We will deliver the notes in book-entry form only through
The Depository Trust Company on or about August 24, 2017 against payment in immediately available funds.
SUMMARY
The Contingent
Income Auto-Callable Notes Linked to the Common Stock of Advanced Micro Devices, Inc., due August 26, 2019 (the “notes”)
are our senior
debt securities. Any payments on the notes are fully and unconditionally guaranteed by BAC. The notes and
the related guarantee are not insured by the Federal Deposit Insurance Corporation or secured by collateral.
The notes will
rank equally with all of our other unsecured senior debt, and the related guarantee will rank equally with all of BAC’s other
unsecured and unsubordinated debt. Any payments due on the notes, including any repayment of the principal amount, will be subject
to the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
Unless earlier called, the notes will mature on
August 26, 2019.
If, on any quarterly Observation Date,
the Observation Value is greater than or equal to the Threshold Value, we will pay a Contingent Coupon Payment of [$36.25] per
$1,000 in principal amount of the notes ([3.625%] of the principal amount) on the applicable Contingent Payment Date, as set forth
below. The actual Contingent Coupon Payment will be determined on the pricing date. The notes will be automatically called on the
relevant Observation Date if the Observation Value is greater than or equal to the Starting Value on that Observation Date, at
an amount equal to the sum of the principal amount plus the Contingent Coupon Payment with respect to that Observation Date. If
the notes are not called prior to maturity, and if the Ending Value is greater than or equal to the Threshold Value, we will pay
to you at maturity the principal amount plus the final Contingent Coupon Payment. If the Ending Value of is less than the Threshold
Value, we will deliver to you a number of shares of the Underlying Stock equal to the product of the Exchange Ratio multiplied
by the Price Multiplier as of the final Observation Date, or at our option, the cash value of those shares. In that case, you will
not receive the final Contingent Coupon Payment. The notes are not traditional debt securities and it is possible that the notes
will not pay any Contingent Coupon Payments, and you may lose some or all of your principal amount at maturity.
Payments on the notes, including any
Contingent Coupon Payments, depend on the credit risk of BofA Finance and BAC and on the performance of the Underlying Stock. The
economic terms of the notes are based on BAC’s internal funding rate, which is the rate it would pay to borrow funds through
the issuance of market-linked notes and the economic terms of certain related hedging arrangements it enters into. BAC’s
internal funding rate is typically lower than the rate it would pay when it issues conventional fixed or floating rate debt securities.
This difference in funding rate, as well as the underwriting discount and the hedging related charges described below, will reduce
the economic terms of the notes to you and the initial estimated value of the notes. Due to these factors, the public offering
price you pay to purchase the notes will be greater than the initial estimated value of the notes as of the pricing date.
On the cover page of this pricing supplement,
we have provided the initial estimated value range for the notes. The final pricing supplement will set forth the initial estimated
value of the notes as of the pricing date. For more information about the initial estimated value and the structuring of the notes,
see “Risk Factors” beginning on page PS-8 and “Structuring the Notes” on page PS-18.
Issuer:
|
BofA Finance LLC (“BofA Finance”)
|
Guarantor:
|
Bank of America Corporation (“BAC”)
|
Term:
|
Two years, if not previously called.
|
Issue Date:
|
August 24, 2017
|
Maturity Date:
|
August 26, 2019
|
Underlying Stock:
|
The common stock of Advanced Micro Devices, Inc. (Bloomberg symbol: AMD). See the section entitled “The Underlying Stock” beginning on page PS-15 of this pricing supplement.
|
Automatic Call:
|
All (but not less than all) of the notes will be automatically called if the Observation Value is greater than or equal to the Starting Value on any quarterly Observation Date. If the notes are automatically called, the Early Redemption
|
|
Payment will be paid on the applicable Contingent Payment Date.
|
Early Redemption Payment:
|
The sum of the principal amount plus the Contingent Coupon Payment with respect to the applicable Observation Date.
|
Contingent Coupon Payment:
|
If, on any Observation Date, the Observation Value is greater than or equal to the Threshold Value, we will pay a Contingent Coupon Payment of [$36.25] per $1,000 in principal amount ([3.625%] of the principal amount) on the applicable Contingent Payment Date. Accordingly, the maximum return on the notes will be equal to [14.50%] per annum.
The actual Contingent Coupon Payment will be determined on the pricing date.
|
Redemption Amount:
|
If the notes have not been automatically called,
the Redemption Amount per note will be:
·
if the Ending Value is greater than or equal to the Threshold Value, the principal amount plus
the Contingent Coupon Payment with respect to the final Observation Date.
·
if the Ending Value is less than the Threshold Value, the number of shares equal to the product
of the Exchange Ratio multiplied by the Price Multiplier as of the final Observation Date, or at our option, the Cash Delivery
Amount. If we elect to deliver shares of the Underlying Stock, fractional shares will be paid in cash.
|
Starting Value:
|
The Starting Value of the Underlying Stock will be the Closing Market Price on the pricing date.
|
Observation Value:
|
The Closing Market Price of the Underlying Stock on the applicable Observation Date, multiplied by the Price Multiplier as of that day.
|
Ending Value:
|
The Closing Market Price of the Underlying Stock on the final Observation Date, multiplied by the Price Multiplier as of that day.
|
Threshold Value:
|
60% of the Starting Value.
|
Exchange Ratio:
|
The principal amount of $1,000 per note divided by the Starting Value.
|
Price Multiplier:
|
1, subject to adjustment for certain corporate events relating to the Underlying Stock described in the product supplement under “Description of the Notes—Anti-Dilution Adjustments.”
|
Cash Delivery Amount:
|
The product of the Exchange Ratio multiplied by the Ending Value.
|
Observation Dates:
|
November 22, 2017, February 22, 2018, May 23, 2018, August 22, 2018, November 21, 2018, February 21, 2019, May 22, 2019 and August 21, 2019, subject to postponement as set forth in the product supplement, in the section “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates.”
|
Contingent Payment Dates:
|
November 28, 2017, February 27, 2018, May 29, 2018, August 27, 2018, November 27, 2018, February 26, 2019, May 28, 2019 and the maturity date, subject to postponement if the applicable Observation Date is postponed as described above, or if a scheduled Contingent Payment Date is not a business day, as described in the prospectus.
|
Calculation Agent:
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), an affiliate of BofA Finance.
|
Selling Agent:
|
MLPF&S
|
The pricing date, issue date and
other dates set forth above are subject to change, and will be set forth in the final pricing supplement relating to the notes.
You should read carefully this entire
pricing supplement, product supplement, prospectus supplement, and prospectus to understand fully the terms of the notes, as well
as the tax and other considerations important to you in making a decision about whether to invest in the notes. In particular,
you should review carefully the section in this pricing supplement entitled “Risk Factors,” which highlights a number
of risks of an investment in the notes, to determine whether an investment in the notes is appropriate for you. If information
in this pricing supplement is inconsistent with the product supplement, prospectus supplement or prospectus, this pricing supplement
will supersede those documents. You are urged to consult with your own attorneys and business and tax advisors before making a
decision to purchase any of the notes.
The information in this “Summary”
section is qualified in its entirety by the more detailed explanation set forth elsewhere in this pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus. You should rely only on the information contained in this pricing supplement
and the accompanying product supplement, prospectus supplement and prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. None
of us, the Guarantor or any selling agent is making an offer to sell these notes in any jurisdiction where the offer or sale is
not permitted. You should assume that the information in this pricing supplement, the accompanying product supplement, prospectus
supplement, and prospectus is accurate only as of the date on their respective front covers.
Capitalized terms used but not defined
in this pricing supplement have the meanings set forth in the accompanying product supplement, prospectus supplement and prospectus.
Unless otherwise indicated or unless the context requires otherwise, all references in this pricing supplement to “we,”
“us,” “our,” or similar references are to BofA Finance, and not to BAC (or any other affiliate of BofA
Finance).
The above documents may be accessed at the following links:
Hypothetical Payments on the Notes
The table below illustrates hypothetical
payments on the notes at maturity based on a $1,000 investment in the notes for a range of Ending Values of the Underlying Stock.
The table is based on a hypothetical
Contingent Coupon Payment of $36.25 per note, a hypothetical Starting Value of $100, a hypothetical Threshold Value of $60 (60%
of the Underlying Stock’s hypothetical Starting Value) and assumes that the Price Multiplier of 1 will not change during
the term of the notes. The actual Contingent Coupon Payment, Starting Value and Threshold Value will be determined on the pricing
date.
For recent actual prices of the Underlying,
see “The Underlying Stock” section below.
The
hypothetical payments set forth below are for illustrative purposes only and may not be the actual payments applicable to the notes.
Ending
Value
|
Underlying
Stock Return
|
Redemption
Amount per Note
(1)
|
Total
Rate of Return on the Notes (Excluding Any Contingent Coupon Payments Paid Prior to Maturity)
|
$0.00
|
-100.00%
|
10 shares or $0.00
|
-100.00%
|
$20.00
|
-80.00%
|
10 shares or $200.00
|
-80.00%
|
$40.00
|
-60.00%
|
10 shares or $400.00
|
-60.00%
|
$50.00
|
-50.00%
|
10 shares or $500.00
|
-50.00%
|
$60.00
(2)
|
-40.00%
|
$1,036.25
|
3.625%
|
$75.00
|
-25.00%
|
$1,036.25
|
3.625%
|
$85.00
|
-15.00%
|
$1,036.25
|
3.625%
|
$95.00
|
-5.00%
|
$1,036.25
|
3.625%
|
$100.00
(3)
|
0.00%
|
$1,036.25
|
3.625%
|
$110.00
|
10.00%
|
$1,036.25
|
3.625%
|
$120.00
|
20.00%
|
$1,036.25
|
3.625%
|
$140.00
|
40.00%
|
$1,036.25
|
3.625%
|
$160.00
|
60.00%
|
$1,036.25
|
3.625%
|
$180.00
|
80.00%
|
$1,036.25
|
3.625%
|
$200.00
|
100.00%
|
$1,036.25
|
3.625%
|
|
(1)
|
If the Ending Value is less than the Threshold Value, you will receive a number of shares of the
Underlying Stock equal to the Exchange Ratio (10 shares per $1,000 in principal), or at our option, the Cash Delivery Amount. If
we deliver shares of the Reference Stock at maturity, the value of these shares may decrease between the final Observation Date
and the maturity date. See “Risk Factors—If shares of the Underlying Stock will be paid on the notes, you will be subject
to the price fluctuation of the Underlying Stock from the final Observation Date to the maturity date.”
|
|
(2)
|
This is the
hypothetical
Threshold Value.
|
|
(3)
|
The
hypothetical
Starting Value of 100 used in the table above has been chosen for illustrative
purposes only, and does not represent a likely actual Starting Value for the Underlying Stock.
|
Total Contingent Coupon
Payments
The table below illustrates the hypothetical total Contingent Coupon
Payments per $1,000 in principal amount over the term of the notes, based on a hypothetical Contingent Coupon Payment of $36.25
per note, depending on how many Contingent Coupon Payments are payable prior to early redemption or maturity. The actual Contingent
Coupon Payment will be determined on the pricing date. Depending on the performance of the Underlying Stock, you may not receive
any Contingent Coupon Payments during the term of the notes.
Number of Contingent Coupon Payment
s
|
Total Contingent Coupon Payment
s
|
8
|
$290.00
|
7
|
$253.75
|
6
|
$217.50
|
5
|
$181.25
|
4
|
$145.00
|
3
|
$108.75
|
2
|
$72
.50
|
1
|
$
36.25
|
0
|
$
0.00
|
risk
factors
Your investment in the notes entails
significant risks, many of which differ from those of a conventional debt security. Your decision to purchase the notes should
be made only after carefully considering the risks of an investment in the notes, including those discussed below, with your advisors
in light of your particular circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about
significant elements of the notes or financial matters in general.
Your investment may result in a loss;
there is no guaranteed return of principal.
The notes are not principal protected. There is no fixed repayment amount of principal
on the notes at maturity. If the notes are not called and the Ending Value is below the Threshold Value, we will deliver to you
a number of shares of the Underlying Stock equal to the product of the Exchange Ratio multiplied by the Price Multiplier as of
the final Observation Date, or at our option, the Cash Delivery Amount. In this case, the Redemption Amount, as of the final Observation
Date, will be worth less than 60% of the principal amount and could be zero. As a result, depending on the performance of the Underlying
Stock, you may lose all or a substantial portion of your principal.
Your
return on the notes is limited to the return represented by the Contingent Coupon Payments,
if
any, over the term of the notes.
Your return on the notes is limited to the contingent payments paid over the term of the notes,
regardless of the extent to which the Ending Value exceeds the Threshold Value or the Starting Value. Similarly, the Redemption
Amount payable at maturity or the Early Redemption Payment payable upon an automatic call will never exceed the sum of the principal
amount and the applicable Contingent Coupon Payment, regardless of the extent to which the Observation Value
exceeds
the Starting Value or Threshold Value.
In contrast, a direct investment in
the Underlying Stock would allow you to receive the benefit of any appreciation in its value. Thus, any return on the notes will
not reflect the return you would realize if you actually owned shares of the Underlying Stock and received the dividends paid or
distributions made on them.
The notes are subject to a potential
automatic early redemption, which would limit your ability to receive the Contingent Coupon Payments over the full term of the
notes.
The notes are subject to a potential automatic early redemption. Prior to maturity, the notes will be automatically
called on any Observation Date if the Observation Value is greater than or equal to the Starting Value. If the notes are redeemed
prior to the maturity date, you will be entitled to receive the Early Redemption Payment. In this case, you will lose the opportunity
to continue to receive Contingent Coupon Payment after the date of early redemption. If the notes are redeemed prior to the maturity
date, you may be unable to invest in other securities with a similar level of risk that could provide a return that is similar
to the notes.
You may not receive any Contingent
Coupon Payments
. The terms of the notes differ from those of ordinary debt securities in that they do not provide for the regular
periodic payments of interest. Instead, investors in the notes will not necessarily receive Contingent Coupon Payments on the notes.
If an Observation Value is less than the Threshold Value on an Observation Date, you will not receive the Contingent Coupon Payment
applicable to that Observation Date. If the Observation Value is less than the Threshold Value on all the Observation Dates during
the term of the notes, you will not receive any Contingent Coupon Payment during the term of the notes, and will not receive a
positive return on the notes.
If shares of the Underlying Stock
will be paid on the notes, you will be subject to the price fluctuation of the Underlying Stock from the final Observation Date
to the maturity date.
If we choose to pay the Redemption Amount in shares of the Underlying Stock, you will not receive those
shares until maturity. If the price of the Underlying Stock decreases from the final Observation Date to the maturity date, you
will suffer a further loss on your investment in the notes.
Your return on the notes may be less
than the yield on a conventional debt security of comparable maturity.
Any return that you receive on the notes, which could
be negative, may be less than the return you would earn if you purchased a conventional debt security with the same maturity date.
As a result, your investment in the notes may not reflect the full opportunity cost to you when you consider factors, such as inflation,
that affect the time value of money.
Payments
on the notes are subject to our credit risk and the credit risk of the Guarantor, and actual or perceived changes in our or the
Guarantor’s creditworthiness are expected to affect the value of the notes
. The notes are our senior unsecured debt securities.
Any payments on the notes will be fully and unconditionally guaranteed by the Guarantor. The notes are not guaranteed by any entity
other than the Guarantor. As a result, your receipt of all payments on the notes will be dependent upon our ability and the ability
of the Guarantor to repay our obligations under the notes on the applicable payment dates,
regardless
of how the Underlying Stock performs. No assurance can be given as to what our financial condition or the financial condition of
the Guarantor will be at any time during the term of the notes. If we and the Guarantor become unable to meet our respective financial
obligations as they become due, you may not receive the amounts payable under the terms of the notes.
In addition, our credit ratings and
the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations. Consequently,
our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s credit
ratings or increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities (the
“credit spread”) prior to the maturity date may adversely affect the market value of the notes. However, because your
return on the notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective obligations,
such as the price of the Underlying Stock, an improvement in our or the Guarantor’s credit ratings will not reduce the other
investment risks related to the notes.
We are a finance subsidiary and,
as such, will have limited assets and operations.
We are a finance subsidiary of BAC and will have no assets, operations or
revenues other than those related to the issuance, administration and repayment of our debt securities that are guaranteed by BAC.
As a finance subsidiary, to meet our obligations under the notes, we are dependent upon payment or contribution of funds and/or
repayment of outstanding loans from BAC and/or its other subsidiaries. Therefore, our ability to make payments on the notes may
be limited. In addition, we will have no independent assets available for distributions to holders of the notes if they make claims
in respect of the notes in a bankruptcy, resolution or similar proceeding. Accordingly, any recoveries by such holders may be limited
to those available under the related guarantee by BAC, and that guarantee will rank equally with all other unsecured senior obligations
of BAC.
The
public offering price you pay for the notes will exceed the initial estimated value.
The range of estimated values that is
provided on the cover page of this preliminary pricing supplement, and the estimated value as of the pricing date that will be
provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference to
our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit
spreads
and those of the Guarantor, the Guarantor’s internal funding rate, mid-market
terms on hedging transactions, expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected
term of the notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.
The initial estimated value does not
represent a minimum or maximum price at which we, the Guarantor, MLPF&S or any of our other affiliates would be willing to
purchase your notes in any secondary market (if any exists) at any time. The value of your notes at any time after the pricing
date will vary based on many factors that cannot be predicted with accuracy, including our and the Guarantor’s creditworthiness
and changes in market conditions.
If you attempt to sell the notes prior
to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated value. This
is due to, among other things, changes in the price of the Underlying Stock, the Guarantor’s internal funding rate, and the
inclusion in the public offering price of the underwriting discount and the hedging related charges, all as further described in
“Structuring the Notes” below. These factors, together with various credit, market and economic factors over the term
of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect
the value of the notes in complex and unpredictable ways.
We cannot assure you that a trading
market for your notes will ever develop or be maintained.
We will not list the notes on any securities exchange. We cannot
predict how the notes will trade in any secondary market or whether that market will be liquid or illiquid.
The development of a trading market
for the notes will depend on the Guarantor’s financial performance and other factors, including changes in the price of the
Underlying Stock. The number of potential buyers of your notes in any secondary market may be limited. We anticipate that the selling
agent will act as a market-maker for the notes, but none of us, the Guarantor or any selling agent is required to do so. There
is no assurance that any party will be willing to purchase your notes at any price in any secondary market. The selling agent may
discontinue its market-making activities as to the notes at any time. To the extent that the selling agent engages in any market-making
activities, it may bid for or offer the notes. Any price at which the selling agent may bid for, offer, purchase, or sell any notes
may differ from the values determined by pricing models that it may use, whether as a result of dealer discounts, mark-ups, or
other transaction costs. These bids, offers, or completed transactions may affect the prices, if any, at which the notes might
otherwise trade in the market.
In addition, if at any time the selling
agent were to cease acting as a market-maker as to the notes, it is likely that there would be significantly less liquidity in
the secondary market. In such a case, the price at which the notes could be sold likely would be lower than if an active market
existed.
The payments on the notes will not reflect
changes in the price of the Underlying Stock other than on the Observation Dates.
Changes in the price of the Underlying Stock
during the term of the notes other than on the Observation Dates will not affect the amount of payments on the notes or whether
the notes will be called. The calculation agent will determine whether each Contingent Coupon Payment is payable, or whether the
notes will be called, and calculate the Redemption Amount, by comparing only the Starting Value or the Threshold Value to the Observation
Value or the Ending Value. No other price of the Underlying Stock will be taken into account. As a result, if the notes are not
called prior to maturity, you will receive less than the principal amount at maturity even if the price of the Underlying Stock
has increased at certain times during the term of the notes before decreasing to a value that is less than the Threshold Value
as of the final Observation Date.
Trading and hedging activities by
us, the Guarantor and any of our other affiliates may affect your return on the notes and their market value.
We, the Guarantor
and our other affiliates, including the selling agents, may buy or sell shares of the Underlying Stock, or futures or options contracts
on the Underlying Stock, or other listed or over-the-counter derivative instruments linked to the Underlying Stock. We, the Guarantor
and any of our other affiliates, including the selling agents, may execute such purchases or sales for our own or their own accounts,
for business reasons, or in connection with hedging our obligations under the notes. These transactions could affect the value
of the Underlying Stock in a manner that could be adverse to your investment in the notes. On or before the pricing date, any purchases
or sales by us, the Guarantor or our other affiliates, including the selling agents or others on their behalf (including for the
purpose of hedging anticipated exposures), may affect the value of the Underlying Stock. Consequently, the value of the Underlying
Stock may change subsequent to the pricing date, adversely affecting the market value of the notes.
We, the Guarantor or one or more of
our other affiliates, including the selling agents, may also engage in hedging activities that could affect the value of the Underlying
Stock on the pricing date. In addition, these activities may decrease the market value of your notes prior to maturity, and may
affect the amounts to be paid on the notes. We, the Guarantor or one or more of our other affiliates, including the selling agents,
may purchase or otherwise acquire a long or short position in the notes and may hold or resell the notes. For example, the selling
agents may enter into these transactions in connection with any market making activities in which they engage. We cannot assure
you that these activities will not adversely affect the value of the Underlying Stock, the market value of your notes prior to
maturity or the amounts payable on the notes.
Our trading, hedging and other business
activities may create conflicts of interest with you.
We, the Guarantor or one or more of our other affiliates, including the
selling agents, may engage in trading activities related to the Underlying Stock that are not for your account or on your behalf.
We, the Guarantor or one or more of our other affiliates, including the selling agents, also may issue or underwrite other financial
instruments with returns based upon the Underlying Stock. These trading and other business activities may present a conflict of
interest between your interest in the notes and the interests we, the Guarantor and our other affiliates, including the selling
agents, may have in our proprietary accounts, in facilitating transactions, including block trades, for our or their other customers,
and in accounts under our or their management. These trading and other business activities, if they influence the value of the
Underlying Stock or secondary trading in your notes, could be adverse to your interests as a beneficial owner of the notes.
We expect to enter into arrangements
or adjust or close out existing transactions to hedge our obligations under the notes. We, the Guarantor or our other affiliates
also may enter into hedging transactions relating to other notes or instruments, some of which may have returns calculated in a
manner related to that of the notes offered hereby. We may enter into such hedging arrangements with one of our affiliates. Our
affiliates may enter into additional hedging transactions with other parties relating to the notes and the Underlying Stock. This
hedging activity is expected to result in a profit to those engaging in the hedging activity, which could be more or less than
initially expected, or the hedging activity could also result in a loss. We and our affiliates will price these hedging transactions
with the intent to realize a profit, regardless of whether the value of the notes increases or decreases. Any profit in connection
with such hedging activities will be in addition to any other compensation that we, the Guarantor and our other affiliates, including
the selling agents, receive for the sale of the notes, which creates an additional incentive to sell the notes to you.
There may be potential conflicts
of interest involving the calculation agent, which is an affiliate of ours.
We have the right to appoint and remove the calculation
agent. One of our affiliates will be the calculation agent for the notes and, as such, will make a variety of determinations relating
to the notes, including the amounts that will be paid on the notes. Under some circumstances, these duties could result in a conflict
of interest between its status as our affiliate and its responsibilities as calculation agent. These conflicts could occur, for
instance, in connection with the calculation agent’s determination as to whether a Market Disruption Event (as defined below)
has occurred, or in connection with judgments that it would be required to make if certain corporate events occur as to the Underlying
Stock. The calculation agent will be required to carry out its duties in good faith and use its reasonable judgment. However, because
we expect that the Guarantor will control the calculation agent, potential conflicts of interest could arise.
The U.S. federal income tax consequences
of an investment in the notes are uncertain, and may be adverse to a holder of the notes.
No statutory, judicial, or administrative
authority directly addresses the characterization of the notes or securities similar to the notes for U.S. federal income tax purposes.
As a result, significant aspects of the U.S. federal income tax consequences of an investment in the notes are not certain. Under
the terms of the notes, you will have agreed with us to treat the notes as contingent income-bearing single financial contracts,
as described under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative characterization for the notes, the timing and character of income, gain or loss with
respect to the notes may differ. No ruling will be requested from the IRS with respect to the notes and no assurance can be given
that the IRS will agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.”
You are urged to consult with your own
tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the notes.
* * *
Investors in the notes should review
the additional risk factors set forth beginning on page PS-5 of the product supplement prior to making an investment decision.
DESCRIPTION OF
THE NOTES
General
The notes will be part of a series of
medium-term notes entitled “Senior Medium-Term Notes, Series A” issued under the senior indenture, as amended and supplemented
from time to time, among us, the Guarantor and The Bank of New York Mellon Trust Company N.A., as trustee. The senior indenture
is more fully described in the prospectus supplement and prospectus. The following description of the notes supplements the description
of the general terms and provisions of the notes and debt securities set forth under the headings “Description of the Notes”
in the prospectus supplement and “Description of Debt Securities” in the prospectus. These documents should be read
in connection with this pricing supplement.
Our payment obligations on the notes
are fully and unconditionally guaranteed by the Guarantor. The notes will rank equally with all of our other unsecured senior debt
from time to time outstanding. The guarantee of the notes will rank equally with all other unsecured senior obligations of the
Guarantor. Any payments due on the notes, including any repayment of principal, are subject to our credit risk, as issuer, and
the credit risk of BAC, as guarantor.
The notes will be issued in denominations
of $1,000 and whole multiples of $1,000. You may transfer the notes only in whole multiples of $1,000.
Prior to maturity, the notes are not
repayable at your option or at our option. The notes may be automatically called prior to maturity as described under “—Automatic
Early Redemption.”
If any payment on the notes is due on
a day that is not a business day, the payment will be postponed to the next business day, and no interest will be payable as a
result of that postponement.
Contingent Coupon Payment
If, on any Observation Date, the Observation
Value is greater than or equal to the Threshold Value, we will pay the Contingent Coupon Payment on the applicable Contingent Payment
Date.
The “Contingent
Coupon Payment” will be [$36.25] per note ([3.625%] of the principal amount). The actual
Contingent
Coupon Payment will be determined on the pricing date.
The “Threshold Value” will
be 60% of the Starting Value.
The “Observation Dates”
will be November 22, 2017, February 22, 2018, May 23, 2018, August 22, 2018, November 21, 2018, February 21, 2019, May 22, 2019
and August 21, 2019, subject to postponement as described in “Description of the Notes—Certain Terms of the Notes—Events
Relating to Observation Dates” of product supplement STOCK-1.
The “Contingent Payment Dates”
will be November 28, 2017, February 27, 2018, May 29, 2018, August 27, 2018, November 27, 2018, February 26, 2019, May 28, 2019
and the maturity date.
For so long as the notes are held in
book-entry only form, we will pay the Contingent Coupon Payment to the persons in whose names the notes are registered at the close
of business one business day prior to each Contingent Payment Date. If the notes are not held in book-entry only form, the record
dates will be the fifteenth calendar day preceding the applicable payment date, whether or not that date is a business day.
Notwithstanding the foregoing, the Redemption
Amount, including the final Contingent Coupon Payment with respect to the final Observation Date, if payable, will be paid to the
persons in whose names the notes are registered on the maturity date.
Automatic Early Redemption
The notes will be automatically called
in whole, but not in part, prior to maturity if the Observation Value on any Observation Date is greater than or equal to the Starting
Value. Upon an early redemption, you will receive the Early Redemption Payment on the applicable Contingent Payment Date. You will
not receive any additional payments on the notes after the early redemption date.
The “Early Redemption Payment”
will be the principal amount of your notes, plus the Contingent Coupon Payment with respect to the applicable Observation Date.
Redemption Amount
If
your notes are not automatically called prior to maturity, then at maturity, subject to our credit risk as issuer of the notes
and the credit risk of the Guarantor as guarantor of the notes, you will receive
the Redemption Amount per note that you hold, denominated in U.S. dollars. The Redemption Amount per note will be calculated as
follows:
|
·
|
If the Ending Value is greater than or equal to the Threshold Value, the Redemption Amount will
equal the principal amount plus the Contingent Coupon Payment with respect to the final Observation Date.
|
|
·
|
If the Ending Value is less than the Threshold Value, we will deliver to you a number of shares
of the Underlying Stock equal to the product of the Exchange Ratio multiplied by the Price Multiplier as of the final Observation
Date, or at our option, the Cash Delivery Amount. If we elect to deliver shares of the Underlying Stock, fractional shares will
be paid in cash. In this case, the Redemption Amount, as of the final Observation Date, will be worth less than 60% of the principal
amount and could be zero.
|
The
“Exchange Ratio” will be equal to the principal amount of $1,000 per note divided by the Starting Value.
The
“Price Multiplier” will be 1, subject to adjustment for certain corporate events relating to the Underlying Stock described
in the product supplement under “Description of the Notes—Anti-Dilution Adjustments.”
The
“Cash Delivery Amount” will be equal to the product of the Exchange Ratio multiplied by the Ending Value.
Determining the Starting Value, the
Observation Value and the Ending Value
The “Starting Value” will
be the Closing Market Price on the pricing date.
The “Observation Value”
will be the Closing Market Price on the applicable Observation Date, multiplied by the Price Multiplier as of that day.
The “Ending Value” will
be the Closing Market Price on the final Observation Date, multiplied by the Price Multiplier as of that day.
The Observation Dates are subject to
postponement as set forth in the product supplement, in the section “Description of the Notes—Certain Terms of the
Notes—Events Relating to Observation Dates.”
Events of Default and Acceleration
If an
Event of Default, as defined in the Senior Indenture
and in the section entitled “Description
of Debt Securities — Events of Default and Rights of Acceleration” beginning on page 35 of the accompanying prospectus,
with respect to the notes occurs and is continuing, the amount payable to a holder of the notes upon any acceleration permitted
under the Senior Indenture will be equal to the amount described under the caption “—Redemption Amount,” calculated
as though the date of acceleration were the maturity date of the notes and as though the final Observation Date were the third
trading day prior to the date of acceleration. We will also
determine whether the final Contingent Coupon Payment is payable based upon the price of the Underlying Stock on that day; any
such final Contingent Coupon Payment may be prorated by the calculation agent to reflect the length of the final contingent payment
period. In case of a default in the payment of the notes, whether at their maturity or upon acceleration, the notes will not bear
a default interest rate.
THE UNDERLYING STOCK
We have derived the following information
from publicly available documents. None of us, the Guarantor, MLPF&S or any of our other affiliates has independently verified
the accuracy or completeness of the following information.
Because the Underlying Stock is registered
under the Securities Exchange Act of 1934, the company issuing the Underlying Stock (the “Underlying Company”) is required
to file periodically certain financial and other information specified by the SEC. Information provided to or filed with the SEC
by the Underlying Company can be located at the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington,
D.C. 20549 or through the SEC’s web site at http://www.sec.gov by reference to the applicable CIK number set forth below.
This document relates only to the notes
and does not relate to the Underlying Stock or to any other securities of the Underlying Company. None of us, the Guarantor, MLPF&S
or any of our other affiliates has participated or will participate in the preparation of the Underlying Company’s publicly
available documents. None of us, the Guarantor, MLPF&S or any of our other affiliates has made any due diligence inquiry with
respect to the Underlying Company in connection with the offering of the notes. None of us, the Guarantor, MLPF&S or any of
our other affiliates makes any representation that the publicly available documents or any other publicly available information
regarding the Underlying Company are accurate or complete. Furthermore, there can be no assurance that all events occurring prior
to the date of this document, including events that would affect the accuracy or completeness of these publicly available documents
that would affect the trading price of the Underlying Stock, have been or will be publicly disclosed. Subsequent disclosure of
any events or the disclosure or failure to disclose material future events concerning an Underlying Company could affect the value
of the Underlying Stock and therefore could affect your return on the notes. The selection of the Underlying Stock is not a recommendation
to buy or sell the Underlying Stock.
Advanced Micro Devices, Inc.
Advanced Micro Devices, Inc. manufactures
semiconductor products, including microprocessors, embedded microprocessors, chipsets, graphics, video and multimedia products.
The Underlying Stock trades on the NASDAQ Capital Market under the symbol “AMD”.
The following table shows the
quarterly high and low Closing Market Prices of the shares of the Underlying Stock on its primary exchange from the first quarter
of 2012 through August 2, 2017. 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. These historical trading prices may have been adjusted to reflect
certain corporate actions, such as stock splits and reverse stock splits.
2012
|
|
|
First Quarter
|
8.25
|
5.43
|
Second Quarter
|
8.20
|
5.41
|
Third Quarter
|
6.03
|
3.28
|
Fourth Quarter
|
3.28
|
1.86
|
2013
|
|
|
First Quarter
|
2.85
|
2.40
|
Second Quarter
|
4.38
|
2.29
|
Third Quarter
|
4.64
|
3.27
|
Fourth Quarter
|
4.09
|
3.14
|
2014
|
|
|
First Quarter
|
4.47
|
3.31
|
Second Quarter
|
4.47
|
3.65
|
Third Quarter
|
4.66
|
3.41
|
Fourth Quarter
|
3.40
|
2.47
|
2015
|
|
|
First Quarter
|
3.31
|
2.24
|
Second Quarter
|
2.87
|
2.22
|
Third Quarter
|
2.53
|
1.62
|
Fourth Quarter
|
3.00
|
1.74
|
2016
|
|
|
First Quarter
|
2.93
|
1.80
|
Second Quarter
|
5.45
|
2.62
|
Third Quarter
|
7.67
|
4.96
|
Fourth Quarter
|
12.07
|
6.30
|
2017
|
|
|
First Quarter
|
15.20
|
9.75
|
Second Quarter
|
14.64
|
10.04
|
Third Quarter (through August 2, 2017)
|
14.76
|
12.15
|
Supplement
to the Plan of Distribution; Role of MLPF&S
and
Conflicts of Interest
MLPF&S, a broker-dealer affiliate
of ours, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling
agent in the distribution of the notes. Accordingly, the offering of the notes will conform to the requirements of FINRA Rule 5121.
MLPF&S may not make sales in this offering to any of its discretionary accounts without the prior written approval of the account
holder.
MLPF&S will sell the notes to other
broker-dealers that will participate in the offering and that are not affiliated with us, at an agreed discount to the principal
amount. Each of those broker-dealers may sell the notes to one or more additional broker-dealers. MLPF&S has informed us that
these discounts may vary from dealer to dealer and that not all dealers will purchase or repurchase the notes at the same discount.
MLPF&S and any of our other broker-dealer
affiliates, may use this pricing supplement, and the accompanying product supplement, prospectus supplement and prospectus for
offers and sales in secondary market transactions and market-making transactions in the notes. However, they are not obligated
to engage in such secondary market transactions and/or market-making transactions. The selling agent may act as principal or agent
in these transactions, and any such sales will be made at prices related to prevailing market conditions at the time of the sale.
At MLPF&S’s discretion, for
a short, undetermined initial period after the issuance of the notes, MLPF&S 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 for the notes will be based
on then-prevailing market conditions and other considerations, including the performance of the Underlying Stock and the remaining
term of the notes. However, none of us, the Guarantor, MLPF&S or any of our other affiliates is obligated to purchase your
notes at any price or at any time, and we cannot assure you that any party will purchase your notes at a price that equals or exceeds
the initial estimated value of the notes.
Any price that MLPF&S may pay to
repurchase the notes will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction
costs. At certain times, this price may be higher than or lower than the initial estimated value of the notes.
STRUCTURING THE NOTES
The notes are our debt securities, the
return on which is linked to the performance of the Underlying Stock. 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 borrows the funds under
these types of notes at a rate, which we refer to in this document as BAC’s internal funding rate, that is more favorable
to BAC than the rate that it might pay for a conventional fixed or floating rate debt security. This generally relatively lower
internal funding rate, which is reflected in the economic terms of the notes, along with the fees and charges associated with market-linked
notes, typically results in the initial estimated value of the notes on the pricing date being less than their public offering
price.
In order to meet our payment obligations
on the notes, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call
options, put options or other derivatives) with MLPF&S or one of our other affiliates. The terms of these hedging arrangements
are determined based upon terms provided by MLP&S and its affiliates, and take into account a number of factors, including
our and BAC’s creditworthiness, interest rate movements, the volatility of the Underlying Stock, the tenor of the notes and
the hedging arrangements. The economic terms of the notes and their initial estimated value depend in part on the terms of these
hedging arrangements.
MLPF&S has advised us that the hedging
arrangements will include hedging related charges, reflecting the costs associated with, and our affiliates’ profit earned
from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces, actual profits
or losses from these hedging transactions may be more or less than any expected amounts.
For further information, see “Risk
Factors” beginning on page PS-8 above and “Supplemental Use of Proceeds” on page 16 of product supplement STOCK-1.
U.S.
FEDERAL INCOME TAX SUMMARY
The following summary of the material
U.S. federal income tax considerations of the acquisition, ownership, and disposition of the notes supplements, and to the extent
inconsistent supersedes, the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus
and under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive
of all possible tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”),
regulations promulgated under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary
regulations), rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all
as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect.
No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax
consequences described below. This summary does not include any description of the tax laws of any state or local governments,
or of any foreign government, that may be applicable to a particular holder.
Although the notes are issued by us,
they will be treated as if they were issued by Bank of America Corporation for U.S. federal income tax purposes. Accordingly throughout
this tax discussion, references to “we,” “our” or “us” are generally to Bank of America Corporation
unless the context requires otherwise.
This summary is directed solely to U.S.
Holders and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the notes upon original issuance and will
hold the notes as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment
and that are not excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor
concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any tax
consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes
in U.S. federal or other tax laws.
General
Although there is no statutory, judicial,
or administrative authority directly addressing the characterization of the notes, we intend to treat the notes for all tax purposes
as contingent income-bearing single financial contracts linked to the Underlying Stock and under the terms of the notes, we and
every investor in the notes agree, in the absence of an administrative determination or judicial ruling to the contrary, to treat
the notes in accordance with such characterization. In the opinion of our counsel Morrison & Foerster LLP, it is reasonable
to treat the notes as contingent income-bearing single financial contracts linked to the Underlying Stock. However, Morrison &
Foerster LLP has advised us that it is unable to conclude that it is more likely than not that this treatment will be upheld. This
discussion assumes that the notes constitute contingent income-bearing single financial contracts linked to the Underlying Stock
for U.S. federal income tax purposes. If the notes do not constitute contingent income-bearing single financial contracts, the
tax consequences described below would be materially different.
This characterization of the notes
is not binding on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization
of the notes or any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with
respect to their proper characterization and treatment. Due to the absence of authorities on point, significant aspects of the
U.S. federal income tax consequences of an investment in the notes are not certain, and no assurance can be given that the IRS
or any court will agree with the characterization and tax treatment described in this pricing supplement. Accordingly, you are
urged to consult your tax advisor regarding all aspects of the U.S. federal income tax consequences of an investment in the notes,
including possible alternative characterizations.
Unless otherwise stated, the following
discussion is based on the characterization described above. The discussion in this section assumes that there is a significant
possibility of a significant loss of principal on an investment in the notes.
We will not attempt to ascertain whether
the issuer of the Underlying Stock would be treated as a “passive foreign investment company” (“PFIC”),
within the meaning of Section 1297 of the Code or a United States real property holding corporation, within the meaning of Section
897(c) of the Code. If the issuer of the Underlying Stock were so treated, certain adverse U.S. federal income tax consequences
could possibly apply to a holder of the notes. You should refer to information filed with the SEC by the issuers of the Underlying
Stock and consult your tax advisor regarding the possible consequences to you, if any, if the issuer of the Underlying Stock is
or becomes a PFIC or is or becomes a United States real property holding corporation.
U.S. Holders
Although the U.S. federal income tax
treatment of any Contingent Coupon Payment on the notes is uncertain, we intend to take the position, and the following discussion
assumes, that any Contingent Coupon Payment constitutes taxable ordinary income to a U.S. Holder at the time received or accrued
in accordance with the U.S. Holder’s regular method of accounting. By purchasing the notes you agree, in the absence of an
administrative determination or judicial ruling to the contrary, to treat any Contingent Coupon Payment as described in the preceding
sentence.
Upon receipt of a cash payment at maturity
or upon a sale, exchange or redemption of the notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss
equal to the difference between the amount realized (other than amounts representing any Contingent Coupon Payment, which would
be taxed as described above) and the U.S. Holder’s tax basis in the notes. A U.S. Holder’s tax basis in the notes will
equal the amount paid by that holder to acquire them. This capital gain or loss generally will be long-term capital gain or loss
if the U.S. Holder held the notes for more than one year. The deductibility of capital losses is subject to limitations.
If the notes are settled by physical
delivery of a number of shares of Underlying Stock at maturity, although no assurances can be provided in this regard, a U.S. Holder
may generally expect not to recognize gain or loss upon maturity and any cash payment of accrued contingent payment would be taxed
as ordinary income (as described above). However, a U.S. Holder would generally be required to recognize gain or loss, if any,
with respect to any cash received in lieu of fractional shares, equal to the difference between the cash received and the pro rata
portion of the tax basis allocable to those fractional shares. Any such gain or loss would be treated as capital gain or loss.
A U.S. Holder’s tax basis in the shares of Underlying Stock delivered would generally equal its tax basis in the notes. A
U.S. Holder’s holding period for the shares of Underlying Stock delivered would begin on the day after the Underlying Stock
is received. If a U.S. Holder receives cash instead of Underlying Stock upon maturity, such U.S. Holder will generally be taxed
in the same manner as described in the preceding paragraph.
Alternative Tax Treatments.
Due
to the absence of authorities that directly address the proper tax treatment of the notes, prospective investors are urged to consult
their tax advisors regarding all possible alternative tax treatments of an investment in the notes. In particular, the IRS could
seek to subject the notes to the Treasury regulations governing contingent payment debt instruments. If the IRS were successful
in that regard, the timing and character of income on the notes would be affected significantly. Among other things, a U.S. Holder
would be required to accrue original issue discount every year at a “comparable yield” determined at the time of issuance.
In addition, any gain realized by a U.S. Holder at maturity, or upon a sale, exchange, or redemption of the notes generally would
be treated as ordinary income, and any loss realized at maturity would be treated as ordinary loss to the extent of the U.S. Holder’s
prior accruals of original issue discount, and as capital loss thereafter.
In addition, it is possible that the
notes could be treated as a unit consisting of a deposit and a put option written by the note holder, in which case the timing
and character of income on the notes would be affected significantly.
The IRS released Notice 2008-2 (“Notice”),
which sought comments from the public on the taxation of financial instruments currently taxed as “prepaid forward contracts.”
The scope of the Notice may extend to instruments similar to the notes. According to the Notice, the IRS and Treasury are considering
whether a holder of such instruments should be required to accrue ordinary income on a current basis, regardless of whether any
payments are made prior to maturity. It is not possible to determine what guidance the IRS and Treasury will ultimately issue,
if any. Any such future guidance
may affect the amount, timing and character of income, gain,
or loss in respect of the notes, possibly with retroactive effect.
The IRS and Treasury are also considering
additional issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether
foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of
the Code, concerning certain “constructive ownership transactions,” generally applies or should generally apply to
such instruments, and whether any of these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations
require the accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble
to the regulations states that the “wait and see” method of accounting does not properly reflect the economic accrual
of income on those contracts, and requires current accrual of income for some contracts already in existence. While the proposed
regulations do not apply to prepaid forward contracts, the preamble to the proposed regulations expresses the view that similar
timing issues exist in the case of prepaid forward contracts. If the IRS or Treasury publishes future guidance requiring current
economic accrual for contingent payments on prepaid forward contracts, it is possible that you could be required to accrue income
over the term of the notes.
Because of the absence of authority
regarding the appropriate tax characterization of the notes, it is also possible that the IRS could seek to characterize the notes
in a manner that results in tax consequences that are different from those described above. For example, the IRS could possibly
assert that any gain or loss that a holder may recognize at maturity or upon sale, exchange or redemption of the notes should be
treated as ordinary gain or loss.
It is possible that the IRS could assert
that a U.S. Holder’s holding period in respect of the notes should end on the applicable Observation Date, even though such
holder will not receive any amounts in respect of the notes prior to the redemption or maturity of the notes. In such case, if
the applicable Observation Date is not in excess of one year from the original issue date, a U.S. Holder may be treated as having
a holding period in respect of the notes equal to one year or less, in which case any gain or loss such holder recognizes at such
time would be treated as short-term capital gain or loss.
Non-U.S. Holders
Because the U.S. federal income tax
treatment of the notes (including any Contingent Coupon Payment) is uncertain, we will withhold U.S. federal income tax at a 30%
rate (or at a lower rate under an applicable income tax treaty) on the entire amount of any Contingent Coupon Payment made unless
such payments are effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (in which case,
to avoid withholding, the Non-U.S. Holder will be required to provide a Form W-8ECI). We will not pay any additional amounts in
respect of such withholding. To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer identification
number and certify as to its eligibility under the appropriate treaty’s limitations on benefits article, if applicable. In
addition, special rules may apply to claims for treaty benefits made by Non-U.S. Holders that are entities rather than individuals.
The availability of a lower rate of withholding under an applicable income tax treaty will depend on whether such rate applies
to the characterization of the payments under U.S. federal income tax laws. A Non-U.S. Holder that is eligible for a reduced rate
of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS.
A Non-U.S. Holder will generally not
be subject to U.S. federal income or withholding tax on any gain (not including, for the avoidance of doubt, any amounts representing
accrued Contingent Coupon Payment which would be subject to the rules discussed in the previous paragraph) from the sale, exchange
or redemption of the notes or their settlement at maturity, provided that the Non-U.S. Holder complies with applicable certification
requirements and that the payment is not effectively connected with the conduct by the Non-U.S. Holder of a U.S. trade or business.
Notwithstanding the foregoing, gain from the sale, exchange or redemption of the notes or their settlement at maturity may be subject
to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S. for 183 days or
more during the taxable year of the sale, exchange, or redemption and certain other conditions are satisfied.
If a Non-U.S. Holder of the notes is
engaged in the conduct of a trade or business within the U.S. and if any Contingent Coupon Payment and gain realized on the sale,
exchange, redemption, or settlement of the notes, is effectively connected with the conduct of such trade or business (and, if
certain tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S.
Holder, although exempt from U.S. federal withholding tax, generally will be subject to U.S. federal income tax on such Contingent
Coupon Payment and gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders should read
the material under the heading “—U.S. Holders,” for a description of the U.S. federal income tax consequences
of acquiring, owning, and disposing of the notes. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be
subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion of its earnings
and profits for the taxable year that are effectively connected with its conduct of a trade or business in the U.S., subject to
certain adjustments.
A “dividend equivalent”
payment is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S.
withholding tax if paid to a Non-U.S. Holder. Under U.S. Treasury Department regulations, payments (including deemed payments)
with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend
equivalents if such specified ELIs reference an interest in an “underlying security,” which is generally any interest
in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give
rise to a U.S. source dividend. However, U.S. Treasury Department regulations provide that withholding on dividend equivalent payments
will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2018. Based on our determination
that the notes are not delta one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent payments,
if any, under the notes. However, it is possible that the notes could be treated as deemed reissued for U.S. federal income tax
purposes upon the occurrence of certain events affecting the Underlying Stock or the notes, and following such occurrence the notes
could be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into
other transactions in respect of the Underlying Stock or the notes should consult their tax advisors as to the application of the
dividend equivalent withholding tax in the context of the notes and their other transactions. If any payments are treated as dividend
equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without being required
to pay any additional amounts with respect to amounts so withheld.
As discussed above, alternative characterizations
of the notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or
clarification of the law, by regulation or otherwise, cause payments as to the notes to become subject to withholding tax in addition
to the withholding tax described above, tax will be withheld at the applicable statutory rate. Non-U.S. Holders should consult
their own tax advisors regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax.
Under
current law, while the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible
in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty
benefit, a note is likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities
should consult their own tax advisors regarding the U.S. federal estate tax consequences of investing in a note.
Backup Withholding and Information
Reporting
Please see the discussion under “U.S.
Federal Income Tax Considerations — Taxation of Debt Securities — Backup Withholding and Information Reporting”
in the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules
to payments made on the notes.