Risk Factors
There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-6 of product supplement EQUITY INDICES ARN-1, page S-4 of the Series A MTN prospectus supplement, and page 7 of the prospectus identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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Depending on the performance of the Basket as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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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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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 Basket Components.
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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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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
value of the Basket
,
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-
20
. 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
Basket
, 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 Basket Components) 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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Changes in the level of one of the Basket Components may be offset by changes in the level of the other Basket Components. Due to the different Initial Component Weights, changes in the level of some Basket Components will have a more substantial impact on the value of the Basket than similar changes in the levels of the other Basket Components.
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The index sponsors may adjust each Basket Component in a way that affects its level, and the index sponsors have no obligation to consider your interests.
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You will have no rights of a holder of the securities included in the Basket Components, 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 Basket Components, we, BAC and our other affiliates do not control any company included in any Basket Component, and have not verified any disclosure made by any other company.
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Accelerated Return Notes
®
|
TS-
7
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
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Your return on the notes and the value of the notes may be affected by exchange rate movements and factors affecting the international securities markets, specifically changes in the countries represented by the Basket Components. In addition, you will not obtain the benefit of any increase in the value of the currencies in which the securities included in the Basket Components trade against the U.S. dollar, which you would have received if you had owned the securities represented by the Basket Components during the term of your notes, although the levels of the Basket Components may be adversely affected by general exchange rate movements in the market.
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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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Additional Risk Factors
There are risks associated with emerging markets.
An investment in the notes will involve risks not generally associated with investments which have no emerging market component. In particular, many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments may be subject to change without review or appeal. Many emerging markets suffer from underdevelopment of capital markets and tax regulation. The risk of expropriation and nationalization remains a threat. Guarding against such risks is made more difficult by low levels of corporate disclosure and unreliability of economic and financial data.
Other Terms of the Notes
Market Measure Business Day
The
following definition shall
supersede and replace the definition of
a
“Market Measure Business Day” set forth in product supplement EQUITY INDICES ARN-1.
A “Market Measure Business Day” means a day on which:
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(A)
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each of the New York Stock Exchange and NASDAQ Stock Market, Inc. (as to the
S&P 100
®
Index
)
,
the
Eurex (as to the EURO STOXX 50
®
Index)
,
the Tokyo Stock Exchange (as to the Nikkei Stock Average Index)
and the
London Stock Exchange, the Hong Kong Stock Exchange, the São Paulo Stock Exchange, and the Korea Stock Exchange
(as to the
MSCI Emerging Markets Index
)
(
or any succ
essor
s
to the foregoing exchange
s) are
open for trading; and
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(B)
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the Basket Components or any successors thereto are calculated and published.
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Accelerated Return Notes
®
|
TS-
8
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
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The Basket
The Basket is designed to allow investors to participate in the percentage changes in the levels of the Basket Components from the Starting Value to the Ending Value of the Basket. The Basket Components are described in the section “The Basket Components” below. Each Basket Component will be assigned an initial weight on the pricing date, as set forth in the table below.
For more information on the calculation of the value of the Basket, please see the section entitled “Description of ARNs-Basket Market Mea
sures" beginning on page PS-21
of product supplement EQUITY INDICES ARN-1.
If
July 8, 2019
were the pricing date
,
for each Basket Component, the Initial Component Weight, the closing level, the hypothetical Component Ratio and the initial contribution to the Basket value would be as follows:
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Basket Component
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Bloomberg Symbol
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Initial Component Weight
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Closing Level
(1)(2)
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Hypothetical Component Ratio
(1)(3)
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Initial Basket Value Contribution
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S&P 100
®
Index
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OEX
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7
0.00%
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1,314.36
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0.05325786
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7
0.00
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EURO STOXX 50
®
Index
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SX5E
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1
0.00%
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3,523.76
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0.00283788
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1
0.00
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Nikkei Stock Average Index
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NKY
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10.00%
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21,534.35
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0.00046437
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10.00
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MSCI Emerging Markets Index
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MXEF
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10.00%
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1,046.24
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0.00955804
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10.00
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Starting Value
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100.00
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(1)
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The actual closing level of each Basket Component and the resulting actual Component Ratios will be determined on the pricing date, subject to adjustment as more fully described in the section entitled “Description of ARNs-Basket Market Measures-Determination of the Component Ratio for Each Basket Component" b
eginning on page PS-21
of product supplement EQUITY INDICES ARN-1 if a Market Disruption Event occurs on the pricing date as to any Basket Component.
In addition, if the pricing date is determined by the calculation agent not to be a Market Measure Business Day for any Basket Component by reason of an extraordinary event, occurrence, declaration or otherwise, the calculation agent will establish the closing level of that Basket Component, and thus its Component Ratio, in the same manner as if a Market Disruption Event occurred as to that Basket Component.
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(2)
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These were the closing levels of the Basket Components on
July 8, 2019
.
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(3)
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Each hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket Component (as a percentage) multiplied by 100, and then divided by the closing level of that Basket Component on
July 8, 2019
and rounded to eight decimal places.
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The calculation agent will calculate the value of the Basket
by summing the products of the closing level for each Basket Component on each calculation day during the Maturity Valuation Period and the Component Ratio applicable to such Basket Component. If a Market Disruption Event occurs as to any Basket Component on any scheduled calculation day, the closing level of that Basket Component will be determined as more fully d
escribed beginning on page PS-18
of product supplement EQUITY INDICES ARN-1 in the section “Description of ARNs—The Starting Value and the Ending Value—Ending Value."
|
Accelerated Return Notes
®
|
TS-
9
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
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While actual historical
information on the Basket will not exist before the pricing date, the following graph sets forth the hypothetical historical
daily
performance of the Basket from January 1, 2008 through
July 8, 2019
.
The graph is based upon actual daily historical levels of the Basket Components, hypothetical Component Ratios
based on the closing levels of the Basket Components
as of December 31, 2007, and a Basket value of 100.00 as of that date. This hypothetical historical data on the Basket is not necessarily indicative of the future performance of the Basket or what the value of the notes may be. Any
hypothetical
historical upward or downward trend in the value of the
Basket during any period set forth below is not an indication that the value of the Basket is more or less likely to increase or decrease at any time over the term of the notes.
Hypothetical
Historical Performance of the Basket
|
Accelerated Return Notes
®
|
TS-
10
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
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The Basket Components
All disclosures contained in this term sheet regarding the Basket Components, 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
S&P Dow Jones Indices LLC (
“S&P”
) with respect to the
S&P 100
®
Index (the “
OEX
”),
STOXX Limited (“STOXX”) with respect to the EURO STOXX 50
®
Index (the “SX5E”)
,
Nikkei Inc. (“Nikkei”) with respect to the Nikkei Stock Average Index (the “NKY”) and
MSCI Inc. (“MSCI”)
with respect to the
MSCI Emerging Markets Index
(the “MXEF”)
(
S&P, STOXX
,
Nikkei
and MSCI
together, the “index sponsors”)
.
The index sponsors have no obligation to continue to publish, and may discontinue or suspend the publication of any Basket Component at any time. The consequences of any index sponsor discontinuing publication of a Basket Component are discussed in the section entitled “Description of the Notes—Discontinuance of an Index” beginning on page PS-21 of product supplement EQUITY INDICES
ARN-1 on page PS-19 entitled “Description of ARNs - Discontinuance of an Index”
.
None of us
, BAC, the calculation agent,
MLPF&S
or BofAS
accepts any responsibility for the calculation, maintenance, or publication of any Basket Component or any successor index.
T
he S&P 1
00
®
Index
The S&P 100
®
Index (the “OEX”) is a subset of the S&P 500
®
Index (the “SPX”)
and measures the performance of large cap companies in the United States
.
The OEX was introduced in 1983 and comprises 100 leading U.S. stocks with exchange-listed options. Constituents of the OEX are generally
among the largest and most established companies in the SPX. To be included in the OEX, a company must maintain exchange-listed options,
be a U.S. company (determined by reference to location of operations, corporate structure, accounting standards, and exchange listings,
)
have a market capitalization in excess of the minimum capitalization requirements of the SPX, have a public float of at least 50%, have four
consecutive quarters of positive as-reported earnings and
have
a ratio of annual dollar value traded to float adjusted market capitalization of at least
1.00.
The OEX includes companies from the eleven
main groups
included in the SPX
:
Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials; Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The Underlying Sponsor may from time to time, in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives sta
ted above
.
SPX
The SPX
is intended to provide an indication of the pattern of common stock price movement. The calculation of the level of the
SPX
is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943.
The SPX includes companies from eleven main groups: Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials; Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The Underlying Sponsor may from time to time, in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives stated above.
The
Index sponsor
calculates the
SPX
by reference to the prices of the constituent stocks of the
SPX
without taking account of the value of dividends paid on those stocks. As a result, the return on the notes will not reflect the return you would realize if you actually owned the
SPX
constituent stocks and received the dividends paid on those stocks.
Computation of the
SPX
While the
Index sponsor
currently employs the following methodology to calculate the
SPX
, no assurance can be given that the
Index sponsor
will not modify or change this methodology in a manner that may affect the Redemption Amount.
Historically, the market value of any component stock of the
SPX
was calculated as the product of the market price per share and the number of then outstanding shares of such component stock. In March 2005, the
Index sponsor
began shifting the
SPX
halfway from a market capitalization weighted formula to a float-adjusted formula, before moving the
SPX
to full float adjustment on September 16, 2005. The
Index sponsor
’s criteria for selecting stocks for the
SPX
did not change with the shift to float adjustment. However, the adjustment affects each company’s weight in the
SPX
.
Under float adjustment, the share counts used in calculating the
SPX
reflect only those shares that are available to investors, not all of a company’s outstanding shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for purposes of calculating the
SPX
. Generally, these “control holders” will include officers and directors, private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily be considered part of the float.
|
Accelerated Return Notes
®
|
TS-
11
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
|
Treasury stock, stock options, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight factor (“IWF”) is calculated by dividing the available float shares by the total shares outstanding.
Available float shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds 5% of the company’s shares, the
Index sponsor
would assign that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares and another control group holds 20% of the company’s shares, the
Index sponsor
would assign an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control. As of July 31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the
SPX
. Constituents of the
SPX
prior to July 31, 2017 with multiple share class lines will be grandfathered in and continue to be included in the
SPX
. If a constituent company of the
SPX
reorganizes into a multiple share class line structure, that company will remain in the
SPX
at the discretion of the S&P Index Committee in order to minimize turnover.
The
SPX
is calculated using a base-weighted aggregate methodology. The level of the
SPX
reflects the total market value of all component stocks relative to the base period of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in order to make the level easier to work with and track over time. The actual total market value of the component stocks during the base period of the years 1941 through 1943 has been set to an indexed level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the daily calculation of the
SPX
is computed by dividing the total market value of the component stocks by the “index divisor.” By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the
SPX
, it serves as a link to the original base period level of the
SPX
. The index divisor keeps the
SPX
comparable over time and is the manipulation point for all adjustments to the
SPX
, which is index maintenance.
SPX
Maintenance
SPX
maintenance includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common shares outstanding and the stock prices of the companies in the
SPX
, and do not require index divisor adjustments.
To prevent the level of the
SPX
from changing due to corporate actions, corporate actions which affect the total market value of the
SPX
require an index divisor adjustment. By adjusting the index divisor for the change in market value, the level of the
SPX
remains constant and does not reflect the corporate actions of individual companies in the
SPX
. Index divisor adjustments are made after the close of trading and after the calculation of the
SPX
closing level.
Changes in a company’s shares outstanding of 5.00% or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers are made as soon as reasonably possible. Share changes due to mergers or acquisitions of publicly held companies that trade on a major exchange are implemented when the transaction occurs, even if both of the companies are not in the same headline index, and regardless of the size of the change. All other changes of 5.00% or more (due to, for example, company stock repurchases, private placements, redemptions, exercise of options, warrants, conversion of preferred stock, notes, debt, equity participation units, at-the-market offerings, or other recapitalizations) are made weekly and are announced on Fridays for implementation after the close of trading on the following Friday. Changes of less than 5.00% are accumulated and made quarterly on the third Friday of March, June, September, and December, and are usually announced two to five days prior.
If a change in a company’s shares outstanding of 5.00% or more causes a company’s IWF to change by five percentage points or more, the IWF is updated at the same time as the share change. IWF changes resulting from partial tender offers are considered on a case by case basis.
|
Accelerated Return Notes
®
|
TS-
12
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
|
The following graph shows the
daily
historical performance of the
OEX
in the period from January 1, 2008
through
July 8, 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. On
July 8, 2019
, the closing level of the
OEX
was
1,314.36
.
Historical Performance of the
S&P 100
®
Index
This historical data on the
OEX
is not necessarily indicative of the future performance of the
OEX
or what the value of the notes may be. Any historical upward or downward trend in the level of the
OEX
during any period set forth above is not an indication that the level of the
OEX
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 levels of the
OEX
.
License Agreement
S&P
®
is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P Dow Jones Indices LLC. “Standard & Poor’s
®
,” “
S&P 100
®
”
,
“
S&P 500
®
”
and “S&P
®
” are trademarks of Standard & Poor’s Financial Services LLC. These trademarks have been sublicensed for certain purposes by our affiliate, MLPF&S. The
OEX
is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by
MLPF&S
.
The notes are
not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, Standard & Poor’s Financial Services LLC or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders of the
notes
or any member of the public regarding the advisability of investing in securities generally or in
the notes
particularly or the ability of the
OEX
to track general market performance. S&P Dow Jones Indices’ only relationship to
MLPF&S
with respect to the
OEX
is the licensing of the
OEX
and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its third party licensors. The
OEX
is determined, composed and calculated by S&P Dow Jones Indices without regard to
us, MLPF&S,
or the
notes
. S&P Dow Jones Indices have no obligation to take our needs, BAC’s needs or the needs of
MLPF&S
or holders of
the notes
into consideration in determining, composing or calculating the
OEX
. S&P Dow Jones Indices are
not responsible for and have not participated in the determination of the prices, and amount of
the notes
or the timing of the issuance or sale of
the notes
or in the determination or calculation of the equation by which
the notes
are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration, marketing or trading of
the notes
. There is no assurance that investment products based on the
OEX
will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security or futures contract within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or futures contract, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial products unrelated to
the notes
currently being issued by
us
, but which may be similar to and competitive with
the notes.
In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the
OEX
.
It is possible that this trading activity will affect the value of
the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE
OEX
OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US, BAC, MLPF&S, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE OEX OR
WITH
|
Accelerated Return Notes
®
|
TS-
13
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
|
RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT
LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY
HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT,
STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND
MLPF&S,
OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
|
Accelerated Return Notes
®
|
TS-
14
|
|
Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
|
The EURO STOXX 50
®
Index
The SX5E was created by STOXX, which is part of the Deutsche Börse Group. Publication of the SX5E began in February 1998, based on an initial SX5E level of 1,000 at December 31, 1991. On March 1, 2010, STOXX announced the removal of the “Dow Jones” prefix from all of its indices, including the SX5E.
SX5E Composition and Maintenance
The composition of the SX5E is reviewed annually, based on the closing stock data on the last trading day in August. Changes in the composition of the SX5E are made to ensure that the SX5E includes the 50 market sector leaders from within the SX5E.
The free float factors for each component stock used to calculate the SX5E, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the next quarterly review.
The SX5E is also reviewed on an ongoing monthly basis. Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect the SX5E composition are announced immediately, implemented two trading days later and become effective on the next trading day after implementation.
SX5E Calculation
The SX5E is calculated with the “Laspeyres formula,” which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating the SX5E value can be expressed as follows:
The “free float market capitalization of the SX5E” is equal to the sum of the product of the price, the number of shares and the free float factor and the weighting cap factor for each component stock as of the time the SX5E is being calculated.
The SX5E is also subject to a divisor, which is adjusted to maintain the continuity of the SX5E values across changes due to corporate actions, such as the deletion and addition of stocks, the substitution of stocks, stock dividends, and stock splits.
Neither we nor any of our affiliates, including the selling agent, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the SX5E or any successor to the SX5E. STOXX does not guarantee the accuracy or the completeness of the SX5E or any data included in the SX5E. STOXX assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the SX5E. STOXX disclaims all responsibility for any errors or omissions in the calculation and dissemination of the SX5E or the manner in which the SX5E is applied in determining the amount payable on the notes at maturity.
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Accelerated Return Notes
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TS-
15
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
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The following graph shows the
daily
historical performance of the
SX5E
in the period from January 1, 2008 through
July 8, 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. On
July 8, 2019
, the closing level of the
SX5E
was
3,523.76
.
Historical Performance of the EURO STOXX 50
®
Index
This historical data on the
SX5E
is not necessarily indicative of the future performance of the
SX5E
or what the value of the notes may be. Any historical upward or downward trend in the level of the
SX5E
during any period set forth above is not an indication that the level of the
SX5E
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 levels of the
SX5E
.
License Agreement
One of our affiliates has entered into a non-exclusive license agreement with STOXX providing for the license to it and certain of its affiliated companies, including us, in exchange for a fee, of the right to use indices owned and published by STOXX (including the SX5E) in connection with certain securities, including the notes offered hereby.
The license agreement requires that the following language be stated in this document:
STOXX and its licensors (the “Licensors”) have no relationship to us, other than the licensing of the SX5E and the related trademarks for use in connection with the notes. STOXX and its Licensors do not:
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sponsor, endorse, sell, or promote the notes;
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recommend that any person invest in the notes offered hereby or any other securities;
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have any responsibility or liability for or make any decisions about the timing, amount, or pricing of the notes;
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have any responsibility or liability for the administration, management, or marketing of the notes; or
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consider the needs of the notes or the holders of the notes in determining, composing, or calculating the SX5E, or have any obligation to do so.
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STOXX and its Licensors will not have any liability in connection with the notes. Specifically:
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STOXX and its Licensors do not make any warranty, express or implied, and disclaims any and all warranty concerning:
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the results to be obtained by the notes, the holders of the notes or any other person in connection with the use of the SX5E and the data included in the SX5E;
|
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the accuracy or completeness of the SX5E and its data;
|
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the merchantability and the fitness for a particular purpose or use of the SX5E and its data;
|
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STOXX and its Licensors will have no liability for any errors, omissions, or interruptions in the SX5E or its data; and
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Under no circumstances will STOXX be liable for any lost profits or indirect, punitive, special, or consequential damages or losses, even if STOXX or its Licensors know that they might occur.
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The licensing agreement discussed above is solely for our benefit and that of
STOXX, and not for the benefit of the holders of the notes or any other third
parties.
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Accelerated Return Notes
®
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TS-16
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Accelerated Return Notes
®
Linked to a Global Equity Index Basket, due September , 2020
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The Nikkei Stock Average Index
The Index, also known as the Nikki 225 Index, is an equity index calculated, published, and disseminated by Nikkei Inc. The Index measures the composite price performance of selected Japanese stocks. The Index is currently based on 225 stocks (each, an “Index Stock”) trading on the Tokyo Stock Exchange (“TSE”) and represents a broad cross-section of Japanese industry. All 225 of the Index Stocks are listed in the First Section of the TSE. Index Stocks listed in the First Section are among the most actively traded stocks on the TSE. The Index started on September 7, 1950. However, it was retroactively calculated back to May 16, 1949, when the TSE reopened for the first time after World War II.
Calculation of the Index
The Index is a modified, price-weighted index. Each Index Stock’s weight is based on its price per share rather than the total market capitalization of the issuer. Nikkei Inc. calculates the Index by multiplying the per share price of each Index Stock by the corresponding weighting factor for that Index Stock (a “Weight Factor”), calculating the sum of all these products and dividing that sum by a divisor. The divisor is subject to periodic adjustments as set forth below. Each Weight Factor is computed by dividing 50 by the presumed par value of the relevant Index Stock, so that the share price of each Index Stock when multiplied by its Weight Factor corresponds to a share price based on a uniform par value of 50. Each Weight Factor represents the number of shares of the related Index Stock which are included in one trading unit of the Index. The stock prices used in the calculation of the Index are those reported by a primary market for the Index Stocks, currently the TSE. The level of the Index is currently calculated once per 15 seconds during TSE trading hours.
In order to maintain continuity in the level of the Index in the event of certain changes due to non-market factors affecting the Index Stocks, such as the addition or deletion of stocks, stock splits, or increase in paid-in capital, the divisor used in calculating the Index is adjusted in a manner designed to prevent any instantaneous change or discontinuity in the level of the Index. The divisor remains at the new value until a further adjustment is necessary as the result of another change. In the event of a change affecting any Index Stock, the divisor is adjusted in such a way that the sum of all share prices immediately after the change multiplied by the applicable Weight Factor and divided by the new divisor, i.e., the level of the Index immediately after the change, will equal the level of the Index immediately prior to the change.
Index Maintenance
The Index is reviewed annually at the beginning of October. The purpose of the review is to maintain the representative nature of the Index Stocks. Stocks with high market liquidity are added and those with low liquidity are deleted. At the same time, to take changes in industry structure into account, the balance of the sectors, in terms of the number of constituents, is considered. Liquidity of a stock is assessed by the two measures: “trading value” and “magnitude of price fluctuation by volume,” which is calculated as (high price/low price) / volume. Among stocks on the TSE First Section, the top 450 stocks in terms of liquidity are selected to form the “high liquidity group”. Those constituents that are not in the high liquidity group are deleted. Those non-constituent stocks which are in the top 75 of the high liquidity group are added.
After the liquidity deletions and additions, constituents are deleted and added to balance the number of constituents among sectors, and to make the total number of the constituents equal 225. Among the 450 “high liquidity” stocks, half of those that belong to a sector are designated as the “appropriate number of stocks” for that sector. The actual number of constituents in a sector is then compared with its “appropriate number,” and if the actual number is larger or smaller than the “appropriate number,” then components are deleted or added, as necessary. Stocks to be deleted are selected from stocks with lower liquidity and stocks to be added are selected from stocks with higher liquidity. Stocks selected according to the foregoing procedures are candidates for addition or deletion, as applicable, and the final determinations will be made by Nikkei Inc.
The Index is also reviewed on an ongoing basis in response to extraordinary developments, such as bankruptcies or mergers. Any stock becoming ineligible for listing in the TSE First Section due to any of the following reasons will be removed from the Index: (i) bankruptcy and liquidation events; (ii) corporate restructurings, such as mergers, share exchanges or share transfers; (iii) excess debt or other reasons; or (iv) transfer to the TSE Second Section. In addition, a component stock designated as “security under supervision” becomes a deletion candidate. However, the decision to delete such a candidate will be made by examining the sustainability and the probability of delisting for each individual case. Upon deletion of a stock from the Index, Nikkei Inc. will generally select as a replacement the most liquid stock that is both in the “high liquidity group” and in the same sector as the deleted stock. When deletions are known in advance, replacements may be selected as part of the periodic review process or by using similar procedures.
The Tokyo Stock Exchange
The TSE is one of the world’s largest securities exchanges in terms of market capitalization. Trading hours for most products listed on the TSE are currently from 9:00 A.M. to 11:00 A.M. and from 12:30 P.M. to 3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day, the TSE will close prior to the opening of business in New York City on the same calendar day. Therefore, the closing level of the Index on a trading day will generally be available in the U.S. by the opening of business on the same calendar day.
The TSE has adopted certain measures, including daily price floors and ceilings on individual stocks, intended to prevent any extreme short-term price fluctuations resulting from order imbalances. In general, any stock listed on the TSE cannot be traded at a price lower than the applicable price floor or higher than the applicable price ceiling. These price floors and ceilings are expressed in absolute Japanese yen, rather than percentage limits based on the closing price of the stock on the previous trading day. In addition, when there is a major order imbalance in a listed stock, the TSE posts a “special bid quote” or a “special asked quote” for that stock at a specified
higher
or lower price level than the stock’s last sale price in order to solicit
counter-orders and balance supply and demand for the stock.
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TS-
17
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
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The TSE may also suspend the trading of individual stocks in certain limited and extraordinary circumstances, including, for example, unusual trading activity in that stock. As a result, changes in the Index may be limited by price limitations or special quotes, or by suspension of trading, on individual stocks that make up the Index, and these limitations, in turn, may adversely affect the market value of the notes.
The following graph shows the
daily
historical performance of the
NKY
in the period from January 1, 2008 through
July 8, 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. On
July 8, 2019
, the closing level of the
NKY
was
21,534.35
.
Historical Performance of the Nikkei Stock Average Index
This historical data on the
NKY
is not necessarily indicative of the future performance of the
NKY
or what the value of the notes may be. Any historical upward or downward trend in the level of the
NKY
during any period set forth above is not an indication that the level of the
NKY
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 levels of the
NKY
.
License Agreement
We have entered into an agreement with Nikkei Inc. providing us with a non-exclusive license with the right to use the Index in exchange for a fee. The Index is the intellectual property of Nikkei Inc. (the “index sponsor”), formerly known as Nihon Keizai Shimbum, Inc. “Nikkei”, “Nikkei Stock Average”, and “Nikkei 225” are the service marks of Nikkei Inc. Nikkei Inc. reserves all the rights, including copyright, to the Index.
The notes are not in any way sponsored, endorsed or promoted by the index sponsor. The index sponsor does not make any warranty or representation whatsoever, express or implied, either as to the results to be obtained as to the use of the Index or the figure as which the NKY stands at any particular day or otherwise. The NKY is compiled and calculated solely by the index sponsor. However, the index sponsor shall not be liable to any person for any error in the NKY and the index sponsor shall not be under any obligation to advise any person, including a purchaser or seller of the notes, of any error therein.
In addition, the index sponsor gives no assurance regarding any modification or change in any methodology used in calculating the Index and is under no obligation to continue the calculation, publication and dissemination of the NKY.
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Accelerated Return Notes
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TS-
18
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
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The
MSCI Emerging Markets Index
The MXEF is intended to measure equity market performance in the global emerging markets. The MXEF is a free float--adjusted market capitalization index with a base date of December 31, 1987 and an initial value of 100. The MXEF is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. The MXEF has a base value of 100.00 and a base date of December 31, 1987. As of January 31, 2018, the MXEF consists of the following 24 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
As of
June 28
, 2019
, the five largest country weights were China (
31.
55
%), South Korea (
12.
37
%), Taiwan (
1
0.83
%), India (
8.97
%), and
Brazil (7.65
%) and the five largest sector weights were Financials (
25.24
%)
,
Information
Technology (
13
.87
%)
, Consumer Discretionary (
13.
45
%),
Communication Services
(
11.69
%) and Energy (
7
.
59
%).
The MXEF is an
“
MSCI Index.
”
The Country Indices
Each country
’
s index included in an MSCI Index is referred to as a
“
Country Index.
”
Under the MSCI methodology, each Country Index is an
“
MSCI Global Standard Index.
”
The components of each Country Index used to be selected by the index sponsor from among the universe of securities eligible for inclusion in the relevant Country Index so as to target an 85% free float-adjusted market representation level within each of a number of industry groups, subject to adjustments to (i) provide for sufficient liquidity, (ii) reflect foreign investment restrictions (only those securities that can be held by non-residents of the country corresponding to the relevant Country Index are included) and (iii) meet certain other investibility criteria. Following a change in the index sponsor
’
s methodology implemented in May 2008, the 85% target is now measured at the level of the country universe of eligible securities rather than the industry group level-so each Country Index will seek to include the securities that represent 85% of the free float-adjusted market capitalization of all securities eligible for inclusion-but will still be subject to liquidity, foreign investment restrictions and other investibility adjustments. The index sponsor defines
“
free float
”
as total shares excluding shares held by strategic investors such as governments, corporations, controlling shareholders and management, and shares subject to foreign ownership restrictions.
Calculation of the Country Indices
Each Country Index is a free float-adjusted market capitalization index that is designed to measure the market performance, including price performance, of the equity securities in that country. Each Country Index is calculated in the relevant local currency as well as in U.S. dollars, with price, gross and net returns.
Each component is included in the relevant Country Index at a weight that reflects the ratio of its free float-adjusted market capitalization (
i.e.
, free public float multiplied by price) to the free float-adjusted market capitalization of all the components in that Country Index. The index sponsor defines the free float of a security as the proportion of shares outstanding that is deemed to be available for purchase in the public equity markets by international investors.
Calculation of the MSCI Indices
The performance of a MSCI Index on any given day represents the weighted performance of all of the components included in all of the Country Indices. Each component in a MSCI Index is included at a weight that reflects the ratio of its free float-adjusted market capitalization (
i.e.
, free public float multiplied by price) to the free float-adjusted market capitalization of all the components included in all of the Country Indices.
Maintenance of and Changes to the MSCI Indices
The index sponsor maintains the MSCI Indices with the objective of reflecting, on a timely basis, the evolution of the underlying equity markets and segments. In maintaining the indices, emphasis is also placed on continuity, continuous investibility of the constituents, replicability, index stability and low turnover in the indices.
As part of the changes to the index sponsor
’
s methodology which became effective in May 2008, maintenance of the indices falls into three broad categories:
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semi-annual reviews, which will occur each May and November and will involve a comprehensive reevaluation of the market, the universe of eligible securities and other factors involved in composing the indices;
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quarterly reviews, which will occur each February, May, August and November and will focus on significant changes in the market since the last semi-annual review and on including significant new eligible securities (such as IPOs, which were not eligible for earlier inclusion in the indices); and
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ongoing event-related changes, which will generally be reflected in the indices at the time of the event and will include changes resulting from mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events.
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Based on these reviews, additional components may be added, and current components may be removed, at any time. The index sponsor generally announces all changes resulting from semi-annual reviews, quarterly reviews and ongoing events in advance of their implementation, although in exceptional cases they may be announced during market hours for same or next day implementation.
Neither we nor any of our affiliates, MLPF&S
or BofAS
, accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the MSCI Indices. The index sponsor does not guarantee the accuracy or the completeness of the MSCI Indices or any data included in the MSCI Indices. The index sponsor assumes no liability for any errors, omissions, or
disruption in the calculation and dissemination of the MSCI
Indices. The index sponsor disclaims all responsibility for any errors or
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Accelerated Return Notes
®
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TS-
19
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
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omissions in the calculation and dissemination of the MSCI Indices or the manner in which the MSCI Indices is applied in determining the amount payable on the notes at maturity.
Prices and Exchange Rates
Prices
The prices used to calculate the MSCI Indices are the official exchange closing prices or those figures accepted as such. The index sponsor reserves the right to use an alternative pricing source on any given day.
Exchange Rates
The index sponsor uses the closing spot rates published by WM / Reuters at 4:00 p.m., London time. The index sponsor uses WM / Reuters rates for all countries for which it provides indices.
In case WM/Reuters does not provide rates for specific markets on given days (for example Christmas Day and New Year
’
s Day), the previous business day
’
s rates are normally used. The index sponsor independently monitors the exchange rates on all its indices and may, under exceptional circumstances, elect to use an alternative exchange rate if the WM / Reuters rates are not available, or if the index sponsor determines that the WM / Reuters rates are not reflective of market circumstances for a given currency on a particular day. In such circumstances, an announcement would be sent to clients with the related information. If appropriate, the index sponsor may conduct a consultation with the investment community to gather feedback on the most relevant exchange rate.
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Accelerated Return Notes
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TS-
20
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
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The following graph shows the daily historical performance of the
MXEF
in the period from January 1, 2008 through
July 8, 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. On
July 8, 2019
, the closing level of the MXEF
was
1,046.24
.
Historical Performance of the
MSCI Emerging Markets Index
This historical data on the
MXEF
is not necessarily indicative of the future performance of the
MXEF
or what the value of the notes may be. Any historical upward or downward trend in the level of the
MXEF
during any period set forth above is not an indication that the level of the
MXEF
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 levels of the
MXEF
.
License Agreement
Our affiliate,
MLPF&S
has entered into a non-exclusive license agreement with MSCI whereby
MLPF&S
and certain of its affiliates, in exchange for a fee, are permitted to use the MSCI indices in connection with certain securities, including the notes. We are not affiliated with MSCI, the only relationship between MSCI and us is any licensing of the use of MSCI’s indices and trademarks relating to them.
The license agreement provides that the following language must be set forth herein:
THE NOTES ARE NOT SPONSORED, ENDORSED, SOLD, OR PROMOTED BY MSCI, ANY OF ITS AFFILIATES, ANY OF ITS INFORMATION PROVIDERS, OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING, OR CREATING THE MXE
F
INDEX (COLLECTIVELY, THE “MSCI PARTIES”). THE MXE
F
INDEX IS THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MXE
F
INDEX ARE SERVICE MARKS OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED TO US FOR USE FOR CERTAIN PURPOSES. THE NOTES HAVE NOT BEEN PASSED ON BY ANY OF THE MSCI PARTIES AS TO THEIR LEGALITY OR SUITABILITY WITH RESPECT TO ANY PERSON OR ENTITY AND NONE OF THE MSCI PARTIES MAKES ANY WARRANTIES OR BEARS ANY LIABILITY WITH RESPECT TO THE NOTES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NONE OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO US OR OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN ANY SECURITIES GENERALLY OR IN THIS OFFERING PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS, AND TRADE NAMES OF THE MXE
F
INDEX, WHICH ARE DETERMINED, COMPOSED, AND CALCULATED BY MSCI WITHOUT REGARD TO THE NOTES, TO US, TO THE OWNERS OF THE NOTES, OR TO ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF US OR OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN DETERMINING, COMPOSING, OR CALCULATING THE MXE
F
INDEX. NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE NOTES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE AMOUNT THAT MAY BE PAID AT MATURITY ON THE NOTES. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO US OR TO OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR, OFFERING OF THE NOTES
.
No purchaser, seller or holder of the notes, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote the notes without first contacting MSCI to determine whether MSCI’s permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written permission of MSCI.
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21
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
|
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Supplement to the Plan of Distribution; Conflicts of Interest
Under our di
stribution agreement with BofAS
,
BofAS
will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.
MLPF&S will
purchase the notes from
BofAS for resale, and
will receive a selling concession in connection with the sale of the notes in an
amount up to
the full amount of underwriting discount set forth on the cover of this term sheet.
MLPF&S
and BofAS
,
each
a broker-dealer subsidiary of BAC,
are members
of the Financial Industry Regulatory Authority, Inc. (
“
FINRA
”
) and will participate as selling agent
in the case of BofAS and as dealer in the case of MLPF&S
in the distribution of the notes.
Accordingly, offerings of the notes will conform to the requirements of Rule 5121 applicable to FINRA members.
Neither BofAS nor
MLPF&S may make sales in this offering to any of its discretionary accounts without the prior written approval of the account holder.
We may deliver the notes against payment therefor in New York, New York on a date that is greater than
two
business days following the pricing date.
Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in
two
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, if the initial settlement of the notes occurs more than
two
business days from the pricing date, purchasers who wish to trade the notes more than
two
business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange.
In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units.
If you place an order to purchase the notes, you are consenting to MLPF&S
and/or one of its affiliates
acting as a principal in effecting the transaction for your account
.
MLPF&S and BofAS
may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices
, and these will
include MLPF&S
’
s
and BofAS’s
trading commissions and mark-ups
or mark-downs
.
MLPF&S
and BofAS
may act as principal or agent in these market-making transactions; however
,
neither is
obligated to engage in any such transactions.
At their
discretion
,
for a short
,
undetermined
initial period after the issuance of the notes, MLPF&S
and BofAS may offer to buy the notes
in the secondary market
at a price that may exceed
the
initial estimated value
of the notes. Any price offered by MLPF&S or BofAS for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the
Basket
and the remaining term of the notes.
However, neither we nor any of our
affiliates is obligated to purc
hase your notes at any price, or at any time, and we cannot assure you that we or any of our affiliates will purchase your notes
at a price that
equals or
exceeds the
initial estimated value
of the notes.
The value of the notes shown on your account statement
will be based on
BofA
S
’
s
estimate of
the value of the notes if BofA
S or another of our affiliates were to make a market in the notes, which it is not obligated t
o do.
That estimate will be based upon the price that
BofA
S may pay
for the notes in light of then-prevailing market conditions
and other considerations, as mentioned above, and will include transaction costs.
At certain times, this price may b
e higher than or lower than the
initial estimated value
of the notes
.
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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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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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|
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
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TS-
22
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Accelerated Return Notes
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Linked to
a Global Equity Index Basket, due September , 2020
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Structuring the Notes
The notes are our debt securities, the return on which is linked to the
performance
of the Basket.
The related guarantees are BAC’s obligations.
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 borrow
s
the funds under these
types of
notes at a rate that is more favorable to
BAC
than the rate that
it
might pay for a conventional fixed or floating rate debt security.
This
rate, which we refer to in this term sheet as BAC’s internal funding rate, is typically lower than the rate BAC would pay when it issues conventional fixed or floating rate debt securities.
This ge
nerally relatively lower internal funding
rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-
linked notes, typically
results in the initial estimated value of the notes on the pricing date being less than their public offering price
.
At maturity, we are required to pay the Redemption Amount to holders of the notes, which will be calculated based on the
performance
of t
he Basket and the $10 per unit p
rincipal
a
mount
.
In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with
BofAS
or one of
our other
affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants,
including
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 Basket Components, the tenor of the note
s
and the tenor of the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS
has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to
BofAS
from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by
BofAS
or any third party hedge providers.
For further information, see “Risk Factors—General Risks Relating to ARNs” beginning on page PS-6 and “Use of Proceeds” on page PS-1
6
of product supplement EQUITY INDICES ARN-1.
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Accelerated Return Notes
®
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Accelerated Return Notes
®
Linked to
a Global Equity Index Basket, due September , 2020
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Summary Tax Consequences
You should consider the U.S. federal income tax consequences of an investment in the notes, including the following:
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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
Basket.
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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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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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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.
You should
review carefully the discussion
under the section entitled
“U.S. Federal Income Tax Summary” beginning on page PS-26 of product supplement EQUITY INDICES ARN-1
.
In addition, any reference to
“Morrison & Foerster LLP” in the aforementioned tax discussions in product supplement EQUITY INDICES ARN-1 should be read as a reference to “Sidley Austin LLP.”
Where You Can Find More Information
We
and BAC
have filed a registration statement (including a product
suppl
ement, a prospectus supplement,
and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents
relating to this offering
that
w
e
and BAC
have filed with the SEC, for more complete information about
us, BAC
and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by c
alling MLPF&S
or BofAS
toll-free at 1-800-294-1322
.
“Accelerated Return Notes
®
” and “ARNs
®
” are
BAC’s
registered service marks.
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Accelerated Return Notes
®
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