes in complex and unpredictable ways.
|
•
|
The initial estimated
value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your notes in any secondary market (if any exists) at any time.
The value of your Notes at any
time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlyings,
our and BAC’s creditworthiness and changes in market conditions.
|
|
•
|
We
cannot assure you that a trading market for your Notes will ever develop or be maintained.
We will not list the Notes on any
securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that market will be liquid or
illiquid.
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The
Contingent Coupon Payment or Redemption Amount, as applicable, will not reflect the prices of the Underlyings other than on the
Observation Dates.
The prices of the Underlyings during the term of the Notes other than on the Observation Dates will not
affect payments on the Notes. Notwithstanding the foregoing, investors should generally be aware of the performance of the Underlyings
while holding the Notes. The calculation agent will determine whether each Contingent Coupon Payment is payable and calculate the
Contingent Coupon Payment or the Redemption Amount, as applicable, by comparing only the Starting Value, the Coupon Barrier or
the Threshold Value, as applicable, to the Observation Value or the Ending Value for each Underlying. No other prices of the Underlyings
will be taken into account. As a result, if the Notes are not automatically called prior to maturity, you will receive less than
the principal amount at maturity even if the price of each Underlying has increased at certain times during the term of the Notes
before the Least Performing Underlying decreases to a price that is less than its Threshold Value as of the Valuation Date.
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Because
the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may not receive any return
on the Notes and may lose some or all of your principal amount even if the Observation Value of one Underlying is always greater
than or equal to its Coupon Barrier or Threshold Value, as applicable.
Your Notes are linked to the least performing of the
Underlyings, and a change in the price of one Underlying may not correlate with changes in the price of the other Underlying(s).
The Notes are not linked to a basket composed of the Underlyings, where the depreciation in the price of one Underlying could be
offset to some extent by the appreciation in the price of the other Underlying(s). In the case of the Notes, the individual performance
of each Underlying would not be combined, and the depreciation in the price of one Underlying would not be offset by any appreciation
in the price of the other Underlying(s). Even if the Observation Value of an Underlying is at or above its Coupon Barrier on an
Observation Date, you will not receive the Contingent Coupon Payment with respect to that Observation Date if the Observation Value
of the Least Performing Underlying is below its Coupon Barrier on that day. In addition, even if the Ending Value of an Underlying
is at or above its Threshold Value, you will lose a portion of your principal if the Ending Value of the Least Performing Underlying
is below its Threshold Value.
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All
of the securities held by each Underlying are concentrated in one industry.
The XOP holds securities issued by companies in
the oil and gas exploration industry and the SMH holds securities issued by companies in the semiconductor industry. Although an
investment in the Notes will not give holders any ownership or other direct interests in the securities held by the Underlyings,
the return on an investment in the Notes will be subject to certain risks similar to those associated with direct equity investments
in these sectors. Accordingly, by investing in the Notes, you will not benefit from the diversification which could result from
an investment linked to companies that operate in multiple sectors.
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The performance of the XOP may not correlate with the performance
of its underlying index as well as the net asset value per share of the XOP, especially during periods of market volatility
.
The performance of the XOP 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 the XOP 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 XOP not holding all or substantially all of the underlying assets 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 XOP, differences in trading hours between the XOP (or the underlying
assets held by the XOP) and its 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.
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In addition, because the shares of the XOP are traded
on a securities exchange and are subject to market supply and investor demand, the market price of one share of the XOP may differ
from its net asset value per share; shares of the XOP may trade at, above, or below its net asset value per share. During periods
of market volatility, securities held by the XOP may be unavailable in the secondary market, market participants may be unable
to calculate accurately the net asset value per share of the XOP and the liquidity of the XOP may be adversely
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
9
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
affected. Market volatility may also disrupt the ability of market participants
to trade shares of the XOP. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants
are willing to buy and sell shares of the XOP. As a result, under these circumstances, the market value of shares of the XOP may
vary substantially from the net asset value per share of the XOP.
For the foregoing reasons, the performance of the XOP
may not match the performance of its underlying index or the net asset value per share of the XOP over the same period. Because
of this variance, the return on the Notes to the extent dependent on the performance of the XOP may not be the same as an investment
directly in the securities, commodities or other assets included in the underlying index or the same as a debt security with a
return linked to the performance of the underlying index.
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The
stocks of companies in the oil and gas sector are subject to swift price fluctuations.
The issuers of the stocks held by the
XOP develop and produce, among other things, crude oil and natural gas, and provide, among other things, drilling services and
other services related to oil and gas production and distribution. Stock prices for these types of companies are affected by supply
and demand both for their specific product or service and for oil and gas products in general. The price of oil and gas, exploration
and production spending, government regulation, world events and economic conditions will likewise affect the performance of these
companies. Correspondingly, the stocks of companies in this sector are subject to swift price fluctuations caused by events relating
to international politics, energy conservation, the success of exploration projects and tax and other governmental regulatory policies.
Weak demand for the companies’ products or services or for oil and gas products and services in general, as well as negative
developments in these other areas, would adversely impact the value of the stocks held by the XOP, the market price of the XOP,
and the value of the Notes.
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Adverse
conditions in the semiconductor production and equipment sector may reduce your return on the Notes.
All or substantially all
of the stocks held by the SMH are issued by companies whose primary line of business is directly associated with the semiconductor
production and equipment sector. The SMH is subject to the risk that companies that are in the semiconductor production and equipment
sector may be similarly affected by particular economic or market events. As product cycles shorten and manufacturing capacity
increases, these companies may become increasingly subject to aggressive pricing, which hampers profitability. Semiconductor companies
are vulnerable to wide fluctuations in securities prices due to rapid product obsolescence. Many semiconductor companies may not
successfully introduce new products, develop and maintain a loyal customer base or achieve general market acceptance for their
products, and failure to do so could have a material adverse effect on their business, results of operations and financial condition.
Reduced demand for end-user products, underutilization of manufacturing capacity, and other factors could adversely impact the
operating results of companies in the semiconductor production and equipment sector. Semiconductor companies typically face high
capital costs and such companies may need additional financing, which may be difficult to obtain. They also may be subject to risks
relating to research and development costs and the availability and price of components. Moreover, they may be heavily dependent
on intellectual property rights and may be adversely affected by loss or impairment of those rights. Some of the companies involved
in the semiconductor production and equipment sector are also engaged in other lines of business unrelated to the semiconductor
business, and they may experience problems with these lines of business, which could adversely affect their operating results.
The international operations of many semiconductor companies expose them to risks associated with instability and changes in economic
and political conditions, foreign currency fluctuations, changes in foreign regulations, tariffs and trade disputes, competition
from subsidized foreign competitors with lower production costs and other risks inherent to international business. The semiconductor
production and equipment sector is highly cyclical, which may cause the operating results of many semiconductor companies to vary
significantly. Companies in the semiconductor production and equipment sector also may be subject to competition from new market
entrants. The stock prices of companies in the semiconductor production and equipment sector have been and will likely continue
to be extremely volatile compared to the overall market. These factors could affect the semiconductor production and equipment
sector and could affect the value of the equity securities held by the SMH and the price of the SMH during the term of the Notes,
which may adversely affect the value of your Notes.
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The
anti-dilution adjustments will be limited
. The calculation agent may adjust the Price Multiplier of the Underlyings and other
terms of the Notes to reflect certain corporate actions by the Underlyings, as described in the section “Description of the
Notes—Anti-Dilution and Discontinuance Adjustments Relating to ETFs” in the accompanying product supplement. The calculation
agent will not be required to make an adjustment for every event that may affect the Underlyings and will have broad discretion
to determine whether and to what extent an adjustment is required.
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The
sponsor or investment advisor of an Underlying may adjust that Underlying in a way that affects its prices, and the sponsor or
investment advisor has no obligation to consider your interests.
The sponsor or investment advisor of an Underlying can
add, delete, or substitute the components included in that Underlying or make other methodological changes that could change its
price. Any of these actions could adversely affect the value of your Notes.
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The
performance of each Underlying may not correlate with the performance of its underlying index (each, an “Underlying Index”)
as well as the net asset value per share of the Underlying, especially during periods of market volatility.
The performance
of each Underlying 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 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 not holding all or substantially all of the underlying assets 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, differences in trading hours between the
Underlying (or the underlying assets held by the Underlying) and the Underlying Index, or due to other
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
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 each Underlying are traded on a securities exchange and are subject to market supply and investor
demand, the market price of one share of the Underlying may differ from its net asset value per share; shares of the Underlying
may trade at, above, or below its net asset value per share. During periods of market volatility, securities held by each Underlying
may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset value per
share of the Underlying and the liquidity of the Underlying may be adversely affected. Market volatility may also disrupt the
ability of market participants to trade shares of the Underlying. Further, market volatility may adversely affect, sometimes materially,
the prices at which market participants are willing to buy and sell shares of the Underlying. As a result, under these circumstances,
the market value of shares of the Underlying may vary substantially from the net asset value per share of the Underlying.
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Trading and hedging activities by us, the Guarantor
and any of our other affiliates may create conflicts of interest with you and may affect your return on the Notes and their market
value.
We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell shares of the Underlyings
or the securities held by or included in the Underlyings, or futures or options contracts on the Underlyings or those securities,
or other listed or over-the-counter derivative instruments linked to the Underlyings or those securities. While we, the Guarantor
or one or more of our other affiliates, including BofAS, may from time to time own the Underlyings or the securities represented
by the Underlyings, except to the extent that BAC’s common stock may be included in the Underlyings, we, the Guarantor and
our other affiliates, including BofAS, do not control any company included in the Underlyings, and have not verified any disclosure
made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, may execute such purchases
or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations under the Notes.
These transactions may present a conflict of interest between your interest in the Notes and the interests we, the Guarantor and
our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions, including block
trades, for our or their other customers, and in accounts under our or their management. These transactions may affect the value
of the Underlyings in a manner that could be adverse to your investment in the Notes. On or before the pricing date, any purchases
or sales by us, the Guarantor or our other affiliates, including BofAS or others on its behalf (including for the purpose of hedging
anticipated exposures), may affect the value of the Underlyings. Consequently, the value of the Underlyings may change subsequent
to the pricing date, adversely affecting the market value of the Notes.
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We, the
Guarantor or one or more of our other affiliates, including BofAS, may also engage in hedging activities that could affect the
value of the Underlyings on the pricing date. In addition, these activities may decrease the market value of your Notes prior to
maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or one or more of our other affiliates, including
BofAS, may purchase or otherwise acquire a long or short position in the Notes and may hold or resell the Notes. For example, BofAS
may enter into these transactions in connection with any market making activities in which it engages. We cannot assure you that
these activities will not adversely affect the value of the Underlyings, the market value of your Notes prior to maturity or the
amounts payable on the Notes.
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There
may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours.
We have the right to
appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will
make a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances,
these duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation
agent.
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The U.S. federal income tax consequences of an
investment in the Notes are uncertain, and may be adverse to a holder of the Notes.
No statutory, judicial, or administrative
authority directly addresses the characterization of the Notes or securities similar to the Notes for U.S. federal income tax purposes.
As a result, significant aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. Under
the terms of the Notes, you will have agreed with us to treat the Notes as contingent income-bearing single financial contracts,
as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative characterization for the Notes, the timing and character of gain or loss with respect
to the Notes may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance can be given that
the IRS will agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.” You are urged
to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the Notes.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
The Underlyings
All disclosures
contained in this pricing supplement regarding the Underlyings, including, without limitation, their make-up, method of calculation,
and changes in their components, have been derived from publicly available sources. The information reflects the policies of, and
is subject to change by, each of SSGA Funds Management, Inc. (“SSGA”), the advisor to the XOP and VanEck Vectors ETF
Trust (“VanEck Trust”) and Van Eck Associates Corporation (“VanEck”), with respect to the SMH. We refer
to SSGA and VanEck as the “Investment Advisors.” Each of the Investment Advisors, which license the copyright and all
other rights to the Underlyings, have no obligation to continue to publish, and may discontinue publication of, the Underlyings.
The consequences of the Investment Advisor discontinuing publication of the applicable Underlying is discussed in “Description
of the Notes-Anti-Dilution and Discontinuance Adjustments Relating to ETFs- Discontinuance of an ETF” in the accompanying
product supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts any responsibility for the calculation,
maintenance or publication of any Underlying or any successor Underlying. None of us, the Guarantor, BofAS or any of our other
affiliates makes any representation to you as to the future performance of the Underlyings. You should make your own investigation
into the Underlyings.
The SPDR® S&P® Oil
& Gas Exploration & Production ETF
The XOP seeks to provide investment results that, before
fees and expenses, correspond generally to the total return performance of the S&P
®
Oil & Gas Exploration
& Production Select Industry
®
Index (the “Underlying Index”). SSGA currently serves as the investment
advisor to the XOP. The Underlying Index represents the oil and gas exploration and production sub-industry portion of the S&P
Total Market Index
TM
(“S&P TMI”), an index that measures the performance of the U.S. equity market.
The XOP is composed of companies that are in the oil and gas exploration and production sector. As of March 31, 2019, there were
64 oil and gas exploration and production sector companies included in the XOP. As of March 31, 2019, no single company represented
more than 2.42% of the XOP’s holdings.
The XOP utilizes a “sampling”
strategy in attempting to track the performance of the Underlying Index, which means that the XOP is not required to purchase all
of the securities represented in the index but may instead purchase a subset of the securities in the Underlying Index in an effort
to hold a portfolio of securities with generally the same risk and return characteristics of the Underlying Index. The XOP will
normally invest at least 80% of its total assets in common stocks that comprise the Underlying Index.
The Underlying Index
The Underlying Index is an equally-weighted index that
is designed to measure the performance of the oil and gas exploration and production sub-industry portion of the S&P Total
Market Index (“S&P TMI”), an index that measures the performance of the U.S. equity market. The S&P TMI includes
all U.S. common equities listed on the NYSE, NYSE Arca, NYSE American (formerly NYSE MKT), NASDAQ Global Select Market, NASDAQ
Select Market, NASDAQ Capital Market, Bats BZX, Bats BYX, Bats EDGA, Bats EDGX and IEX. Each of the component stocks in the Underlying
Index is a constituent company within the oil and gas sub-industry portion of the S&P TMI.
To be eligible for inclusion in
the Underlying Index, companies must be in the S&P TMI, and must be included in the relevant Global Industry Classification
Standard (GICS) sub-industry. The GICS was developed to establish a global standard for categorizing companies into sectors and
industries.
In addition, companies must satisfy
one of the two following combined size and liquidity criteria:
1. float-adjusted
market capitalization above US$500 million and float-adjusted liquidity ratio above 90%; or
2. float-adjusted
market capitalization above US$400 million and float-adjusted liquidity ratio above 150%.
All U.S. companies satisfying these requirements are
included in the Underlying Index. The total number of companies in the Underlying Index should be at least 35. If there are fewer
than 35 stocks, stocks from a supplementary list of highly correlated sub-industries that meet the market capitalization and liquidity
thresholds above are included in order of their float-adjusted market capitalization to reach 35 constituents. Minimum market capitalization
requirements may be relaxed to ensure there are at least 22 companies in the Underlying Index as of each rebalancing effective
date.
Eligibility factors include:
Market Capitalization: Float-adjusted market capitalization
should be at least US$400 million for inclusion in the Underlying Index. Existing index components must have a float-adjusted market
capitalization of US$300 million to remain in the Underlying Index at each rebalancing.
Liquidity: The liquidity measurement used is a liquidity
ratio, defined as dollar value traded over the previous 12 months divided by the float-adjusted market capitalization as of the
Underlying Index rebalancing reference date. Stocks having a float-adjusted market capitalization above US$500 million must have
a liquidity ratio greater than 90% to be eligible for addition to the Underlying Index. Stocks having a float-adjusted market capitalization
between US$400 and US$500 million must have a liquidity ratio greater than 150% to be eligible for addition to the Underlying Index.
Existing index constituents must have a liquidity ratio greater than 50% to remain in the Underlying Index at the quarterly rebalancing.
The length of time to evaluate liquidity is reduced to the available trading period for IPOs or spin-offs that do not have 12 months
of trading history.
Domicile: U.S. companies only.
Takeover Restrictions: At the discretion of the index
sponsor, constituents with shareholder ownership restrictions defined in company organizational documents may be deemed ineligible
for inclusion in the Underlying Index. Ownership restrictions preventing entities from replicating
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
the index weight of a company may be excluded from the eligible universe
or removed from the Underlying Index.
Turnover: The index sponsor believes turnover in index
membership should be avoided when possible. At times a company may appear to temporarily violate one or more of the addition criteria.
However, the addition criteria are for addition to the Underlying Index, not for continued membership. As a result, an index constituent
that appears to violate the criteria for addition to the Underlying Index will not be deleted unless ongoing conditions warrant
a change in the composition of the Underlying Index.
Computation of the Underlying Index
The Underlying Index is calculated as the Underlying
Index market value divided by the divisor. In an equal-weighted index like the Underlying Index, the market capitalization of each
stock used in the calculation of the index market value is redefined so that each stock has an equal weight in the index on each
rebalancing date. The adjusted market capitalization for each stock in the index is calculated as the product of the stock price,
the number of shares outstanding, the stock’s float factor and the adjustment factor.
A stock’s float factor refers to the number of
shares outstanding that are available to investors. S&P indices exclude shares closely held by control groups from the Underlying
Index calculation because such shares are not available to investors. For each stock, S&P calculates an Investable Weight Factor
(IWF) which is the percentage of total shares outstanding that are included in the Underlying Index calculation.
The adjustment factor for each stock is assigned at
each rebalancing date and is calculated by dividing a specific constant set for the purpose of deriving the adjustment factor (often
referred to as modified index shares) by the number of stocks in the Underlying Index multiplied by the float adjusted market value
of such stock on such rebalancing date.
Adjustments are also made to ensure that no stock in
the Underlying Index will have a weight that exceeds the value that can be traded in a single day for a theoretical portfolio of
$2 billion. Theoretical portfolio values are reviewed annually and any updates are made at the discretion of the Underlying Index
committee, as defined below. The maximum basket liquidity weight for each stock in the Underlying Index will be calculated using
the ratio of its three-month median daily value traded to the theoretical portfolio value of $2 billion. Each stock’s weight
in the Underlying Index is then compared to its maximum basket liquidity weight and is set to the lesser of (1) its maximum basket
liquidity weight or (2) its initial equal weight. All excess weight is redistributed across the Underlying Index to the uncapped
stocks. If necessary, a final adjustment is made to ensure that no stock in the Underlying Index has a weight greater than 4.5%.
No further adjustments are made if the latter step would force the weight of those stocks limited to their maximum basket liquidity
weight to exceed that weight. If the Underlying Index contains exactly 22 stocks as of the rebalancing effective date, the Underlying
Index will be equally weighted without basket liquidity constraints.
If a company has more than one share class line in
the S&P Total Market Index, such company will be represented once by the designated listing (generally the share class with
both (i) the highest one-year trading liquidity as defined by median daily value traded and (ii) the largest float-adjusted market
capitalization). S&P reviews designated listings on an annual basis and any changes are implemented after the close of the
third Friday in September. The last trading day in July is used as the reference date for the liquidity and market capitalization
data in such determination. Once a listed share class line is added to the Underlying Index, it may be retained in the Underlying
Index even though it may appear to violate certain constituent addition criteria. For companies that issue a second publicly traded
share class to Underlying Index share class holders, the newly issued share class line will be considered for inclusion if the
event is mandatory and the market capitalization of the distributed class is not considered to be de minimis.
The Underlying Index is calculated by using the divisor
methodology used in all S&P equity indices. The initial divisor was set to have a base value of 1,000 on June 20, 2003. The
Underlying Index level is the Underlying Index market value divided by the Underlying Index divisor. In order to maintain Underlying
Index series continuity, it is also necessary to adjust the divisor at each rebalancing. Therefore, the divisor (after rebalancing)
equals the Underlying Index market value (after rebalancing) divided by the Underlying Index value before rebalancing. The divisor
keeps the Underlying Index comparable over time and is one manipulation point for adjustments to the Underlying Index, which we
refer to as maintenance of the Underlying Index.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Historical Performance of the XOP
The following
graph shows the daily historical performance of the XOP in the period from January 1, 2008 through June 11, 2019. We obtained this
historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained
from Bloomberg L.P. The horizontal line in the graph represents its hypothetical Coupon Barrier and Threshold Value of $15.45,
which is 60% of its hypothetical Starting Value of $25.75, which was its closing price on June 11, 2019. The actual Starting Value,
Coupon Barrier and Threshold Value will be determined on the pricing date.
This historical
data on the XOP is not necessarily indicative of the future performance of the XOP or what the price of the Notes may be. Any historical
upward or downward trend in the price of the XOP during any period set forth above is not an indication that the level of the XOP
is more or less likely to increase or decrease at any time over the term of the Notes.
Before investing
in the Notes, you should consult publicly available sources for the prices and trading pattern of the XOP.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
The VanEck Vectors® Semiconductor
ETF
The
SMH is an exchange-traded fund that trades on the NYSE Arca, Inc. under the ticker symbol “SMH.” The SMH seeks to replicate
as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Semiconductor 25 Index
(“MVSMH”). For more information about the MVSMH, please see “The MVIS® US Listed Semiconductor 25 Index”
below.
The
SMH, using a “passive” or indexing investment approach, attempts to approximate the investment performance of the MVSMH
by investing in a portfolio of securities that generally replicates the MVSMH.
The
SMH’s return may not match the return of the MVSMH for a number of reasons. For example, the SMH incurs a number of operating
expenses not applicable to the MVSMH and incurs costs associated with buying and selling securities, especially when rebalancing
the SMH’s securities holdings to reflect changes in the composition of the MVSMH, which are not factored into the return
of the MVSMH. Transaction costs, including brokerage costs, will decrease the SMH’s net asset value to the extent not offset
by the transaction fee payable by an authorized participant. Market disruptions and regulatory restrictions could have an adverse
effect on the SMH’s ability to adjust its exposure to the required levels in order to track the MVSMH. Errors in the MVSMH
data, the MVSMH computations and/or the construction of the MVSMH in accordance with its methodology may occur from time to time
and may not be identified and corrected by the MVSMH provider for a period of time or at all, which may have an adverse impact
on the SMH and its shareholders. In addition, the SMH may not invest in certain securities included in the MVSMH, or invest in
them in the exact proportions in which they are represented in the MVSMH. The SMH’s performance may also deviate from the
return of the MVSMH due to legal restrictions or limitations imposed by the governments of certain countries, certain listing standards
of the SMH’s listing exchange, a lack of liquidity on stock exchanges in which the securities trade, potential adverse tax
consequences or other regulatory reasons (such as diversification requirements). The SMH may value certain of its investments and/or
other assets based on fair value prices. To the extent the SMH calculates its net asset value based on fair value prices and the
value of the MVSMH is based on securities’ closing prices (i.e., the value of the MVSMH is not based on fair value prices),
the SMH’s ability to track the MVSMH may be adversely affected. In addition, any issues the SMH encounters with regard to
currency convertibility (including the cost of borrowing funds, if any) and repatriation may also increase tracking risk. In light
of the factors discussed above, the SMH’s return may deviate significantly from the return of the MVSMH. Changes to the composition
of the MVSMH in connection with a rebalancing or reconstitution of the MVSMH may cause the SMH to experience increased volatility,
during which time the SMH’s index tracking risk may be heightened.
The MVIS® US Listed Semiconductor
25 Index
All
information contained in this pricing supplement regarding the MVSMH, including, without limitation, its make-up, method of calculation
and changes in its components, from publicly available information, without independent verification. This information reflects
the policies of, and is subject to change by, MV Index Solutions GmbH (“MVIS”). The MVSMH was developed by MVIS and
is maintained and published by MVIS. The MVSMH is calculated by Solactive AG. MVIS has no obligation to continue to publish, and
may discontinue the publication of, the MVSMH.
The
MVSMH is reported by Bloomberg L.P. under the ticker symbol “MVSMH.”
The
MVSMH is designed to track the performance of the largest and most liquid U.S.-listed companies that derive at least 50% (25% for
current components) of their revenues from semiconductors. This includes companies engaged primarily in the production of semiconductors
and semiconductor equipment. The MVSMH was launched on August 12, 2011 with a base index value of 1,000 as of September 29, 2000.
Index Composition and Maintenance
The Index Universe
The index universe includes only
common stocks and stocks with similar characteristics from financial markets that are freely investable for foreign investors and
that provide real-time and historical component and currency pricing. Limited partnerships are excluded. Companies from financial
markets that are not freely investable for foreign investors or that do not provide real-time and historical component and currency
pricing may still be eligible if they have a listing on an eligible exchange and if they meet all the size and liquidity requirements
on that exchange.
Only stocks that have a full market
capitalization exceeding US$50 million are eligible for the index universe.
Investable Index Universe
Companies with a free-float (or
shares available to foreign investors) of less than 5% for existing index components or less than 10% for new components are ineligible
for inclusion.
In addition to the above, stocks
that are currently not in the Semiconductor Index must meet the following size and liquidity requirements:
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a full market capitalization exceeding
US$150 million;
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a three-month average-daily-trading
volume of at least US$1 million at the current review and also at the previous two reviews; and
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at least 250,000 shares traded per month
over the last six months at the current review and also at the previous two reviews.
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For stocks already in the Semiconductor
Index the following applies:
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
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a full market capitalization exceeding
US$75 million; and
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a three-month average-daily-trading
volume of at least US$0.2 million in at least two of the latest three quarters (current review and also at previous two reviews)
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In addition, a three-month average-daily-trading
volume of at least US$0.6 million at current review or at one of the previous two reviews; or
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at least 200,000 shares traded per month
over the last six months at the current review or at one of the previous two reviews.
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In case the number of investable
stocks drops below the minimum component number for the respective index, current components remain investable.
Only one share line of each company
is eligible. In case more than one share line fulfills the above size and liquidity rules, only the largest share line by free-float
market capitalization is eligible. MVIS can, in exceptional cases (e.g., significantly higher liquidity), decide for a different
share line.
In case the free-float market capitalization
of a non-component share line:
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exceeds the free-float market capitalization
of a share line of the same company which is an index component by at least 25%; and
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fulfills all size and liquidity eligibility
criteria for non-components,
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the current component share line will
be replaced by the larger one. MVIS can, in exceptional cases (e.g., significantly higher liquidity), decide to keep the current
share line instead.
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Index Constituent Selection
The MVSMH is reviewed on a semi-annual
basis in March and September.
The target coverage of the MVSMH
is 25 companies from the investable universe. MVSMH constituents are selected using the following procedure:
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(1)
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The largest 50 stocks (by full market
capitalization) from the investable universe qualify.
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(2)
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The 50 stocks are ranked in two different
ways — by free-float market capitalization in descending order (the largest company receives rank “1”) and then
by three-month average-daily-trading volume in descending order (the most liquid company receives rank “1”). These
two ranks are added up.
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(3)
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The 50 stocks are then ranked by the
sum of their two ranks in Step 2 in ascending order. If two companies have the same sum of ranks, the larger company is placed
on top.
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a.
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Initially, the highest ranked 25 companies
made up the MVSMH.
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b.
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On-going, a 10-40 buffer is applied:
the highest ranked 10 companies qualify. The remaining 15 companies are selected from the highest ranked remaining current MVSMH
components ranked between 11 and 40. If the number of selected companies is still below 25, then the highest ranked remaining stocks
are selected until 25 companies have been selected.
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Review Schedule
The reviews for the MVSMH are based
on the closing data on the last business day in February and August. If a company does not trade on the last business day in February
or August, the last available price for this company will be used.
The underlying index data (e.g.,
new number of shares, new free-float factors and new weighting cap factors) is announced on the second Friday in March or September.
The weighting cap factors are based on closing data of the Wednesday prior to the second Friday in March or September. Changes
to the MVSMH are implemented and based on the closing prices of the third Friday in March or September. If the third Friday is
not a business day, then the review will take place on the last business day before the third Friday. If a constituent of the MVSMH
does not trade on the third Friday in March or September, then the last available price for that index constituent will be used.
Changes become effective on the next business day. The component changes to the MVSMH are announced on the second Friday in March
or September.
Ongoing Maintenance
In addition to the periodic reviews,
the MVSMH is continually reviewed for corporate events (e.g., mergers, takeovers, spin-offs, delistings and bankruptcies) that
affect the MVSMH components.
Deletions.
For all corporate
events that result in a stock deletion from the MVSMH, the deleted stock will be replaced with the highest ranked non-component
on the most recent selection list immediately only if the number of components in the MVSMH would drop below 20. The replacement
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
stock will be added at the same weight as the deleted stock. Only
in case the number of components drop below its minimum due to a merger of two or more index components, the replacement stock
will be added with its free-float market capitalization, weighted with the capping factor of the uncapped components in the small-weight
group of the weighting scheme. In all other cases (i.e., there is not replacement), the additional weight resulting from the deletion
will be redistributed proportionally across all other components of the MVSMH.
Changes to Free-Float Factor
and Number of Shares
. Changes to the number of shares or the free-float factors due to corporate actions like stock dividends,
splits, rights issues, etc. are implemented immediately and will be effective the next trading day (i.e., the ex-date). Simple
share/float changes are implemented after a 3-day notice period.
Initial Public Offerings (IPOs)
and Spin-Offs.
An IPO stock is eligible for fast-track addition to the index universe for the Semiconductor Index once; either
at the next semi-annual review if it has been trading since at least the last trading day of the month prior to the review snapshot
dates (i.e., the last trading day in February or August) or else at the then-following semi-annual review. In order to be added
to the Semiconductor Index the IPO stock has to meet the size and liquidity requirements:
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the IPO must have a full market capitalization
exceeding US$150 million;
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the IPO must have a free-float factor
of at least 10%;
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the IPO must have an average-daily-trading
volume of at least US$1 million; and
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the IPO must have traded at least 250,000
shares per month (or per 22 days).
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This rule is applicable for newly
spun-off companies as well.
Changes due to Mergers &
Takeovers.
A merger or takeover is deemed successful if it has been declared wholly unconditional and has received approval
of all regulatory agencies with jurisdiction over the transaction. The result of a merger or takeover is typically one surviving
stock and one or more non-surviving stocks that may not necessarily be de-listed from the respective trading system(s).
If a MVSMH component merges with
or takes over another MVSMH component: The surviving stock remains in the MVSMH and the other stock is deleted immediately from
the MVSMH. Its shares and float are adjusted according to the terms of the merger/takeover. The index market capitalization of
the merged company corresponds to the market capitalization of the two separate companies.
If a MVSMH component merges with
or takes over a non-MVSMH component: If the surviving stock meets the MVSMH requirements, then it remains in the MVSMH and its
shares (if the share change is greater than 10%) and float are adjusted according to the terms of the merger/takeover. If the surviving
stock does not meet the MVSMH requirements, then it is deleted immediately from the MVSMH.
If a non-MVSMH component merges
with or takes over a MVSMH component: If the surviving stock meets the MVSMH requirements, then it will be added to the MVSMH (shares
(if the share change is greater than 10%) and float adjusted according to the terms of the merger/takeover) and will replace the
current MVSMH component. If the surviving stock does not meet the MVSMH requirements, then it will not be added to the MVSMH and
the current MVSMH component is deleted immediately from the MVSMH.
Changes due to Spin-Offs.
Each spin-off stock is immediately added to the MVSMH for at least two trading days. If a spin-off company does not qualify for
the MVSMH, it will be deleted based on its closing price. Shares and floats of the surviving companies are adjusted according to
the terms of the spin-off. In case the number of MVSMH components drops below the minimum component number and no non-component
stock is eligible as a replacement, the determination of the addition is subject to MVIS’s decision.
Index Calculation
The value of the MVSMH is calculated
using the Laspeyres’ formula, rounded to two decimal places, with stock prices converted to U.S. dollars:
where (for
all stocks (i) in the MVSMH):
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pi = stock price (rounded to four decimal places);
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qi = number of shares;
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ffi = free-float factor (rounded to two decimal places);
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fxi = exchange rate (local currency to U.S. Dollar) (rounded to 12 decimal places);
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
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Semiconductor ETF
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cfi = sector-weighting cap factor (if applicable, otherwise set to 1) (rounded to 16 decimal places);
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M = free-float market capitalization of the Semiconductor Index; and
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D = divisor (rounded to six decimal places).
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Free-Float
The MVSMH is free-float adjusted
— that is, the number of shares outstanding is reduced to exclude closely held shares (amount larger than 5% of the company’s
full market capitalization) from the index calculation. At times, other adjustments are made to the share count to reflect foreign
ownership limits. These are combined with the block-ownership adjustments into a single factor. To avoid unwanted double counting,
either the block-ownership adjustment or the restricted stocks adjustment is applied, whichever produces the higher result. Free-float
factors are reviewed quarterly.
Company-Weighting Cap Factors
Companies in the MVSMH are weighted
according to their free-float market capitalization, as modified by the company-weighting cap factors. The MVSMH used the company-weighting
cap factors to ensure diversification to avoid overweighting. The company-weighting cap factors are reviewed quarterly and applied,
if necessary. The following weighting scheme applies to the MVSMH:
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(1)
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All MVSMH components are weighted by
their free-float market capitalization.
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(2)
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All companies exceeding 4.5% but at
least the largest five and at the maximum the largest 10 companies are grouped together (so called “Large-Weights”).
All other companies are grouped together as well (so called “Small-Weights“).
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(3)
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The aggregated weighting of the Large-Weights
is capped at 50%:
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a.
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Large-Weights: If the aggregated weighting
of all companies in Large-Weight exceeds 50%, then a capping factor is calculated to bring the weighting down to 50%; at the same
time, a second capping factor for the Small-Weights is calculated to increase the aggregated weight to 50%. These two factors are
then applied to all companies in the Large-Weights or the Small-Weights respectively.
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b.
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Large-Weights: The maximum weight for
any single stock is 20% and the minimum weighting is 5%. If a stock is above the maximum or below the minimum weight, then the
weight will be reduced to the maximum weight or increased to the minimum weight and the excess weight will be re-distributed proportionally
across all other remaining Semiconductor Index constituents in the Large-Weights.
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c.
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Small-Weights: The maximum weight for
any single stock is 4.5%. If a stock is above the maximum weight, then the weight will be reduced to the maximum weight and the
excess weight will be re-distributed proportionally across all other remaining MVSMH constituents in the Small-Weights.
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Divisor
Adjustments
Index maintenance
(reflecting changes in, e.g., shares outstanding, capital actions, addition or deletion of stocks to the MVSMH) should not change
the level of the MVSMH. This is accomplished with an adjustment to the divisor. Any change to the stocks in the MVSMH that alters
the total market value of the MVSMH while holding stock prices constant will require a divisor adjustment.
where ΔMC
is the difference between closing market capitalization and adjusted closing market capitalization of the Semiconductor Index.
Data Correction
Incorrect
or missing input data will be corrected immediately.
Corporate
Action Related Adjustments
Corporate
actions range widely from routine share issuances or buy backs to unusual events like spin-offs or mergers. These are listed on
the table below with notes about the necessary changes and whether the divisor will be adjusted. Implementation takes place on
the ex-date.
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Special
cash dividend
p
i, adjusted
= p
i
– (Dividend x (1 – Withholding Tax))
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Divisor change:
Yes
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
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Split
Shareholders
receive “B” new shares for every “A” share held.
Rights
offering
Shareholders
receive “B” new shares for every “A” share held.
If the subscription-price
is either not available or not smaller than the closing price, then no adjustment will be done.
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Divisor
change: No
Divisor
change: No
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Stock dividend
Divisor change: No
Shareholders
receive “B” new shares for every “A” share held.
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Stock dividend
from treasury
Divisor change: Yes
Stock dividends
from treasury are adjusted as ordinary cash dividends. Shareholders receive ‘B’ new shares for every ‘A’
share held.
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Stock dividend
of a different company security
Divisor change: Yes
Shareholders
receive “B” shares of a different company for every “A” share held.
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Spin-offs
Divisor change: Yes
Shareholders
receive “B” new shares for every “A” share held.
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
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Semiconductor ETF
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Addition/deletion
of a company
Divisor change: Yes
Net
change in market value determines the divisor adjustment.
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Changes
in shares outstanding/free-float
Divisor change: Yes
Any secondary
issuance, share repurchase, buy back, tender offer, Dutch auction, exchange offer, bought deal equity offering or prospectus offering
will be updated at the semi-annual review if the change is smaller than 10%. Changes larger than 10% will be pre-announced (3 trading
days’ notice) and implemented on a best efforts basis. If necessary and information is available, resulting float changes
are taken into consideration. Share changes will not be implemented in the week between review announcement and implementation.
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Changes due to a merger/takeover/spin-off
Divisor change: Yes
Net change in free-float market value determines the divisor adjustment. In case of no
change, the divisor change is 0.
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With corporate
actions where cash dividends or other corporate assets are distributed to shareholders, the price of the stock will drop on the
ex-dividend day (the first day when a new shareholder is eligible to receive the distribution). The effect of the divisor adjustment
is to prevent this price drop from causing a corresponding drop in the MVSMH.
Corporate
actions are announced at least four days prior to implementation.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
®
Semiconductor ETF
Historical Performance of the SMH
The
following graph shows the daily historical performance of the SMH in the period from December 23, 2011 through June 11, 2019. We
obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information
obtained from Bloomberg L.P. The horizontal line in the graph represents its hypothetical Coupon Barrier and Threshold Value of
$64.25 (rounded to two decimal places), which is 60% of its hypothetical Starting Value of $
1
07.08,
which was its closing price on June 11, 2019. The actual Starting Value, Coupon Barrier and Threshold Value will be determined
on the pricing date.
This historical
data on the SMH is not necessarily indicative of the future performance of the SMH or what the value of the Notes may be. Any historical
upward or downward trend in the price of the SMH during any period set forth above is not an indication that the price of the SMH
is more or less likely to increase or decrease at any time over the term of the Notes.
Before investing
in the Notes, you should consult publicly available sources for the prices and trading pattern of the SMH.
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
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Semiconductor ETF
Supplement to the Plan of Distribution; Role
of BofAS and Conflicts of Interest
BofAS, a broker-dealer
affiliate of ours, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate
as selling agent in the distribution of the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA
Rule 5121. BofAS may not make sales in this offering to any of its discretionary accounts without the prior written approval of
the account holder.
We expect
to deliver the Notes against payment therefor in New York, New York on a date that is greater than two business days following
the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required
to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement
of the Notes occurs more than two business days from the pricing date, purchasers who wish to trade the Notes more than two business
days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
Under our
distribution agreement with BofAS, BofAS will purchase the Notes from us as principal at the public offering price indicated on
the cover of this pricing supplement, less the indicated underwriting discount. BofAS will sell the Notes to other broker-dealers
that will participate in the offering and that are not affiliated with us, at an agreed discount to the principal amount. Each
of those broker-dealers may sell the Notes to one or more additional broker-dealers. BofAS has informed us that these discounts
may vary from dealer to dealer and that not all dealers will purchase or repurchase the Notes at the same discount. Certain dealers
who purchase the notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees
or commissions. The public offering price for investors purchasing the notes in these fee-based advisory accounts may be as low
as $972.50 per note.
BofAS and
any of our other broker-dealer affiliates, may use this pricing supplement, and the accompanying product supplement, prospectus
supplement and prospectus for offers and sales in secondary market transactions and market-making transactions in the Notes. However,
they are not obligated to engage in such secondary market transactions and/or market-making transactions. The selling agent may
act as principal or agent in these transactions, and any such sales will be made at prices related to prevailing market conditions
at the time of the sale.
At BofAS’s
discretion, for a short, undetermined initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary
market at a price that may exceed the initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based
on then-prevailing market conditions and other considerations, including the performance of the Underlyings and the remaining term
of the Notes. However, none of us, the Guarantor, BofAS or any of our other affiliates is obligated to purchase your Notes at any
price or at any time, and we cannot assure you that any party will purchase your Notes at a price that equals or exceeds the initial
estimated value of the Notes.
Any price
that BofAS may pay to repurchase the Notes will depend upon then prevailing market conditions, the creditworthiness of us and the
Guarantor, and transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of
the Notes.
No Prospectus
(as defined in Directive 2003/71/EC, as amended (the “Prospectus Directive”)) will be prepared in connection with these
Notes. Accordingly, these Notes may not be offered to the public in any member state of the European Economic Area (the “EEA”),
and any purchaser of these Notes who subsequently sells any of these Notes in any EEA member state must do so only in accordance
with the requirements of the Prospectus Directive, as implemented in that member state.
The Notes
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. For these purposes, the expression “offer" includes the communication in any form
and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to
decide to purchase or subscribe the Notes, and a “retail investor” means a person who is one (or more) of: (a) a retail
client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); or (b) a customer,
within the meaning of Insurance Distribution Directive 2016/97/EU, as amended, where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in the Prospectus Directive.
Consequently, no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”),
for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared, and therefore,
offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs
Regulation.
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P® Oil & Gas Exploration & Production ETF and the VanEck Vectors
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Structuring the Notes
The
Notes are our debt securities, the return on which is linked to the performance of the Underlyings. The related guarantee is BAC’s
obligation. As is the case for all of our and BAC’s respective debt securities, including our market-linked notes, the economic
terms of the Notes reflect our and BAC’s actual or perceived creditworthiness at the time of pricing. In addition, because
market-linked notes result in increased operational, funding and liability management costs to us and BAC, BAC typically borrows
the funds under these types of notes at a rate, which we refer to in this pricing supplement as BAC’s internal funding rate,
that is more favorable to BAC than the rate that it might pay for a conventional fixed or floating rate debt security. This generally
relatively lower internal funding rate, which is reflected in the economic terms of the Notes, along with the fees and charges
associated with market-linked notes, typically results in the initial estimated value of the Notes on the pricing date being less
than their public offering price.
In order
to meet our payment obligations on the Notes, at the time we issue the Notes, we may choose to enter into certain hedging arrangements
(which may include call options, put options or other derivatives) with BofAS or one of our other affiliates. The terms of these
hedging arrangements are determined based upon terms provided by BofAS and its affiliates, and take into account a number of factors,
including our and BAC’s creditworthiness, interest rate movements, the volatility of the Underlyings, the tenor of the Notes
and the hedging arrangements. The economic terms of the Notes and their initial estimated value depend in part on the terms of
these hedging arrangements.
BofAS
has advised us that the hedging arrangements will include hedging related charges, reflecting the costs associated with, and our
affiliates’ profit earned from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable
market forces, actual profits or losses from these hedging transactions may be more or less than any expected amounts.
For
further information, see “Risk Factors” beginning on page PS-8 above and “Supplemental Use of Proceeds”
on page PS-16 of the accompanying product supplement.
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U.S. Federal Income Tax Summary
The following summary of the material U.S.
federal income tax considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent inconsistent
supersedes, the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and under
“U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive of all possible
tax considerations. In addition, any reference to “Morrison & Foerster LLP” in the aforementioned tax discussions
in the accompanying prospectus and prospectus supplement should be read as a reference to “Sidley Austin LLP.” This
summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under the
Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations), rulings, current
administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect and all
of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that
the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
This summary does not include any description of the tax laws of any state or local governments, or of any foreign government,
that may be applicable to a particular holder.
Although the Notes are issued by us, they
will be treated as if they were issued by Bank of America Corporation for U.S. federal income tax purposes. Accordingly throughout
this tax discussion, references to “we,” “our” or “us” are generally to Bank of America Corporation
unless the context requires otherwise.
This summary is directed solely to U.S.
Holders and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the Notes upon original issuance and will
hold the Notes as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment,
and that are not excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor
concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax
consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes
in U.S. federal or other tax laws.
General
Although there is no statutory, judicial,
or administrative authority directly addressing the characterization of the Notes, we intend to treat the Notes for all tax purposes
as contingent income-bearing single financial contracts with respect to the Underlyings and under the terms of the Notes, we and
every investor in the Notes agree, in the absence of an administrative determination or judicial ruling to the contrary, to treat
the Notes in accordance with such characterization. In the opinion of our counsel, Sidley Austin LLP, it is reasonable to treat
the Notes as contingent income-bearing single financial contracts with respect to the Underlyings. However, Sidley Austin LLP has
advised us that it is unable to conclude that it is more likely than not that this treatment will be upheld. This discussion assumes
that the Notes constitute contingent income-bearing single financial contracts with respect to the Underlyings for U.S. federal
income tax purposes. If the Notes did not constitute contingent income-bearing single financial contracts, the tax consequences
described below would be materially different.
This characterization of the Notes is
not binding on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization
of the Notes or any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with
respect to their proper characterization and treatment. Due to the absence of authorities on point, significant aspects of the
U.S. federal income tax consequences of an investment in the Notes are not certain, and no assurance can be given that the IRS
or any court will agree with the characterization and tax treatment described in this pricing supplement. Accordingly, you are
urged to consult your tax advisor regarding all aspects of the U.S. federal income tax consequences of an investment in the Notes,
including possible alternative characterizations.
Unless otherwise stated, the following
discussion is based on the characterization described above. The discussion in this section assumes that there is a significant
possibility of a significant loss of principal on an investment in the Notes.
We will not attempt to ascertain whether
the issuer of either Underlying would be treated as a “passive foreign investment company” (“PFIC”), within
the meaning of Section 1297 of the Code, or a United States real property holding corporation, within the meaning of Section 897(c)
of the Code. If the issuer of either Underlying were so treated, certain adverse U.S. federal income tax consequences could possibly
apply to a holder of the Notes. You should refer to information filed with the SEC by the issuers of the Underlyings and consult
your tax advisor regarding the possible consequences to you, if any, if the issuer of either Underlying is or becomes a PFIC or
is or becomes a United States real property holding corporation.
U.S. Holders
Although the U.S. federal income tax treatment
of any Contingent Coupon Payment on the Notes is uncertain, we intend to take the position, and the following discussion assumes,
that any Contingent Coupon Payment constitutes taxable ordinary income to a U.S. Holder at the time received or accrued in accordance
with the U.S. Holder’s regular method of accounting. By purchasing the Notes you agree, in the absence of an administrative
determination or judicial ruling to the contrary, to treat any Contingent Coupon Payment as described in the preceding sentence.
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Upon receipt of a cash payment at maturity
or upon a sale, exchange, or redemption of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or
loss equal to the difference between the amount realized (other than amounts representing any Contingent Coupon Payment, which
would be taxed as described above) and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes
will equal the amount paid by that holder to acquire them. Subject to the discussion below concerning the possible application
of the “constructive ownership” rules of Section 1260 of the Code this capital gain or loss generally will be long-term
capital gain or loss if the U.S. Holder held the Notes for more than one year. The deductibility of capital losses is subject to
limitations.
Possible Application of Section 1260
of the Code.
Since each Underlying is the type of financial asset described under Section 1260 of the Code (including, among
others, any equity interest in pass-through entities such as exchange traded funds, regulated investment companies, real estate
investment trusts, partnerships, and passive foreign investment companies, each a “Section 1260 Financial Asset”),
while the matter is not entirely clear, there may exist a risk that an investment in the Notes will be treated, in whole or in
part, as a “constructive ownership transaction” to which Section 1260 of the Code applies. If Section 1260 of the Code
applies, all or a portion of any long-term capital gain recognized by a U.S. Holder in respect of the Notes will be recharacterized
as ordinary income (the “Excess Gain”). In addition, an interest charge will also apply to any deemed underpayment
of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income inclusion for the U.S. Holder
in taxable years prior to the taxable year of the sale, exchange, redemption, or settlement (assuming such income accrued at a
constant rate equal to the applicable federal rate as of the date of sale, exchange, redemption, or settlement).
If an investment in the Notes is treated
as a constructive ownership transaction, it is not clear to what extent any long-term capital gain of a U.S. Holder in respect
of the Notes will be recharacterized as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any)
that would be recharacterized as ordinary income in respect of the Notes will equal the excess of (i) any long-term capital gain
recognized by the U.S. Holder in respect of the Notes and attributable to Section 1260 Financial Assets, over (ii) the “net
underlying long-term capital gain” (as defined in Section 1260 of the Code) such U.S. Holder would have had if such U.S.
Holder had acquired an amount of the corresponding Section 1260 Financial Assets at fair market value on the original issue date
for an amount equal to the portion of the issue price of the Notes attributable to the corresponding Section 1260 Financial Assets
and sold such amount of Section 1260 Financial Assets at maturity or upon sale, exchange or redemption of the Notes at fair market
value. Unless otherwise established by clear and convincing evidence, the net underlying long-term capital gain is treated as zero
and therefore it is possible that all long-term capital gain recognized by a U.S. Holder in respect of the Notes will be recharacterized
as ordinary income if Section 1260 of the Code applies to an investment in the Notes. U.S. Holders should consult their tax advisors
regarding the potential application of Section 1260 of the Code to an investment in the Notes.
As described below, the IRS, as indicated
in Notice 2008-2 (the “Notice”), is considering whether Section 1260 of the Code generally applies or should apply
to the Notes, including in situations where the Underlyings are not the type of financial asset described under Section 1260 of
the Code.
Alternative Tax Treatments
. Due
to the absence of authorities that directly address the proper tax treatment of the Notes, prospective investors are urged to consult
their tax advisors regarding all possible alternative tax treatments of an investment in the Notes. In particular, the IRS could
seek to subject the Notes to the Treasury regulations governing contingent payment debt instruments. If the IRS were successful
in that regard, the timing and character of income on the Notes would be affected significantly. Among other things, a U.S. Holder
would be required to accrue original issue discount every year at a “comparable yield” determined at the time of issuance.
In addition, any gain realized by a U.S. Holder at maturity or upon a sale, exchange, or redemption of the Notes generally would
be treated as ordinary income, and any loss realized at maturity or upon a sale, exchange, or redemption of the Notes generally
would be treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of original issue discount, and as capital
loss thereafter.
In addition, it is possible that the Notes
could be treated as a unit consisting of a deposit and a put option written by the note holder, in which case the timing and character
of income on the Notes would be affected significantly.
The Notice sought comments from the public
on the taxation of financial instruments currently taxed as “prepaid forward contracts.” This Notice addresses instruments
such as the Notes. According to the Notice, the IRS and Treasury are considering whether a holder of an instrument such as the
Notes should be required to accrue ordinary income on a current basis, regardless of whether any payments are made prior to maturity.
It is not possible to determine what guidance the IRS and Treasury will ultimately issue, if any. Any such future guidance may
affect the amount, timing and character of income, gain, or loss in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering
additional issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether
foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of
the Code, concerning certain “constructive ownership transactions,” generally applies or should generally apply to
such instruments, and whether any of these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations
require the accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble
to the regulations states that the “wait and see” method of accounting does not properly reflect the economic accrual
of income on those contracts, and requires current accrual of income for some contracts already in existence. While the proposed
regulations do not apply to prepaid forward contracts, the preamble to the proposed regulations expresses the view that similar
timing issues exist in the case of prepaid forward contracts. If the IRS or Treasury publishes future guidance requiring current
economic accrual for contingent payments on prepaid forward contracts, it is possible that you could be required to accrue income
over the term of the Notes.
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Because of the absence of authority regarding
the appropriate tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner
that results in tax consequences that are different from those described above. For example, the IRS could possibly assert that
any gain or loss that a holder may recognize at maturity or upon the sale, exchange, or redemption of the Notes should be treated
as ordinary gain or loss.
Non-U.S. Holders
Because the U.S. federal income tax treatment
of the Notes (including any Contingent Coupon Payment) is uncertain, we will withhold U.S. federal income tax at a 30% rate (or
at a lower rate under an applicable income tax treaty) on the entire amount of any Contingent Coupon Payment made unless such payments
are effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (in which case, to avoid withholding,
the Non-U.S. Holder will be required to provide a Form W-8ECI). We will not pay any additional amounts in respect of such withholding.
To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer identification number and certify as to
its eligibility under the appropriate treaty’s limitations on benefits article, if applicable. In addition, special rules
may apply to claims for treaty benefits made by Non-U.S. Holders that are entities rather than individuals. The availability of
a lower rate of withholding under an applicable income tax treaty will depend on whether such rate applies to the characterization
of the payments under U.S. federal income tax laws. A Non-U.S. Holder that is eligible for a reduced rate of U.S. federal withholding
tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.
Except as discussed below, a Non-U.S. Holder
generally will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes (not including,
for the avoidance of doubt, any amounts representing accrued Contingent Coupon Payments which would be subject to the rules discussed
in the previous paragraph) upon the sale, exchange or redemption of the Notes or their settlement at maturity, provided that the
Non-U.S. Holder complies with applicable certification requirements and that the payment is not effectively connected with the
conduct by the Non-U.S. Holder of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale, exchange, or redemption
of the Notes or their settlement at maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident
alien individual and is present in the U.S. for 183 days or more during the taxable year of the sale, exchange, redemption, or
settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged
in the conduct of a trade or business within the U.S. and if any Contingent Coupon Payment and gain realized on the settlement
at maturity, or upon sale, exchange, or redemption of the Notes, is effectively connected with the conduct of such trade or business
(and, if certain tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.),
the Non-U.S. Holder, although exempt from U.S. federal withholding tax, generally will be subject to U.S. federal income tax on
such Contingent Coupon Payment and gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders
should read the material under the heading “—U.S. Holders,” for a description of the U.S. federal income tax
consequences of acquiring, owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation, it
may also be subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion
of its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the
U.S., subject to certain adjustments.
A “dividend equivalent” payment
is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding
tax if paid to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked
instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified
ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation
for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However,
IRS guidance provides that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one
instruments and that are issued before January 1, 2021. Based on our determination that the Notes are not delta-one instruments,
Non-U.S. Holders should not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is
possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain
events affecting the Underlyings or the Notes, and following such occurrence the Notes could be treated as subject to withholding
on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions in respect of the Underlyings
or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context
of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the
applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
As discussed above, alternative characterizations
of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or
clarification of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax in addition
to the withholding tax described above, tax will be withheld at the applicable statutory rate. Prospective Non-U.S. Holders should
consult their own tax advisors regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax.
Under current
law, while the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible
in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty
benefit, a note is likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities
should consult their own tax advisors regarding the U.S. federal estate tax consequences of investing in a note.
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Backup Withholding and Information Reporting
Please see the discussion under “U.S.
Federal Income Tax Considerations — Taxation of Debt Securities — Backup Withholding and Information Reporting”
in the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules
to payments made on the Notes.
Foreign Account Tax Compliance Act (“FATCA”)
The discussion in the accompanying prospectus
under “U.S. Federal Income Tax Considerations – Foreign Account Tax Compliance Act” is hereby modified to reflect
regulations proposed by Treasury indicating its intent to eliminate the requirements under FATCA of withholding on gross proceeds
from the sale, exchange, settlement at maturity or other disposition of relevant financial instruments. Treasury has indicated
that taxpayers may rely on these proposed regulations pending their finalization.
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Where You Can Find More Information
The terms and risks of the Notes are
contained in this pricing supplement and in the following related product supplement, prospectus supplement and prospectus, which
can be accessed at the following links:
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•
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Product
Supplement EQUITY-1 dated January 24, 2017:
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https://www.sec.gov/Archives/edgar/data/70858/000119312517016445/d331325d424b5.htm
|
•
|
Series
A MTN prospectus supplement dated November 4, 2016 and prospectus dated November 4, 2016:
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https://www.sec.gov/Archives/edgar/data/70858/000119312516760144/d266649d424b3.htm
These documents
(together, the “Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without
cost, be accessed on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should
read the Note Prospectus, including this pricing supplement, for information about us, BAC and this offering. Any prior or contemporaneous
oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms
used but not defined in this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus
supplement. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,”
“us,” “our,” or similar references are to BofA Finance, and not to BAC.
As a result
of the completion of the reorganization of Bank of America’s U.S. broker-dealer business, references to Merrill Lynch, Pierce,
Fenner and Smith Incorporated. (“MLPF&S”) in the accompanying product supplement, prospectus supplement and prospectus,
as such references relate to MLPF&S’s institutional services, should now be read as references to BofAS.
The Notes
are our senior debt securities. Any payments on the Notes are fully and unconditionally guaranteed by BAC. The
Notes and the related guarantee are not insured by the Federal Deposit Insurance Corporation or secured by collateral. The
Notes will rank equally with all of our other senior unsecured debt, and the related guarantee will rank equally with all of BAC’s
other senior unsecured debt. Any payments due on the Notes, including any repayment of the principal amount, will be subject to
the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
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