Linked to the Least Performing of the iShares®
Russell 1000 Growth ETF and the Nasdaq-100® Index
| ● | Maturity of approximately 2.25 years. |
| ● | Payment on the Notes will depend on the individual performance
of the iShares® Russell 1000 Growth ETF and the Nasdaq-100®
Index (each an “Underlying”). |
| ● | 300% upside exposure to increases in the value of the
Least Performing Underlying, subject to the Max Return of 37.20%. |
| ● | 1-to-1 downside exposure to decreases in the value of the Least
Performing Underlying beyond a 10% decline, with up to 90% of the principal at risk. |
| ● | All payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”),
as issuer of the Notes, and Bank of America Corporation (“BAC” or the “Guarantor”), as guarantor of the Notes. |
| ● | No periodic interest payments. |
| ● | The Capped Buffered Enhanced Return Notes linked to the Least Performing of the iShares®
Russell 1000 Growth ETF and the Nasdaq-100® Index, due November
15, 2024 (the “Notes”) priced on August 12, 2022 and will issue on August 17, 2022. |
| ● | The Notes will not be listed on any securities exchange. |
The initial estimated value of the Notes as of the
pricing date is and $985.50 per $1,000 in principal amount of Notes, which is less than the public offering price listed below. The
actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy. See “Risk Factors”
beginning on page PS-8 of this pricing supplement and “Structuring the Notes” on page PS-21 of this pricing supplement for
additional information.
There are important differences between the Notes
and a conventional debt security. Potential purchasers of the Notes should consider the information in “Risk Factors” beginning
on page PS-8 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.
None of the Securities and Exchange Commission (the
“SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined
if this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
|
Public offering price |
Underwriting discount(1) |
Proceeds, before expenses, to BofA Finance |
Per Note |
$1,000.00 |
$0.00 |
$1,000.00 |
Total |
$5,691,000.00 |
$0.00 |
$5,691,000.00 |
(1) |
In addition to the underwriting discount above, if any, an affiliate of BofA Finance will pay a referral fee of up to $4.50 per $1,000 in principal amount of Notes in connection with the distribution of the Notes to other registered broker dealers. |
The Notes and the related guarantee:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
|
Selling Agent |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Terms of the Notes
The Notes provide you a leveraged
return, subject to the Max Return, if the Ending Value of the Least Performing Underlying is greater than its Starting Value. If the Ending
Value of the Least Performing Underlying is equal to or less than its Starting
Value but greater than or equal to its Threshold Value, you will receive the principal amount of your Notes at maturity. If the Ending
Value of the Least Performing Underlying is less than its Threshold Value, there
is full exposure to declines in the Least Performing Underlying beyond its Threshold
Value, and you will lose some or a significant portion of your investment in the Notes. Any payments on the Notes will be calculated based
on $1,000 in principal amount of Notes and will depend on the performance of the Underlyings, subject to our and BAC’s credit risk.
Issuer: |
BofA Finance |
Guarantor: |
BAC |
Denominations: |
The Notes will be issued in minimum denominations of $1,000 and whole multiples of $1,000 in excess thereof. |
Term: |
Approximately 2.25 years. |
Underlyings: |
The iShares® Russell 1000 Growth ETF (Bloomberg symbol: “IWF”) and the Nasdaq-100® Index (Bloomberg symbol: “NDX”), a price return index. |
Pricing Date: |
August 12, 2022 |
Issue Date: |
August 17, 2022 |
Valuation Date: |
November 12, 2024, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Calculation Days” in the accompanying product supplement. |
Maturity Date: |
November 15, 2024 |
Starting Value: |
IWF: $255.95
NDX: 13,565.87 |
Ending Value: |
With respect to the IWF, its Closing Market Price on the Valuation Date multiplied by its Price Multiplier. With respect to the NDX, its closing level on the Valuation Date. |
Price Multiplier: |
With respect to the IWF, 1, subject to adjustment for certain events as described in “Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-27 of the accompanying product supplement. |
Upside Participation Rate: |
300% |
Max Return: |
$1,372.00 per $1,000 in principal amount of Notes, which represents a return of 37.20% over the principal amount. |
Threshold Value: |
IWF: $230.36, which is 90% of its Starting Value (rounded
to two decimal places).
NDX: 12,209.28, which is 90% of its Starting Value (rounded
to two decimal places). |
Threshold Rate: |
100% |
Redemption Amount: |
The Redemption Amount per $1,000 in principal amount of Notes will be: |
a) |
If the Ending Value of the Least Performing Underlying is greater than its Starting Value: |
|
|
b) |
If the Ending Value of the Least Performing Underlying is equal to or less than its Starting Value but greater than or equal to its Threshold Value: |
|
|
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-2 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
|
c) |
If the Ending Value of the Least Performing Underlying is less than its Threshold Value: |
|
|
|
In this case, the Redemption Amount will be less than the principal amount and you could lose up to 90% of your principal amount. |
Calculation Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
Selling Agent: |
BofAS |
CUSIP: |
09709U5X2 |
Underlying Return: |
With respect to each Underlying,
|
Least Performing Underlying: |
The Underlying with the lowest Underlying Return. |
Events of Default and Acceleration: |
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 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 “Redemption Amount” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate. |
Any payments on the Notes depend on the credit risk
of BofA Finance, as Issuer, and BAC, as Guarantor, and on the performance of the Underlyings. The economic terms of the Notes are based
on BAC’s internal funding rate, which is the rate it would pay to borrow funds through the issuance of market-linked notes, and
the economic terms of certain related hedging arrangements BAC’s affiliates enter 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, if any, the referral fee and the hedging related charges described below (see “Risk Factors”
beginning on page PS-8), 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 pricing
date.
The initial estimated value of the Notes as of the pricing
date is set forth on the cover page of this pricing supplement. For more information about the initial estimated value and the structuring
of the Notes, see “Risk Factors” beginning on page PS-8 and “Structuring the Notes” on page PS-21.
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-3 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Redemption Amount Determination
On
the Maturity Date, you will receive a cash payment per $1,000 in principal amount of Notes determined as follows:
All payments described above are subject
to the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-4 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Hypothetical Payout Profile and Examples of Payments at Maturity
Capped Buffered
Enhanced Return Notes Table
The following table, graph and Redemption Amount Calculation
Examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the
Notes. They illustrate the calculation of the Redemption Amount and the return on the Notes based on a hypothetical Starting Value of
100 for the Least Performing Underlying, a hypothetical Threshold Value of 90 for the Least Performing Underlying, the Upside Participation
Rate of 300%, the Threshold Rate of 100%, the Max Return of $1,372.00 per $1,000 in principal amount of Notes and a range of hypothetical
Ending Values of the Least Performing Underlying. The actual amount you receive and the resulting return will depend on the actual
Starting Values, Threshold Values and Ending Values of the Underlyings, and whether you hold the Notes to maturity. The following
examples do not take into account any tax consequences from investing in the Notes.
For recent actual values of the Underlyings, see “The
Underlyings” section below. The Ending Value of each Underlying will not include any income generated by dividends or other distributions
paid with respect to shares or units of that Underlying or on the securities included in that Underlying, as applicable. In addition,
all payments on the Notes are subject to Issuer and Guarantor credit risk.
Ending
Value of the Least Performing Underlying
|
Underlying
Return of the Least Performing Underlying
|
Redemption
Amount per Note
|
Return
on the Notes
|
160.00 |
60.00% |
$1,372.00 |
37.20% |
150.00 |
50.00% |
$1,372.00 |
37.20% |
140.00 |
40.00% |
$1,372.00 |
37.20% |
130.00 |
30.00% |
$1,372.00 |
37.20% |
120.00 |
20.00% |
$1,372.00 |
37.20% |
112.40 |
12.40% |
$1,372.00(1) |
37.20% |
110.00 |
10.00% |
$1,300.00 |
30.00% |
105.00 |
5.00% |
$1,150.00 |
15.00% |
102.00 |
2.00% |
$1,060.00 |
6.00% |
100.00(2) |
0.00% |
$1,000.00 |
0.00% |
90.00(3) |
-10.00% |
$1,000.00 |
0.00% |
89.00 |
-11.00% |
$990.00 |
-1.00% |
80.00 |
-20.00% |
$900.00 |
-10.00% |
70.00 |
-30.00% |
$800.00 |
-20.00% |
50.00 |
-50.00% |
$600.00 |
-40.00% |
0.00 |
-100.00% |
$100.00 |
-90.00% |
(1) |
The Redemption Amount per $1,000 in principal amount of Notes cannot exceed the Max Return. |
(2) |
The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only. The actual Starting Value of each Underlying is set forth on page PS-2 above. |
(3) |
This is the hypothetical Threshold Value of the Least Performing Underlying. |
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-5 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Hypothetical Payout Profile and Examples of Payments at Maturity
This graph reflects the return on the Notes based on
the Upside Participation Rate of 300%, the Threshold Value of 90% of the Starting Value of the Least Performing Underlying, the Threshold
Rate of 100% and the Max Return of $1,372.00 per $1,000 in principal amount of Notes. The green line reflects the return on the Notes,
while the dotted gray line reflects the returns of a direct investment in the Least Performing Underlying, excluding dividends.
This graph has been prepared for purposes of illustration
only.
Redemption
Amount Calculation Examples
Example 1
The Ending Value of the Least Performing
Underlying is 115.00, or 115.00% of its Starting Value:
Starting Value of the Least Performing Underlying: |
100.00 |
|
Ending Value of the Least Performing Underlying: |
115.00 |
|
|
|
|
Example 2
The Ending Value of the Least Performing
Underlying is 102.00, or 102.00% of its Starting Value:
Starting Value of the Least Performing Underlying: |
100.00 |
|
Ending Value of the Least Performing Underlying: |
102.00 |
|
|
|
|
Example 3
The Ending Value of the Least Performing
Underlying is 95.00, or 95.00% of its Starting Value:
Starting Value of the Least Performing Underlying: |
100.00 |
|
Threshold Value of the Least Performing Underlying: |
90.00 |
|
Ending Value of the Least Performing Underlying: |
95.00 |
|
|
|
|
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-6 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Example 4
The Ending Value of the Least Performing
Underlying is 50.00, or 50.00% of its Starting Value:
Starting Value of the Least Performing Underlying: |
100.00 |
|
Threshold Value of the Least Performing Underlying: |
90.00 |
|
Ending Value of the Least Performing Underlying: |
50.00 |
|
|
|
|
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-7 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Risk Factors
Your investment in the Notes entails significant
risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after
carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors in light of your particular
circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the Notes
or financial matters in general. 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, each as identified on page PS-5 below.
Structure-related Risks
| ● | 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 Ending Value of any Underlying is less than its Threshold Value, at maturity, your investment
will be subject to 1:1 downside exposure to decreases in the value of the Least Performing Underlying and you will lose 1% of the principal
amount for each 1% that the Ending Value of the Least Performing Underlying is less than its Threshold Value. In that case, you will lose
some or a significant portion of your investment in the Notes. |
| ● | The return on the Notes will be limited to the Max Return. The return on the Notes will not exceed the Max Return, regardless
of the performance of the Underlying. |
| ● | The Notes do not bear interest. Unlike a conventional debt security, no interest payments will be paid over the term of the
Notes, regardless of the extent to which the Ending Value of the Least Performing Underlying exceeds its Starting Value or Threshold Value. |
| ● | 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. |
| ● | The Redemption Amount will not reflect changes in the values of the Underlyings other than on the Valuation Date. Changes in
the values of the Underlyings during the term of the Notes other than on the Valuation Date will not be reflected in the calculation of
the Redemption Amount. No other values of the Underlyings will be taken into account. Notwithstanding the foregoing, investors should
generally be aware of the performance of the Underlyings while holding the Notes. As a result, you will receive less than the principal
amount at maturity even if the value of each Underlying has increased at certain times during the term of the Notes before the Least Performing
Underlying decreases to a value on the Valuation Date that is less than its Threshold Value. |
| ● | Because the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may not receive
any return on the Notes and may lose some or a significant portion of your investment in the Notes even if the Ending Value of one Underlying
is greater than or equal to its Threshold Value. Your Notes are linked to the least performing of the Underlyings, and a change in
the value of one Underlying may not correlate with changes in the value of the other Underlying(s). The Notes are not linked to a basket
composed of the Underlyings, where the depreciation in the value of one Underlying could be offset to some extent by the appreciation
in the value of the other Underlying(s). In the case of the Notes, the individual performance of each Underlying would not be combined,
and the depreciation in the value of one Underlying would not be offset by any appreciation in the value of the other Underlying(s). Even
if the Ending Value of an Underlying is at or above its Threshold Value, you will lose some or a significant portion of your investment
in the Notes if the Ending Value of the Least Performing Underlying is below its Threshold Value. |
| ● | Any payments on the Notes are subject to our credit risk and the credit risk of the Guarantor, and any 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 the Redemption Amount at maturity will be dependent upon our ability
and the ability of the Guarantor to repay our respective obligations under the Notes on the Maturity Date, regardless of the Ending Value
of the Least Performing Underlying as compared to its Starting Value.
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. |
| ● | We are a finance subsidiary and, as such, have no independent assets, operations, or revenues. We are a finance subsidiary
of the Guarantor, 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. |
Valuation- and Market-related
Risks
| ● | The public offering price you are paying for the Notes exceeds their initial estimated value. The initial estimated value of
the Notes that is provided on the cover page of this pricing supplement is an estimate only, determined as of the pricing 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 |
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-8 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
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 values of the Underlyings, changes in the Guarantor’s
internal funding rate, and the inclusion in the public offering price of the underwriting discount, if any, the referral fee and the hedging
related charges, all as further described in “Structuring the Notes” below. These factors, together with various credit, market
and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary
market and will affect the value of the Notes in complex and unpredictable ways.
| ● | The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any time after
issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlyings, our and
BAC’s creditworthiness and changes in market conditions. |
| ● | 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. |
Conflict-related Risks
| ● | Trading and hedging activities by us, the Guarantor and any of our other affiliates, including BofAS, 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, may buy or sell shares or units of the Underlyings or the securities held by or included in the Underlyings, as applicable,
or futures or options contracts or exchange traded instruments on the Underlyings or those securities, or other instruments whose value
is derived from the Underlyings or those securities. While we, the Guarantor or one or more of our other affiliates, including BofAS,
may from time to time own shares or units of the Underlyings or the securities represented by the Underlyings, as applicable, except to
the extent that BAC’s common stock may be included in the Underlyings, we, the Guarantor and our other affiliates, including BofAS,
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, may execute such purchases or sales for our own or their own accounts, for business
reasons, or in connection with hedging our obligations under the Notes. These transactions may present a conflict of interest between
your interest in the Notes and the interests we, the Guarantor and our other affiliates, including BofAS, 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.
These transactions may adversely affect the values of the Underlyings in a manner that could be adverse to your investment in the Notes.
On or before the pricing date, any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or
their behalf (including those for the purpose of hedging some or all of our anticipated exposure in connection with the Notes), may have
affected the values of the Underlyings. Consequently, the values of the Underlyings may change subsequent to the pricing date, which may
adversely affect the market value of the Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, may also have engaged in hedging activities that could have
affected the values of the Underlyings on the pricing date. In addition, these hedging activities, including the unwinding of a hedge,
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, 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 values of the Underlyings, the market value of your
Notes prior to maturity or the amounts payable on the Notes. |
| ● | There may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right
to appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will make
a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances, these
duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent. |
Underlying-related Risks
| ● | The 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 SEC, 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. |
| ● | There is no assurance that the strategy employed by the IWF will be successful. The IWF seeks to
track the investment results, before fees and expenses, of an index composed of large-capitalization U.S. equities that exhibit growth
characteristics, which is currently the Russell 1000® |
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-9 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
| | Growth Index. The
Russell 1000® Growth Index measures the capitalization-weighted price performance of the stocks included in the Russell
1000® Index that are determined by FTSE Russell to be growth oriented, with higher price-to-book ratios and higher forecasted
growth values. A “growth” investment strategy is premised on the goal of investing in stocks of companies whose earnings are
expected to increase at an above-average rate compared to their industry sector or the overall market. However, the growth characteristics
referenced by the Russell 1000® Growth Index may not be accurate predictors of growth stocks, and there is no guarantee
that growth stocks will appreciate. In addition, the Russell 1000® Growth Index’s selection methodology includes
a significant bias against stocks with strong value characteristics, and stocks with strong value characteristics may outperform stocks
with weak value characteristics. There is no assurance that the IWF will outperform any other index, exchange-traded fund or strategy
that tracks U.S. stocks selected using other criteria and may underperform the Russell 1000® Index as a whole. It is possible
that the stock selection methodology of the Russell 1000® Growth Index will adversely affect its return and, consequently,
the level of the Russell 1000® Growth Index, the price of one share of the IWF and the value and return of the Notes. |
| ● | The anti-dilution adjustments will be limited. The calculation agent may adjust the Price Multiplier of the IWF and other terms
of the Notes to reflect certain actions by the IWF, as described in the section “Description of the Notes—Anti-Dilution and
Discontinuance Adjustments Relating to ETFs” in the accompanying product supplement. The calculation agent will not be required
to make an adjustment for every event that may affect the IWF and will have broad discretion to determine whether and to what extent an
adjustment is required. |
| ● | The publisher or the sponsor or investment advisor of an Underlying may adjust that Underlying in a way that affects its values,
and the publisher or the sponsor or investment advisor has no obligation to consider your interests. The publisher or the sponsor
or investment advisor of an Underlying can add, delete, or substitute the components included in that Underlying or make other methodological
changes that could change its value. Any of these actions could adversely affect the value of your Notes. |
Tax-related Risks
| ● | The U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be adverse to a holder of the Notes.
No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or securities similar to
the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment
in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes as single financial contracts,
as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue Service (the “IRS”)
were successful in asserting an alternative characterization for the Notes, the timing and character of gain or loss with respect to the
Notes may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance can be given that the IRS will agree
with the statements made in the section entitled “U.S. Federal Income Tax Summary.” You are urged to consult with your
own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the Notes. |
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-10 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
The Underlyings
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, the investment advisor
of the IWF and the sponsor of the NDX (collectively, the “Underlying Sponsors”). The Underlying Sponsors, which license the
copyright and all other rights to the respective 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” and “Description of the Notes — Anti-Dilution and
Discontinuance Adjustments Relating to ETFs — Discontinuance of or Material Change to an ETF” in the accompanying product
supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts any responsibility for the calculation, maintenance or
publication of any Underlying or any successor underlying. None of us, the Guarantor, BofAS or any of our other affiliates makes any representation
to you as to the future performance of the Underlyings. You should make your own investigation into the Underlyings.
The iShares® Russell 1000 Growth
ETF
The IWF is an exchange-traded fund
of iShares® Trust, a registered investment company, that seeks to track the investment results, before fees and expenses,
of an index composed of large-capitalization U.S. equities that exhibit growth characteristics, which we refer to as the Underlying Index
with respect to the IWF. The Underlying Index for the IWF is currently the Russell 1000® Growth Index. The Russell 1000®
Growth Index measures the capitalization-weighted price performance of the stocks included in the Russell 1000® Index that
are determined by FTSE Russell to be growth oriented, with higher price-to-book ratios and higher forecasted growth values. The shares
of the iShares® Russell 1000 Growth ETF trade on the NYSE Arca under the symbol “IWF”.
The shares of the IWF are registered
under the Exchange Act. Accordingly, information filed with the SEC relating to the IWF, including its periodic financial reports, may
be found on the SEC website.
The Russell 1000® Growth
Index
All information contained in this
pricing supplement regarding the Russell 1000® Growth Index (the “Growth Index”), including, without limitation,
its make-up, method of calculation and changes in its components, has been derived from publicly available information, without independent
verification. This information reflects the policies of, and is subject to change by, FTSE Russell. The Growth Index is calculated, maintained
and published by FTSE Russell. FTSE Russell has no obligation to publish, and may discontinue the publication of, the Growth Index. The
Growth Index is reported by Bloomberg under the ticker symbol “RLG.”
The Growth Index measures the capitalization-weighted
price performance of the stocks included in the Russell 1000® Index (each, a “Russell 1000 Component Stock”
and collectively, the “Russell 1000 Component Stocks”) that are determined by FTSE Russell to be growth oriented, with higher
price-to-book ratios and higher forecasted growth values. The Russell 1000® Index measures the capitalization-weighted
price performance of 1,000 U.S. large-capitalization stocks listed on eligible U.S. exchanges.
FTSE Russell uses a “non-linear
probability” method to assign stocks to the Growth Index and the Russell 1000® Value Index (the “Value Index”),
an index that measures the capitalization-weighted price performance of the Russell 1000 Component Stocks determined by FTSE Russell to
be value oriented, with lower price-to-book ratios and lower forecasted growth values. The term “probability” is used to indicate
the degree of certainty that a stock is value or growth based on its relative book-to-price (B/P) ratio, I/B/E/S forecast medium-term
growth (2 year) and sales per share historical growth (5 year). This method allows stocks to be represented as having both growth and
value characteristics, while preserving the additive nature of the indices.
The process for assigning growth
and value weights is applied separately to the Russell 1000 Component Stocks. The Russell 1000 Component Stocks are ranked by their adjusted
book-to-price ratio (B/P), their I/B/E/S forecast medium-term growth (2 year) and sales per share historical growth (5 year). These rankings
are converted to standardized units, where the value variable represents 50% of the score and the two growth variables represent the remaining
50%. They are then combined to produce a Composite Value Score (“CVS”).
The Russell 1000 Component Stocks
are then ranked by their CVS, and a probability algorithm is applied to the CVS distribution to assign growth and value weights to each
stock. In general, a stock with a lower CVS is considered growth, a stock with a higher CVS is considered value, and a stock with a CVS
in the middle range is considered to have both growth and value characteristics, and is weighted proportionately in the growth and value
indices. Stocks are always fully represented by the combination of their growth and value weights (e.g., a stock that is given a 20% weight
in the Value Index will have an 80% weight in the Growth Index).
Stock A, in the figure below, is
a security with 20% of its available shares assigned to the Value Index and the remaining 80% assigned to the Growth Index. Hence, the
sum of a stock’s market capitalization in the Value Index and the Growth Index will always equal its market capitalization in the
Russell 1000® Index.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-11 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
In the figure above, the quartile
breaks are calculated such that approximately 25% of the available market capitalization lies in each quartile. Stocks at the median are
divided 50% in each of the Value Index and the Growth Index. Stocks below the first quartile are 100% in the Growth Index. Stocks above
the third quartile are 100% in the Value Index. Stocks falling between the first and third quartile breaks are in both the Value Index
and the Growth Index to varying degrees, depending on how far they are above or below the median and how close they are to the first or
third quartile breaks.
Roughly 70% of the available market
capitalization is classified as all growth or all value. The remaining 30% have some portion of their market value in either the Value
Index or the Growth Index, depending on their relative distance from the median value score. Note that there is a small position cutoff
rule. If a stock’s weight is more than 95% in one index, its weight is increased to 100% in that index.
In an effort to mitigate unnecessary
turnover, FTSE Russell implements a banding methodology at the CVS level of the growth and value style algorithm. If a company’s
CVS change from the previous year is greater than or equal to +/- 0.10 and if the company remains in the same core index (i.e., the Russell
1000® Index), then the CVS remains unchanged during the next reconstitution process. Keeping the CVS static for these companies
does not mean the probability (growth/value) will remain unchanged in all cases due to the relation of a CVS score to the overall index.
However, this banding methodology is intended to reduce turnover caused by smaller, less meaningful movements while continuing to allow
the larger, more meaningful changes to occur, signaling a true change in a company’s relation to the market.
In calculating growth and value
weights, stocks with missing or negative values for B/P, or missing values for I/B/E/S growth, or missing sales per share historical growth
(6 years of quarterly numbers are required), are allocated by using the mean value score of the base index (the Russell 1000®
Index), the Russell Global Sectors (ICB) industry, subsector or sector group into which the company falls. Each missing (or negative B/P)
variable is substituted with the industry, subsector or sector group independently. An industry must have five members or the substitution
reverts to the subsector, and so forth to the sector. In addition, a weighted value score is calculated for securities with low analyst
coverage for I/B/E/S medium-term growth. For securities with coverage by a single analyst, 2/3 of the industry, subsector, or sector group
value score is weighted with 1/3 the security’s independent value score. For those securities with coverage by two analysts, 2/3
of the independent security’s value score is used and only 1/3 of the industry, subsector, or sector group is weighted. For those
securities with at least three analysts contributing to the I/B/E/S medium-term growth, 100% of the independent security’s value
score is used.
Selection of Stocks Comprising the Growth Index
Each company eligible for inclusion in the Growth Index
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) 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 Growth
Index 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
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-12 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
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 Growth Index 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., 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 Growth Index. Similarly, companies with only 5% or less of their shares available in the marketplace
are not eligible for the Growth Index. 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
traded securities are not eligible for inclusion. Exchange traded funds and mutual funds are also excluded.
Annual reconstitution is a process by which the Growth
Index 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 Growth Index using the then existing market capitalizations of eligible
companies. Reconstitution of the Growth Index 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 Growth Index 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 IWF
The following graph sets forth the daily historical
performance of the IWF in the period from January 3, 2017 through the pricing 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 IWF’s Threshold Value of $230.36 (rounded to two decimal places), which is 90% of the IWF’s Starting
Value of $255.95.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-13 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
This historical data on the IWF is not necessarily indicative
of the future performance of the IWF or what the value of the Notes may be. Any historical upward or downward trend in the Closing Market
Price of the IWF during any period set forth above is not an indication that the Closing Market Price of the IWF 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 Closing Market Prices and trading pattern of the IWF.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-14 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
The Nasdaq-100®
Index
The NDX is intended to measure the performance of the
100 largest domestic and international non-financial securities listed on The Nasdaq Stock Market ("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.; |
| ● | 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; |
| ● | the issuer of the security may not have annual financial
statements with an audit opinion that is currently withdrawn; and |
| ● | the issuer of the security must have “seasoned”
on NASDAQ, the New York Stock Exchange 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:
| ● | the security’s U.S. listing must be exclusively
on the Nasdaq Global Select Market or the Nasdaq Global Market; |
| ● | 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. (measured annually during the ranking review process); |
| ● | 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 |
| ● | 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
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-15 |
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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:
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%.
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,
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-16 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
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 3, 2017 through the pricing 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 Threshold Value of 12,209.28 (rounded to two decimal places), which is 90% of the NDX’s Starting
Value of 13,565.87.
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 closing level
of the NDX during any period set forth above is not an indication that the closing 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 closing 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, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Licensee”)
is in the licensing of
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-17 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
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.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-18 |
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Supplement to the Plan of Distribution; Role of BofAS and Conflicts
of Interest
BofAS, a broker-dealer affiliate of ours, is a member
of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling agent in the distribution of
the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121. 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 pricing date. Under Rule 15c6-1 of the Securities Exchange
Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes more than two business days prior to the original issue
date will be required to specify alternative settlement arrangements to prevent a failed settlement.
Under our distribution agreement with BofAS, BofAS will
purchase the Notes from us as principal at the public offering price indicated on the cover of this pricing supplement, less the indicated
underwriting discount, if any. BofAS will sell the Notes to other broker-dealers that will participate in the offering and that are not
affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may sell the Notes to one or more additional
broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer and that not all dealers will purchase or repurchase
the Notes at the same discount. In addition to the underwriting discount, if any, an affiliate of BofA Finance will pay a referral fee
of up to $4.50 per $1,000 in principal amount of the Notes in connection with the distribution of the Notes to other registered broker-dealers.
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.
At BofAS’s discretion, for a short, undetermined
initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary market at a price that may exceed the
initial estimated value of the Notes. Any price offered by BofAS for the Notes 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 of our other affiliates is obligated to purchase your Notes at any price or at any time, and we cannot assure you that any
party will purchase your Notes at a price that equals or exceeds the initial estimated value of the Notes.
Any price that 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, 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:
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-19 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
You are urged to carefully review the selling restrictions
that may be applicable to your jurisdiction beginning on page S-68 of the accompanying prospectus supplement.
European Economic Area and United Kingdom
None of this pricing supplement, the accompanying product
supplement, the accompanying prospectus or the accompanying prospectus supplement is a prospectus for the purposes of the Prospectus Regulation
(as defined below). This pricing supplement, the accompanying product supplement, the accompanying prospectus and the accompanying prospectus
supplement have been prepared on the basis that any offer of Notes in any Member State of the European Economic Area (the “EEA”)
or in the United Kingdom (each, a “Relevant State”) will only be made to a legal entity which is a qualified investor under
the Prospectus Regulation (“Qualified Investors”). Accordingly any person making or intending to make an offer in that Relevant
State of Notes which are the subject of the offering contemplated in this pricing supplement, the accompanying product supplement, the
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 BofA Finance, as issuer, or BAC, as 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.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-20 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Structuring the Notes
The Notes are our debt securities, the return on which
is linked to the performance of the Underlyings. The related guarantee is BAC’s obligation. As is the case for all of our and BAC’s
respective debt securities, including our market-linked notes, the economic terms of the Notes reflect our and BAC’s actual or perceived
creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational, funding and liability
management costs to us and BAC, BAC typically borrows the funds under these types of notes at a rate, which we refer to in this pricing
supplement as BAC’s internal funding rate, that is more favorable to BAC than the rate that it might pay for a conventional fixed
or floating rate debt security. This generally relatively lower internal funding rate, which is reflected in the economic terms of the
Notes, along with the fees and charges associated with market-linked notes, resulted in the initial estimated value of the Notes on the
pricing date being less than their public offering price.
In order to meet our payment obligations on the Notes,
at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options
or other derivatives) with 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-8 above and “Supplemental Use of Proceeds” on page PS-19 of the accompanying product supplement.
Validity of the Notes
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 SEC 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.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-21 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
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, in the opinion of our counsel, Sidley Austin LLP, and based on certain
factual representations received from us, the Notes should be treated as single financial contracts with respect to the 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. This discussion assumes that the Notes constitute
single financial contracts with respect to the Underlyings for U.S. federal income tax purposes. If the Notes did not constitute single
financial contracts, the tax consequences described below would be materially different.
This characterization of the Notes is not binding
on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or
any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper
characterization and treatment. Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences
of an investment in the Notes are not certain, and no assurance can be given that the IRS or any court will agree with the characterization
and tax treatment described in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of
the U.S. federal income tax consequences of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following discussion is
based on the characterization described above. The discussion in this section assumes that there is a significant possibility of a significant
loss of principal on an investment in the Notes.
We will not attempt to ascertain whether the issuer
of an Underlying or the issuer of any component stock included in the Underlying would be treated as a “passive foreign investment
company” (“PFIC”), within the meaning of Section 1297 of the Code, or a United States real property holding corporation,
within the meaning of Section 897(c) of the Code. If the issuer of one or more stocks included in 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 the issuer of an Underlying or the issuer of any component stock included in the Underlying is or becomes a PFIC or
is or becomes a United States real property holding corporation.
U.S. Holders
Upon receipt of a cash payment at maturity or upon a
sale or exchange of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the difference between
the amount realized and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes will equal the amount
paid by that holder to acquire them. Subject to the discussion below concerning the possible application of the “constructive ownership”
rules of Section 1260 of the Code, 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.
Possible Application of Section 1260 of the Code. Since
one Underlying is the type of financial asset described under Section 1260 of the Code (including, among others, any equity interest in
pass-through entities such as exchange traded funds, regulated investment companies, real estate
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-22 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
investment trusts, partnerships, and passive foreign
investment companies, each a “Section 1260 Financial Asset”), while the matter is not entirely clear, there may exist a risk
that an investment in the Notes will be treated, in whole or in part, as a “constructive ownership transaction” to which Section
1260 of the Code applies. If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized by a U.S. Holder
in respect of the Notes will be recharacterized as ordinary income (the “Excess Gain”). In addition, an interest charge will
also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income
inclusion for the U.S. Holder in taxable years prior to the taxable year of the sale, exchange, or settlement (assuming such income accrued
at a constant rate equal to the applicable federal rate as of the date of sale, exchange, or settlement).
If an investment in the Notes is treated as a constructive
ownership transaction, it is not clear to what extent any long-term capital gain of a U.S. Holder in respect of the Notes will be recharacterized
as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary
income in respect of the Notes will equal the excess of (i) any long-term capital gain recognized by the U.S. Holder in respect of the
Notes and attributable to Section 1260 Financial Assets, over (ii) the “net underlying long-term capital gain” (as defined
in Section 1260 of the Code) such U.S. Holder would have had if such U.S. Holder had acquired an amount of the corresponding Section 1260
Financial Assets at fair market value on the original issue date for an amount equal to the portion of the issue price of the Notes attributable
to the corresponding Section 1260 Financial Assets and sold such amount of Section 1260 Financial Assets at maturity or upon sale or exchange
of the Notes at fair market value. Unless otherwise established by clear and convincing evidence, the net underlying long-term capital
gain is treated as zero and therefore it is possible that all long-term capital gain recognized by a U.S. Holder in respect of the Notes
will be recharacterized as ordinary income if Section 1260 of the Code applies to an investment in the Notes. U.S. Holders should consult
their tax advisors regarding the potential application of Section 1260 of the Code to an investment in the Notes.
As described below, the IRS, as indicated in Notice
2008-2 (the “Notice”), is considering whether Section 1260 of the Code generally applies or should apply to the Notes, including
in situations where the Underlyings are not the type of financial asset described under Section 1260 of the Code.
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 or exchange of the Notes generally would be treated as ordinary income, and any loss realized at maturity or upon
a sale or exchange of the Notes generally would be treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of
original issue discount, and as capital loss thereafter.
The Notice sought comments from the public on the taxation
of financial instruments currently taxed as “prepaid forward contracts.” This Notice addresses instruments such as the Notes.
According to the Notice, the IRS and Treasury are considering whether a holder of an instrument such as the Notes should be required to
accrue ordinary income on a current basis, regardless of whether any payments are made prior to maturity. It is not possible to determine
what guidance the IRS and Treasury will ultimately issue, if any. Any such future guidance may affect the amount, timing and character
of income, gain, or loss in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering additional
issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders
of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of the Code, concerning certain
“constructive ownership transactions,” generally applies or should generally apply to such instruments, and whether any of
these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations require the
accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble to the regulations
states that the “wait and see” method of accounting does not properly reflect the economic accrual of income on those contracts,
and requires current accrual of income for some contracts already in existence. While the proposed regulations do not apply to prepaid
forward contracts, the preamble to the proposed regulations expresses the view that similar timing issues exist in the case of prepaid
forward contracts. If the IRS or Treasury publishes future guidance requiring current economic accrual for contingent payments on prepaid
forward contracts, it is possible that you could be required to accrue income over the term of the Notes.
Because of the absence of authority regarding the appropriate
tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner that results in tax
consequences that are different from those described above. For example, the IRS could possibly assert that any gain or loss that a holder
may recognize at maturity or upon the sale or exchange of the Notes should be treated as ordinary gain or loss.
Because the NDX is an index that periodically rebalances,
it is possible that the Notes could be treated as a series of single financial contracts, each of which matures on the next rebalancing
date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated as disposing of the Notes on each rebalancing
date in return for new Notes that mature on the next rebalancing date, and a U.S. Holder would accordingly likely recognize capital gain
or loss on each rebalancing date equal to the difference between the holder’s tax basis in the Notes (which would be adjusted to
take into account any prior recognition of gain or loss) and the fair market value of the Notes on such date.
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CAPPED BUFFERED ENHANCED RETURN NOTES | PS-23 |
Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Non-U.S. Holders
Except as discussed below, a Non-U.S. Holder generally
will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes provided that the Non-U.S. Holder
complies with applicable certification requirements and that the payment is not effectively connected with the conduct by the Non-U.S.
Holder of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale or exchange of the Notes or their settlement at
maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S.
for 183 days or more during the taxable year of the sale, exchange, or settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in the
conduct of a trade or business within the U.S. and if any gain realized on the settlement at maturity, or upon sale or exchange of the
Notes, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is attributable to a permanent
establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S. federal withholding tax,
generally will be subject to U.S. federal income tax on such gain on a net income basis in the same manner as if it were a U.S. Holder.
Such Non-U.S. Holders should read the material under the heading “—U.S. Holders,” for a description of the U.S. federal
income tax consequences of acquiring, owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation,
it may also be subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion of
its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the U.S., subject
to certain adjustments.
A “dividend equivalent” payment is treated
as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid
to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”)
that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent
payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2023. Based on our
determination that the Notes are not delta-one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the 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, tax will be withheld at the
applicable statutory rate. As discussed above, the IRS has indicated in the Notice that it is considering whether income in respect of
instruments such as the Notes should be subject to withholding tax.Prospective Non-U.S. Holders should consult their own tax advisors
regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax. Under current law, while
the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible in those individuals’
gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual
has retained certain interests or powers), should note that, absent an applicable treaty benefit, a Note is likely to be treated as U.S.
situs property, subject to U.S. federal estate tax. These individuals and entities should consult their own tax advisors regarding the
U.S. federal estate tax consequences of investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal
Income Tax Considerations — 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.
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Capped Buffered Enhanced Return Notes Linked to the Least Performing of the iShares® Russell 1000 Growth ETF and the Nasdaq-100® Index
Where You Can Find More Information
The terms and risks of the Notes are contained in this
pricing supplement and in the following related product supplement, prospectus supplement and prospectus, which can be accessed at the
following links:
| ● | Product Supplement EQUITY-1 dated January 3, 2020: |
https://www.sec.gov/Archives/edgar/data/70858/000119312520001483/d836196d424b5.htm
| ● | Series A MTN prospectus supplement dated December 31, 2019 and prospectus dated
December 31, 2019: |
https://www.sec.gov/Archives/edgar/data/70858/000119312519326462/d859470d424b3.htm
This pricing supplement and the accompanying product
supplement, prospectus supplement and prospectus have been filed as part of a registration statement with the SEC, which may, without
cost, be accessed on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should read
this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for information about us, BAC and
this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by this
pricing supplement and the accompanying product supplement, prospectus supplement and prospectus. Certain terms used but not defined in
this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus supplement. Unless otherwise
indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,”
or similar references are to BofA Finance, and not to BAC.
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.
|
CAPPED BUFFERED ENHANCED RETURN NOTES | PS-25 |
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