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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)
November 24,
2021
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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 $35,513,880 Trigger Autocallable Contingent Yield
Notes
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Linked to the
Least Performing of the Russell 2000®
Index and the NASDAQ-100®
Index Due November 30,
2026
Fully and
Unconditionally Guaranteed by Bank of America
Corporation
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Investment
Description
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The
Trigger Autocallable Contingent Yield Notes (the “Notes”) linked to
the least performing of the Russell 2000® Index
and the NASDAQ-100® Index (each, an “Underlying”) due
November 30, 2026 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 Notes
will pay a Contingent Coupon Payment on each quarterly Coupon
Payment Date if, and only if, the Current Underlying Level of the
Least Performing Underlying on the related quarterly Observation
Date is greater than or equal to its Coupon Barrier. If the Current
Underlying Level of the Least Performing Underlying on the
applicable quarterly Observation Date is less than its Coupon
Barrier, no Contingent Coupon Payment will accrue or be paid on the
related Coupon Payment Date. Beginning approximately six months
after issuance, if the Current Underlying Level of the Least
Performing Underlying on the applicable quarterly Observation Date
(other than the Final Observation Date) is greater than or equal to
its Initial Value, we will automatically call the Notes and pay you
the Stated Principal Amount plus the Contingent Coupon Payment for
that Observation Date, and no further amounts will be owed to you.
If the Notes have not previously been automatically called, at
maturity, the amount you receive will depend on the Final Value of
the Least Performing Underlying on the Final Observation Date. If
the Final Value of the Least Performing Underlying on the Final
Observation Date is greater than or equal to its Downside
Threshold, you will receive the Stated Principal Amount at maturity
(plus the final Contingent Coupon Payment). However, if the Notes
have not been automatically called prior to maturity and the Final
Value of the Least Performing Underlying on the Final Observation
Date is less than its Downside Threshold, you will receive less
than the Stated Principal Amount at maturity, resulting in a loss
that is proportionate to the decline in the closing level of the
Least Performing Underlying from the Trade Date to the Final
Observation Date, up to a 100% loss of your investment. On each
Observation Date, the “Least Performing Underlying” is the
Underlying with the lowest Underlying Return from the Trade Date to
that Observation Date. Investing in the Notes involves
significant risks. You may lose a substantial portion or all of
your initial investment. All payments on the Notes will be
based solely on the performance of the Least
Performing Underlying. You will not benefit in any way from the
performance of the other Underlying. You will therefore be
adversely affected if either Underlying
performs poorly, regardless of the performance of the other
Underlying. You will not receive dividends or other distributions
paid on any stocks included in the Underlyings or participate in
any appreciation of either Underlying. The contingent repayment of
the Stated Principal Amount applies only if you hold the Notes to
maturity or earlier automatic call. Any payment on the Notes,
including any repayment of the Stated Principal Amount, is subject
to the creditworthiness of the 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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❑
Contingent Coupon Payment — We will pay you a Contingent
Coupon Payment on each quarterly Coupon Payment Date if, and only
if, the Current Underlying Level of the Least Performing Underlying
on the related Observation Date is greater than or equal to its
Coupon Barrier. Otherwise, no Contingent Coupon Payment will
be paid for that quarter.
❑
Automatic Call — Beginning approximately six months after
issuance, we will automatically call the Notes and pay you the
Stated Principal Amount plus the final Contingent Coupon Payment if
the Current Underlying Level of the Least Performing Underlying on
the applicable quarterly Observation Date (other than the Final
Observation Date) is greater than or equal to its Initial Value.
If the Notes are not automatically called, investors may have
full downside market exposure to the Least Performing Underlying at
maturity.
❑
Downside Exposure with Contingent Repayment of Principal at
Maturity — If the Notes are not automatically called prior to
maturity and the Final Value of the Least Performing Underlying on
the Final Observation Date is greater than or equal to its Downside
Threshold, you will receive the Stated Principal Amount at maturity
(plus the final Contingent Coupon Payment). However, if the Final
Value of the Least Performing Underlying on the Final Observation
Date is less than its Downside Threshold, you will receive less
than the Stated Principal Amount of your Notes at maturity,
resulting in a loss that is proportionate to the decline in the
closing level of the Least Performing Underlying from the Trade
Date to the Final Observation 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
Observation
Dates2
Final
Observation Date2
Maturity
Date
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November 24,
2021
November 30,
2021
Quarterly, subject
to automatic call beginning on May 24, 2022
November 24,
2026
November 30,
2026
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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-6 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 STATED PRINCIPAL AMOUNT AT MATURITY, AND THE
NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE LEAST PERFORMING
UNDERLYING. 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-7 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 SOME OR ALL
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 Trigger Autocallable Contingent Yield Notes linked to the
least performing of the Russell 2000® Index and the
NASDAQ-100® Index due November 30, 2026. Any payment on
the Notes will be based on the performance of the Least Performing
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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Underlyings
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Contingent
Coupon Rate
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Initial
Values
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Coupon
Barriers
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Downside
Thresholds
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CUSIP
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Russell
2000® Index (Ticker: RTY)
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6.86%
per annum
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2,331.459
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1,678.650, which
is 72% of the Initial Value (rounded to three decimal
places)
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1,678.650, which
is 72% of the Initial Value (rounded to three decimal
places)
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09710E341
/ US09710E3412
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NASDAQ-100®
Index (Ticker: NDX)
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16,367.81
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11,784.82, which
is 72% of the Initial Value (rounded to two decimal
places)
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11,784.82, which
is 72% of the Initial Value (rounded to two decimal
places)
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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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$0.225
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$9.775
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Total
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$35,513,880.00
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$799,062.30
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$34,714,817.70
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(1) The
underwriting discount is $0.225 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 $9.775
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 has agreed to sell to UBS, all of the Notes for $9.775
per Note, UBS will receive an underwriting discount of $0.225 per
Note for each Note it sells in this offering. UBS proposes to offer
the Notes to the public at a price of $10.00 per Note. 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 $9.603 per $10 in Stated Principal Amount.
See “Summary” beginning on page PS-4 of this pricing supplement,
“Risk Factors” beginning on page PS-7 of this pricing supplement
and “Structuring the Notes” on page PS-23 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 can tolerate a
loss of all or a substantial portion of your investment and are
willing to make an investment that will have the full downside
market risk of an investment in the Least Performing
Underlying.
♦
You understand and
accept the risks associated with the Underlyings.
♦
You are willing to
accept the individual market risk of each Underlying and understand
that any decline in the level of one Underlying will not be offset
or mitigated by a lesser decline or any potential increase in the
level of the other Underlying.
♦
You believe the
Current Underlying Level of each Underlying is likely to be greater
than or equal to its Coupon Barrier on the Observation Dates, and,
if the Current Underlying Level of either Underlying is not, you
can tolerate receiving few or no Contingent Coupon Payments over
the term of the Notes.
♦
You believe the
Current Underlying Level of each Underlying will be greater than or
equal to its Downside Threshold on the Final Observation Date, and,
if the Current Underlying Level of either Underlying is below its
Downside Threshold on the Final Observation Date, you can tolerate
a loss of all or a substantial portion of your
investment.
♦
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 Least Performing Underlying.
♦
You understand
that your return will be based on the performance of the Least
Performing Underlying and you will not benefit from the performance
of the other Underlying.
♦
You are willing to
hold Notes that will be called on the earliest Observation Date
(beginning six months after issuance, other than the Final
Observation Date) on which the Current Underlying Level of the
Least Performing Underlying is greater than or equal to its Initial
Value.
♦
You are willing to
make an investment whose positive return is limited to the
Contingent Coupon Payments, regardless of the potential
appreciation of the Underlyings, which could be
significant.
♦
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 do not seek
guaranteed current income from your investment and are willing to
forgo dividends or any other distributions paid on the stocks
included in the Underlyings.
♦
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 of loss of your entire investment.
♦
You cannot
tolerate the loss of all or a substantial portion of your initial
investment, or you are not willing to make an investment that will
have the full downside market risk of an investment in the Least
Performing Underlying.
♦
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
each of the Underlyings.
♦
You are unwilling
to accept the individual market risk of each Underlying or do not
understand that any decline in the level of one Underlying will not
be offset or mitigated by a lesser decline or any potential
increase in the level of the other Underlying.
♦
You do not believe
the Current Underlying Level of each Underlying is likely to be
greater than or equal to its Coupon Barrier on the Observation
Dates, or you cannot tolerate receiving few or no Contingent Coupon
Payments over the term of the Notes.
♦
You believe the
Current Underlying Level of either Underlying will be less than its
Downside Threshold on the Final Observation Date, exposing you to
the full downside performance of the Least Performing
Underlying.
♦
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 Least Performing Underlying.
♦
You are unwilling
to accept that your return will be based on the performance of the
Least Performing Underlying, or you seek an investment based on the
performance of a basket composed of the Underlyings.
♦
You are unwilling
to hold Notes that will be called on the earliest Observation Date
(beginning six months after issuance, other than the Final
Observation Date) on which the Current Underlying Level of the
Least Performing Underlying is greater than or equal to its Initial
Value.
♦
You seek an
investment that participates in the full appreciation of the
Underlyings and whose positive return is not limited to the
Contingent Coupon Payments.
♦
You seek an
investment for which there will be an active secondary
market.
♦
You seek
guaranteed current income from this investment or prefer to receive
the dividends and any other distributions paid on the stocks
included in the Underlyings.
♦
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 Underlyings”
herein for more information on the Underlyings. 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
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Summary
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Issuer
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BofA
Finance
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Guarantor:
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BAC
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Public
Offering Price
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100%
of the Stated Principal Amount
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Stated
Principal Amount
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$10.00
per Note
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Minimum
Investment
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$1,000
(100 Notes)
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Term
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Approximately
five years, unless earlier automatically called
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Trade
Date1
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November 24,
2021
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Issue
Date1
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November 30,
2021
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Final
Observation Date
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November 24,
2026
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Maturity
Date
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November 30,
2026
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Underlyings
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Russell
2000® Index (Ticker: RTY)
NASDAQ-100®
Index (Ticker: NDX)
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Automatic Call
Feature
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The
Notes will be automatically called if the Current Underlying Level
of the Least Performing Underlying on any Observation Date
occurring on or after May 24, 2022 (other than the Final
Observation Date) is greater than or equal to its Initial
Value.
If the
Notes are automatically called, we will pay you on the applicable
Coupon Payment Date a cash payment per $10.00 Stated Principal
Amount equal to the Stated Principal Amount plus the Contingent
Coupon Payment for the applicable Observation Date.
If the
Notes are automatically called, no further payments will be made on
the Notes.
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Observation
Dates
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See
“Observation Dates and Coupon Payment Dates” on page
PS-6.
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Coupon
Payment Dates
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See
“Observation Dates and Coupon Payment Dates” on page
PS-6.
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Contingent Coupon
Payment/Contingent Coupon Rate
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If the
Current Underlying Level of the Least Performing Underlying on the
applicable quarterly Observation Date is greater than or equal to
its Coupon Barrier, we will make a Contingent Coupon Payment with
respect to that Observation Date on the related Coupon Payment
Date.
However, if the
Current Underlying Level of the Least Performing Underlying on the
applicable quarterly Observation Date is below its Coupon Barrier,
no Contingent Coupon Payment will accrue or be payable on the
related Coupon Payment Date.
Each
Contingent Coupon Payment will be in the amount of $0.1715 for each
$10.00 Stated Principal Amount (based on the per annum Contingent
Coupon Rate of 6.86%) and will be payable, if applicable, on
the related Coupon Payment Date.
Contingent
Coupon Payments on the Notes are not guaranteed. We will not pay
you the Contingent Coupon Payment for any Observation Date on which
the Current Underlying Level of the Least Performing Underlying on
that Observation Date is less than its Coupon Barrier, even if
the
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Current
Underlying Level of the other Underlying is above its Coupon
Barrier.
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Payment At
Maturity (per $10.00 Stated Principal Amount)
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If
the Notes are not automatically called prior to maturity and the
Final Value of the Least Performing Underlying on the Final
Observation Date is greater than or equal to its Downside
Threshold, on the Maturity Date we will pay you the Stated
Principal Amount plus the Contingent Coupon Payment with respect to
the Final Observation Date.
If
the Notes are not automatically called prior to maturity and the
Final Value of the Least Performing Underlying on the Final
Observation Date is less than its Downside Threshold, we will
pay you a cash payment on the Maturity Date that is less than your
Stated Principal Amount and may be zero, resulting in a loss that
is proportionate to the negative Underlying Return of the Least
Performing Underlying on the Final Observation Date, equal
to:
$10.00
× (1 + Underlying Return of the Least Performing Underlying on
the Final Observation Date)
Accordingly,
you may lose all or a substantial portion of your Stated Principal
Amount at maturity, depending on how significantly the Least
Performing Underlying declines, even if the Final Value of the
other Underlying is above its Downside
Threshold.
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Least
Performing Underlying
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On
each Observation Date, including the Final Observation Date, the
Underlying with the lowest Underlying Return as of that Observation
Date.
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Underlying
Return
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For
any Underlying on any Observation Date, calculated as
follows:
Current
Underlying Level — Initial Value
Initial Value
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Downside
Threshold
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For
any Underlying, 72% of its Initial Value, as specified on the
cover page of this pricing supplement.
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Coupon
Barrier
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For
any Underlying, 72% of its Initial Value, as specified on the
cover page of this pricing supplement.
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Initial
Value
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For
any Underlying, its closing level on the Trade Date, as specified
on the cover page of this pricing supplement.
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Current Underlying
Level
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For
any Underlying and any Observation Date, the closing level of that
Underlying on that Observation Date.
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Final
Value
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For
any Underlying, its Current Underlying Level on the Final
Observation Date.
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Calculation
Agent
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BofAS,
an affiliate of BofA Finance.
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Selling
Agents
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BofAS
and UBS.
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Events
of Default and Acceleration:
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If an
Event of Default, as defined in the senior indenture relating to
the Notes and in the section entitled “Description of Debt
Securities—Events of Default and Rights of Acceleration” beginning
on
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1See “Supplement to
the Plan of Distribution; Role of BofAS and Conflicts of Interest”
in this pricing supplement for additional information.
PS-4
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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 Final Observation Date
were the third trading day prior to the date of acceleration. We
will also determine whether the final Contingent Coupon Payment is
payable based upon the levels of the Underlyings on the deemed
Final Observation Date; any such final Contingent Coupon Payment
will be prorated by the calculation agent to reflect the length of
the final contingent payment period. In case of a default in
the payment of the Notes, whether at their maturity or upon
acceleration, the Notes will not bear a default interest
rate.
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Investment
Timeline
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Trade
Date
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The
closing level of each Underlying (its Initial Value) is observed,
the Contingent Coupon Level/Contingent Coupon Rate is set, and the
Coupon Barrier and Downside Threshold for each Underlying are
determined.
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Quarterly
(autocallable after six months)
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If the
Current Underlying Level of the Least Performing Underlying on any
quarterly Observation Date is greater than or equal to its Coupon
Barrier, we will pay you a Contingent Coupon Payment on the related
Coupon Payment Date. However, if the Current Underlying Level of
the Least Performing Underlying on any quarterly Observation Date
is below its Coupon Barrier, no Contingent Coupon Payment will
accrue or be payable on the related Coupon Payment
Date.
The
Notes will be automatically called if the Current Underlying Level
of the Least Performing Underlying on any Observation Date
(beginning approximately six months after issuance, other than the
Final Observation Date) is greater than or equal to its Initial
Value.
If the
Notes are automatically called on any Observation Date, we will pay
the Stated Principal Amount plus the applicable Contingent Coupon
Payment on the related Coupon Payment Date.
If the
Notes are automatically called, no further payments will be made on
the Notes.
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Maturity Date
(if not previously automatically called)
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If the
Notes are not automatically called prior to maturity, the Final
Value of each Underlying will be observed on the Final Observation
Date.
If
the Final Value of the Least Performing Underlying on the Final
Observation Date is greater than or equal to its Downside
Threshold, on the Maturity Date we will pay you the Stated
Principal Amount plus the
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Contingent Coupon
Payment (if applicable) with respect to the Final Observation
Date.
If
the Final Value of the Least Performing Underlying on the Final
Observation Date is less than its Downside Threshold, on the
Maturity Date we will pay you a cash payment that is less than your
Stated Principal Amount and may be zero, resulting in a loss that
is proportionate to the negative Underlying Return of the Least
Performing Underlying on the Final Observation Date, equal
to:
$10.00
× (1 + Underlying Return of the Least Performing Underlying on
the Final Observation Date)
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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
EACH UNDERLYING AND ANY DECLINE IN THE LEVEL OF ONE UNDERLYING MAY
NEGATIVELY AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED
BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE LEVEL OF THE
OTHER UNDERLYING. THE CONTINGENT REPAYMENT OF THE
STATED PRINCIPAL AMOUNT APPLIES ONLY IF YOU HOLD THE NOTES TO
MATURITY OR EARLIER AUTOMATIC CALL. ANY PAYMENT ON THE NOTES IS
SUBJECT TO THE CREDITWORTHINESS OF BOFA FINANCE AND THE
GUARANTOR.
PS-5
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Observation Dates and Coupon Payment
Dates
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Observation
Dates1
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Coupon Payment
Dates
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February 24,
2022*
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February 28,
2022
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May
24, 2022
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May
26, 2022
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August
24, 2022
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August
26, 2022
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November 25,
2022
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November 29,
2022
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February 24,
2023
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February 28,
2023
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May
24, 2023
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May
26, 2023
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August
24, 2023
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August
28, 2023
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November 24,
2023
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November 28,
2023
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February 26,
2024
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February 28,
2024
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May
24, 2024
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May
29, 2024
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August
26, 2024
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August
28, 2024
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November 25,
2024
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November 27,
2024
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February 24,
2025
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February 26,
2025
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May 27,
2025
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May
29, 2025
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August
25, 2025
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August
27, 2025
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November 24,
2025
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November 26,
2025
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February 24,
2026
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February 26,
2026
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May
26, 2026
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May
28, 2026
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August
24, 2026
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August
26, 2026
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November 24,
2026*
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November 30,
2026
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*The
Notes are NOT automatically callable until second Observation Date,
which is May 24, 2022, and will NOT be automatically callable
on the Final Observation Date (November 24, 2026).
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1 The
Observation Dates are subject to postponement as set forth in
“Additional Terms Relating to Observation Dates”
below.
Additional
Terms Relating to Observation Dates
Events Relating
to Observation Dates — The following replaces in its
entirety the section entitled “Description of the Notes—Certain
Terms of the Notes — Events Relating to Observation Dates” in
the accompanying product supplement:
If,
with respect to any Underlying, (i) a Market Disruption Event
occurs on a scheduled Observation Date or (ii) the calculation
agent determines that by reason of an extraordinary event,
occurrence, declaration or otherwise, any scheduled Observation
Date is not a Trading Day for any Underlying (any such day in
either (i) or (ii) being a “Non-Observation Date”), the
calculation agent will determine the closing level of the
applicable Underlyings for that day as follows:
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●
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The closing level
of an Underlying that is not so affected will be its closing level
on that Non-Observation Date.
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●
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The closing level
of an Underlying that is affected by
that Non-Observation Date will be deemed to be its
closing level on the first scheduled Trading Day following
that Non-Observation Date. However, if (i) a Market
Disruption Event occurs on the first scheduled Trading Day
following that Non-Observation Date or (ii) the first scheduled
Trading Day following that Non-Observation Date is determined by
the calculation agent not to be a Trading Day by reason of an
extraordinary event, occurrence, declaration or otherwise, the
closing level of the Underlying for the relevant Observation Date
will be determined (or, if not determinable, estimated) by the
calculation agent in a manner which the calculation agent considers
commercially reasonable under the circumstances on such first
scheduled Trading Day following that Non-Observation Date,
regardless of the occurrence of a Market Disruption Event or
non-Trading Day on that day.
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The
applicable Observation Date will be deemed to occur after the
calculation agent has determined the closing levels of the
Underlyings as provided above.
PS-6
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 Notes are not automatically called prior
to maturity and the Final Value of any Underlying is less than its
Downside Threshold, at maturity, you will lose 1% of the Stated
Principal Amount for each 1% that the Final Value of the Least
Performing Underlying is less than its Initial Value. In that case,
you will lose a significant portion or all of your investment in
the Notes. Generally, the longer the Notes remain outstanding,
the less likely the Notes will be subject to an automatic call
because of the shorter time remaining for the level of an
Underlying that has experienced a decline to recover. The periods
in which it is less likely the Notes will be subject to an
automatic call generally coincide with a period of greater risk of
loss of the Stated Principal Amount on your Notes.
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♦
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The
limited downside protection provided by the Downside Threshold
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 an automatic call or maturity, you may
have to sell them at a loss relative to your initial investment
even if the level of each Underlying at that time is equal to or
greater than its Downside Threshold. All payments on the Notes are
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 is limited to the return represented by the Contingent
Coupon Payments, if any, over the term of the Notes. Your
return on the Notes is limited to the Contingent Coupon Payments
paid over the term of the Notes, regardless of the extent to which
the Current Underlying Level or Final Value of any Underlying
exceeds its Coupon Barrier or Initial Value, as applicable.
Similarly, the amount payable at maturity or upon an automatic call
will never exceed the sum of the Stated Principal Amount and the
applicable Contingent Coupon Payment, regardless of the extent to
which the Final Value or the Current Underlying Level of any
Underlying exceeds its Initial Value. In contrast, a direct
investment in the securities included in one or more of the
Underlyings would allow you to receive the benefit of any
appreciation in their values. Thus, any return on the Notes
will not reflect the return you would realize if you actually owned
those securities and received the dividends paid or distributions
made on them.
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♦
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The
Notes are subject to a potential automatic early call, which would
limit your ability to receive the Contingent Coupon Payments over
the full term of the Notes. The Notes are subject
to a potential automatic early call. Beginning in May 2022, the
Notes will be automatically called if, on any Observation Date
(other than the Final Observation Date), the Current Underlying
Level of the Least Performing Underlying is greater than or equal
to its Initial Value. If the Notes are automatically called prior
to the Maturity Date, you will be entitled to receive the Stated
Principal Amount and the Contingent Coupon Payment with respect to
the applicable Observation Date. In this case, you will lose the
opportunity to continue to receive Contingent Coupon Payments after
the date of automatic call. If the Notes are called prior to the
Maturity Date, you may be unable to invest in other securities with
a similar level of risk that could provide a return that is similar
to the Notes.
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♦
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You
may not receive any Contingent Coupon Payments. The
Notes do not provide for any regular fixed coupon payments.
Investors in the Notes will not necessarily receive any Contingent
Coupon Payments on the Notes. If the Current Underlying Level of
the Least Performing Underlying is less than its Coupon Barrier on
an Observation Date, you will not receive the Contingent Coupon
Payment applicable to that Observation Date. If the Current
Underlying Level of the Least Performing Underlying is less than
its Coupon Barrier on all the Observation Dates during the term of
the Notes, you will not receive any Contingent Coupon Payments
during the term of the Notes, and will not receive a positive
return on the Notes.
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♦
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The
Contingent Coupon Payment, Payment at Maturity, or payment upon an
automatic call, as applicable, will not reflect the levels of the
Underlyings other than on the Observation
Dates. The levels of the Underlyings during the
term of the Notes other than on the Observation Dates will not
affect payments on the Notes. Notwithstanding the foregoing,
investors should generally be aware of the performance of the
Underlyings while holding the Notes, as the performance of the
Underlyings may influence the market value of the Notes. The
calculation agent will determine whether each Contingent Coupon
Payment is payable and will calculate the Contingent Coupon Payment
or the Payment at Maturity, as applicable, by comparing only the
Initial Value, the Coupon Barrier or the Downside Threshold, as
applicable, to the Current Underlying Level or the Final Value for
each Underlying. No other levels of the Underlyings will be taken
into account. As a result, if the Notes are not automatically
called prior to maturity and the Final Value of the Least
Performing Underlying is less than its Downside Threshold, you will
receive less than the Stated Principal Amount at maturity, even if
the level of each Underlying was always above its Downside
Threshold prior to the Final Observation Date.
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PS-7
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♦
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Because the
Notes are linked to the performance of the least performing between
the RTY and the NDX, you are exposed to
greater risk of receiving no Contingent Coupon Payments or
sustaining a significant loss on your investment than if the Notes
were linked to just the RTY or just the
NDX. The risk that you will not receive any
Contingent Coupon Payments and/or lose a significant portion or all
of your investment in the Notes is greater if you invest in the
Notes as opposed to substantially similar securities that are
linked to the performance of just the RTY or just the NDX.
With two Underlyings, it is more likely that either Underlying will
close below its Coupon Barrier on the Observation Dates or below
its Downside Threshold on the Final Observation Date than if the
Notes were linked to only one of the Underlyings, and therefore it
is more likely that you will not receive any Contingent Coupon
Payments or will receive a Payment at Maturity that is
significantly less than the Stated Principal Amount on the Maturity
Date.
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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. In addition, if
interest rates increase during the term of the Notes, the
Contingent Coupon Payment (if any) may be less than the yield on a
conventional debt security of comparable maturity.
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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 all payments 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 applicable payment
date, regardless of the Current Underlying Level or Final Value, as
applicable, of any Underlying as compared to its Coupon Barrier,
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
amounts 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 values of the
Underlyings, 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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Valuation-
and Market-related Risks
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♦
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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 levels of the Underlyings, 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.
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♦
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The
initial estimated value does not represent a minimum or maximum
price at which we, BAC, BofAS or any
of our other affiliates would be willing to purchase your
Notes in any secondary market (if any exists) at any time. The
value of your Notes at any time after issuance will vary based on
many factors that cannot be predicted with accuracy, including
the performance of the Underlyings,
our and BAC’s creditworthiness and changes in market
conditions.
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♦
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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 the distribution participants, for
approximately a five-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
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PS-8
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 the distribution
participants over the term of the Notes, will decline to zero on a
straight line basis over that five-month period. Accordingly,
the estimated value of your Notes during this initial five-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 then-prevailing market
conditions and other considerations, including the performance of
the Underlyings and the remaining term of the
Notes. However, none of us, the Guarantor, BofAS or any
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.
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♦
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We
cannot assure you that a trading market for your Notes will ever
develop or be maintained. We will not list the Notes on any
securities exchange. We cannot predict how the Notes will
trade in any secondary market or whether that market will be liquid
or illiquid.
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The
development of a trading market for the Notes will depend on the
Guarantor’s financial performance and other factors, including
changes in the levels of the Underlyings. 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.
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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 or an automatic
call. 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 or an automatic call. These factors include the levels of
the Underlyings and the securities included in the Underlyings; the
volatility of the Underlyings and the securities included in the
Underlyings; the correlation among the Underlyings; the dividend
rate paid on the securities included in the Underlyings, 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 each of the Underlyings is currently or
has been less than its Coupon Barrier; 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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♦
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A
higher Contingent Coupon Rate and/or a lower Coupon Barrier and/or
Downside Threshold may reflect greater expected volatility of the
Underlyings, which is generally associated with a greater risk of
loss. Volatility is a measure of the degree of
variation in the levels of the Underlyings over a period of time.
The greater the expected volatilities of the Underlyings at the
time the terms of the Notes are set, the greater the expectation is
at that time that you may not receive one or more, or all,
Contingent Coupon Payments and that you may lose a significant
portion or all of the Stated Principal Amount at maturity. In
addition, the economic terms of the Notes, including the Contingent
Coupon Rate, the Coupon Barrier and the Downside Threshold, are
based, in part, on the expected volatilities of the Underlyings at
the time the terms of the Notes are set, where higher expected
volatilities will generally be reflected in a higher Contingent
Coupon Rate than the fixed rate we would pay on conventional debt
securities of the same maturity and/or on otherwise comparable
securities and/or a lower Coupon Barrier and/or a lower Downside
Threshold as compared to otherwise comparable securities.
Accordingly, a higher Contingent Coupon Rate will generally be
indicative of a greater risk of loss while a lower Coupon Barrier
or Downside Threshold does not necessarily indicate that the Notes
have a greater likelihood of paying Contingent Coupon Payments or
returning the Stated Principal Amount at maturity. You should be
willing to accept the downside market risk of each Underlying and
the potential loss of a significant portion or all of the Stated
Principal Amount at maturity.
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Conflicted-related
Risks
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♦
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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 Underlyings, or futures or options contracts on the Underlyings
or those securities, or other listed or over-the-counter derivative
instruments linked to the Underlyings or those securities. 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 Underlyings. 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
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PS-9
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 Underlyings. 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 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
Underlyings, except to the extent that BAC’s or UBS Group AG’s (the
parent company of UBS) common stock may be included in the
Underlyings, as applicable, we, the Guarantor and our other
affiliates, including BofAS, and UBS and its affiliates do not
control any company included in the Underlyings, and have not
verified any disclosure made by any other company. We, the
Guarantor or one or more of our other affiliates, including BofAS,
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
Underlyings 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
Underlyings. Consequently, the value of the Underlyings 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 Underlyings, the market value of your Notes prior to maturity
or the amounts payable on the Notes.
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♦
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There may be
potential conflicts of interest involving the calculation agent,
which is an affiliate of ours. We have the right to appoint and
remove the calculation agent. One of our affiliates will be the
calculation agent for the Notes and, as such, will make a variety
of determinations relating to the Notes, including the amounts that
will be paid on the Notes. Under some circumstances, these duties
could result in a conflict of interest between its status as our
affiliate and its responsibilities as calculation agent.
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Underlying-related
Risks
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♦
|
The
Notes are subject to the market risk of the
Underlyings. The return on the Notes, which may be
negative, is directly linked to the performance of the Underlyings
and indirectly linked to the value of the securities included in
the Underlyings. The level of the Underlyings can rise or fall
sharply due to factors specific to the Underlyings and the
securities included in the Underlyings 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.
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♦
|
The
publisher of an Underlying may adjust that Underlying in a way that
affects its levels, and the publisher has no obligation to consider
your interests. The publisher of an Underlying can add,
delete, or substitute the components included in that Underlying or
make other methodological changes that could change its level. Any
of these actions could adversely affect the value of your
Notes.
|
|
♦
|
You
are exposed to the market risk of each
Underlying. Your return on the Notes is not linked to a
basket consisting of the Underlyings. Rather, it will be contingent
upon the independent performance of each of the RTY and the NDX.
Unlike an instrument with a return linked to a basket of underlying
assets, in which risk is mitigated and diversified among all of the
components of the basket, you will be exposed to the risks related
to both the RTY and the NDX. Poor performance by either of the
Underlyings over the term of the Notes may negatively affect your
return and will not be offset or mitigated by positive performance
by the other Underlying. For the Notes to be automatically called
or to receive any Contingent Coupon Payment or contingent repayment
of principal at maturity, both Underlyings must close at or above
their respective Initial Values, Coupon Barriers or Downside
Thresholds, respectively, on the applicable Observation Date or
Final Observation Date, as applicable. In addition, if the Notes
are not called prior to maturity, you may incur a loss
proportionate to the negative return of the Least Performing
Underlying even if the other Underlying appreciates during the term
of the Notes. Accordingly, your investment is subject to the market
risk of both Underlyings. Additionally, movements in the values of
the Underlyings may be correlated or uncorrelated at different
times during the term of the Notes, and such correlation (or lack
thereof) could have an adverse effect on your return on the Notes.
For example, the likelihood that one of the Underlyings will close
below its Coupon Barrier on an Observation Date or below its
Downside Threshold on the Final Observation Date will increase when
the
|
PS-10
movements in the
values of the Underlyings are uncorrelated. Thus, if the
performance of the Underlyings is not correlated or is negatively
correlated, the risk of not receiving a Contingent Coupon Payment
and of incurring a significant loss of principal at maturity is
greater. In addition, correlation generally decreases for each
additional Underlying to which the Notes are linked, resulting in a
greater potential for a significant loss of principal at maturity.
Although the correlation of the Underlyings’ performance may change
over the term of the Notes, the economic terms of the Notes,
including the Contingent Coupon Rate, Downside Thresholds and
Coupon Barriers, are determined, in part, based on the correlation
of the Underlyings’ performance calculated using our and our
affiliates' pricing models at the time when the terms of the Notes
are finalized. All other things being equal, a higher Contingent
Coupon Rate and lower Downside Threshold and Coupon Barrier is
generally associated with lower correlation of the Underlyings,
which may indicate a greater potential for missed Contingent Coupon
Payments and/or a significant loss on your investment at
maturity. See “Correlation of the Underlyings”
below.
|
♦
|
The
Notes are subject to risks associated with small-size
capitalization companies. The stocks comprising the RTY are
issued by companies with small-sized market capitalization. The
stock prices of small-size companies may be more volatile than
stock prices of large capitalization companies. Small-size
capitalization companies may be less able to withstand adverse
economic, market, trade and competitive conditions relative to
larger companies. Small-size capitalization companies may also be
more susceptible to adverse developments related to their products
or services.
|
|
♦
|
The
Notes are subject to risks associated with foreign securities
markets. The
NDX includes certain foreign equity securities. You should be aware
that investments in securities linked to the value of foreign
equity securities involve particular risks. The foreign securities
markets comprising the NDX may have less liquidity and may be more
volatile than U.S. or other securities markets and market
developments may affect foreign markets differently from U.S. or
other securities markets. Direct or indirect government
intervention to stabilize these foreign securities markets, as well
as cross-shareholdings in foreign companies, may affect trading
prices and volumes in these markets. Also, there is generally less
publicly available information about foreign companies than about
those U.S. companies that are subject to the reporting requirements
of the U.S. Securities and Exchange Commission, and foreign
companies are subject to accounting, auditing and financial
reporting standards and requirements that differ from those
applicable to U.S. reporting companies. Prices of securities in
foreign countries are subject to political, economic, financial and
social factors that apply in those geographical regions. These
factors, which could negatively affect those securities markets,
include the possibility of recent or future changes in a foreign
government’s economic and fiscal policies, the possible imposition
of, or changes in, currency exchange laws or other laws or
restrictions applicable to foreign companies or investments in
foreign equity securities and the possibility of fluctuations in
the rate of exchange between currencies, the possibility of
outbreaks of hostility and political instability and the
possibility of natural disaster or adverse public health
developments in the region. Moreover, foreign economies may
differ favorably or unfavorably from the U.S. economy in important
respects such as growth of gross national product, rate of
inflation, capital reinvestment, resources and
self-sufficiency.
|
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
contingent income-bearing single financial contracts, as described
below under “U.S. Federal Income Tax Summary—General.” If the
Internal Revenue Service (the “IRS”) were successful in asserting
an alternative characterization for the Notes, the timing and
character of income, gain or loss with respect to the Notes may
differ. No ruling will be requested from the IRS with respect to
the Notes and no assurance can be given that the IRS will agree
with the statements made in the section entitled “U.S. Federal
Income Tax Summary.” You are urged to consult with your own
tax advisor regarding all aspects of the U.S. federal income tax
consequences of investing in the Notes.
|
PS-11
Hypothetical
terms only. Actual terms may vary. See the cover page for actual
offering terms.
The
examples below illustrate the hypothetical payment upon automatic
call or at maturity for a $10.00 Stated Principal Amount Note 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:
5 years, unless earlier automatically called
|
|
♦
|
Hypothetical
Initial Values:
|
|
o
|
Russell
2000® Index : 100.00
|
|
o
|
NASDAQ-100® Index:
100.00
|
|
♦
|
Contingent Coupon
Rate: 6.86% per annum (or 1.715% per quarter)
|
|
♦
|
Quarterly
Contingent Coupon Payment: $0.1715 per quarter per
Note
|
|
♦
|
Observation Dates:
Quarterly, automatically callable (other than on the Final
Observation Date) after approximately 6 months as set forth on page
PS-6 of this pricing supplement
|
|
♦
|
Hypothetical
Coupon Barriers:
|
|
o
|
Russell
2000® Index : 72.00, which is 72% of its
hypothetical Initial Value
|
|
o
|
NASDAQ-100®
Index: 72.00, which is 72% of its hypothetical Initial
Value
|
|
♦
|
Hypothetical
Downside Thresholds:
|
|
o
|
Russell
2000® Index : 72.00, which is 72% of its
hypothetical Initial Value
|
|
o
|
NASDAQ-100®
Index: 72.00, which is 72% of its hypothetical Initial
Value
|
*The
hypothetical Initial Values, Coupon Barriers and Downside
Thresholds do not represent the actual Initial Values, Coupon
Barriers and Downside Thresholds, respectively, applicable to the
Underlyings. The actual Initial Values, Coupon Barriers and
Downside Thresholds are set forth on the cover page of this
pricing supplement. All payments on the Notes
are subject to issuer and guarantor credit
risk.
Example 1 —
Notes are automatically called on the second Observation
Date.
|
Date
|
Current
Underlying Level of the Underlying
|
Payment (per
Note)
|
|
Russell
2000® Index
|
NASDAQ-100® Index
|
|
|
First
Observation Date
|
50.00
(below Coupon Barrier)*
|
78.00
(at or above Coupon Barrier)
|
$0.0000 (not
callable)
|
|
Second
Observation Date
|
105.00
(at or above Coupon Barrier and Initial
Value)*
|
105.00
(at or above Coupon Barrier and Initial
Value)
|
$10.1715 (Payment
upon automatic call)
|
|
|
|
Total
Payment:
|
$10.1715 (1.715%
total return)
|
*
Denotes Least Performing Underlying for the applicable Observation
Date
The
Least Performing Underlying on the first Observation Date closes
below its
Coupon Barrier, and as a result no Contingent Coupon Payment is
paid on the first Coupon Payment Date. On the second Observation
Date (which is approximately six months after the Trade Date and is
the first Observation Date on which the Notes are subject to
potential automatic call), the Least Performing Underlying closes
above its Initial Value, and the Notes are automatically called on
the related Coupon Payment Date. You will receive on the Coupon
Payment Date a total of $10.1715 per Note, reflecting the $10.0000
Stated Principal Amount plus the applicable Contingent
Coupon Payment. You would have been paid a total of $10.1715 per
Note for a 1.715% total return on the Notes over six months.
No further amount would be owed to you under the Notes, and you
would not participate in the appreciation of the
Underlyings.
PS-12
Example 2 —
Notes are NOT automatically called and the Final Value of the Least
Performing Underlying is at or above its Downside
Threshold.
|
Date
|
Current
Underlying Level of the Underlying
|
Payment (per
Note)
|
|
Russell
2000® Index
|
NASDAQ-100® Index
|
|
|
First
Observation Date
|
99.00
(at or above Coupon Barrier)
|
85.00
(at or above Coupon Barrier)*
|
$0.1715 (Contingent
Coupon Payment — not callable)
|
|
Second
to Nineteenth Observation Dates
|
various (all at
or above Coupon Barrier; all below Initial
Value)
|
various (all
below Coupon Barrier and Initial Value)*
|
$0.0000 (not
called)
|
|
Final
Observation Date
|
78.00
(at or above Downside Threshold and Coupon
Barrier)
|
77.00
(at or above Downside Threshold and Coupon
Barrier)*
|
$10.1715 (Payment
at Maturity)
|
|
|
|
Total
Payment:
|
$10.3430 (3.430%
total return)
|
*
Denotes Least Performing Underlying for the applicable Observation
Date(s)
The
Least Performing Underlying on the first Observation Date closes
above its Coupon Barrier and therefore a Contingent Coupon Payment
is paid on the first Coupon Payment Date. On each of the second to
nineteenth Observation Dates, the Least Performing Underlying
closes below its Coupon Barrier. Therefore, no Contingent Coupon
Payment is paid on any related Coupon Payment Date. In addition, on
each of the second to nineteenth Observation Dates, the Least
Performing Underlying closes below its Initial Value, and as a
result the Notes are not automatically called. On the Final
Observation Date, the Least Performing Underlying closes at or
above its Downside Threshold (which is also above its Coupon
Barrier). Therefore, at maturity, you would receive a total of
$10.1715 per Note, reflecting the $10.0000 Stated Principal Amount
plus the applicable Contingent Coupon Payment. When added to
the total Contingent Coupon Payments of $0.1715 received in respect
of the prior Observation Dates, you would have been paid a total of
$10.3430 per Note for a 3.430% total return on the Notes over five
years.
Example 3 —
Notes are NOT automatically called and the Final Value of the Least
Performing Underlying is below its Downside
Threshold.
|
Date
|
Current
Underlying Level of the Underlying
|
Payment (per
Note)
|
|
Russell
2000® Index
|
NASDAQ-100® Index
|
|
|
First
Observation Date
|
95.00
(at or above Coupon Barrier)
|
66.00
(below Coupon Barrier)*
|
$0.0000 (not
callable)
|
|
Second
to Nineteenth Observation Dates
|
Various (all
below Coupon Barrier and Initial
Value)
|
Various (all
below Coupon Barrier and Initial Value)*
|
$0.0000 (not
called)
|
|
Final
Observation Date
|
110.00
(at or above Downside Threshold and Coupon
Barrier)
|
30.00
(below Downside Threshold and Coupon
Barrier)*
|
$10.0000 × [1
+ Underlying Return of the Least Performing Underlying on the Final
Observation Date] =
$10.0000 × [1
+ -70.00%] =
$10.0000 ×
0.30 =
$3.0000 (Payment
at Maturity)
|
|
|
|
Total
Payment:
|
$3.0000 (-70.00%
total return)
|
*
Denotes Least Performing Underlying for the applicable Observation
Date(s)
The
Least Performing Underlying on each Observation Date closes below
its Coupon Barrier, and as a result no Contingent Coupon Payment is
paid on any Coupon Payment Date during the term of the Notes. In
addition, on each of the second to nineteenth Observation Dates,
the Least Performing Underlying closes below its Initial Value, and
as a result the Notes are not automatically called. On the Final
Observation Date, the Least Performing Underlying closes below its
Downside Threshold (which is also below its Coupon Barrier).
Therefore, at maturity, investors are exposed to the downside
performance of the Least Performing Underlying and you will receive
$3.0000 per Note for a -70.00% total return on the Notes over
five years, which reflects the percentage decrease of the
Least Performing Underlying from the Trade Date to the Final
Observation Date.
PS-13
All
disclosures contained in this pricing supplement regarding the
Underlyings, including, without limitation, their make-up, method
of calculation, and changes in their components, have been derived
from publicly available sources. The information reflects the
policies of, and is subject to change by, each of FTSE Russell, the
sponsor of the RTY, and Nasdaq, Inc., the sponsor of the NDX. We
refer to FTSE Russell and Nasdaq, Inc. as the “Underlying
Sponsors.” The Underlying Sponsors, which license the copyright and
all other rights to the Underlyings, have no obligation to continue
to publish, and may discontinue publication of, the Underlyings.
The consequences of any Underlying Sponsor discontinuing
publication of the applicable 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
any 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 Underlyings.
You
should make your own investigation into the
Underlyings.
The
Russell 2000®
Index
The
RTY was developed by Russell Investments (“Russell”) before FTSE
International Limited and Russell combined in 2015 to create FTSE
Russell, which is wholly owned by London Stock Exchange Group.
Additional information on the RTY is available at the following
website: http://www.ftserussell.com. No information on that website
is deemed to be included or incorporated by reference in this
pricing supplement.
Russell
began dissemination of the RTY (Bloomberg L.P. index symbol “RTY”)
on January 1, 1984. FTSE Russell calculates and publishes the RTY.
The RTY was set to 135 as of the close of business on December 31,
1986. The RTY is designed to track the performance of the small
capitalization segment of the U.S. equity market. As a subset of
the Russell 3000® Index, the RTY consists of the
smallest 2,000 companies included in the Russell 3000®
Index. The Russell 3000® Index measures the
performance of the largest 3,000 U.S. companies, representing
approximately 98% of the investable U.S. equity market. The RTY is
determined, comprised, and calculated by FTSE Russell without
regard to the Notes.
Selection
of Stocks Comprising the RTY
All
companies eligible for inclusion in the RTY must be classified as a
U.S. company under FTSE Russell’s country-assignment methodology.
If a company is incorporated, has a stated headquarters location,
and trades in the same country (American Depositary Receipts and
American Depositary Shares are not eligible), then the company is
assigned to its country of incorporation. If any of the three
factors are not the same, FTSE Russell defines three Home Country
Indicators (“HCIs”): country of incorporation, country of
headquarters, and country of the most liquid exchange (as defined
by a two-year average daily dollar trading volume) (“ADDTV”) from
all exchanges within a country. Using the HCIs, FTSE Russell
compares the primary location of the company’s assets with the
three HCIs. If the primary location of its assets matches any of
the HCIs, then the company is assigned to the primary location of
its assets. If there is insufficient information to determine the
country in which the company’s assets are primarily located, FTSE
Russell will use the country from which the company’s revenues are
primarily derived for the comparison with the three HCIs in a
similar manner. FTSE Russell uses the average of two years of
assets or revenues data to reduce potential turnover. If conclusive
country details cannot be derived from assets or revenues data,
FTSE Russell will assign the company to the country of its
headquarters, which is defined as the address of the company’s
principal executive offices, unless that country is a Benefit
Driven Incorporation “BDI” country, in which case the company will
be assigned to the country of its most liquid stock exchange. BDI
countries include: Anguilla, Antigua and Barbuda, Bahamas,
Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman
Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands,
Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Marshall
Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and
Caicos Islands. For any companies incorporated or headquartered in
a U.S. territory, including Puerto Rico, Guam, and U.S. Virgin
Islands, a U.S. HCI is assigned.
All
securities eligible for inclusion in the RTY must trade on a major
U.S. exchange. Stocks must have a closing price at or above $1.00
on their primary exchange on the last trading day in May to be
eligible for inclusion during annual reconstitution. However, in
order to reduce unnecessary turnover, if an existing member’s
closing price is less than $1.00 on the last day of May, it will be
considered eligible if the average of the daily closing prices
(from its primary exchange) during the month of May is equal to or
greater than $1.00. Initial public offerings are added each quarter
and must have a closing price at or above $1.00 on the last day of
their eligibility period in order to qualify for index inclusion.
If an existing stock does not trade on the “rank day” (typically
the last trading day in May but a confirmed timetable is announced
each spring) but does have a closing price at or above $1.00 on
another eligible U.S. exchange, that stock will be eligible for
inclusion.
An
important criterion used to determine the list of securities
eligible for the RTY is total market capitalization, which is
defined as the market price as of the last trading day in May for
those securities being considered at annual reconstitution times
the total number of shares outstanding. Where applicable, common
stock, non-restricted exchangeable shares and partnership
units/membership interests are used to determine market
capitalization. Any other form of shares such as preferred stock,
convertible preferred stock, redeemable shares, participating
preferred stock, warrants and rights, installment receipts or trust
receipts, are excluded from the calculation. If multiple share
classes of common stock exist, they are combined. In cases where
the common stock share classes act independently of each other
(e.g.,
PS-14
tracking
stocks), each class is considered for inclusion separately. If
multiple share classes exist, the pricing vehicle will be
designated as the share class with the highest two-year trading
volume as of the rank day in May.
Companies
with a total market capitalization of less than $30 million are not
eligible for the RTY. Similarly, companies with only 5% or less of
their shares available in the marketplace are not eligible for the
RTY. Royalty trusts, limited liability companies, closed-end
investment companies (companies that are required to report
Acquired Fund Fees and Expenses, as defined by the SEC, including
business development companies), blank check companies, special
purpose acquisition companies, and limited partnerships are also
ineligible for inclusion. Bulletin board, pink sheets, and
over-the-counter (“OTC”) traded securities are not eligible for
inclusion. Exchange traded funds and mutual funds are also
excluded.
Annual
reconstitution is a process by which the RTY is completely rebuilt.
Based on closing levels of the company’s common stock on its
primary exchange on the rank day of May of each year, FTSE Russell
reconstitutes the composition of the RTY using the then existing
market capitalizations of eligible companies. Reconstitution of the
RTY occurs on the last Friday in June or, when the last Friday in
June is the 29th or 30th, reconstitution occurs on the prior
Friday. In addition, FTSE Russell adds initial public offerings to
the RTY on a quarterly basis based on total market capitalization
ranking within the market-adjusted capitalization breaks
established during the most recent reconstitution. After membership
is determined, a security’s shares are adjusted to include only
those shares available to the public. This is often referred to as
“free float.” The purpose of the adjustment is to exclude from
market calculations the capitalization that is not available for
purchase and is not part of the investable opportunity
set.
Historical
Performance of the RTY
The
following graph sets forth the daily historical performance of the
RTY 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 RTY’s Coupon Barrier and Downside Threshold of
1,678.650 (rounded to three decimal places), which is 72% of the
RTY’s Initial Value of 2,331.459.
This
historical data on the RTY is not necessarily indicative of the
future performance of the RTY or what the value of the Notes may
be. Any historical upward or downward trend in the level of the RTY
during any period set forth above is not an indication that the
level of the RTY 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 RTY.
License
Agreement
“Russell 2000®” and “Russell 3000®” are
trademarks of FTSE Russell and have been licensed for use by our
affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"). The Notes are not sponsored, endorsed,
sold, or promoted by FTSE Russell, and FTSE Russell makes no
representation regarding the advisability of investing in the
Notes.
FTSE
Russell and MLPF&S have entered into a non-exclusive license
agreement providing for the license to MLPF&S and its
affiliates, including us, in exchange for a fee, of the right to
use indices owned and published by FTSE Russell in connection with
some securities, including the Notes. The license agreement
provides that the following language must be stated in this pricing
supplement:
PS-15
The
Notes are not sponsored, endorsed, sold, or promoted by FTSE
Russell. FTSE Russell makes 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 RTY to track
general stock market performance or a segment of the same. FTSE
Russell’s publication of the RTY in no way suggests or implies an
opinion by FTSE Russell as to the advisability of investment in any
or all of the securities upon which the RTY is based. FTSE
Russell’s only relationship to MLPF&S and to us is the
licensing of certain trademarks and trade names of FTSE Russell and
of the RTY, which is determined, composed, and calculated by FTSE
Russell without regard to MLPF&S, us, or the Notes. FTSE
Russell is not responsible for and has not reviewed the Notes nor
any associated literature or publications and FTSE Russell makes no
representation or warranty express or implied as to their accuracy
or completeness, or otherwise. FTSE Russell reserves the right, at
any time and without notice, to alter, amend, terminate, or in any
way change the RTY. FTSE Russell has no obligation or liability in
connection with the administration, marketing, or trading of the
Notes.
FTSE
RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. FTSE
RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY MLPF&S, US, HOLDERS OF THE NOTES, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE RTY OR ANY DATA INCLUDED
THEREIN. FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RTY OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL FTSE RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
The
NASDAQ-100® Index
The
NDX is intended to measure the performance of the 100 largest
domestic and international non-financial securities listed on
NASDAQ based on market capitalization. The NDX reflects companies
across major industry groups including computer hardware and
software, telecommunications, retail/wholesale trade and
biotechnology. It does not contain securities of financial
companies including investment companies.
The
NDX began trading on January 31, 1985 at a base value of 125.00.
The NDX is calculated and published by Nasdaq, Inc. In
administering the NDX, Nasdaq, Inc. will exercise reasonable
discretion as it deems appropriate.
Underlying
Stock Eligibility Criteria
NDX
eligibility is limited to specific security types only. The
security types eligible for the NDX include foreign or domestic
common stocks, ordinary shares, ADRs and tracking stocks. Security
types not included in the NDX are closed-end funds, convertible
debt securities, exchange traded funds, limited liability
companies, limited partnership interests, preferred stocks, rights,
shares or units of beneficial interest, warrants, units, and other
derivative securities. The NDX does not contain securities of
investment companies. For purposes of the NDX eligibility criteria,
if the security is a depositary receipt representing a security of
a non-U.S. issuer, then references to the “issuer” are references
to the issuer of the underlying security.
Initial
Eligibility Criteria
To be
eligible for initial inclusion in the NDX, a security must be
listed on Nasdaq and meet the following criteria:
|
●
|
the
security’s U.S. listing must be exclusively on the Nasdaq Global
Select Market or the Nasdaq Global Market (unless the security was
dually listed on another U.S. market prior to January 1, 2004 and
has continuously maintained such listing);
|
|
●
|
the
security must be of a non-financial company;
|
|
●
|
the
security may not be issued by an issuer currently in bankruptcy
proceedings;
|
|
●
|
the
security must have a minimum three-month average daily trading
volume of at least 200,000 shares;
|
|
●
|
if the
issuer of the security is organized under the laws of a
jurisdiction outside the U.S., then such security must have listed
options on a recognized options market in the U.S. or be eligible
for listed-options trading on a recognized options market in the
U.S.;
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the
issuer of the security may not have entered into a definitive
agreement or other arrangement which would likely result in the
security no longer being eligible for inclusion in the
NDX;
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●
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the
issuer of the security may not have annual financial statements
with an audit opinion that is currently withdrawn; and
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●
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the
issuer of the security must have “seasoned” on NASDAQ, NYSE or NYSE
Amex. Generally, a company is considered to be seasoned if it has
been listed on a market for at least three full months (excluding
the first month of initial listing).
|
Continued
Eligibility Criteria
In
addition, to be eligible for continued inclusion in the NDX,
the following criteria apply:
PS-16
|
●
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the
security’s U.S. listing must be exclusively on the Nasdaq Global
Select Market or the Nasdaq Global Market;
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●
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the
security must be of a non-financial company;
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●
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the
security may not be issued by an issuer currently in bankruptcy
proceedings;
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●
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the
security must have a minimum three-month average daily trading
volume of at least 200,000 shares;
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●
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if the
issuer of the security is organized under the laws of a
jurisdiction outside the U.S., then such security must have listed
options on a recognized options market in the U.S. or be eligible
for listed-options trading on a recognized options market in the
U.S. (measured annually during the ranking review
process);
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●
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the
security must have an adjusted market capitalization equal to or
exceeding 0.10% of the aggregate adjusted market capitalization of
the NDX at each month-end. In the event a company does not meet
this criterion for two consecutive month-ends, it will be removed
from the NDX effective after the close of trading on the third
Friday of the following month; and
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●
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the
issuer of the security may not have annual financial statements
with an audit opinion that is currently withdrawn.
|
Computation of
the NDX
The
value of the NDX equals the aggregate value of the NDX share
weights (the “NDX Shares”) of each of the NDX securities multiplied
by each such security’s last sale price (last sale price refers to
the last sale price on NASDAQ), and divided by the divisor of the
NDX. If trading in an NDX security is halted while the market is
open, the last traded price for that security is used for all NDX
computations until trading resumes. If trading is halted before the
market is open, the previous day’s last sale price is used. The
formula for determining the NDX value is as follows:
|
Aggregated
Adjusted Market Value
|
|
Divisor
|
The
NDX is ordinarily calculated without regard to cash dividends on
NDX securities. The NDX is calculated during the trading day and is
disseminated once per second from 09:30:01 to 17:16:00 ET. The
closing level of the NDX may change up until 17:15:00 ET due to
corrections to the last sale price of the NDX securities. The
official closing value of the NDX is ordinarily disseminated at
17:16:00 ET.
NDX
Maintenance
Changes to
NDX Constituents
Changes to the NDX
constituents may be made during the annual ranking review. In
addition, if at any time during the year other than the annual
review, it is determined that an NDX security issuer no longer
meets the criteria for continued inclusion in the NDX, or is
otherwise determined to have become ineligible for continued
inclusion in the NDX, it is replaced with the largest market
capitalization issuer not currently in the NDX that meets the
applicable eligibility criteria for initial inclusion in the
NDX.
Ordinarily, a
security will be removed from the NDX at its last sale price.
However, if at the time of its removal the NDX security is halted
from trading on its primary listing market and an official closing
price cannot readily be determined, the NDX security may, in
Nasdaq, Inc.’s discretion, be removed at a price of $0.00000001
(“zero price”). This zero price will be applied to the NDX security
after the close of the market but prior to the time the official
closing value of the NDX is disseminated.
Divisor
Adjustments
The
divisor is adjusted to ensure that changes in the NDX constituents
either by corporate actions (that adjust either the price or shares
of an NDX security) or NDX participation outside of trading hours
do not affect the value of the NDX. All divisor changes occur after
the close of the applicable index security
markets.
Quarterly
NDX Rebalancing
The
NDX will be rebalanced on a quarterly basis if it is determined
that (1) the current weight of the single NDX security with the
largest market capitalization is greater than 24.0% of the NDX or
(2) the collective weight of those securities whose individual
current weights are in excess of 4.5% exceeds 48.0% of the NDX. In
addition, a “special rebalancing” of the NDX may be conducted at
any time if Nasdaq, Inc. determines it necessary to maintain the
integrity and continuity of the NDX. If either one or both of the
above weight distribution conditions are met upon quarterly review,
or Nasdaq, Inc. determines that a special rebalancing is necessary,
a weight rebalancing will be performed.
If the
first weight distribution condition is met and the current weight
of the single NDX security with the largest market capitalization
is greater than 24.0%, then the weights of all securities with
current weights greater than 1.0% (“large securities”) will be
scaled down proportionately toward 1.0% until the adjusted weight
of the single largest NDX security reaches 20.0%.
PS-17
If the
second weight distribution condition is met and the collective
weight of those securities whose individual current weights are in
excess of 4.5% (or adjusted weights in accordance with the previous
step, if applicable) exceeds 48.0% of the NDX, then the weights of
all such large securities in that group will be scaled down
proportionately toward 1.0% until their collective weight, so
adjusted, is equal to 40.0%.
The
aggregate weight reduction among the large securities resulting
from either or both of the rebalancing steps above will then be
redistributed to those securities with weightings of less than 1.0%
(“small securities”) in the following manner. In the first
iteration, the weight of the largest small security will be scaled
upwards by a factor which sets it equal to the average NDX weight
of 1.0%. The weights of each of the smaller remaining small
securities will be scaled up by the same factor reduced in relation
to each security’s relative ranking among the small securities such
that the smaller the NDX security in the ranking, the less its
weight will be scaled upward. This is intended to reduce the market
impact of the weight rebalancing on the smallest component
securities in the NDX.
In the
second iteration of the small security rebalancing, the weight of
the second largest small security, already adjusted in the first
iteration, will be scaled upwards by a factor which sets it equal
to the average NDX weight of 1.0%. The weights of each of the
smaller remaining small securities will be scaled up by this same
factor reduced in relation to each security’s relative ranking
among the small securities such that, once again, the smaller the
security in the ranking, the less its weight will be scaled upward.
Additional iterations will be performed until the accumulated
increase in weight among the small securities equals the aggregate
weight reduction among the large securities that resulted from the
rebalancing in accordance with the two weight distribution
conditions discussed above.
Finally, to
complete the rebalancing process, once the final weighting
percentages for each NDX security have been set, the NDX Shares
will be determined anew based upon the last sale prices and
aggregate capitalization of the NDX at the close of trading on the
last calendar day in February, May, August and November. Changes to
the NDX Shares will be made effective after the close of trading on
the third Friday in March, June, September and December, and an
adjustment to the divisor is made to ensure continuity of the NDX.
Ordinarily, new rebalanced NDX Shares will be determined by
applying the above procedures to the current NDX Shares. However,
Nasdaq, Inc. may, from time to time, determine rebalanced weights,
if necessary, by applying the above procedure to the actual current
market capitalization of the NDX components. In such instances,
Nasdaq, Inc. would announce the different basis for rebalancing
prior to its implementation.
During
the quarterly rebalancing, data is cutoff as of the previous month
end and no changes are made to the NDX from that cutoff until the
quarterly index share change effective date, except in the case of
changes due to corporate actions with an ex-date.
Adjustments
for Corporate Actions
Changes in the
price and/or NDX Shares driven by corporate events such as stock
dividends, splits, and certain spin-offs and rights issuances will
be adjusted on the ex-date. If the change in total shares
outstanding arising from other corporate actions is greater than or
equal to 10.0%, the change will be made as soon as practicable.
Otherwise, if the change in total shares outstanding is less than
10.0%, then all such changes are accumulated and made effective at
one time on a quarterly basis after the close of trading on the
third Friday in each of March, June, September, and December. The
NDX Shares are derived from the security’s total shares
outstanding. The NDX Shares are adjusted by the same percentage
amount by which the total shares outstanding have
changed.
Historical
Performance of the NDX
The
following graph sets forth the daily historical performance of the
NDX 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 NDX’s Coupon Barrier and Downside Threshold of
11,784.82 (rounded to two decimal places), which is 72% of the
NDX’s Initial Value of 16,367.81.
PS-18
This
historical data on the NDX is not necessarily indicative of the
future performance of the NDX or what the value of the Notes may
be. Any historical upward or downward trend in the level of the NDX
during any period set forth above is not an indication that the
level of the NDX 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 NDX.
License
Agreement
The
Notes are not sponsored, endorsed, sold or promoted by Nasdaq, Inc.
or its affiliates (Nasdaq, Inc. with its affiliates, are referred
to as the “Corporations”). The Corporations have not passed on the
legality or suitability of, or the accuracy or adequacy of
descriptions and disclosures relating to, the Notes. The
Corporations make no representation or warranty, express or
implied, to the owners 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 NDX to track
general stock market performance. The Corporations’ only
relationship to our affiliate, MLPF&S (“Licensee”) is in
the licensing of the NASDAQ®, OMX®, NASDAQ
OMX®, and NDX registered trademarks, and certain trade
names of the Corporations or their licensor and the use of the NDX
which is determined, composed and calculated by Nasdaq, Inc.
without regard to Licensee or the Notes. Nasdaq, Inc. has no
obligation to take the needs of the Licensee or the owners of the
Notes into consideration in determining, composing or calculating
the NDX. The Corporations are not responsible for and have not
participated in the determination of the timing of, prices at, or
quantities of the Notes to be issued or in the determination or
calculation of the equation by which the Notes are to be converted
into cash. The Corporations have no liability in connection with
the administration, marketing or trading of the Notes.
THE
CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE NDX OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE NDX OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NDX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
PS-19
Correlation of
the Underlyings
The
graph below illustrates the daily performance of the RTY and the
NDX from January 1, 2008 through the Trade Date. For
comparison purposes, each Underlying has been “normalized” to have
a closing level of 100 on January 1, 2008 by dividing the closing
level of that Underlying on each trading day by the closing level
of that Underlying on January 1, 2008 and multiplying by 100. We
obtained the closing levels used to determine the normalized
closing levels set forth below from Bloomberg L.P., without
independent verification.
The
correlation of a pair of Underlyings represents a statistical
measurement of the degree to which the returns of those Underlyings
were similar to each other over a given period in terms of timing
and direction. The correlation between a pair of Underlyings is
scaled from 1.0 to -1.0, with 1.0 indicating perfect positive
correlation (i.e., the value of both Underlyings are
increasing together or decreasing together and the ratio of their
returns has been constant), 0 indicating no correlation
(i.e., there is no statistical relationship between the
returns of that pair of Underlyings) and -1.0 indicating perfect
negative correlation (i.e., as the value of one Underlying
increases, the value of the other Underlying decreases and the
ratio of their returns has been constant).
The
graph below illustrates the historical performance of each
Underlying relative to each other over the time period shown and
provides an indication of how close the relative performance of
each Underlying has historically been to the other Underlying. A
closer relationship between the daily returns of two or more
underlying assets over a given period indicates that such
underlying assets have been more positively correlated. Lower (or
more-negative) correlation among two or more underlying assets over
a given period may indicate that it is less likely that those
underlying assets will subsequently move in the same direction.
Therefore, lower correlation among the Underlyings may indicate a
greater potential for one of the Underlyings to close below its
respective Coupon Barrier or Downside Threshold on an Observation
Date, including the Final Observation Date, as applicable, because
there may be a greater likelihood that at least one of the
Underlyings will decrease in value significantly. However, even if
the Underlyings have a higher positive correlation, one or both of
the Underlyings may close below the respective Coupon Barrier(s) or
Downside Threshold(s) on an Observation Date or the Final
Observation Date, as applicable, as the Underlyings may both
decrease in value. Moreover, the actual correlation among the
Underlyings may differ, perhaps significantly, from their
historical correlation. Although the correlation of the
Underlyings’ performance may change over the term of the Notes, the
economic terms of the Notes, including the Contingent Coupon Rate,
Downside Threshold and Coupon Barrier are determined, in part,
based on the correlation of the Underlyings’ performance calculated
using our and our affiliates' pricing models at the time when the
terms of the Notes are finalized. All other things being equal, a
higher Contingent Coupon Rate and lower Downside Threshold and
Coupon Barrier is generally associated with lower correlation among
the Underlyings, which may indicate a greater potential for missed
Contingent Coupon Payments and/or a significant loss on your
investment at maturity. See “Risk Factors — You are exposed to the
market risk of each Underlying”, “—Because the Notes are linked to
the performance of the least performing between the RTY and the
NDX, you are exposed to greater risk of receiving no Contingent
Coupon Payments or sustaining a significant loss on your investment
than if the Notes were linked to just the RTY or just the NDX”
and “—A higher Contingent Coupon Rate and/or a lower Coupon Barrier
and/or Downside Threshold may reflect greater expected volatility
of the Underlyings, which is generally associated with a greater
risk of loss” herein.
Past
performance and correlation of the Underlyings are not indicative
of the future performance or correlation of the
Underlyings.
PS-20
|
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 receive an underwriting discount of $0.225
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
$9.775 per Note. UBS proposes to offer the Notes to the public at a
price of $10.00 per Note. UBS will receive an underwriting discount
of $0.225 for each Note it sells to the public. The underwriting
discount will be received by UBS and its financial advisors
collectively. 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. These broker-dealer
affiliates 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 the distribution participants, for
approximately a five-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 Underlyings 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.
PS-21
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 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 in 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 in 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-22
The
Notes are our debt securities, the return on which is linked to the
performance of the Underlyings. The related guarantees are BAC’s
obligations. Any payments on the Notes, including any Contingent
Coupon Payments, depend on the credit risk of BofA Finance and BAC
and on the performance of each of the Underlyings. 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 of the Notes as of the
Trade Date.
In
order to meet our payment obligations on the Notes, at the time we
issue the Notes, we may choose to enter into certain hedging
arrangements (which may include call options, put options or other
derivatives) with BofAS or one of our other affiliates. The terms
of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a
number of factors, including our and BAC’s creditworthiness,
interest rate movements, the volatility of the Underlyings, the
tenor of the Notes and the hedging arrangements. The economic terms
of the Notes and their initial estimated value depend in part on
the terms of these hedging arrangements.
BofAS
has advised us that the hedging arrangements will include hedging
related charges, reflecting the costs associated with, and our
affiliates’ profit earned from, these hedging arrangements. Since
hedging entails risk and may be influenced by unpredictable market
forces, actual profits or losses from these hedging transactions
may be more or less than any expected amounts.
For
further information, see “Risk Factors” beginning on page PS-7
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-23
|
U.S.
Federal Income Tax Summary
|
The
following summary of the material U.S. federal income and estate
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, we intend to treat
the Notes for all tax purposes as contingent income-bearing single
financial contracts with respect to the Underlyings and under the
terms of the Notes, we and every investor in the Notes agree, in
the absence of an administrative determination or judicial ruling
to the contrary, to treat the Notes in accordance with such
characterization. In the opinion of our counsel, Sidley Austin LLP,
it is reasonable to treat the Notes as contingent income-bearing
single financial contracts with respect to the Underlyings.
However, Sidley Austin LLP has advised us that it is unable to
conclude that it is more likely than not that this treatment will
be upheld. This discussion assumes that the Notes constitute
contingent income-bearing single financial contracts with respect
to the Underlyings for U.S. federal income tax purposes. If
the Notes did not constitute contingent income-bearing single
financial contracts, the tax consequences described below would be
materially different.
This
characterization of the Notes is not binding on the IRS or the
courts. No statutory, judicial, or administrative authority
directly addresses the characterization of the Notes or any similar
instruments for U.S. federal income tax purposes, and no ruling is
being requested from the IRS with respect to their proper
characterization and treatment. Due to the absence of authorities
on point, significant aspects of the U.S. federal income tax
consequences of an investment in the Notes are not certain, and no
assurance can be given that the IRS or any court will agree with
the characterization and tax treatment described in this pricing
supplement. Accordingly, you are urged to consult your tax
advisor regarding all aspects of the U.S. federal income tax
consequences of an investment in the Notes, including possible
alternative characterizations.
Unless
otherwise stated, the following discussion is based on the
characterization described above. The discussion in this
section assumes that there is a significant possibility of a
significant loss of principal on an investment in the
Notes.
We
will not attempt to ascertain whether the issuer of any component
stocks included in an 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 an 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 each Underlying and consult your
tax advisor regarding the possible consequences to you, if any, if
any issuer of a component stock included in an Underlying is or
becomes a PFIC or is or becomes a United States real property
holding corporation.
PS-24
U.S.
Holders
Although the U.S.
federal income tax treatment of any Contingent Coupon Payment on
the Notes is uncertain, we intend to take the position, and the
following discussion assumes, that any Contingent Coupon Payment
constitutes taxable ordinary income to a U.S. Holder at the time
received or accrued in accordance with the U.S. Holder’s regular
method of accounting. By purchasing the Notes you agree, in
the absence of an administrative determination or judicial ruling
to the contrary, to treat any Contingent Coupon Payment as
described in the preceding sentence.
Upon
receipt of a cash payment at maturity or upon a sale, exchange, or
redemption of the Notes prior to maturity, a U.S. Holder generally
will recognize capital gain or loss equal to the difference between
the amount realized (other than amounts representing any Contingent
Coupon Payment, which would be taxed as described above) and the
U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax
basis in the Notes will equal the amount paid by that holder to
acquire them. This capital gain or loss generally will be long-term
capital gain or loss if the U.S. Holder held the Notes for more
than one year. The deductibility of capital losses is subject to
limitations.
Alternative Tax
Treatments. Due to the absence of authorities that directly
address the proper tax treatment of the Notes, prospective
investors are urged to consult their tax advisors regarding all
possible alternative tax treatments of an investment in the Notes.
In particular, the IRS could seek to subject the Notes to the
Treasury regulations governing contingent payment debt instruments.
If the IRS were successful in that regard, the timing and character
of income on the Notes would be affected significantly. Among other
things, a U.S. Holder would be required to accrue original issue
discount every year at a “comparable yield” determined at the time
of issuance. In addition, any gain realized by a U.S. Holder at
maturity or upon a sale, exchange, or redemption of the Notes
generally would be treated as ordinary income, and any loss
realized at maturity or upon a sale, exchange, or redemption of the
Notes generally would be treated as ordinary loss to the extent of
the U.S. Holder’s prior accruals of original issue discount, and as
capital loss thereafter.
In
addition, it is possible that the Notes could be treated as a unit
consisting of a deposit and a put option written by the Note
holder, in which case the timing and character of income on the
Notes would be affected significantly.
The
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, exchange, or redemption of
the Notes should be treated as ordinary gain or loss.
Because each
Underlying is an index that periodically rebalances, it is possible
that the Notes could be treated as a series of contingent
income-bearing 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.
PS-25
Non-U.S.
Holders
Because the U.S.
federal income tax treatment of the Notes (including any Contingent
Coupon Payment) is uncertain, we (or the applicable paying agent)
will withhold U.S. federal income tax at a 30% rate (or at a lower
rate under an applicable income tax treaty) on the entire amount of
any Contingent Coupon Payment made unless such payments are
effectively connected with the conduct by the Non-U.S. Holder of a
trade or business in the U.S. (in which case, to avoid withholding,
the Non-U.S. Holder will be required to provide a Form W-8ECI). We
(or the applicable paying agent) will not pay any additional
amounts in respect of such withholding. To claim benefits under an
income tax treaty, a Non-U.S. Holder must obtain a taxpayer
identification number and certify as to its eligibility under the
appropriate treaty’s limitations on benefits article, if
applicable. In addition, special rules may apply to claims for
treaty benefits made by Non-U.S. Holders that are entities rather
than individuals. The availability of a lower rate of withholding
under an applicable income tax treaty will depend on whether such
rate applies to the characterization of the payments under U.S.
federal income tax laws. A Non-U.S. Holder that is eligible for a
reduced rate of U.S. federal withholding tax pursuant to an income
tax treaty may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund with the IRS.
Except
as discussed below, a Non-U.S. Holder generally will not be subject
to U.S. federal income or withholding tax for amounts paid in
respect of the Notes (not including, for the avoidance of doubt,
amounts representing any Contingent Coupon Payment which would be
subject to the rules discussed in the previous paragraph) upon the
sale, exchange, or redemption of the Notes or their settlement at
maturity, provided that the Non-U.S. Holder complies with
applicable certification requirements and that the payment is not
effectively connected with the conduct by the Non-U.S. Holder of a
U.S. trade or business. Notwithstanding the foregoing, gain
from the sale, exchange, or redemption of the Notes or their
settlement at maturity may be subject to U.S. federal income tax if
that Non-U.S. Holder is a non-resident alien individual and is
present in the U.S. for 183 days or more during the taxable year of
the sale, exchange, redemption, or settlement and certain other
conditions are satisfied.
If a
Non-U.S. Holder of the Notes is engaged in the conduct of a trade
or business within the U.S. and if any Contingent Coupon Payment
and gain realized on the settlement at maturity, or upon sale,
exchange, or redemption of the Notes, is effectively connected with
the conduct of such trade or business (and, if certain tax treaties
apply, is attributable to a permanent establishment maintained by
the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although
exempt from U.S. federal withholding tax, generally will be subject
to U.S. federal income tax on such Contingent Coupon Payment and
gain on a net income basis in the same manner as if it were a U.S.
Holder. Such Non-U.S. Holders should read the material under the
heading “—U.S. Holders,” for a description of the U.S. federal
income tax consequences of acquiring, owning, and disposing of the
Notes. In addition, if such Non-U.S. Holder is a foreign
corporation, it may also be subject to a branch profits tax equal
to 30% (or such lower rate provided by any applicable tax treaty)
of a portion of its earnings and profits for the taxable year that
are effectively connected with its conduct of a trade or business
in the U.S., subject to certain adjustments.
A
“dividend equivalent” payment is treated as a dividend from sources
within the United States and such payments generally would be
subject to a 30% U.S. withholding tax if paid to a Non-U.S. Holder.
Under Treasury regulations, payments (including deemed
payments) with respect to equity-linked instruments (“ELIs”) that
are “specified ELIs” may be treated as dividend equivalents if such
specified ELIs reference an interest in an “underlying security,”
which is generally any interest in an entity taxable as a
corporation for U.S. federal income tax purposes if a payment with
respect to such interest could give rise to a U.S. source dividend.
However, IRS guidance provides that withholding on dividend
equivalent payments will not apply to specified ELIs that are not
delta-one instruments and that are issued before January 1, 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 Underlyings or the Notes, and following such
occurrence the Notes could be treated as subject to withholding on
dividend equivalent payments. Non-U.S. Holders that enter, or have
entered, into other transactions in respect of the Underlyings or
the Notes should consult their tax advisors as to the application
of the dividend equivalent withholding tax in the context of the
Notes and their other transactions. If any payments are treated as
dividend equivalents subject to withholding, we (or the applicable
paying agent) would be entitled to withhold taxes without being
required to pay any additional amounts with respect to amounts so
withheld.
As
discussed above, alternative characterizations of the Notes for
U.S. federal income tax purposes are possible. Should an
alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the
Notes to become subject to withholding tax in addition to the
withholding tax described above, tax will be withheld at the
applicable statutory rate. Prospective Non-U.S. Holders
should consult their own tax advisors regarding the tax
consequences of such alternative characterizations.
U.S. Federal
Estate Tax. Under current law, while the matter is not
entirely clear, individual Non-U.S. Holders, and entities whose
property is potentially includible in those individuals’ gross
estates for U.S. federal estate tax purposes (for example, a trust
funded by such an individual and with respect to which the
individual has retained certain interests or powers), should note
that, absent an applicable treaty benefit, a Note is likely to be
treated as U.S. situs property, subject to U.S. federal estate tax.
These individuals and entities should consult their own tax
advisors regarding the U.S. federal estate tax consequences of
investing in a Note.
PS-26
Backup
Withholding and Information Reporting
Please
see the discussion under “U.S. Federal Income Tax Considerations —
General — 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-27
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