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Pricing
Supplement
(To
Prospectus dated December 31, 2019,
Prospectus
Supplement dated December 31, 2019 and
Product
Supplement EQUITY-1 dated January 3, 2020)
Dated November 9,
2020
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Filed
Pursuant to Rule 424(b)(2)
Series
A Registration Statement No. 333-234425
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BofA
Finance LLC $6,748,000 Capped Airbag
GEARS
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Linked
to the S&P
500® Index Due November
17, 2021
Fully and
Unconditionally Guaranteed by Bank of America
Corporation
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Investment
Description
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The Capped
Airbag GEARS (the “Notes”) linked to the
S&P
500® Index (the “Underlying”) due November
17, 2021 are senior unsecured obligations issued by
BofA Finance LLC (“BofA Finance”), a direct, wholly-owned
subsidiary of Bank of America Corporation (“BAC” or the
“Guarantor”), which are fully and unconditionally guaranteed
by the Guarantor. The return on the Notes is linked to the
performance of the Underlying from its Initial Value to its Final
Value. If the Underlying Return is positive, BofA Finance will
repay the Stated Principal Amount of the Notes at
maturity plus a return equal to the Underlying Return
multiplied by the Upside Gearing of 1.50, but no more than the
Maximum Gain of 11.75%. If the Underlying Return is zero
or negative and the Final Value is greater than or equal
to the Downside Threshold of 90% of the Initial
Value, BofA Finance will repay the Stated Principal Amount of
the Notes at maturity. However, if the Underlying Return is
negative and the Final Value is less than the Downside
Threshold, you will receive less than the Stated Principal
Amount, and possibly nothing, at maturity. In this case, you will
be exposed to the downside performance of the Underlying beyond
the Downside Threshold at a rate greater than 1-for-1.
Specifically, you will be exposed to a decrease
of approximately 1.11% in your initial investment for
each 1% decline in the Underlying in excess of the Threshold
Percentage from the Trade Date to the Valuation Date, with up to a
100% loss of your initial investment.
Investing in
the Notes involves significant risks.
You will not receive coupon payments during
the approximate 12 month term
of the Notes. You may lose a
substantial portion or all of your initial investment.
You will not receive dividends or other distributions paid on
any stocks included in the Underlying.
Downside exposure to the Underlying is
buffered only if you hold
the Notes to maturity. Any payment on
the Notes, including any repayment
of the Stated Principal Amount, is subject to
the creditworthiness of BofA Finance and the
Guarantor and is not, either directly or indirectly, an
obligation of any third party.
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Features
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Key
Dates
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❑ Enhanced
Growth Potential Subject to the Maximum
Gain— If the Underlying Return is
positive, BofA Finance will repay the Stated Principal Amount
of the Notes at maturity plus a return equal to
the Underlying Return multiplied by the Upside Gearing, but no
more than the Maximum Gain. The Upside Gearing feature
will provide leveraged exposure to a limited range of positive
performance of the Underlying.
❑ Downside
Exposure with Contingent Repayment of Principal at
Maturity— If the Underlying Return is zero or negative
and the Final Value of the Underlying is
greater than or equal to the Downside Threshold, you will
receive the Stated Principal Amount at maturity. However, if
the Underlying Return is negative and the Final Value of
the Underlying is less than the Downside
Threshold, you will receive less than the Stated Principal
Amount, and possibly nothing, at maturity. In this case, you
will be exposed to the downside performance of the Underlying
beyond the Downside Threshold at a rate greater than
1-for-1. Specifically, you will be exposed to a decrease
of approximately 1.11% in your initial investment for
each 1% decline in the Underlying in excess of the Threshold
Percentage from the Trade Date to the Valuation Date, up to a 100%
loss of your investment.
.
Any
payment on the Notes is
subject to the creditworthiness of BofA Finance and the
Guarantor.
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Trade
Date1
Issue
Date1
Valuation
Date2
Maturity
Date
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November 9,
2020
November 16,
2020
November 9,
2021
November 17,
2021
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1 See
“Supplement to the Plan of Distribution; Role of BofAS and
Conflicts of Interest” in this pricing supplement for
additional information.
2 See
page PS-4 for additional details.
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NOTICE TO
INVESTORS: THE NOTES ARE
SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT
INSTRUMENTS. BOFA FINANCE IS NOT
NECESSARILY OBLIGATED TO REPAY THE FULL AMOUNT
OF THE STATED PRINCIPAL AMOUNT AT MATURITY, AND
THE NOTES CAN HAVE DOWNSIDE MARKET RISK
SIMILAR TO THE UNDERLYING, SUBJECT TO THE
BUFFER. THIS MARKET RISK IS IN ADDITION TO
THE CREDIT RISK INHERENT IN PURCHASING A DEBT OBLIGATION
OF BOFA FINANCE THAT IS GUARANTEED
BY BAC. YOU SHOULD NOT PURCHASE
THE NOTES IF YOU DO NOT UNDERSTAND OR ARE
NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN
THE NOTES.
YOU
SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER
“RISK FACTORS’’ BEGINNING ON PAGE
PS-6 OF THIS PRICING SUPPLEMENT, PAGE
PS-5 OF THE ACCOMPANYING PRODUCT SUPPLEMENT,
PAGE S-5 OF THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND PAGE 7 OF
THE ACCOMPANYING PROSPECTUS BEFORE PURCHASING
ANY NOTES. EVENTS RELATING TO ANY OF THOSE
RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE
MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES.
YOU MAY LOSE A SIGNIFICANT PORTION OF YOUR
INITIAL INVESTMENT IN THE NOTES.
THE NOTES WILL NOT BE LISTED ON ANY
SECURITIES EXCHANGE AND MAY HAVE LIMITED OR NO
LIQUIDITY.
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Notes Offering
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We are
offering Capped Airbag GEARS linked to the S&P
500® Index due November 17, 2021. Any payment
on the Notes will be based on the performance of
the Underlying. The Notes are our senior
unsecured obligations, guaranteed by BAC, and are offered
for a minimum investment of 100 Notes (each Note corresponding
to $10.00 in Stated Principal Amount) at the Public
Offering Price described below.
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Underlying
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Upside
Gearing
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Downside
Gearing
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Maximum
Gain
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Initial
Value
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Downside
Threshold
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Threshold
Percentage
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CUSIP
/ ISIN
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the
S&P
500® Index (Ticker: SPX)
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1.50
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1.11
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11.75%
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3,550.50
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3,195.45, which
is 90% of the Initial Value
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10.00%
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05591G314/
US05591G3149
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See
“Summary” in this pricing
supplement. The Notes will have
the terms specified in the accompanying product supplement,
prospectus supplement and prospectus, as supplemented by this
pricing supplement.
None of
the Securities and Exchange Commission (the “SEC”), any state
securities commission, or any other regulatory body has approved or
disapproved of these Notes or the guarantee, or passed
upon the adequacy or accuracy of this pricing supplement, or the
accompanying product supplement, prospectus supplement or
prospectus. Any representation to the contrary is a criminal
offense. The Notes and the related guarantee of
the Notes by the Guarantor are unsecured and are not
savings accounts, deposits, or other obligations of a bank.
The Notes are not guaranteed by Bank of America,
N.A. or any other bank, are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency and involve
investment risks.
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Public Offering
Price
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Underwriting
Discount(1)
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Proceeds (before
expenses) to BofA Finance
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Per Note
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$ 10.00
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$0.00
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$ 10.00
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Total
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$6,748,000.00
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$0.00
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$6,748,000.00
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(1) The
underwriting discount is $0.00 per Note. BofA Securities, Inc.
(“BofAS”), acting as principal, has agreed to purchase from
BofA Finance, and BofA Finance has agreed to sell to BofAS,
the aggregate principal amount of the Notes set forth above for
$10.00 per Note. UBS Financial Services Inc. (“UBS”), acting as a
selling agent for sales of the Notes, has agreed to
purchase from BofAS, and BofAS had agreed to sell to UBS, all
of the Notes for $10.00 per Note. UBS proposes to offer the
Notes to certain fee-based advisory accounts for which UBS is an
investment advisor at a price of $10.00 per Note. UBS will
receive an underwriting discount of $0.00 per Note for each Note
that it sells in this offering. For additional information on
the distribution of the Notes, see “Supplement to the Plan of
Distribution; Role of BofAS and Conflicts of Interest” in this
pricing supplement.
The
initial estimated value of
the Notes is less than the
public offering price. The initial estimated value of
the Notes as of the Trade Date is
$9.941 per $10 in Stated Principal Amount. See
“Summary” on page PS-4 of this pricing supplement, “Risk
Factors” beginning on page PS-6 of this pricing supplement and
“Structuring the Notes” on page PS-17 of this pricing
supplement for additional information. The actual value
of your Notes at any time will reflect many factors and
cannot be predicted with accuracy.
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UBS Financial
Services Inc.
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BofA
Securities
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Additional Information
about BofA Finance LLC, Bank of America Corporation and
the Notes
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You
should read carefully this entire pricing supplement and the
accompanying 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 the “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, BofAS or
UBS 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 and
the accompanying product supplement, prospectus supplement, and
prospectus is accurate only as of the date on their respective
front covers.
Certain 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-referenced accompanying documents may be accessed at the
following links:
♦
Product supplement
EQUITY-1 dated January 3, 2020:
♦
Series A MTN
prospectus supplement dated December 31, 2019 and prospectus dated
December 31, 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
in right of payment with all of our other unsecured and
unsubordinated obligations, and the related guarantee will rank
equally in right of payment with all of BAC’s other unsecured and
unsubordinated obligations, in each case except
obligations that are subject to any priorities or preferences by
law. Any payments due on the Notes, including any repayment of the
principal amount, will be subject to the credit risk of BofA
Finance, as issuer, and BAC, as guarantor.
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PS-2
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The Notes may
be suitable for you if, among other
considerations:
♦
You fully
understand the risks inherent in an investment in the Notes,
including the risk of loss of your
entire investment.
♦
You do not seek
current income from your investment and are willing to
forgo dividends or any other distributions paid on the stocks
included in the Underlying.
♦
You can
tolerate a loss of a substantial portion or
all of your investment and are willing to make an investment
that is subject to leveraged downside market exposure to any
decline in the Underlying in excess of the Threshold
Percentage.
♦
You understand and
accept the risks associated with the Underlying.
♦
You believe that
the level of the Underlying will increase over the
term of the Notes and the Final Value is likely to
close above the Initial Value, and you are willing
to give up any appreciation in excess of the Maximum
Gain.
♦
You understand and
accept that your potential return is limited by the Maximum
Gain.
♦
You can tolerate
fluctuations in the value of the Notes prior to maturity
that may be similar to or exceed the downside fluctuations in
the level of the Underlying.
♦
You are
willing and able to hold the Notes to maturity, and
accept that there may be little or no secondary
market for the Notes.
♦
You are willing to
assume the credit risk of BofA
Finance and BAC for all payments under
the Notes, and understand that if BofA
Finance and BAC default
on their obligations, you might not receive any
amounts due to you, including any repayment of the Stated
Principal Amount.
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The Notes may not be
suitable for you if, among other considerations:
♦
You do not fully
understand the risks inherent in an investment in the Notes,
including the
risk loss of your entire investment.
♦
You seek current
income from this investment or prefer to receive the
dividends and any other distributions paid on
the stocks included in the Underlying.
♦
You cannot
tolerate the loss of a substantial portion of
your initial investment, or you are not willing to
make an investment that is subject to the leveraged downside
market exposure to any decline in the Underlying in excess of the
Threshold Percentage.
♦
You require an
investment designed to guarantee a full return
of the Stated Principal Amount at maturity.
♦
You do not
understand or are not willing to accept the risks
associated with the Underlying.
♦
You believe
that the level of the Underlying will decline during the
term of the Notes and the Final Value is likely to
close below the Downside Threshold on the Valuation
Date, exposing you to downside performance of the
Underlying, or you believe the Underlying will appreciate over
the term of the Notes by more than the Maximum
Gain.
♦
You seek an
investment that participates in the full appreciation in the level
of the Underlying or that has unlimited potential.
♦
You cannot
tolerate fluctuations in the value of the Notes prior to
maturity that may be similar to or exceed the downside
fluctuations in the level of the Underlying.
♦
You seek an
investment for which there will be an active secondary
market.
♦
You prefer the
lower risk of conventional fixed income investments with comparable
maturities and credit ratings.
♦
You are not
willing to assume the credit risk of BofA
Finance and BAC for all payments under
the Notes, including any repayment of the Stated
Principal Amount.
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The
suitability considerations identified above are not exhaustive.
Whether or not the Notes are a suitable investment for you will
depend on your individual circumstances and you should reach an
investment decision only after you and your investment, legal, tax,
accounting and other advisors have carefully considered the
suitability of an investment in the Notes in light of your
particular circumstances. You should review “The
Underlying” herein for more information on
the Underlying. You should
also review carefully the “Risk Factors” section
herein for risks related to an investment in the
Notes.
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PS-3
100%
of the Stated Principal Amount
Approximately twelve months
November 9,
2021, subject to postponement as set forth in “Description of
the Notes—Certain Terms of the Notes—Events Relating
to Calculation Days” beginning on page PS-21 of the
accompanying product supplement.
The
S&P 500® Index (Ticker: SPX)
Payment At
Maturity (per $10.00 Stated Principal Amount)
If
the Underlying Return is positive, we will repay the
Stated Principal Amount of the Notes at maturity plus a
return equal to the Underlying Return multiplied by the Upside
Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00 × (1
+ the lesser of (i) Underlying Return x Upside
Gearing and (ii) Maximum Gain)
If
the Underlying Return is zero or negative and the Final
Value is greater than or equal to the Downside
Threshold, we will repay the Stated Principal Amount
of the Notes at maturity.
If
the Underlying Return is negative and the Final Value
is less than the Downside Threshold, we will
repay less than the Stated Principal Amount of your Notes at
maturity, resulting in a loss of
approximately 1.11% for each 1% decline in the Underlying
in excess of the Threshold Percentage from the Trade Date to the
Final Valuation Date, calculated as follows:
$10.00 +
[$10.00 × Downside
Gearing × (Underlying
Return + Threshold Percentage)]
Accordingly,
you
may lose approximately 1.11% of
your Stated Principal Amount of
the Notes for each 1% decline in the Underlying in excess of the
Threshold Percentage from the Trade Date to the
Valuation Date. You may lose all
or a substantial portion of your Stated Principal
Amount at maturity, depending on how
significantly
the Underlying declines.
Final
Value — Initial Value
Initial Value
11.75%, which
corresponds to a maximum Payment at Maturity
of $11.175.
90% of the Initial
Value, as specified on the cover page of this pricing
supplement.
The quotient of
the Initial Value divided
by the Downside Threshold, which
is approximately 1.11.
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The closing
level of the Underlying on the Trade Date, as
specified on the cover page of this pricing
supplement.
The closing
level of the Underlying on the Valuation
Date.
BofAS,
an affiliate of BofA Finance.
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 22 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 “—Payment at
Maturity” above, calculated as though the date of acceleration
were the Maturity Date of the Notes and as though
the Valuation Date were the third trading day prior to
the date of acceleration. 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.
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The closing
level of the Underlying (its Initial
Value) is observed, the Maximum Gain is
set and the Downside Threshold for
the Underlying is determined.
If
the Underlying Return is positive, we will repay the
Stated Principal Amount of the Notes at maturity plus a
return equal to the Underlying Return multiplied by the Upside
Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00 × (1
+ the lesser of (i) Underlying Return x Upside
Gearing and (ii) Maximum Gain)
If
the Underlying Return is zero or negative and the Final Value is
greater than or equal to the Downside Threshold, we will
repay the Stated Principal Amount of the Notes at
maturity.
If
the Underlying Return is negative and the Final Value is less than
the Downside Threshold, we will repay less than the
Stated Principal Amount of your Notes at maturity, resulting in a
loss of approximately 1.11% for each 1% decline in
the Underlying in excess of the Threshold Percentage from the Trade
Date to the Valuation Date, calculated as
follows:
$10.00
+ [$10.00 × Downside Gearing ×
(Underlying
Return + Threshold Percentage)]
Accordingly,
you may
lose approximately 1.11% of
your Stated Principal Amount for each 1% decline
in the Underlying in excess of the Threshold Percentage from the
Trade Date to the Valuation Date. You may lose all or a substantial
portion of your Stated Principal Amount at
maturity, depending on how significantly the Underlying
declines.
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INVESTING IN
THE NOTES INVOLVES SIGNIFICANT
RISKS. YOU MAY LOSE A SUBSTANTIAL PORTION OR ALL OF
YOUR INITIAL INVESTMENT. YOU WILL BE EXPOSED TO THE
MARKET RISK OF
THE UNDERLYING. DOWNSIDE EXPOSURE TO THE
UNDERLYING IS BUFFERED ONLY IF YOU HOLD THE NOTES TO
MATURITY. ANY PAYMENT ON
THE NOTES IS SUBJECT TO THE
CREDITWORTHINESS OF BOFA FINANCE AND THE
GUARANTOR.
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1
See
“Supplement to the Plan of Distribution; Role of BofAS and
Conflicts of Interest” in this pricing supplement for additional
information.
PS-4
Your investment
in the Notes entails significant risks, many of which differ from
those of a conventional debt security. Your decision to purchase
the Notes should be made only after carefully considering the risks
of an investment in the Notes, including those discussed below,
with your advisors in light of your particular circumstances. The
Notes are not an appropriate investment for you if you are not
knowledgeable about significant elements of the Notes or financial
matters in general. You should carefully review the more detailed
explanation of risks relating to the Notes in the “Risk Factors”
sections beginning on page PS-5 of the accompanying product
supplement, page S-5 of the accompanying prospectus
supplement and page 7 of the accompanying prospectus
identified on page
PS-2 above.
Structure-related
Risks
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♦
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Your investment
may result in a loss; there is no guaranteed return of
principal. There is no fixed principal repayment amount on
the Notes at maturity. If the Final Value is less
than the Downside Threshold, at maturity, you
will be exposed on a leveraged basis to declines in the
Underlying beyond its Initial Value. In that case, you will
lose a significant portion or all of your investment
in the Notes.
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♦
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The
Notes do not bear interest. Unlike a conventional debt
security, no interest payments will be paid over the term of the
Notes, regardless of the extent to which the Final
Value exceeds the Initial Value.
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♦
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The
return on the Notes will be limited to the Maximum
Gain. The return on the Notes will not exceed
the Maximum Gain, regardless of the performance of
the Underlying. Your return on the Notes may be less than the
return that you could have realized if you invested directly in
the securities held by the Underlying, and you will not
receive the full benefit of any appreciation in the Underlying
beyond that Maximum Gain.
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♦
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Downside
exposure to the Underlying is
buffered only if you hold the Notes
to maturity. You should be willing to
hold your Notes to maturity. If you are able to sell your Notes in
the secondary market prior to maturity, you may have to sell
them at a loss relative to your initial investment even if
the level of the Underlying at that time is equal to
or greater than the Downside Threshold. Any payment on
the Notes is subject to the credit risk of BofA Finance,
as issuer, and BAC, as guarantor.
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♦
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The
Upside Gearing applies only at maturity. You should be
willing to hold your Notes to maturity. If you are able to sell
your Notes in the secondary market prior to maturity, the price you
receive will likely not reflect the full economic value of the
Upside Gearing, and the return you realize may be less
than the then-current underlying return multiplied by the
Upside Gearing, even if such return is positive. You can receive
the full benefit of the Upside Gearing only if you hold your Notes
to maturity. Any payment on the Notes is subject to the credit risk
of BofA Finance, as issuer, and BAC, as guarantor.
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♦
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Your return on
the Notes may be less than the yield on a conventional debt
security of comparable maturity. Any return that you
receive on the Notes may be less than the return you would
earn if you purchased a conventional debt security with the same
Maturity Date. As a result, your investment in the Notes
may not reflect the full opportunity cost to you when you consider
factors, such as inflation, that affect the time value of
money.
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♦
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Any
payment on the Notes is 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 payment
on the Notes will be fully and unconditionally guaranteed by the
Guarantor. The Notes are not guaranteed by any entity other
than the Guarantor. As a result, your receipt of
any payment on the Notes will be dependent upon our
ability and the ability of the Guarantor to repay our respective
obligations under the Notes on the Maturity Date, regardless
of the Final Value as compared to the Downside
Threshold or Initial Value, as applicable. No
assurance can be given as to what our financial condition or the
financial condition of the Guarantor will be on the Maturity Date.
If we and the Guarantor become unable to meet our respective
financial obligations as they become due, you may not receive
the amount payable under the terms of the Notes and
you could lose all of your initial investment.
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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 value of
the Underlying, an improvement in our or the Guarantor’s credit
ratings will not reduce the other investment risks related to the
Notes.
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♦
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We
are a finance subsidiary and, as such, have no independent assets,
operations or revenues. We are a finance subsidiary
of BAC, have no operations other than those related to the
issuance, administration and repayment of our debt securities that
are guaranteed by the Guarantor, and are dependent upon the
Guarantor and/or its other subsidiaries to meet our obligations
under the Notes in the ordinary course. Therefore, our
ability to make payments on the Notes may be
limited.
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♦
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Economic and
market factors have affected the terms
of the Notes and may affect the
market value of the Notes prior to
maturity. Because market-linked notes,
including the Notes, can be thought of as having a debt component
and a derivative component, factors that influence the values of
debt instruments and options and other derivatives will also affect
the terms and features of the Notes at issuance and the market
price of the Notes prior to maturity. These factors include
the level of the Underlying and the securities
included in the Underlying; the volatility of
the Underlying and the securities included in the
Underlying; the dividend rate paid on the securities included
in the Underlying, if applicable; the time remaining to the
maturity of the Notes; interest rates in the markets; geopolitical
conditions and economic, financial, political, force majeure and
regulatory or judicial events; whether the level of the
Underlying is currently or has been less than the Downside
Threshold; the availability of comparable instruments; the
creditworthiness of BofA Finance, as issuer, and BAC, as
guarantor; and the then current bid-ask spread for the Notes
and the factors discussed under “— Trading and hedging
activities by us, the Guarantor and any of our other
affiliates, including BofAS, and UBS and its affiliates,
may create conflicts of interest with you and may affect your
return on the Notes and their market value” below. These
factors are unpredictable and interrelated and may offset or
magnify each other.
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PS-5
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♦
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The
Payment at Maturity will not reflect the level of the
Underlying other than on the Valuation
Date. The
level of the Underlying during the term of the Notes other than on
the Valuation Date will not affect payment on the
Notes. Notwithstanding the foregoing, investors should generally be
aware of the performance of the Underlying while holding the
Notes, as the performance of the Underlying may influence the
market value of the Notes. The calculation agent will calculate
the Payment at Maturity by comparing only the Initial
Value or the Downside Threshold, as applicable, to the
Final Value for the Underlying. No other level of the
Underlying will be taken into account. As a result,
if the Final Value of the Underlying is less than the Downside
Threshold, you will receive less than the Stated Principal
Amount at maturity, even if the level of
the Underlying was always above the Downside
Threshold prior to the Valuation Date.
|
Valuation- and
Market-related Risks
|
♦
|
The
public offering price
you are paying for the
Notes exceeds their initial
estimated value. The
initial estimated value of the Notes that is provided on the
cover page of this pricing supplement is an
estimate only, determined as of the Trade Date 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. 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 level of the Underlying, changes
in the Guarantor’s internal funding rate, and the inclusion in
the public offering price of the underwriting discount and the
hedging related charges, all as further described in "Structuring
the Notes" below. These factors, together with various credit,
market and economic factors over the term of the Notes, are
expected to reduce the price at which you may be able to sell the
Notes in any secondary market and will affect the value of the
Notes in complex and unpredictable ways.
|
|
♦
|
The
initial estimated value does not represent a minimum or maximum
price at which we, BAC, BofAS or any
of our other affiliates would be willing to purchase your
Notes in any secondary market (if any exists) at any
time. The value of your Notes at any time after issuance
will vary based on many factors that cannot be predicted with
accuracy, including the performance of the Underlying,
our and BAC’s creditworthiness and changes in market
conditions.
|
|
♦
|
The
price of the Notes that may be paid by
BofAS in any secondary market (if BofAS
makes a market, which it is not required to do), as well
as the price which may be reflected
on customer account
statements, will be higher
than the then-current estimated
value of the Notes for a limited time period
after the Trade Date. As agreed by BofAS
and UBS, for approximately a three-month period
after the Trade Date, to the extent BofAS offers to
buy the Notes in the secondary market, it will do so at a
price that will exceed the estimated value of the Notes at that
time. The amount of this excess, which represents a
portion of the hedging-related charges expected to be realized by
BofAS and UBS over the term of the Notes, will decline to
zero on a straight line basis over
that three-month period. Accordingly, the
estimated value of your Notes during this
initial three-month period may be lower than the value
shown on your customer account statements. Thereafter,
if BofAS buys or sells your Notes, it will do so at prices
that reflect the estimated value determined by reference to its
pricing models at that time. Any price at any time after the Trade
Date will be based on the then-prevailing market
conditions and other considerations, including the performance of
the Underlying and the remaining term of the
Notes. However, none of us, the Guarantor, BofAS or any
other party 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.
|
|
♦
|
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 level of the Underlying. The number of
potential buyers of your Notes in any secondary market may be
limited. We anticipate that BofAS will act as a market-maker for
the Notes, but none of us, the Guarantor or BofAS 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. BofAS may
discontinue its market-making activities as to the Notes at any
time. To the extent that BofAS engages in any market-making
activities, it may bid for or offer the Notes. Any price at which
BofAS 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 BofAS 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.
Conflict-related
Risks
|
♦
|
Trading and
hedging activities by us, the Guarantor and any of our other
affiliates, including BofAS, and UBS and its affiliates, may create
conflicts of interest with you and may affect your return on the
Notes and their market value. We, the Guarantor or one or
more of our other affiliates, including BofAS, and UBS and its
affiliates, may buy or sell the securities held by or included in
the Underlying, or futures or options contracts on the Underlying
or those securities, or other listed or over-the-counter derivative
instruments linked to the Underlying or those securities. We, the
Guarantor or one or more of our other affiliates, including BofAS,
and UBS and its affiliates also may issue or underwrite other
financial instruments with returns based upon the Underlying. 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, including BofAS,
and UBS and its 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 or UBS may enter into such
hedging arrangements with one of our or their affiliates. Our
affiliates or their affiliates may enter into additional hedging
transactions with other parties relating to the Notes and the
Underlying. 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 and UBS and its 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 BofAS, and UBS and
its affiliates receive for the sale of the Notes, which creates
an
|
PS-6
additional
incentive to sell the Notes to you. While we, the Guarantor or one
or more of our other affiliates, including BofAS, and UBS and its
affiliates may from time to time own securities represented by the
Underlying, except to the extent that BAC’s or UBS Group
AG’s (the parent Company of UBS) common stock may be
included in the Underlying, as applicable, we, the Guarantor and
our other affiliates, including BofAS, and UBS and its affiliates
do not control any company included in the Underlying, and have not
verified any disclosure made by any other company. We, the
Guarantor or one or more of our other affiliates, including BofAS,
and UBS and its affiliates may execute such purchases or sales for
our own or their own accounts, for business reasons, or in
connection with hedging our obligations under the Notes. The
transactions described above may present a conflict of interest
between your interest in the Notes and the interests we, the
Guarantor and our other affiliates, including BofAS, and UBS and
its affiliates may have in our or their proprietary accounts, in
facilitating transactions, including block trades, for our or their
other customers, and in accounts under our or their
management.
The
transactions described above may adversely affect the value of the
Underlying in a manner that could be adverse to your investment in
the Notes. On or before the Trade Date, any purchases or sales by
us, the Guarantor or our other affiliates, including BofAS or
others on its behalf, and UBS and its affiliates (including for the
purpose of hedging some or all of our anticipated exposure in
connection with the Notes) may have affected the
value of the Underlying. Consequently, the value of the Underlying
may change subsequent to the Trade Date, which may adversely affect
the market value of the Notes. In addition, these activities may
decrease the market value of your Notes prior to maturity, and may
affect the amounts to be paid on the Notes. We, the Guarantor or
one or more of our other affiliates, including BofAS, and UBS and
its affiliates may purchase or otherwise acquire a long or short
position in the Notes and may hold or resell the Notes. For
example, BofAS may enter into these transactions in connection with
any market making activities in which it engages. We cannot assure
you that these activities will not adversely affect the value of
the Underlying, the market value of your Notes prior to maturity or
the amounts payable on the Notes.
|
♦
|
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.
|
Underlying-related
Risks
|
♦
|
The
publisher of the Underlying may adjust
the Underlying in a way that affects its
level, and the publisher has no obligation to consider your
interests. The
publisher of the Underlying can add, delete, or
substitute the components included in the Underlying or
make other methodological changes that could change its level. Any
of these actions could adversely affect the value of your
Notes.
|
|
♦
|
Greater
expected volatility generally indicates an increased risk of loss
at maturity. Volatility is a measure of the degree
of variation in the level of the Underlying over a period
of time. The greater the expected volatility of the
Underlying at the time the terms of the Notes are set, the
greater the expectation is at that time that you may lose a
significant portion or all of the Stated Principal
Amount at maturity. However,
the Underlying's volatility can change significantly over the
term of the Notes, and a relatively lower Downside Threshold may
not necessarily indicate that the Notes have a greater
likelihood of a return of principal at maturity. You should be
willing to accept the downside market risk of the
Underlying and the potential to lose a significant portion or
all of your initial investment.
|
|
♦
|
The
Notes are subject to the market risk of the
Underlying. The return on the Notes, which may be
negative, is directly linked to the performance of
the Underlying and indirectly linked to the value of
the securities included in the Underlying. The level of
the Underlying can rise or fall sharply due to factors
specific to the Underlying and the securities
included in the Underlying and the issuers of such
securities, such as stock price volatility, earnings and financial
conditions, corporate, industry and regulatory developments,
management changes and decisions and other events, as well as
general market factors, such as general stock market or commodity
market volatility and levels, interest rates and economic and
political conditions.
|
Tax-related
Risks
|
♦
|
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
single financial contracts, as described below under “U.S. Federal
Income Tax Summary—General.” If the Internal Revenue Service
(the “IRS”) were successful in asserting an alternative
characterization for the Notes, the timing and character
of gain or loss with respect to the Notes may differ. No
ruling will be requested from the IRS with respect to the Notes and
no assurance can be given that the IRS will agree with the
statements made in the section entitled “U.S. Federal Income Tax
Summary.” You are urged to consult with your own tax
advisor regarding all aspects of the U.S. federal income tax
consequences of investing in the
Notes.
|
PS-7
Hypothetical
terms only. Actual terms may vary. See the cover page for actual
offering terms.
The
examples below illustrate the hypothetical Payment at Maturity
for a $10.00 Stated Principal Amount Note for a hypothetical
range of Underlying Returns for the Underlying with
the following assumptions* (amounts may have been rounded for ease
of reference and do not take into account any tax consequences
from investing in the Notes):
|
●
|
Stated
Principal Amount: $10
|
|
●
|
Term: Approximately 12 months
|
|
●
|
Hypothetical Initial
Value: 100.00
|
|
●
|
Hypothetical Downside
Gearing: 1.11
|
|
●
|
Maximum Payment at
Maturity: $11.175
|
|
●
|
Hypothetical Downside
Threshold: 90.00
|
|
●
|
Threshold
Percentage: 10.00%
|
*The hypothetical Initial
Value, Downside
Gearing, and Downside
Threshold do not represent the
actual Initial Value, Downside
Gearing and Downside Threshold,
respectively, applicable to the Underlying. The
actual Initial
Value, Downside Gearing and Downside
Threshold are set forth on
the cover page of this pricing
supplement. Any payment on
the Notes is subject to
issuer and guarantor credit risk.
|
Final
Value
|
Underlying
Return
|
Payment
at Maturity(1)
|
Return
on the Notes
|
|
160.00
|
60.00%
|
$11.17500
|
11.7500%
|
|
150.00
|
50.00%
|
$11.17500
|
11.7500%
|
|
140.00
|
40.00%
|
$11.17500
|
11.7500%
|
|
130.00
|
30.00%
|
$11.17500
|
11.7500%
|
|
120.00
|
20.00%
|
$11.17500
|
11.7500%
|
|
107.84
|
7.84%
|
$11.17500
|
11.7500%(2)
|
|
105.00
|
5.00%
|
$10.75000
|
7.5000%
|
|
102.00
|
2.00%
|
$10.30000
|
3.0000%
|
|
100.00(3)
|
0.00%
|
$10.00000
|
0.0000%
|
|
90.00(4)
|
-10.00%
|
$10.00000
|
0.0000%
|
|
89.99
|
-10.01%
|
$9.99889
|
-0.0011%
|
|
80.00
|
-20.00%
|
$8.89000
|
-11.1000%
|
|
70.00
|
-30.00%
|
$7.78000
|
-22.2000%
|
|
60.00
|
-40.00%
|
$6.67000
|
-33.3000%
|
|
50.00
|
-50.00%
|
$5.56000
|
-44.4000%
|
|
0.00
|
-100.00%
|
$0.00000
|
0.0000%
|
|
(1) Hypothetical
payments at maturity have been rounded down to five
decimal places
|
|
(2) The “Return
on the Notes” cannot exceed the Maximum Gain and is calculated
based on the Public Offering Price of $10 per Note.
|
|
(3) The
hypothetical Initial Value of 100 used in the table above has been
chosen for illustrative purposes only. The
actual Initial Value is set forth on the cover
page.
(4) This is
the hypothetical Downside Threshold of the Underlying.
|
PS-8
Example
1 — The Final Value of
130.00 is greater than the Initial Value
of 100.00, resulting in an Underlying
Return of 30.00%.
Since
the Underlying Return is positive, we will
repay the Stated Principal Amount of the Notes at
maturity plus a return equal to the Underlying Return
multiplied by the Upside Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00
× (1 + the lesser of (i)
30.00% × 1.50 and
(ii) 11.75%) = $11.175
Example 2
— The Final Value of 105.00 is
greater than the Initial Value of 100.00,
resulting in an Underlying Return of
5.00%.
Since
the Underlying Return is positive, we will
repay the Stated Principal Amount of the Notes at
maturity plus a return equal to the Underlying Return
multiplied by the Upside Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00
× (1 + the lesser
of (i) 5.00% x 1.50 and
(ii) 11.75%) = $10.75
Example
3 — The Final Value of
95.00 is less than the Initial Value of
100.00 (resulting in an Underlying
Return of -5.00%) but greater than
the Downside Threshold
of 90.00.
Since
the Underlying Return is negative and the Final Value is greater
than or equal to the Downside Threshold, we will
repay the Stated Principal Amount of the Notes at
maturity.
Example
4 — The Final Value of
50.00 is less than the Initial Value of
100.00 (resulting in an Underlying Return of
-50.00%) and less than the Downside Threshold
of 90.00.
Since
the Underlying Return is negative and the Final Value is less than
the Downside Threshold, we will repay less than the
Stated Principal Amount of your Notes at maturity, resulting in a
loss of 1.11% of the Stated Principal Amount for
every 1% by which the decline exceeds the Threshold Percentage. In
this example, you would receive a payment at maturity
of $5.56 (a total return
of -44.40%), calculated as follows:
$10.00 + [10.00 × Downside
Gearing × (Underlying Return +Threshold
Percentage)]
$10.00
+
[$10.00 × 1.11 × (-50.00% + 10.00%)]
$10.00
+ [$11.10 × -40.00] = $5.56
PS-9
All
disclosures contained in this pricing supplement regarding the
Underlying, including, without limitation, its make-up, method
of calculation, and changes in its components, have been
derived from publicly available sources. The information reflects
the policies of, and is subject to change by, S&P Dow
Jones Indices LLC (“SPDJI”), the sponsor of
the SPX. We refer to SPDJI as the “Underlying
Sponsor.” The Underlying Sponsor, which licenses the copyright
and all other rights to the Underlying, has no obligation to
continue to publish, and may discontinue publication of, the
Underlying. The consequences of the Underlying Sponsor
discontinuing publication of the Underlying are discussed in
“Description of the Notes—Discontinuance of an Index” in the
accompanying product supplement. None of us, the Guarantor,
the calculation agent, or either Selling
Agent accepts any responsibility for the calculation,
maintenance or publication of the Underlying or any successor
index.
None
of us, the Guarantor, the Selling Agents or any of
our or their respective affiliates makes any
representation to you as to the future performance of the
Underlying.
You
should make your own investigation into the
Underlying.
The S&P
500® Index
The
SPX includes a representative sample of 500 companies in leading
industries of the U.S. economy. 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. SPDJI may from time to time, in
its sole discretion, add companies to, or delete companies from,
the SPX to achieve the objectives stated above.
Company additions
to the SPX must have an unadjusted company market capitalization of
$8.2 billion or more (an increase from the previous requirement of
an unadjusted company market capitalization of $6.1 billion or
more).
SPDJI
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
SPDJI currently employs the following methodology to calculate the
SPX, no assurance can be given that SPDJI will not modify or change
this methodology in a manner that may affect the Payment at
Maturity.
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, SPDJI
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. SPDJI’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.
Treasury stock,
stock options, restricted shares, 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, SPDJI 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, SPDJI 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.
PS-10
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.
Index
Maintenance
Index
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.
Historical
Performance of the SPX
The
following graph sets forth the daily historical performance of
the SPX in the period from January 1, 2008
through the Trade Date. We obtained this historical data from
Bloomberg L.P. We have not independently verified the accuracy or
completeness of the information obtained from Bloomberg L.P. The
horizontal line in the graph represents the
SPX’s Downside Threshold of 3,195.45, which
is 90.00% of the SPX’s Initial
Value of 3,550.50, which was its closing level on
the Trade Date.
This
historical data on the SPX is not necessarily indicative of
the future performance of the SPX or what the value of the
Notes may be. Any historical upward or downward trend in the level
of the SPX during any period set forth above is not an
indication that the level of the SPX 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 SPX.
License
Agreement
S&P® is
a registered trademark of Standard & Poor’s Financial Services
LLC (“S&P”) 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 500®”
and “S&P®” are trademarks of S&P. These
trademarks have been sublicensed for certain purposes by our
affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated (“MLPF&S”). The SPX 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, S&P 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 SPX to track
general market performance. S&P Dow Jones Indices’ only
relationship to MLPF&S with respect to the SPX is the
licensing of the SPX and certain trademarks, service marks and/or
trade names of S&P Dow Jones Indices and/or its third party
licensors. The SPX 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 SPX. S&P Dow Jones
PS-11
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 SPX 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 SPX. 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 SPX 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 DISCLAIM 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 SPX OR WITH
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.
PS-12
|
Supplement
to the Plan of Distribution; Role
of BofAS and Conflicts of
Interest
|
BofAS,
an affiliate of BofA Finance and the lead selling agent for the
sale of the Notes, will not receive an underwriting discount for
any Note sold in this offering. UBS, as selling
agent for sales of the Notes, has agreed to purchase from
BofAS, and BofAS has agreed to sell to UBS, all of the Notes
sold in this offering for $10.00 per Note. UBS will not
receive an underwriting discount for any Note sold in this
offering. UBS proposes to offer the Notes to certain fee-based
advisory accounts for which UBS is an investment advisor at a price
of $10.00 per Note. If all of the Notes are not sold at the
initial offering price, BofAS may change the public offering price
and other selling terms.
BofAS,
a broker-dealer affiliate of ours, is a member of the Financial
Industry Regulatory Authority, Inc. (“FINRA”) and will participate
as lead selling agent in the distribution of
the Notes. Accordingly, the offering of the Notes
will conform to the requirements of FINRA Rule 5121.
BofAS may not make sales in this offering to any of its
discretionary accounts without the prior written approval of the
account holder.
We
will deliver the Notes against payment therefor in New York,
New York on a date that is greater than two business days following
the Trade 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, purchasers who wish
to trade the Notes more than two business days prior to
the Issue Date will be required to specify alternative
settlement arrangements to prevent a failed
settlement.
BofAS and any
of our other broker-dealer affiliates may use this pricing
supplement, and the accompanying product supplement, prospectus
supplement and prospectus, for offers and sales in secondary market
transactions and market-making transactions in the Notes.
However, they are not obligated to engage in such secondary
market transactions and/or market-making transactions.
BofAS 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.
As
agreed by BofAS and UBS, for approximately
a three-month period after the Trade Date, to the
extent BofAS offers to buy the Notes in the secondary
market, it will do so at a price that will exceed the
estimated value of the Notes at that time. The amount of this
excess will decline on a straight line basis over that period.
Thereafter, if BofAS buys or sells your Notes, it will do so
at prices that reflect the estimated value determined by reference
to its pricing models at that time. Any price at any time
after the Trade Date will be based on then-prevailing market
conditions and other considerations, including the performance
of the Underlying and the remaining term of the Notes. However,
none of us, the Guarantor, BofAS, UBS or any other
party is obligated to purchase your Notes at any price or at
any time, and we cannot assure you that any party
will purchase your Notes at a price that equals or exceeds
the initial estimated value of the Notes.
Any
price that BofAS may pay to repurchase the Notes
will depend upon then prevailing market conditions, the
creditworthiness of us and the Guarantor, and transaction costs.
At certain times, this price may be higher than or lower than
the initial estimated value of the Notes.
Sales Outside
of the United
States
The
Notes have not been approved for public sale in any jurisdiction
outside of the United States. There has been no registration
or filing as to the Notes with any regulatory, securities, banking,
or local authority outside of the United States and no action has
been taken by BofA Finance, BAC, BofAS or any other affiliate of
BAC, or by UBS or any of its affiliates, to offer the Notes in any
jurisdiction other than the United States. As such,
these Notes are made available to investors outside of the United
States only in jurisdictions where it is lawful to make such offer
or sale and only under circumstances that will result in compliance
with applicable laws and regulations, including private placement
requirements.
Further, no offer
or sale of the Notes is being made to residents of:
You
are urged to carefully review the selling restrictions that may be
applicable to your jurisdiction beginning on page S-68 of the
accompanying prospectus supplement.
European
Economic Area and United Kingdom
None
of this pricing supplement, the accompanying product supplement,
the accompanying prospectus or the accompanying prospectus
supplement is a prospectus for the purposes of the Prospectus
Regulation (as defined below). This pricing supplement, the
accompanying product supplement, the accompanying prospectus and
the accompanying prospectus supplement have been prepared on the
basis that any offer of Notes in any Member State of the European
Economic Area (the “EEA”) or in the United Kingdom (each,
a “Relevant State”) will only be made to a legal entity which is a
qualified investor under the Prospectus Regulation (“Qualified
Investors”). Accordingly any person making or intending to make an
offer in that Relevant State of Notes which are the subject of
the offering contemplated in this pricing supplement, the
accompanying product supplement, the
PS-13
accompanying
prospectus and the accompanying prospectus supplement may only do
so with respect to Qualified Investors. Neither BofA Finance nor
BAC has authorized, nor does it authorize, the
making of any offer of Notes other than to Qualified Investors. The
expression “Prospectus Regulation” means Regulation (EU)
2017/1129.
PROHIBITION
OF SALES TO EEA AND UNITED KINGDOM RETAIL
INVESTORS — The
Notes are not intended to be offered, sold or otherwise made
available to and should not be offered, sold or otherwise made
available to any retail investor in the EEA or the United
Kingdom. For these purposes: (a) a retail investor means a person
who is one (or more) of: (i) a retail client as defined in point
(11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID
II”); or (ii) a customer within the meaning of Directive (EU)
2016/97 (the Insurance Distribution Directive), where that customer
would not qualify as a professional client as defined in point (10)
of Article 4(1) of MiFID II; or (iii) not a qualified investor as
defined in the Prospectus Regulation; and (b) the expression
“offer” includes the communication in any form and by any means of
sufficient information on the terms of the offer and the Notes to
be offered so as to enable an investor to decide to purchase or
subscribe for the Notes. Consequently no key information document
required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs
Regulation”) for offering or selling the Notes or otherwise making
them available to retail investors in the EEA or the United
Kingdom has been prepared and therefore offering or selling
the Notes or otherwise making them available to any retail investor
in the EEA or in the United Kingdom may be unlawful under
the PRIIPs Regulation.
United
Kingdom
The
communication of this pricing supplement, the accompanying product
supplement, the accompanying prospectus supplement, the
accompanying prospectus and any other document or materials
relating to the issue of the Notes offered hereby is not being
made, and such documents and/or materials have not been approved,
by an authorized person for the purposes of section 21 of the
United Kingdom’s Financial Services and Markets Act 2000, as
amended (the “FSMA”). Accordingly, such documents and/or materials
are not being distributed to, and must not be passed on to, the
general public in the United Kingdom. The communication of such
documents and/or materials as a financial promotion is only being
made to those persons in the United Kingdom who have professional
experience in matters relating to investments and who fall within
the definition of investment professionals (as defined in Article
19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the “Financial Promotion
Order”)), or who fall within Article 49(2)(a) to (d) of the
Financial Promotion Order, or who are any other persons to whom it
may otherwise lawfully be made under the Financial Promotion Order
(all such persons together being referred to as “relevant
persons”). In the United Kingdom, the Notes offered hereby are only
available to, and any investment or investment activity to which
this pricing supplement, the accompanying product supplement, the
accompanying prospectus supplement and the accompanying prospectus
relates will be engaged in only with, relevant persons. Any person
in the United Kingdom that is not a relevant person should not act
or rely on this pricing supplement, the accompanying product
supplement, the accompanying prospectus supplement or the
accompanying prospectus or any of their contents.
Any
invitation or inducement to engage in investment activity (within
the meaning of Section 21 of the FSMA) in connection with the issue
or sale of the Notes may only be communicated or caused to be
communicated in circumstances in which Section 21(1) of the
FSMA does not apply to the issuer or the guarantor.
All
applicable provisions of the FSMA must be complied with in respect
to anything done by any person in relation to the Notes in, from or
otherwise involving the United Kingdom.
PS-14
The
Notes are our debt securities, the return on which is linked to the
performance of the Underlying. The related guarantees are
BAC’s obligations. Any payments on the Notes depend on the credit
risk of BofA Finance and BAC and on the performance of the
Underlying. The economic terms of the Notes reflect our and
BAC’s actual or perceived creditworthiness at the time of pricing
and 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 elsewhere in this pricing
supplement, reduced 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 are paying
to purchase the Notes is greater than the initial estimated
value of the Notes as of the Trade Date.
On the
cover page of this pricing supplement, we have provided the
initial estimated value for the Notes.
In
order to meet our payment obligations on the Notes, at the time we
issue the Notes, we may choose to enter into certain hedging
arrangements (which may include call options, put options or other
derivatives) with BofAS or one of our other affiliates.
The terms of these hedging arrangements are determined based
upon terms provided by BofAS and its affiliates, and take
into account a number of factors, including our and BAC’s
creditworthiness, interest rate movements, the volatility of the
Underlying, the tenor of the Notes and the hedging
arrangements. The economic terms of the Notes and their
initial estimated value depend in part on the terms of these
hedging arrangements.
BofAS has
advised us that the hedging arrangements will include hedging
related charges, reflecting the costs associated with, and our
affiliates’ profit earned from, these hedging arrangements.
Since hedging entails risk and may be influenced by
unpredictable market forces, actual profits or losses from these
hedging transactions may be more or less than any expected amounts.
For
further information, see “Risk Factors” beginning on page
PS-6 above and “Supplemental Use of Proceeds” on page
PS-19 of the accompanying product
supplement.
In the
opinion of McGuireWoods LLP, as counsel to BofA Finance and BAC,
when the trustee has made the appropriate entries or notations on
the applicable schedule to the master global note that represents
the Notes (the “master note”) identifying the Notes offered
hereby as supplemental obligations thereunder in accordance with
the instructions of BofA Finance and the provisions of the
indenture governing the Notes and the related guarantee, and the
Notes have been delivered against payment therefor as contemplated
in this pricing supplement and the related prospectus, prospectus
supplement and product supplement, such Notes will be the legal,
valid and binding obligations of BofA Finance, and the related
guarantee will be the legal, valid and binding obligation of BAC,
subject, in each case, to the effects of applicable bankruptcy,
insolvency (including laws relating to preferences, fraudulent
transfers and equitable subordination), reorganization, moratorium
and other similar laws affecting creditors' rights generally, and
to general principles of equity. This opinion is given as of the
date of this pricing supplement and is limited to the laws of the
State of New York and the Delaware Limited Liability Company Act
and the Delaware General Corporation Law (including the statutory
provisions, all applicable provisions of the Delaware Constitution
and reported judicial decisions interpreting the foregoing) as in
effect on the date hereof. In addition, this opinion is subject to
customary assumptions about the trustee's authorization, execution
and delivery of the indenture governing the Notes and due
authentication of the master note, the validity, binding nature and
enforceability of the indenture governing the Notes and the related
guarantee with respect to the trustee, the legal capacity of
individuals, the genuineness of signatures, the authenticity of all
documents submitted to McGuireWoods LLP as originals, the
conformity to original documents of all documents submitted to
McGuireWoods LLP as copies thereof, the authenticity of the
originals of such copies and certain factual matters, all as stated
in the letter of McGuireWoods LLP dated December 30, 2019, which
has been filed as an exhibit to Pre-Effective Amendment No. 1 to
the Registration Statement (File No. 333-234425) of BofA Finance
and BAC, filed with the Securities and Exchange Commission on
December 30, 2019.
Sidley
Austin LLP, New York, New York, is acting as counsel to BofAS and
as special tax counsel to BofA Finance and BAC.
PS-15
|
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 BAC for U.S. federal income tax purposes.
Accordingly throughout this tax discussion, references to
“we,” “our” or “us” are generally to BAC 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, in the opinion of our
counsel, Sidley Austin LLP, and based on certain factual
representations received from us, the Notes should be treated as
single financial contracts with respect to the Underlying 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. This discussion assumes that the
Notes constitute single financial contracts with respect to the
Underlying for U.S. federal income tax purposes. If the
Notes did not constitute 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 a component
stock included in the Underlying would be treated as a “passive
foreign investment company” (“PFIC”), within the meaning of Section
1297 of the Code, or a United States real property holding
corporation, within the meaning of Section 897(c) of the Code.
If the issuer of one or more stocks included in the
Underlying were so treated, certain adverse U.S. federal income tax
consequences could possibly apply to a holder of the Notes. You
should refer to information filed with the SEC by the issuers of
the component stocks included in the Underlying and consult your
tax advisor regarding the possible consequences to you, if any, if
any issuer of a component stock included in the Underlying is or
becomes a PFIC or is or becomes a United States real property
holding corporation.
U.S.
Holders
Upon
receipt of a cash payment at maturity or upon a
sale or exchange 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 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.
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 ale or exchange of the Notes
generally would be treated as ordinary income, and any loss
realized at maturity or upon a sale or exchange of
the Notes generally would be treated as ordinary loss to the
extent of the U.S. Holder’s prior accruals of original issue
discount, and as capital loss thereafter.
PS-16
The
IRS released Notice 2008-2 (the “Notice”), which sought
comments from the public on the taxation of financial instruments
currently taxed as “prepaid forward contracts.” This Notice
addresses instruments such as the Notes. According to
the Notice, the IRS and Treasury are considering whether a holder
of an instrument such as the Notes should be required to
accrue ordinary income on a current basis, regardless of whether
any payments are made prior to maturity. It is not possible
to determine what guidance the IRS and Treasury will ultimately
issue, if any. Any such future guidance may affect the
amount, timing and character of income, gain, or loss in respect of
the Notes, possibly with retroactive effect.
The
IRS and Treasury are also considering additional issues, including
whether additional gain or loss from such instruments should be
treated as ordinary or capital, whether foreign holders of such
instruments should be subject to withholding tax on any deemed
income accruals, whether Section 1260 of the Code, concerning
certain “constructive ownership transactions,” generally applies or
should generally apply to such instruments, and whether any of
these determinations depend on the nature of the underlying
asset.
In
addition, proposed Treasury regulations require the accrual of
income on a current basis for contingent payments made under
certain notional principal contracts. The preamble to the
regulations states that the “wait and see” method of accounting
does not properly reflect the economic accrual of income on those
contracts, and requires current accrual of income for some
contracts already in existence. While the proposed regulations do
not apply to prepaid forward contracts, the preamble to the
proposed regulations expresses the view that similar timing issues
exist in the case of prepaid forward contracts. If the IRS or
Treasury publishes future guidance requiring current economic
accrual for contingent payments on prepaid forward contracts, it is
possible that you could be required to accrue income over the term
of the Notes.
Because of the
absence of authority regarding the appropriate tax characterization
of the Notes, it is also possible that the IRS could seek to
characterize the Notes in a manner that results in tax consequences
that are different from those described above. For example, the IRS
could possibly assert that any gain or loss that a holder may
recognize at maturity or upon the sale or exchange of the Notes
should be treated as ordinary gain or loss.
Because the
Underlying is an index that periodically rebalances, it is possible
that the Notes could be treated as a series of single financial
contracts, each of which matures on the next rebalancing date. If
the Notes were properly characterized in such a manner, a U.S.
Holder would be treated as disposing of the Notes on each
rebalancing date in return for new Notes that mature on the next
rebalancing date, and a U.S. Holder would accordingly likely
recognize capital gain or loss on each rebalancing date equal to
the difference between the holder’s tax basis in the Notes (which
would be adjusted to take into account any prior recognition of
gain or loss) and the fair market value of the Notes on such
date.
Non-U.S.
Holders
Except
as discussed below, a Non-U.S. Holder generally will not be subject
to U.S. federal income or withholding tax for amounts paid in
respect of the Notes 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 or exchange 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 settlement and
certain other conditions are satisfied.
If a
Non-U.S. Holder of the Notes is engaged in the conduct of a
trade or business within the U.S. and if gain realized on the
settlement at maturity, or upon sale or exchange 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 gain on a net income basis in the
same manner as if it were a U.S. Holder. Such Non-U.S.
Holders should read the material under the heading “—U.S. Holders,”
for a description of the U.S. federal income tax consequences of
acquiring, owning, and disposing of the Notes. In
addition, if such Non-U.S. Holder is a foreign corporation, it may
also be subject to a branch profits tax equal to 30% (or such lower
rate provided by any applicable tax treaty) of a portion of its
earnings and profits for the taxable year that are effectively
connected with its conduct of a trade or business in the U.S.,
subject to certain adjustments.
A
“dividend equivalent” payment is treated as a dividend from sources
within the United States and such payments generally would be
subject to a 30% U.S. withholding tax if paid to a Non-U.S. Holder.
Under Treasury regulations, payments (including deemed
payments) with respect to equity-linked instruments (“ELIs”) that
are “specified ELIs” may be treated as dividend equivalents if such
specified ELIs reference an interest in an “underlying security,”
which is generally any interest in an entity taxable as a
corporation for U.S. federal income tax purposes if a payment with
respect to such interest could give rise to a U.S. source dividend.
However, IRS guidance provides that withholding on dividend
equivalent payments will not apply to specified ELIs that are not
delta-one instruments and that are issued before January 1, 2023.
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 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 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, tax will be
withheld at the applicable statutory rate. As discussed above,
the IRS has indicated in the Notice that it is considering whether
income in respect of instruments such as the Notes should be
subject to withholding tax. Prospective Non-U.S. Holders
should consult their own tax advisors regarding the tax
consequences of such alternative characterizations.
U.S. Federal
Estate Tax. Under current law, while the matter is not
entirely clear, individual Non-U.S. Holders, and entities whose
property is potentially includible in those individuals’ gross
estates for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with
PS-17
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.
PS-18
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