This pricing supplement, which is not complete and may be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying product supplement, prospectus supplement and prospectus are not an offer to sell these notes in any country or jurisdiction where such an offer would not be permitted.
Linked
to the Least Performing of S&P 500® Index and the Common Stock of Dollar General
Corporation
| ● | Approximate 2 year term. |
| ● | Payments on the Notes will depend on the individual performance
of the S&P 500® Index and the common stock of Dollar
General Corporation (each an “Underlying”). |
| ● | A fixed coupon rate of 9.25% per
annum (0.7709% monthly) payable
monthly. |
| ● | If either Underlying
declines by more than 45% from its Starting Value, at maturity your investment
will be subject to 1:1 downside exposure to decreases in the value of the Least Performing Underlying, with up to 100%
of the principal at risk; otherwise, at maturity investors will receive the principal amount. At maturity the investor will also receive
the final Fixed Coupon Payment regardless of the performance of the Least Performing Underlying.
|
| ● | The Starting Values of the Underlyings were determined
on March 7, 2024 (the “Strike Date”). The Starting Value of each Underlying may be higher or lower than its respective closing
value on the pricing date. |
| ● | All payments on the Notes are subject to the credit risk
of BofA Finance LLC (“BofA Finance”) and Bank of America Corporation (“BAC” or the “Guarantor”). |
| ● | The Notes are expected to price on March 8, 2024,
expected to issue on March 13, 2024 and expected to mature on March 12,
2026. |
| ● | The Notes will not be listed on any securities exchange. |
The initial estimated value of the Notes as of the
pricing date is expected to be between $932.20 and $982.20 per $1,000.00 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-7 of this pricing supplement, and “Structuring the Notes” on page PS-21 of
this pricing supplement for additional information.
Potential purchasers of the Notes should consider
the information in “Risk Factors” beginning on page PS-7 of this pricing supplement, "Additional Risk Factors Relating
to DG" beginning on page PS-9 of this pricing supplement, and "Risk Factors" beginning on page PS-5 of the accompanying
product supplement, page S-6 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(1) |
Underwriting discount(1)(2) |
Proceeds, before expenses, to BofA Finance(2) |
Per Note |
$1,000.00 |
$4.00 |
$996.00 |
Total |
|
|
|
(1) |
Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions. The public offering price for investors purchasing the Notes in these fee-based advisory accounts may be as low as $996.00 per $1,000 in principal amount of the Notes. |
(2) |
The underwriting discount per $1,000 in principal amount of Notes may
be as high as $4.00, resulting in proceeds, before expenses, to BofA Finance of as low as $996.00 per $1,000 in principal amount of Notes. |
The Notes and the related guarantee:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
Selling Agent
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
Terms of the Notes
The Fixed Income Yield Notes Linked
to the Least Performing of the S&P 500® Index and the common stock of Dollar General Corporation (the “Notes”)
provide a monthly Fixed Coupon Payment of $7.709 on the applicable Fixed Payment Date.
If the Least Performing Underlying declines by more
than 45% from its Starting Value, there is full exposure to declines in the Least Performing Underlying and you will lose a significant
portion or all of your investment in the Notes. Otherwise, at maturity you will receive the principal amount. At maturity you will also
receive the final Fixed Coupon Payment regardless of the performance of the Least Performing Underlying. The Notes are not traditional
debt securities and you may lose a significant portion or all of your principal amount at maturity. 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 years. |
Underlyings: |
The S&P 500® Index (Bloomberg symbol: “SPX”), a price return index, and the common stock of Dollar General Corporation (New York Stock Exchange (“NYSE”) symbol: “DG”) |
Strike Date: |
March 7, 2024 |
Pricing Date*: |
March 8, 2024 |
Issue Date*: |
March 13, 2024 |
Valuation Date*: |
March 9, 2026, 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*: |
March 12, 2026 |
Starting Value: |
SPX: 5,157.36
DG: $158.93
The Starting Value of each Underlying may be higher
or lower than its respective closing value on the pricing date. |
Ending Value: |
With respect to the SPX, its closing level on the Valuation
Date.
With respect to DG, its Closing Market Price on the
Valuation Date multiplied by its Price Multiplier. |
Price Multiplier: |
With respect to DG, 1, subject to adjustment for certain corporate events relating to DG as described below in “Additional Terms of the Notes — Anti-Dilution Adjustments” beginning on page PS-12 of this pricing supplement. |
Threshold Value: |
SPX: 2,836.55, which is 55% of its Starting Value (rounded
to two decimal places).
DG: $87.41, which is 55% of its Starting Value (rounded
to two decimal places). |
Fixed
Coupon Payment: |
We will pay a monthly Fixed Coupon Payment of $7.709 per $1,000 in principal amount of Notes (equal to a rate of 0.7709% per month or 9.25% per annum) on the applicable Fixed Payment Date (including the Maturity Date). |
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 or equal to its Threshold Value: |
$1,000; or |
b)
If the Ending Value of the Least Performing Underlying is less than its Threshold Value: |
|
|
In this case, the Redemption Amount (excluding
the final Fixed Coupon Payment) will be less than 55% of the principal amount and could be zero. |
|
FIXED INCOME YIELD NOTES | PS-2 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
|
|
The Redemption Amount will also include the final Fixed Coupon
Payment regardless of the performance of the Least Performing Underlying. |
Fixed
Payment Dates*: |
As set forth on page PS-4. |
Calculation Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
Selling Agent: |
BofAS |
CUSIP: |
09711BBD7 |
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 of BofA Finance LLC—Events of Default and Rights of Acceleration; Covenant Breaches” beginning on page 54 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. The final Fixed Coupon Payment will be prorated by the calculation agent to reflect the length of the final fixed payment period. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate. |
*Subject to
change.
|
FIXED INCOME YIELD NOTES | PS-3 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
Fixed Payment Dates
|
Fixed Payment Dates |
|
|
April 11, 2024 |
|
|
May 13, 2024 |
|
|
June 13, 2024 |
|
|
July 11, 2024 |
|
|
August 13, 2024 |
|
|
September 12, 2024 |
|
|
October 11, 2024 |
|
|
November 14, 2024 |
|
|
December 12, 2024 |
|
|
January 13, 2025 |
|
|
February 13, 2025 |
|
|
March 13, 2025 |
|
|
April 11, 2025 |
|
|
May 13, 2025 |
|
|
June 12, 2025 |
|
|
July 11, 2025 |
|
|
August 13, 2025 |
|
|
September 11, 2025 |
|
|
October 14, 2025 |
|
|
November 14, 2025 |
|
|
December 11, 2025 |
|
|
January 13, 2026 |
|
|
February 12, 2026 |
|
|
March 12, 2026 (the “Maturity Date”) |
|
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 and the hedging-related charges described below (see “Risk Factors” beginning on page
PS-7), will reduce the economic terms of the Notes to you and the initial estimated value of the Notes. Due to these factors, the public
offering price you pay to purchase the Notes will be greater than the initial estimated value of the Notes as of the pricing date.
The initial estimated value range of the Notes as of
the date of this pricing supplement is set forth on the cover page of this pricing supplement. The final pricing supplement will set forth
the initial estimated value of the Notes as of the pricing date. For more information about the initial estimated value and the structuring
of the Notes, see “Risk Factors” beginning on page PS-7 and “Structuring the Notes” on page PS-22.
|
FIXED INCOME YIELD NOTES | PS-4 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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 Issuer and Guarantor
credit risk.
|
FIXED INCOME YIELD NOTES | PS-5 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
Hypothetical Payout Profile and Examples of Payments at Maturity
Fixed Income Yield
Notes Table
The following table is for purposes of illustration
only. It is based on hypothetical values and shows hypothetical returns on the Notes. The table illustrates 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 55 for the Least Performing Underlying, the Fixed Coupon Payment of $7.709 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 shares or securities included in that Underlying, as applicable, which
you would otherwise be entitled to receive if you invested in those stocks directly. 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(1)
|
160.00 |
60.00% |
$1,007.709(2) |
0.7709% |
150.00 |
50.00% |
$1,007.709 |
0.7709% |
140.00 |
40.00% |
$1,007.709 |
0.7709% |
130.00 |
30.00% |
$1,007.709 |
0.7709% |
120.00 |
20.00% |
$1,007.709 |
0.7709% |
110.00 |
10.00% |
$1,007.709 |
0.7709% |
105.00 |
5.00% |
$1,007.709 |
0.7709% |
102.00 |
2.00% |
$1,007.709 |
0.7709% |
100.00(3) |
0.00% |
$1,007.709 |
0.7709% |
90.00 |
-10.00% |
$1,007.709 |
0.7709% |
80.00 |
-20.00% |
$1,007.709 |
0.7709% |
55.00(4) |
-45.00% |
$1,007.709 |
0.7709% |
54.99 |
-45.01% |
$557.609 |
-44.2391% |
30.00 |
-70.00% |
$307.709 |
-69.2291% |
20.00 |
-80.00% |
$207.709 |
-79.2291% |
0.00 |
-100.00% |
$7.709 |
-99.2291% |
(1) |
The “Return on the Notes” is calculated based on the Redemption Amount and the final Fixed Coupon Payment, not including any Fixed Coupon Payments paid prior to maturity. |
(2) |
This amount represents the sum of the principal amount and the final Fixed Coupon Payment. |
(3) |
The hypothetical Starting Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent a likely Starting Value for either Underlying. |
(4) |
This is the hypothetical Threshold Value of the Least Performing Underlying. |
|
FIXED INCOME YIELD NOTES | PS-6 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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-6 of the accompanying prospectus supplement
and page 7 of the accompanying prospectus, each as identified on page PS-27 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 either Underlying is less than its Threshold Value, at maturity you will lose
1% of the principal amount for each 1% that the Ending Value of the Least Performing Underlying is less than its Starting Value. In that
case, you will lose a significant portion or all of your principal amount in the Notes. |
| ● | Your return on the Notes is limited to the return represented by the Fixed Coupon Payments over the term of the Notes. Your
return on the Notes is limited to the Fixed Coupon Payments paid over the term of the Notes, regardless of the extent to which the Ending
Value of either Underlying exceeds its Starting Value. Similarly, the amount payable at maturity will never exceed the sum of the principal
amount and the applicable Fixed Coupon Payment, regardless of the extent to which the Ending Value of either Underlying exceeds its Starting
Value. In contrast, a direct investment in the shares of or securities included in either or both of the Underlyings would allow you to
receive the benefit of any appreciation in their values. Thus, any return on the Notes will not reflect the return you would realize if
you actually owned those securities and received the dividends paid or distributions made on them. |
| ● | The Redemption Amount will not reflect the values of the Underlyings other than on the Valuation Date. The values of the Underlyings
during the term of the Notes other than on the Valuation Date will not affect payments on the Notes. Notwithstanding the foregoing, investors
should generally be aware of the performance of the Underlyings while holding the Notes, as the performance of the Underlying may influence
the market value of the Notes. The calculation agent will calculate the Redemption Amount by comparing only the Threshold Value to the
Ending Value for each Underlying. No other values of the Underlyings will be taken into account. As a result, if and the Ending Value
of the Least Performing Underlying is less than its Threshold Value, you will receive less than the principal amount at maturity even
if the value of each Underlying was always above its Threshold Value prior to the Valuation Date. |
| ● | Because the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may lose a significant
portion or all of your principal amount 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 a portion of your principal if the Ending Value of the Least Performing Underlying is below its 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. In addition, if interest rates increase during the term of the Notes, the Fixed Coupon Payment may
be less than the yield on a conventional debt security of comparable maturity. |
| ● | Any payment on the Notes is subject to the credit risk of BofA Finance and the Guarantor, and actual or perceived changes in BofA
Finance’s 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 Fixed Coupon Payments on the Fixed Payment Dates or the Redemption
Amount at maturity, as applicable, will be dependent upon our ability and the ability of the Guarantor to repay our respective obligations
under the Notes on the applicable Fixed Payment Date or the Maturity Date, regardless of the Ending Value of the Least Performing Underlying
as compared to its Starting Value. No assurance can be given as to what our financial condition or the financial condition of the Guarantor
will be at any time after the pricing date of the Notes. If we and the Guarantor become unable to meet our respective financial obligations
as they become due, you may not receive the amount(s) payable under the terms of the Notes. |
| In | addition, our credit ratings and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities
to pay our obligations. Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our
or the Guarantor’s credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S.
Treasury securities (the “credit spread”) prior to the Maturity Date of your Notes 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. |
|
FIXED INCOME YIELD NOTES | PS-7 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
| ● | We are a finance subsidiary and, as such, have no independent assets, operations or revenues. We are a finance subsidiary of
BAC, have no operations other than those related to the issuance, administration and repayment of our debt securities that are guaranteed
by the Guarantor, and are dependent upon the Guarantor and/or its other subsidiaries to meet our obligations under the Notes in the ordinary
course. Therefore, our ability to make payments on the Notes may be limited. |
Valuation– and Market-related Risks
| ● | The public offering price you pay for the Notes will exceed their initial estimated value. The range of initial estimated values
of the Notes that is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the pricing
date that will be provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference
to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit
spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions, expectations
on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes. These pricing models
rely in part on certain forecasts about future events, which may prove to be incorrect. 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 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 the shares of or securities held by or included in the Underlyings, as applicable, or futures or options
contracts on the Underlyings or those securities, or other listed or over-the-counter derivative instruments linked to the Underlyings
or those securities. While we, the Guarantor or one or more of our other affiliates, including BofAS, may from time to time own securities
represented by the Underlyings, 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 Strike Date, any purchases or sales by us, the Guarantor or our other
affiliates, including BofAS or others on its behalf (including 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 Strike Date, which may adversely affect the market value of the Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, also may have engaged in hedging activities that could have
affected the value of the Underlyings on the Strike 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 value 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 publisher of the SPX may adjust the SPX in a way that affects its values, and the publisher has no obligation to consider your
interests. The publisher of the SPX can add, delete, or substitute the components included in the SPX or make other methodological
changes that could change its value. Any of these actions could adversely affect the value of your Notes. |
|
FIXED INCOME YIELD NOTES | PS-8 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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 substantially
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 consisting
of a put option and a deposit, as more fully described below under “U.S. Federal Income Tax Summary—General.” If the
Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the timing
and character of income, gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect to the
Notes and no assurance can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal Income
Tax Summary.” You are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences
of investing in the Notes. |
Additional Risk Factors Relating to DG
| ● | Our offering of the Notes does not constitute a recommendation of DG. You should not take our offering of the Notes as an expression
of our views about how DG will perform in the future or as a recommendation to invest in DG, including through an investment in the Notes.
As we are part of a global financial institution, we, the Guarantor and our other affiliates may, and often do, have positions (both long
and short) in DG that may conflict with an investment in the Notes. You should undertake an independent determination of whether an investment
in the Notes is suitable for you in light of your specific investment objectives, risk tolerance and financial resources. |
| ● | Our affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in DG and
any such research, opinions or recommendations could adversely affect the price of DG. In the ordinary course of business, our affiliates
may have published research reports, expressed opinions or provided recommendations on the Underlying Company (as defined below), DG,
the applicable financial markets or other matters that may influence the price of DG and the value of the Notes, and may do so in the
future. These research reports, opinions or recommendations may be communicated to our clients and clients of our affiliates and may be
inconsistent with purchasing or holding the Notes. Any research reports, opinions or recommendations expressed by our affiliates may not
be consistent with each other and may be modified from time to time without notice. Moreover, other professionals who deal in markets
relating to DG may at any time have significantly different views from those of our affiliates. For these reasons, you are encouraged
to derive information concerning DG from multiple sources, and you should not rely on the views expressed by our affiliates. |
| ● | You will have no rights as a security holder of the Underlying Company, you will have no rights to receive any shares of DG, and
you will not be entitled to dividends or other distributions by the Underlying Company. The Notes are our debt securities. They are
not equity instruments, shares of stock, or securities of any other issuer, other than the related guarantees, which are the securities
of the Guarantor. Investing in the Notes will not make you a holder of DG. You will not have any voting rights, any rights to receive
dividends or other distributions, or any other rights with respect to DG. Unless otherwise set forth under the limited circumstances described
below relating to the Price Multiplier (as described in “Additional Terms of the Notes – Anti-Dilution Adjustments”
below), the payment(s) on the Notes will not reflect the value of dividends paid or distributions made on DG or any other rights associated
with those equity securities. As a result, the return on your Notes may not reflect the return you would realize if you actually owned
shares of DG and received the dividends paid or other distributions made in connection with those shares. Your Notes will be paid in cash
and you have no right to receive delivery of shares of DG. |
| ● | The business activities of us, the Guarantor and any of our other affiliates, including the Selling Agents, relating to the Underlying
Company may create conflicts of interest with you. We, the Guarantor and/or our other affiliates, including the Selling Agents, at
the time of any offering of the Notes or in the future, may engage in business with the Underlying Company, including making loans to,
equity investments in, or providing investment banking, asset management, or other services to the Underlying Company, its affiliates,
and its competitors. |
In connection with these activities, we, the Guarantor
or our other affiliates, including the Selling Agents, may receive information about the Underlying Company that we or they will not divulge
to you or other third parties. One or more of our affiliates may have published, and in the future may publish, research reports on the
Underlying Company. This research is modified from time to time without notice and may express opinions or provide recommendations that
are inconsistent with purchasing or holding your Notes. Any of these activities may adversely affect the value of DG and, consequently,
the market value of your Notes. We, the Guarantor and our other affiliates, including the Selling Agents, do not make any representation
to any purchasers of the Notes regarding any matters whatsoever relating to DG or the Underlying Company. Any prospective purchaser of
the Notes should undertake an independent investigation into DG and the Underlying Company to a level that, in its judgment, is appropriate
to make an informed decision regarding an investment in the Notes. The selection of DG does not reflect any investment recommendations
from us, the Guarantor or our other affiliates, including the Selling Agents.
| ● | The Underlying Company will have no obligations relating to the Notes. The Underlying Company will not have any financial or
legal obligation with respect to the Notes or the amounts to be paid to you, including any obligation to take our interest or the interests
of the noteholders into consideration for any reason, including when taking any corporate actions that might adversely affect the value
of DG or the value of the Notes. The Underlying Company will not receive any of the proceeds from any offering of the Notes, and will
not be responsible for, or participate in, the offering of the Notes, or the determination or calculation of any payment(s) on the Notes. |
| ● | The Price Multiplier of DG or other terms of the Notes will not be adjusted for all corporate events that could affect DG or the
Underlying Company. The Price Multiplier (as defined in “Terms of the Notes”) of DG, the determination of the payment(s)
on the Notes, and |
|
FIXED INCOME YIELD NOTES | PS-9 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
other terms of the Notes may be adjusted for the specified
corporate events affecting DG, as described below in the section entitled “Additional Terms of the Notes—Anti-Dilution Adjustments.”
However, these adjustments do not cover all corporate events that could affect the market price of DG, such as offerings of common shares
for cash or in connection with certain acquisition transactions. The occurrence of any event that does not require the calculation agent
to adjust the Price Multiplier of DG or other terms of the Notes may adversely affect the Closing Market Price of DG, and, as a result,
the market value of the Notes.
| ● | We, the Guarantor and our other affiliates, including the Selling Agents, do not control the Underlying Company. We, the Guarantor
or our other affiliates, including the Selling Agents, currently, or in the future, may engage in business with the Underlying Company,
and we, the Guarantor or our other affiliates, including the Selling Agents, may from time to time own securities of the Underlying Company.
However, none of us, the Guarantor or any of our other affiliates, including the Selling Agents, have the ability to control the actions
of the Underlying Company, including actions that could affect the value of DG. |
| ● | We cannot assure you that publicly available information provided about DG or the Underlying Company is accurate or complete, and
none of us, the Guarantor nor any of our other affiliates, including the Selling Agents, will perform any due diligence procedures with
respect to the Underlying Company. All disclosures relating to DG or the Underlying Company have been derived from publicly available
documents and other publicly available information, without independent verification. None of us, the Guarantor, the Selling Agents or
our other affiliates has participated in, or will participate in, the preparation of those documents or make any due diligence inquiry
with respect to DG or the Underlying Company in connection with the offering of the Notes. We and the Guarantor do not make any representation
that those publicly available documents or any other publicly available information regarding DG or the Underlying Company is accurate
or complete. We and the Guarantor are not responsible for the public disclosure of information by or about DG or the Underlying Company,
whether contained in filings with the SEC or otherwise made publicly available. As a result we cannot give any assurance that, prior to
the date of this pricing supplement, all events which could impact DG, the Underlying Company or the accuracy or completeness of those
public documents or information have been publicly disclosed. Any subsequent disclosure or future failure to disclose material events
concerning DG or the Underlying Company could affect the value of DG and therefore, the value of the Notes. You must rely on your own
evaluation of the merits of an investment linked to DG. |
| ● | The historical performance of DG should not be taken as an indication of its performance during the term of the Notes. The
DG may perform better or worse during the term of the Notes than it has historically. The historical performance of DG, including any
historical performance set forth in this pricing supplement, should not be taken as an indication of its future performance. |
|
FIXED INCOME YIELD NOTES | PS-10 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
Additional Terms of the Notes
With respect to DG only, information included in this section
of the pricing supplement supersedes information in the accompanying product supplement, prospectus supplement and prospectus to the extent
that it is different from that information.
Certain Terms of the Notes
A “Trading Day” means a day on which trading
is generally conducted (or was scheduled to have been generally conducted, but for the occurrence of a Market Disruption Event) on the
NYSE, the Nasdaq Stock Market, the Chicago Board Options Exchange, and in the over-the-counter market for equity securities in the United
States, or any successor exchange or market, or in the case of a security traded on one or more non-U.S. securities exchanges or markets,
on the principal non-U.S. securities exchange or market for such security.
Closing Market Price
The price of DG on the Valuation Date will
be determined by multiplying its Closing Market Price on that day by its “Price Multiplier”.
The “Closing Market Price”
for one share of DG (or one unit of any other security for which a Closing Market Price must be determined) on any Trading Day means any
of the following:
|
• |
|
if DG (or such other security) is listed or admitted to trading on a national securities exchange, the last reported sale price, regular way (or, in the case of The Nasdaq Stock Market, the official closing price), of the principal trading session on that day on the principal U.S. securities exchange registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on which DG (or such other security) is listed or admitted to trading; |
|
• |
|
if DG (or such other security) is not listed or admitted to trading on any national securities exchange but is included in the OTC Bulletin Board Service (or any successor service) operated by FINRA (the “OTC Bulletin Board”), the last reported sale price of the principal trading session on the OTC Bulletin Board on that day; |
|
• |
|
if DG (or such other security) is issued by a foreign issuer and its closing price cannot be determined as set forth in the two bullet points above, and DG (or such other security) is listed or admitted to trading on a non-U.S. securities exchange or market, the last reported sale price, regular way, of the principal trading session on that day on the primary non-U.S. securities exchange or market on which DG (or such other security) is listed or admitted to trading (converted to U.S. dollars using such exchange rate as the calculation agent, in its sole discretion, determines to be commercially reasonable); or |
|
• |
|
if the Closing Market Price cannot be determined as set forth in the prior bullets, the mean, as determined by the calculation agent, of the bid prices for DG (or such other security) obtained from as many dealers in that security (which may include us, BofAS and/or any of our other affiliates), but not exceeding three, as will make the bid prices available to the calculation agent. If no such bid price can be obtained, the Closing Market Price will be determined (or, if not determinable, estimated) by the calculation agent in its sole discretion in a commercially reasonable manner. |
Market Disruption Events
As to DG, a “Market Disruption Event”
means one or more of the following events, as determined by the calculation agent in its sole discretion:
|
(A) |
the suspension, absence or material limitation of trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, of the shares of DG (or shares of any Successor Entity, as defined in “ —Anti-Dilution Adjustments—Reorganization Events”) on the primary exchange where such shares trade, as determined by the calculation agent (without taking into account any extended or after-hours trading session); or |
|
(B) |
the suspension, absence or material limitation of trading, in each case, for more than two consecutive hours of trading, or during the one-half hour period preceding the close of trading, on the primary exchange that trades options contracts or futures contracts related to the shares of DG (or shares of any Successor Entity), as determined by the calculation agent (without taking into account any extended or after-hours trading session), in options contracts or futures contracts related to the shares of DG (or shares of any Successor Entity). |
For the purpose of determining
whether a Market Disruption Event has occurred:
|
(1) |
a limitation on the hours in a Trading Day and/or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange; |
|
(2) |
a decision to permanently discontinue trading in the shares of DG (or shares of any Successor Entity) or the relevant futures or options contracts relating to such shares will not constitute a Market Disruption Event; |
|
(3) |
a suspension in trading in a futures or options contract on the shares of DG (or shares of any Successor Entity), by a major securities market by reason of (a) a price change violating limits set by that securities market, (b) an imbalance of orders relating to those contracts, or (c) a disparity in bid and ask quotes relating to those contracts, will each constitute a suspension of or material limitation on trading in futures or options contracts relating to DG; |
|
FIXED INCOME YIELD NOTES | PS-11 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
|
(4) |
subject to paragraph (3) above, a suspension of or material limitation on trading on the relevant exchange will not include any time when that exchange is closed for trading under ordinary circumstances; and |
|
(5) |
for the purpose of clause (A) above, any limitations on trading during significant market fluctuations under NYSE Rule 80B, or any applicable rule or regulation enacted or promulgated by the NYSE or any other self-regulatory organization or the SEC of similar scope as determined by the calculation agent, will be considered “material.” |
Anti-Dilution Adjustments
As to DG, the calculation agent, in its sole
discretion, may adjust the Price Multiplier, and any other terms of the Notes, if an event described below occurs after the pricing date
and on or before the maturity date of the Notes and if the calculation agent determines that such an event has a dilutive or concentrative
effect on the theoretical value of the shares of DG or shares of any Successor Entity.
The Price Multiplier for DG resulting from
any of the adjustments specified below will be rounded to the eighth decimal place with five one-billionths being rounded upward.
No adjustments to the Price Multiplier will be required unless the adjustment would require a change of at least 0.1% in the Price Multiplier
then in effect. Any adjustment that would require a change of less than 0.1% in the Price Multiplier which is not applied at the time
of the event may be reflected at the time of any subsequent adjustment that would require a change of the Price Multiplier. The required
adjustments specified below do not cover all events that could affect DG.
No adjustments to the Price Multiplier or
any other terms of the Notes will be required other than those specified below. However, the calculation agent may, at its sole discretion,
make additional adjustments to the Price Multiplier or any other terms of the Notes to reflect changes to DG if the calculation agent
determines that the adjustment is appropriate to ensure an equitable result.
The calculation agent will be solely responsible
for the determination of any adjustments to the Price Multiplier or any other terms of the Notes and of any related determinations with
respect to any distributions of stock, other securities or other property or assets, including cash, in connection with any corporate
event described below; its determinations and calculations will be conclusive absent a determination of a manifest error.
No adjustments are required to be made for
certain other events, such as offerings of common equity securities by the Underlying Company for cash or in connection with the occurrence
of a partial tender or exchange offer for DG by the Underlying Company.
Following an event that results in an adjustment
to the Price Multiplier or any of the other terms of the Notes, the calculation agent may (but is not required to) provide holders of
the Notes with information about that adjustment as it deems appropriate, depending on the nature of the adjustment. Upon written request
by any holder of the Notes, the calculation agent will provide that holder with information about such adjustment.
The calculation agent, in its sole discretion
and as it deems reasonable, may adjust the Price Multiplier for DG and any other terms of the Notes as a result of certain events related
to DG, which include, but are not limited to, the following:
Stock Splits and Reverse Stock Splits. If
DG is subject to a stock split or reverse stock split, then once such split has become effective, the Price Multiplier for DG will be
adjusted such that the new Price Multiplier will equal the product of:
|
• |
|
the prior Price Multiplier; and |
|
• |
|
the number of shares that a holder of one share of DG before the effective date of the stock split or reverse stock split would have owned immediately following the applicable effective date. |
For example, a two-for-one stock
split would ordinarily change a Price Multiplier of one into a Price Multiplier of two. In contrast, a one-for-two reverse stock
split would ordinarily change a Price Multiplier of one into a Price Multiplier of one-half.
Stock Dividends. If DG is subject
to (i) a stock dividend (i.e., an issuance of additional shares of DG) that is given ratably to all holders of DG or (ii) a
distribution of additional shares of DG as a result of the triggering of any provision of the organizational documents of the Underlying
Company, then, once the dividend or distribution has become effective and DG is trading ex-dividend, the Price Multiplier for
DG will be adjusted on the ex-dividend date such that the new Price Multiplier will equal the prior Price Multiplier plus the
product of:
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• |
|
the prior Price Multiplier; and |
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• |
|
the number of additional shares issued in the stock dividend with respect to one share of DG; provided that no adjustment will be made for a stock dividend or distribution for which the number of shares of DG paid or distributed is based on a fixed cash equivalent value, unless such distribution is an Extraordinary Dividend (as defined below). |
For example, a stock dividend of one new
share for each share held would ordinarily change a Price Multiplier of one into a Price multiplier of two.
Extraordinary Dividends. There
will be no adjustments to the Price Multiplier to reflect any cash dividends or cash distributions paid with respect to DG other than
Extraordinary Dividends, as described below, and distributions described in “—Reorganization Events” below.
An “Extraordinary Dividend”
means, with respect to a cash dividend or other distribution with respect to DG, a dividend or other distribution that the calculation
agent determines, in its sole discretion, is not declared or otherwise made according to the Underlying Company’s then existing
policy or practice of paying such dividends on a quarterly or other regular basis. If an Extraordinary Dividend occurs, the Price Multiplier
will be adjusted on the ex-dividend date so that the new Price Multiplier will equal the product of:
|
FIXED INCOME YIELD NOTES | PS-12 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
|
• |
|
the prior Price Multiplier; and |
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• |
|
a fraction, the numerator of which is the Closing Market Price per share of DG on the Trading Day preceding the ex-dividend date and the denominator of which is the amount by which the Closing Market Price per share of DG on that preceding Trading Day exceeds the Extraordinary Dividend Amount. |
The “Extraordinary
Dividend Amount” with respect to an Extraordinary Dividend will equal:
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• |
|
in the case of cash dividends or other distributions that constitute regular dividends, the amount per share of DG of that Extraordinary Dividend minus the amount per share of the immediately preceding non-Extraordinary Dividend for that share; or |
|
• |
|
in the case of cash dividends or other distributions that do not constitute regular dividends, the amount per share of DG of that Extraordinary Dividend. |
To the extent an Extraordinary Dividend is
not paid in cash, the value of the non-cash component will be determined by the calculation agent, whose determination will
be conclusive. A distribution on DG described in the section “ —Issuance of Transferable Rights or Warrants” below or
in clause (a), (d) or (e) of the section entitled “ —Anti-Dilution Adjustments—Reorganization Events” below
that also constitutes an Extraordinary Dividend will only cause an adjustment under those respective sections.
Issuance of Transferable Rights or Warrants. If
the Underlying Company issues transferable rights or warrants to all holders of record of DG to subscribe for or purchase DG, including
new or existing rights to purchase DG under a shareholder rights plan or arrangement, then the Price Multiplier will be adjusted on the
Trading Day immediately following the issuance of those transferable rights or warrants so that the new Price Multiplier will equal the
prior Price Multiplier plus the product of:
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• |
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the prior Price Multiplier; and |
|
• |
|
the number of shares of DG that can be purchased with the cash value of those warrants or rights distributed on one share of DG. |
The number of shares that can be purchased will
be based on the Closing Market Price of DG on the date the new Price Multiplier is determined. The cash value of those warrants or rights,
if the warrants or rights are traded on a registered national securities exchange, will equal the closing price of that warrant or right.
If the warrants or rights are not traded on a registered national securities exchange, the cash value will be determined by the calculation
agent and will equal the average of the bid prices obtained from three dealers at 3:00 p.m., New York time, on the date the new Price
Multiplier is determined, provided that if only two of those bid prices are available, then the cash value of those warrants or rights
will equal the average of those bids and if only one of those bids is available, then the cash value of those warrants or rights will
equal that bid.
Reorganization
Events
If after the pricing
date and on or prior to the Valuation Date, as to DG:
|
(a) |
there occurs any reclassification or change of DG, including, without limitation, as a result of the issuance of tracking stock by the Underlying Company; |
|
(b) |
the Underlying Company, or any surviving entity or subsequent surviving entity of the Underlying Company (a “Successor Entity”), has been subject to a merger, combination, or consolidation and is not the surviving entity; |
|
(c) |
any statutory exchange of securities of the Underlying Company or any Successor Entity with another corporation occurs, other than under clause (b) above; |
|
(d) |
the Underlying Company is liquidated or is subject to a proceeding under any applicable bankruptcy, insolvency, or other similar law; |
|
(e) |
the Underlying Company issues to all of its shareholders securities of an issuer other than the Underlying Company, including equity securities of an affiliate of the Underlying Company, other than in a transaction described in clauses (b), (c), or (d) above; |
|
(f) |
a tender or exchange offer or going-private transaction is consummated for all the outstanding shares of the Underlying Company; |
|
(g) |
there occurs any reclassification or change of DG that results in a transfer or an irrevocable commitment to transfer all such outstanding shares of DG to another entity or person; |
|
(h) |
the Underlying Company or any Successor Entity is the surviving entity of a merger, combination, or consolidation, that results in the outstanding shares of DG (other than shares of DG owned or controlled by the other party to such transaction) immediately prior to such event collectively representing less than 50% of the outstanding shares of DG immediately following such event; or |
|
(i) |
the Underlying Company ceases to file the financial and other information with the SEC in accordance with Section 13(a) of the Exchange Act (an event in clauses (a) through (i), a “Reorganization Event”), |
then, on or after the effective date of the Reorganization
Event, the calculation agent shall, in its sole discretion, make an adjustment to the Price Multiplier or any other terms of the Notes
as the calculation agent, in its sole discretion, determines appropriate to account for the economic effect on the Notes of that Reorganization
Event (including adjustments to account for changes in volatility, expected dividends, stock loan rate, or liquidity relevant to DG or
to the Notes), which may, but need not, be determined by reference to the adjustment(s) made in respect of such Reorganization
|
FIXED INCOME YIELD NOTES | PS-13 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
Event by an options exchange to options on DG traded on that options exchange, and determine the effective date of that adjustment. For the avoidance of doubt, any adjustment will be made
on or after the effective date of the Reorganization Event and not on the date of the announcement of a plan or intention to effect such
an event.
If the calculation agent determines that
no adjustment that it could make will produce a commercially reasonable result, then the calculation agent may cause the maturity date
of the Notes to be accelerated to the fifth business day following the date of that determination and the amount payable to you will be
calculated as though the date of early repayment were the stated maturity date of the Notes and as though the Valuation Date were the
fifth Trading Day prior to the date of acceleration.
If the Underlying Company ceases to file
the financial and other information with the SEC in accordance with Section 13(a) of the Exchange Act, as contemplated by clause
(i) above, and the calculation agent determines in its sole discretion that sufficiently similar information is not otherwise available
to you, then the calculation agent may cause the maturity date of the Notes to be accelerated to the fifth business day following the
date of that determination and the amount payable to you will be calculated as though the date of early repayment were the stated maturity
date of the Notes, and as though the Valuation Date were the fifth Trading Day prior to the date of acceleration. If the calculation agent
determines that sufficiently similar information is available to you, the Reorganization Event will be deemed to have not occurred.
Alternative
Anti-Dilution and Reorganization Adjustments
The calculation agent may elect at its discretion
to not make any of the adjustments to the Price Multiplier or to the other terms of the Notes described in this section, but may instead
make adjustments, in its discretion, to the Price Multiplier or any other terms of the Notes that will reflect the adjustments to the
extent practicable made by the Options Clearing Corporation on options contracts on DG or any successor common stock. For example, if
DG is subject to a two-for-one stock split, and the Options Clearing Corporation adjusts the strike prices of the options contract
on DG by dividing the strike price by two, then the calculation agent may also elect to divide any applicable “starting value”
of DG by two. In this case, the Price Multiplier will remain one. This adjustment would have the same economic effect on holders of the
Notes as if the Price Multiplier had been adjusted.
|
FIXED INCOME YIELD NOTES | PS-14 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
The Underlyings
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 S&P 500®
Index
All disclosures contained in this pricing supplement
regarding the SPX, including, without limitation, its make-up, method of calculation, and changes in its components, have been derived
from publicly available sources. The information reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC
(“SPDJI”), the sponsor of the SPX. We refer to SPDJI as the “Underlying Sponsor.” The Underlying Sponsor, which
licenses the copyright and all other rights to the SPX, has no obligation to continue to publish, and may discontinue publication of,
the SPX. The consequences of the Underlying Sponsor discontinuing publication of the SPX are discussed in “Description of the Notes
— Discontinuance of an Index” in the accompanying product supplement. None of us, the Guarantor, the calculation agent, or
BofAS accepts any responsibility for the calculation, maintenance or publication of the SPX or any successor index.
The SPX includes a representative sample of 500 companies
in leading industries of the U.S. economy. The SPX is intended to provide an indication of the pattern of common stock price movement.
The calculation of the level of the SPX is based on the relative value of the aggregate market value of the common stocks of 500 companies
as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during the base period
of the years 1941 through 1943.
The SPX includes companies from eleven main groups:
Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials; Health Care; Industrials; Information Technology;
Real Estate; Materials; and Utilities. SPDJI may from time to time, in its sole discretion, add companies to, or delete companies from,
the SPX to achieve the objectives stated above.
Company additions to the SPX must have an unadjusted
company market capitalization of $15.8 billion or more (an increase from the previous requirement of an unadjusted company market capitalization
of $14.5 billion or more).
SPDJI calculates the SPX by reference to the prices
of the constituent stocks of the SPX without taking account of the value of dividends paid on those stocks. As a result, the return on
the Notes will not reflect the return you would realize if you actually owned the SPX constituent stocks and received the dividends paid
on those stocks.
Computation of the SPX
While SPDJI currently employs the following methodology
to calculate the SPX, no assurance can be given that SPDJI will not modify or change this methodology in a manner that may affect payments
on the Notes.
Historically, the market value of any component stock
of the SPX was calculated as the product of the market price per share and the number of then outstanding shares of such component stock.
In March 2005, SPDJI began shifting the SPX halfway from a market capitalization weighted formula to a float-adjusted formula, before
moving the SPX to full float adjustment on September 16, 2005. SPDJI’s criteria for selecting stocks for the SPX did not change
with the shift to float adjustment. However, the adjustment affects each company’s weight in the SPX.
Under float adjustment, the share counts used in calculating
the SPX reflect only those shares that are available to investors, not all of a company’s outstanding shares. Float adjustment excludes
shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing more
than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for purposes
of calculating the SPX. Generally, these “control holders” will include officers and directors, private equity, venture capital
and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted shares,
ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities
at all levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company
as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds and ETF providers,
401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers and investment
funds, independent foundations and savings and investment plans, will ordinarily be considered part of the float.
Treasury stock, stock options, restricted shares, equity
participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow
investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares, are normally part
of the float unless those shares form a control block. If a company has multiple classes of stock outstanding, shares in an unlisted or
non-traded class are treated as a control block.
For each stock, an investable weight factor (“IWF”)
is calculated by dividing the available float shares by the total shares outstanding. Available float shares are defined as the total
shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for
|
FIXED INCOME YIELD NOTES | PS-15 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
control blocks. For example, if a company’s officers
and directors hold 3% of the company’s shares, and no other control group holds 5% of the company’s shares, SPDJI would assign
that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s officers and directors hold 3%
of the company’s shares and another control group holds 20% of the company’s shares, SPDJI would assign an IWF of 0.77, reflecting
the fact that 23% of the company’s outstanding shares are considered to be held for control. As of July 31, 2017, companies with
multiple share class lines are no longer eligible for inclusion in the SPX. Constituents of the SPX prior to July 31, 2017 with multiple
share class lines will be grandfathered in and continue to be included in the SPX. If a constituent company of the SPX reorganizes into
a multiple share class line structure, that company will remain in the SPX at the discretion of the S&P Index Committee in order to
minimize turnover.
The SPX is calculated using a base-weighted aggregate
methodology. The level of the SPX reflects the total market value of all component stocks relative to the base period of the years 1941
through 1943. An indexed number is used to represent the results of this calculation in order to make the level easier to work with and
track over time. The actual total market value of the component stocks during the base period of the years 1941 through 1943 has been
set to an indexed level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the daily calculation of the SPX is
computed by dividing the total market value of the component stocks by the “index divisor.” By itself, the index divisor is
an arbitrary number. However, in the context of the calculation of the SPX, it serves as a link to the original base period level of the
SPX. The index divisor keeps the SPX comparable over time and is the manipulation point for all adjustments to the SPX, which is index
maintenance.
Index Maintenance
Index maintenance includes monitoring and completing
the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to
company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common shares
outstanding and the stock prices of the companies in the SPX, and do not require index divisor adjustments.
To prevent the level of the SPX from changing due to
corporate actions, corporate actions which affect the total market value of the SPX require an index divisor adjustment. By adjusting
the index divisor for the change in market value, the level of the SPX remains constant and does not reflect the corporate actions of
individual companies in the SPX. Index divisor adjustments are made after the close of trading and after the calculation of the SPX closing
level.
Changes in a company’s shares outstanding of 5.00%
or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers are made as soon as reasonably
possible. Share changes due to mergers or acquisitions of publicly held companies that trade on a major exchange are implemented when
the transaction occurs, even if both of the companies are not in the same headline index, and regardless of the size of the change. All
other changes of 5.00% or more (due to, for example, company stock repurchases, private placements, redemptions, exercise of options,
warrants, conversion of preferred stock, notes, debt, equity participation units, at-the-market offerings, or other recapitalizations)
are made weekly and are announced on Fridays for implementation after the close of trading on the following Friday. Changes of less than
5.00% are accumulated and made quarterly on the third Friday of March, June, September, and December, and are usually announced two to
five days prior.
If a change in a company’s shares outstanding
of 5.00% or more causes a company’s IWF to change by five percentage points or more, the IWF is updated at the same time as the
share change. IWF changes resulting from partial tender offers are considered on a case by case basis.
Historical Performance of the SPX
The following graph sets forth the daily historical
performance of the SPX in the period from January 2, 2019 through the Strike Date. We obtained this historical data from Bloomberg L.P.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. The horizontal line in
the graph represents the SPX’s Threshold Value of 2,836.55 (rounded to two decimal places), which is 55% of the SPX’s Starting
Value of 5,157.36, which was its closing level on the Strike Date.
|
FIXED INCOME YIELD NOTES | PS-16 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
This historical data on the SPX is not necessarily indicative
of the future performance of the SPX or what the value of the Notes may be. Any historical upward or downward trend in the level of the
SPX during any period set forth above is not an indication that the level of the SPX is more or less likely to increase or decrease at
any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the levels of the SPX.
License Agreement
S&P®
is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones®
is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by
S&P Dow Jones Indices LLC. “Standard & Poor’s®,” “S&P
500®” and “S&P®”
are trademarks of S&P. These trademarks have been sublicensed for certain purposes by our affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated. The SPX is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Notes are not sponsored, endorsed, sold or promoted
by S&P Dow Jones Indices LLC, Dow Jones, S&P or any of their respective affiliates (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders of the Notes or any member of the public
regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the SPX to track general
market performance. S&P Dow Jones Indices’ only relationship to Merrill Lynch, Pierce, Fenner & Smith Incorporated with
respect to the SPX is the licensing of the SPX and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or
its third party licensors. The SPX is determined, composed and calculated by S&P Dow Jones Indices without regard to us, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, or the Notes. S&P Dow Jones Indices have no obligation to take our needs, BAC’s needs
or the needs of Merrill Lynch, Pierce, Fenner & Smith Incorporated or holders of the Notes into consideration in determining, composing
or calculating the SPX. S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices
and amount of the Notes or the timing of the issuance or sale of the Notes or in the determination or calculation of the equation by which
the Notes are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration,
marketing or trading of the Notes. There is no assurance that investment products based on the SPX will accurately track index performance
or provide positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a
security or futures contract within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security
or futures contract, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates may
independently issue and/or sponsor financial products unrelated to the Notes currently being issued by us, but which may be similar to
and competitive with the Notes. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance
of the SPX. It is possible that this trading activity will affect the value of the Notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE SPX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO,
ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT
TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES,
AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY
US, BAC, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
SPX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS,
TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT
LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
|
FIXED INCOME YIELD NOTES | PS-17 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
Dollar General Corporation
We have derived the following information on DG and
the company issuing DG (the “Underlying Company”) from publicly available documents. Because DG is registered under the Exchange
Act, the Underlying Company is required to file periodically certain financial and other information specified by the SEC. Information
provided to or filed with the SEC by the Underlying Company can be located through the SEC’s web site at sec.gov by reference to
the CIK number set forth below.
This document relates only to the offering of the Notes
and does not relate to any offering of DG or any other securities of the Underlying Company. None of us, the Guarantor, BofAS or any of
our other affiliates has made any due diligence inquiry with respect to the Underlying Company in connection with the offering of the
Notes. None of us, the Guarantor, BofAS or any of our other affiliates has independently verified the accuracy or completeness of the
publicly available documents or any other publicly available information regarding the Underlying Company and hence makes no representation
regarding the same. Furthermore, there can be no assurance that all events occurring prior to the date of this document, including events
that would affect the accuracy or completeness of these publicly available documents that could affect the trading price of DG, have been
or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose material future events
concerning the Underlying Company could affect the price of DG and therefore could affect your return on the Notes. The selection of DG
is not a recommendation to buy or sell DG.
Dollar General Corporation operates
a chain of discount retail stores. The company offer a broad selection of merchandise, including consumable products such as food, paper
and cleaning products, health, beauty, pet supplies, and non-consumables such as seasonal merchandise. The company serves customers in
the United States and Mexico. The common stock of the company trades on the NYSE under the symbol "DG." The company's CIK number
is 0000029534.
Historical Performance of
DG
The following graph sets forth the daily historical performance of DG in the period from January 2, 2019 through
Strike 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 Closing Market Prices reflected in the graph below may have been adjusted to reflect certain
corporate actions, such as stock splits and reverse stock splits. The horizontal line in the graph represents DG’s Threshold Value
of $87.41 (rounded to two decimal places), which is 55% of DG’s Starting Value of $158.93, which was its Closing Market Price on
the Strike Date.
This historical data on DG is not
necessarily indicative of the future performance of DG or what the value of the Notes may be. Any historical upward or
downward trend
in the Closing Market Price of DG during any period set forth above is not an indication that the Closing Market Price of DG 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 DG.
|
FIXED INCOME YIELD NOTES | PS-18 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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.
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. 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. Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forgo some or all of
their selling concessions, fees or commissions. The public offering price for investors purchasing the Notes in these fee-based advisory
accounts may be as low as $995.30 per $1,000 in principal amount of Notes.
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.
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
|
FIXED INCOME YIELD NOTES | PS-19 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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
|
FIXED INCOME YIELD NOTES | PS-20 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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, typically results in the initial estimated value of the Notes
on the pricing date being less than their public offering price.
In order to meet our payment obligations on the Notes,
at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options
or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a number of factors, including our and BAC’s creditworthiness, interest
rate movements, the volatility of the Underlyings, the tenor of the Notes and the hedging arrangements. The economic terms of the Notes
and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements will
include hedging-related charges, reflecting the costs associated with, and our affiliates’ profit earned from, these hedging arrangements.
Since hedging entails risk and may be influenced by unpredictable market forces, actual profits or losses from these hedging transactions
may be more or less than any expected amounts.
For further information, see “Risk Factors”
beginning on page PS-7 above and “Supplemental Use of Proceeds” on page PS-20 of the accompanying product supplement.
|
FIXED INCOME YIELD NOTES | PS-21 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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
There is no statutory, judicial, or administrative authority
directly addressing the characterization of the Notes or instruments substantially similar to the Notes. We intend to treat the Notes
for all tax purposes as a unit (a “Unit”) consisting of the following:
| (i) | a put option (the “Put Option”) written by you to us that, if exercised, requires you to
pay us an amount equal to the Deposit (as defined below) in exchange for a cash amount based upon the performance of the Underlyings;
and |
| (ii) | a deposit with us of a fixed amount of cash, equal to the issue price of the Note, to secure your obligation
under the Put Option (the “Deposit”) that pays you interest based on our cost of borrowing at the time of issuance (the “Deposit
Interest”). |
Based on the treatment of each Note as a Unit consisting
of the Put Option and the Deposit, it would be reasonable to allocate each Fixed Coupon Payment between the Deposit and the Put Option
and treat % of each Fixed Coupon Payment as Deposit Interest and % of each Fixed Coupon Payment as Put Option premium. Under this approach,
it would be reasonable to allocate 100% of the issue price of a Note to the Deposit and none to the Put Option.
No statutory, judicial or administrative authority directly
addresses the proper treatment of the Notes or instruments substantially similar to the Notes for U.S. federal income tax purposes, and
no ruling is being requested from the IRS with respect to the Notes. Significant aspects of the U.S. federal income tax consequences of
an investment in the Notes are uncertain, and no assurance can be given that the IRS or a court will agree with the tax treatment described
herein. In the opinion of our counsel, Sidley Austin LLP, the treatment of the Notes described above is reasonable under current law;
however, our counsel has advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld,
and that alternative treatments are possible. Accordingly, you should consult your tax advisor regarding the U.S. federal income tax consequences
of an investment in the Notes (including alternative treatments of the notes). Unless otherwise expressly stated, the remainder of this
discussion is based upon, and assumes, the treatment of each Note as a Unit consisting of the Put Option and the Deposit, as well as the
allocation of the Fixed Coupon Payments and issue price of the Note described above.
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 an Underlying that is an index 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 an Underlying or the issuer of one
or more stocks included in an Underlying that is an index 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 issuer of an Underlying or the issuers
of the component stocks included in an Underlying that is an index 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 an Underlying that is an index is or becomes
a PFIC or is or becomes a United States real property holding corporation.
|
FIXED INCOME YIELD NOTES | PS-22 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
U.S. Holders
The Deposit Interest payments will be included in the
income of a U.S. Holder as interest at the time that such interest is accrued or received in accordance with such U.S. Holder’s
regular method of tax accounting. The Put Option premium will not be included in the income of a U.S. Holder until the sale, exchange
or maturity of the Notes. Accordingly, all of the Put Option premium payments on the Notes (except for the last Put Option premium payment)
generally will not be included in the income of a U.S. Holder when they are received.
If at maturity the U.S. Holder receives cash equal to
the full principal amount plus the last Deposit Interest payment and the last Put Option premium payment, then such U.S. Holder (i) would
include the last Deposit Interest payment in income as interest in the manner described above and (ii) would recognize short-term capital
gain equal to the entire amount of Put Option premium, which amount is equal to the sum of all of the Put Option premium payments received.
If at maturity the U.S. Holder receives an amount of
cash that is less than the full principal amount and receives the last Deposit Interest payment and the last Put Option premium payment,
then such U.S. Holder (i) will include the last Deposit Interest payment in income as interest in the manner described above and (ii)
will recognize long-term capital gain or loss with respect to the remaining cash received at maturity (other than the last Put Option
premium payment) in an amount equal to the difference between (1) the sum of all of the Put Option premiums received (including the last
Put Option premium payment) and (2) the excess of the principal amount of the Note over the amount of such cash received.
Upon a sale or exchange of a Note prior to maturity,
a U.S. Holder will generally recognize short-term or long-term capital gain or loss with respect to the Deposit (depending upon the U.S.
Holder’s holding period for the Notes). The U.S. Holder will also generally recognize short-term capital gain or loss with respect
to the Put Option. For purposes of determining the amount of such gain or loss, a U.S. Holder should apportion the amount realized on
the sale or exchange (other than amounts attributable to accrued but unpaid Deposit Interest payments, which would be taxed as described
above) between the Deposit and the Put Option based upon their respective fair market values on the date of such sale or exchange. In
general, the amount of capital gain or loss on the Deposit will equal the amount realized that is attributable to the Deposit, less the
U.S. Holder’s adjusted tax basis in the Deposit. The amount realized that is attributable to the Put Option plus the total Put Option
premiums previously received by the U.S. Holder should be treated as short-term capital gain. Notwithstanding the foregoing, if the fair
market value of the Deposit on the date of such sale or exchange exceeds the total amount realized on the sale or exchange (other than
amounts attributable to accrued but unpaid Deposit Interest payments), the U.S. Holder should be treated as having (i) sold or exchanged
the Deposit for an amount equal to its fair market value on such date and (ii) made a payment (the “Put Option Assumption Payment”)
equal to the amount of such excess in exchange for the purchaser’s assumption of the U.S. Holder’s rights and obligations
under the Put Option. In such event, the U.S. Holder should recognize short-term capital gain or loss in respect of the Put Option in
an amount equal to the difference between the total Put Option premiums previously received by the U.S. Holder and the Put Option Assumption
Payment.
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. Alternatively, under an alternative characterization
of the Notes as income-bearing single financial contracts, the entire Fixed Coupon Payments could
be required to be included in income as ordinary income by a U.S. holder at the time received accrued. Other alternative characterizations
are possible and prospective investors should consult with their tax advisors regarding all aspects of the U.S. federal income tax consequences
of an investment in the Notes.
The IRS released Notice 2008-2 (the “Notice”),
which sought comments from the public on the taxation of financial instruments currently taxed as “prepaid forward contracts.”
This Notice addresses instruments such as the Notes. According to the Notice, the IRS and Treasury are considering whether a holder of
an instrument such as the Notes should be required to accrue ordinary income on a current basis, regardless of whether any payments are
made prior to maturity. It is not possible to determine what guidance the IRS and Treasury will ultimately issue, if any. Any such future
guidance may affect the amount, timing and character of income, gain, or loss in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering additional
issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders
of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of the Code, concerning certain
“constructive ownership transactions,” generally applies or should generally apply to such instruments, and whether any of
these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations require the
accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble to the regulations
states that the “wait and see” method of accounting does not properly reflect the economic accrual of income on those contracts,
and requires current accrual of income for some contracts already in existence. While the proposed regulations do not apply to prepaid
forward contracts, the preamble to the proposed regulations expresses the view that similar timing issues exist in the case of prepaid
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FIXED INCOME YIELD NOTES | PS-23 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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 one of the Underlyings is an index that periodically
rebalances, it is possible that the Notes could be treated as a series of income-bearing single financial contracts, each of which matures
on the next rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated as disposing of
the Notes on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S. Holder would accordingly
likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s tax basis in the Notes
(which would be adjusted to take into account any prior recognition of gain or loss) and the fair market value of the Notes on such date.
Non-U.S. Holders
Assuming the treatment of the Notes as set forth above
is respected and subject to the discussions below regarding the potential application of Section 871(m) of the Code and the discussions
in the accompanying prospectus regarding FATCA, Fixed Coupon Payments with respect to a Note, and gain realized on the sale or exchange
of such Note, should not be subject to U.S. federal income or withholding tax under current law, provided that:
| · | the Non-U.S. Holder does not own, directly or by attribution, ten percent or more of the total combined
voting power of all classes of our stock entitled to vote; |
| · | the Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to us through
stock ownership; |
| · | the Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A) of the Code; |
| · | the certification requirement described below has been fulfilled with respect to the beneficial owner;
and |
| · | and the payment is not effectively connected with the conduct by the Non-U.S. Holder of U.S. trade or
business. |
Certification Requirement. The certification
requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a Note (or a financial institution holding
a Note on behalf of the beneficial owner) furnishes to the applicable withholding agent an IRS Form W-8BEN (or other appropriate form),
on which the beneficial owner certifies under penalties of perjury that it is not a U.S. person.
Alternative Tax Treatments. As described above
under “— U.S. Holders — Alternative Tax Treatments,” the IRS may seek to apply a different characterization and
tax treatment from the treatment described herein. While the U.S. federal income and withholding tax consequences to a Non-U.S. Holder
of ownership and disposition of a Note under current law should generally be the same as those described immediately above, it is possible
that a Non-U.S. Holder could be subject to withholding tax under certain recharacterizations of the Notes.
Moreover, among the issues addressed in the Notice described
in “— U.S. Holders — Alternative Tax Treatments” is the degree, if any, to which income realized by Non-U.S. Holders
should be subject to withholding tax. It is possible that any Treasury regulations or other guidance issued after consideration of this
issue could materially and adversely affect the withholding tax consequences of ownership and disposition of the Notes, possibly with
retroactive effect. Accordingly, prospective investors should consult their tax advisors regarding all aspects of the U.S. federal income
tax consequences of an investment in the Notes, including the possible implications of the Notice discussed above. Prospective investors
should note that we currently do not intend to withhold on any of the payments made with respect to the Notes to Non-U.S. Holders (subject
to compliance by such holders with the certification requirement described above and to the discussion regarding FATCA in the accompanying
prospectus). However, in the event of a change of law or any formal or informal guidance by the IRS, the Treasury or Congress, we (or
the applicable paying agent) may decide to withhold on payments made with respect to the Notes to Non-U.S. Holders and we will not be
required to pay any additional amounts with respect to amounts withheld.
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 Fixed Coupon Payment and 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 Fixed
Coupon Payment and gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders should read
the material under the heading “—U.S. Holders,” for a description of the U.S. federal income tax consequences of acquiring,
owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch
profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion of its earnings and profits for the taxable
year that are effectively connected with its conduct of a trade or business in the U.S., subject to certain adjustments.
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FIXED INCOME YIELD NOTES | PS-24 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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, 2025. Based on our
determination that the Notes are not delta-one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the Underlyings or the Notes, and following such occurrence the Notes could
be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions
in respect of the Underlyings or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
As discussed above, alternative characterizations of
the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax in addition to the withholding
tax described above, tax will be withheld at the applicable statutory rate. Prospective Non-U.S. Holders should consult their own tax
advisors regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax. Under current law, while
the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible in those individuals’
gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual
has retained certain interests or powers), should note that, absent an applicable treaty benefit, a Note is likely to be treated as U.S.
situs property, subject to U.S. federal estate tax. These individuals and entities should consult their own tax advisors regarding the
U.S. federal estate tax consequences of investing in a Note.
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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FIXED INCOME YIELD NOTES | PS-25 |
Fixed Income Yield Notes Linked to the Least Performing of the S&P 500® Index and the Common Stock of Dollar General Corporation
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:
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, except obligations that are subject to any priorities or preferences by law. The related guarantee will rank equally in right
of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations that are subject to any priorities
or preferences by law, and senior to its subordinated obligations. 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.
|
FIXED INCOME YIELD NOTES | PS-26 |
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