Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-213265 (To Prospectus dated November 4, 2016, Prospectus Supplement dated November 4, 2016 and Product Supplement EQUITY INDICES ARN-1 dated December 22, 2016) |
Units $10 principal amount per unit CUSIP No. |
Pricing Date* Settlement Date* Maturity Date* |
June , 2019 July , 2019 August , 2020 |
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*Subject to change based on the actual date the notes are priced for initial sale to the public (the
pricing date
)
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BofA Finance LLC
Accelerated Return Notes
®
Linked to the
Technology Select Sector Index
Fully and Unconditionally Guaranteed by Bank of America Corporation
■
Maturity of approximately 14 months
■
3-to-1 upside exposure to increases in the Index, s
ubject to a capped return of [
13.50% to 17.50%
]
■
1-to-1 downside exposure to decreases in the Index, with 100% of your investment at risk
■
All payments occur at maturity and are subject to the credit risk of BofA Finance LLC, as issuer of the notes, and the credit risk of Bank of America Corporation, as guarantor of the notes
■
No periodic interest payments
■
In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per unit. See
Structuring the Notes
■
Limited secondary market liquidity, with no exchange listing
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Per Unit
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Total
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Public offering price
(1)
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$10.00
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$
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Underwriting discount
(1)
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$0.20
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$
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Proceeds, before expenses, to BofA Finance
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$9.80
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$
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(1)
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For any purchase of 500,000 units or more in a single transaction by an individual investor or in combined transactions with the investor
’
s household in this offering, the public offering price and the underwriting discount will be $9.95 per unit and $0.15 per unit, respectively. See
Supplement to the Plan of Distribution; Conflicts of Interest
below.
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Accelerated Return Notes
®
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TS-
2
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
■
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Product supplement EQUITY INDICES ARN-1 dated December 22, 2016:
https://www.sec.gov/Archives/edgar/data/70858/000119312516802321/d316490d424b5.htm |
■
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Series A MTN prospectus supplement dated November 4, 2016 and prospectus dated November 4, 2016:
https://www.sec.gov/Archives/edgar/data/70858/000119312516760144/d266649d424b3.htm |
You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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You anticipate that the Index will increase moderately from the Starting Value to the Ending Value.
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You are willing to risk a loss of principal and return if the Index decreases from the Starting Value to the Ending Value.
■
You accept that the return on the notes will be capped.
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You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
■
You are willing to forgo dividends or other benefits of owning the stocks included in the Index.
■
You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various
factors, including our and BAC’
s actual and
perceived creditworthiness, BAC’
s internal funding rate and fees and charges on the notes.
■
You are willing to assume our credit risk,
as issuer of the notes, and BAC’
s credit risk, as guarantor of the notes,
for all payments under the notes, including the Redemption Amount.
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■
You believe that the Index will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
■
You seek principal repayment or preservation of capital.
■
You seek an uncapped return on your investment.
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You seek interest payments or other current income on your investment.
■
You want to receive dividends or other distributions paid on the stocks included in the Index.
■
You seek an investment for which there will be a liquid secondary market.
■
You are unwilling or are unable to take market risk on the notes
,
to take our credit risk
,
as iss
uer of the notes, or to take BAC’
s credit risk, as guarantor of the notes.
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Accelerated Return Notes
®
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TS-
3
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Accelerated Return Notes
®
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This graph reflects the returns on the notes, based on the Participation Rate of 300% and a Capped Value of
$
11.55
per unit
(the midpoint of the Capped Value range of [
$11.35 to $11.75
]). The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in the Index, excluding dividends.
This graph has been prepared for purposes of illustration only.
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Accelerated Return Notes
®
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TS-
4
|
Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Ending Value
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Percentage Change from the Starting Value to the Ending Value
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Redemption Amount per Unit
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Total Rate of Return on the Notes
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0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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94.00
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-6.00%
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$9.40
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-6.00%
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97.00
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-3.00%
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$9.70
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-3.00%
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100.00
(1)
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0.00%
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$10.00
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0.00%
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102.00
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2.00%
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$10.60
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6.00%
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105.00
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5.00%
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$11.5
0
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1
5
.0
0%
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110.00
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10.00%
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$11.55
(2)
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15.50%
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120.00
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20.00%
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$11.55
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15.50%
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130.00
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30.00%
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$11.55
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15.50%
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140.00
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40.00%
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$11.55
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15.50%
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150.00
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50.00%
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$11.55
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15.50%
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160.00
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60.00%
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$11.55
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15.50%
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(1)
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The
hypothetical
Starting Value of 100 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Market Measure.
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(2)
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The Redemption Amount per unit cannot exceed the
hypothetical
Capped Value.
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Accelerated Return Notes
®
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TS-
5
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Example 1
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The Ending Value is 80.00, or 80.00% of the Starting Value:
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Starting Value:
100.00
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Ending Value:
80.00
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= $8.00
Redemption Amount per unit
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Example 2
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The Ending Value is 102.00, or 102.00% of the Starting Value:
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Starting Value:
100.00
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Ending Value:
102.00
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= $10.60
Redemption Amount per unit
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Example 3
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The Ending Value is 130.00, or 130.00% of the Starting Value:
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Starting Value:
100.00
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Ending Value:
130.00
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= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be
$
11.55
per unit
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Accelerated Return Notes
®
|
TS-
6
|
Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
■
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Depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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■
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Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
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■
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Payments on the notes are subject to our credit risk, and the credit risk of BAC, and actual or perceived changes in our or BAC’s creditworthiness are expected to affect the value of the notes. If we and BAC become insolvent or are unable to pay our respective obligations, you may lose your entire investment.
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Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks included in the Index.
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We are a finance subsidiary and, as such, will have limited assets and operations.
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BAC’s obligations under its guarantee of the notes will be structurally subordinated to liabilities of its subsidiaries.
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The notes issued by us will not have the benefit of any cross-default or cross-acceleration with other indebtedness of BofA Finance or BAC; events of bankruptcy or insolvency or resolution proceedings relating to BAC and covenant breach by BAC will not constitute an event of default with respect to the notes.
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The initial estimated value of the notes
considers certain assumptions and variables and relies in part on certain forecasts about future events, which may prove to be incorrect. The initial estimated value of the notes
is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables,
including our credit spreads
and those of BAC, BAC’s internal funding
rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.
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■
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The public offering price you pay for the notes will exceed the initial estimated value. 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 the initial estimated value. This is due to, among other things, changes in the
level of the Index
,
BAC’s internal funding rate
, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as further described in Structuring the Notes on page TS-
15
. 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.
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The initial estimated value does not represent a minimum or maximum price at which we,
BAC,
MLPF&S
, 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
Index
, our
and BAC’s
creditworthiness and changes in market conditions.
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A trading market is not expected to develop for the notes.
None of us, BAC
,
MLPF&S
or BofAS
is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.
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BAC and its affiliates’ hedging and trading activities (including trades in shares of companies included in the Index) and any hedging and trading activities BAC or its affiliates engage in that are not for your account or on your behalf, may affect the market value and return of the notes and may create conflicts of interest with you.
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The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
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You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.
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While BAC and our other affiliates may from time to time own securities of companies included in the Index, except to the extent that BAC’s common stock is included in the Index, we, BAC and our other affiliates do not control any company included in the Index, and have not verified any disclosure made by any other company.
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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.
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See Summary Tax Consequences below and U.S. Federal Income Tax Summary beginning on page PS-26 of product supplement EQUITY INDICES ARN-1.
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Accelerated Return Notes
®
|
TS-
7
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
■
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The stocks included in the Index are concentrated in one sector.
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Accelerated Return Notes
®
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TS-
8
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
■
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Each of the component stocks in a Select Sector Index (the Component Stocks) is a constituent company of the S&P 500
®
Index.
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The eleven Select Sector Indices together will include all of the companies represented in the S&P 500
®
Index and each of the stocks in the S&P 500
®
Index will be allocated to at least one of the Select Sector Indices.
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Each constituent stock of the S&P 500
®
Index is assigned to a Select Sector Index based on its GICS sector. Each Select Sector Index is made up of all the stocks in the applicable GICS sector.
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Each Select Sector Index is calculated by the Index Sponsor using a capped market capitalization methodology where single index constituents or defined groups of index constituents are confined to a maximum weight and the excess weight is distributed proportionally among the remaining index constituents. Each Select Sector Index is rebalanced from time to time to re-establish the proper weighting.
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For reweighting purposes, each Select Sector Index is rebalanced quarterly after the close of business on the third Friday of March, June September and December using the following procedures: (1) The rebalancing reference date is the second Friday of March, June, September and December; (2) With prices reflected on the rebalancing reference date, and membership, shares outstanding and investable weight factors (as described in the section Computation of the S&P 500 Index
®
below) as of the rebalancing effective date, each company is weighted by float-adjusted market capitalization methodology. Modifications are made as defined below.
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(i)
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If any
Component Stock
has a weight greater than 24%, that
Component Stock
has its float-adjusted market capitalization weight capped at 23%. The 23% weight cap creates a 2% buffer to ensure that no
Component Stock
exceeds 25% as of the quarter-end diversification requirement date.
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(ii)
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All excess weight is equally redistributed to all uncapped Component Stocks within the relevant Select Sector Index.
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Accelerated Return Notes
®
|
TS-
9
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
(iii)
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After this redistribution, if the float-adjusted market capitalization weight of any other
Component Stock
(s) then breaches 23%, the process is repeated iteratively until no
Component Stock
s breaches the 23% weight cap.
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(iv)
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The sum of the
Component Stock
s with weights greater than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for a buffer below the 5% limit.
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(v)
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If the rule in step (iv) is breached, all the
Component Stock
s are ranked in descending order of their float-adjusted market capitalization weights and the first
Component Stock
that causes the 50% limit to be breached has its weight reduced to 4.5%.
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(vi)
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This excess weight is equally redistributed to all
Component Stock
s with weights below 4.5%. This process is repeated iteratively until step (iv) is satisfied.
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(vii)
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Index share amounts are assigned to each
Component Stock
to arrive at the weights calculated above. Since index shares are assigned based on prices one business day prior to rebalancing, the actual weight of each
Component Stock
at the rebalancing differs somewhat from these weights due to market movements.
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(viii)
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If necessary, the reweighting process may take place more than once prior to the close on the last business day of March, June, September or December to ensure conformity with all diversification requirements.
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Accelerated Return Notes
®
|
TS-
10
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Accelerated Return Notes
®
|
TS-
11
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Accelerated Return Notes
®
|
TS-
12
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Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Accelerated Return Notes
®
|
TS-
13
|
Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
●
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the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not directly above or below the individual investor;
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●
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a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the investor’s household as described above;
and
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●
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a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any purchases made by a trustee’s personal account.
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Accelerated Return Notes
®
|
TS-
14
|
Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
Accelerated Return Notes
®
|
TS-
15
|
Accelerated Return Notes
®
Linked to the Technology Select Sector Index, due August , 2020 |
■
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
|
■
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You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as a single financial contract with respect to the
Index.
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■
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning
on page 50 of the prospectus
) generally will recognize capital gain or loss upon maturity or upon a sale or exchange of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year.
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■
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No assurance can be given that the
Internal Revenue Service (IRS)
or any court will agree with this characterization and tax treatment.
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Under current IRS guidance, withholding on dividend equivalent payments (as discussed in the product supplement), if any, will not apply to notes that are issued as of the date of this pricing supplement unless such notes are delta-one instruments.
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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 the U.S. Department of 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. The U.S. Department of Treasury has indicated that taxpayers may rely on these proposed regulations pending their finalization.
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Accelerated Return Notes
®
|
TS-
16
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