Linked
to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
• The Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF, due October 14, 2025 (the “Notes”)
priced on July 8, 2024 and will issue on July 11, 2024.
• Approximate 15 month term if not called prior to maturity.
• Payments on the Notes will depend on the individual performance of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF (each an “Underlying”).
• Contingent coupon rate of 15.00% per annum (1.25% per month) payable monthly if the Observation Value
of each Underlying on the applicable Observation Date is greater than or equal to 70.00% of its Starting Value, assuming the Notes
have not been called.
• Beginning with the January 8, 2025 Call Observation Date, automatically callable quarterly for an
amount equal to the principal amount plus the relevant Contingent Coupon Payment, if the Observation Value of each Underlying is greater
than or equal to 100.00% of its Starting Value on any Call Observation Date.
• Assuming the Notes are not called prior to maturity, if any Underlying has declined by more
than 35% from its Starting Value on any Trading Day during the Knock-In Period, and the Ending Value of the Least Performing Underlying
is less than 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, you will receive the principal amount.
At maturity you will also receive a final Contingent Coupon Payment if the Observation Value of each Underlying on the final Observation
Date is greater than or equal to 70.00% of its Starting Value.
• The “Knock-In Period” will be the period from but excluding the pricing date to and including
the Valuation Date.
• All payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”
or the “Issuer”), as issuer of the Notes, and Bank of America Corporation (“BAC” or the “Guarantor”),
as guarantor of the Notes.
• The Notes will not be listed on any securities exchange.
• CUSIP No. 09711DLJ9.
The initial estimated value
of the Notes as of the pricing date is $982.50 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-10 of this pricing supplement and “Structuring the Notes” on page PS-28 of this pricing
supplement for additional information.
There are important
differences between the Notes and a conventional debt security. Potential purchasers of the Notes should consider the information in “Risk
Factors” beginning on page PS-10 of this pricing supplement, 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 |
$5.00 |
$995.00 |
Total |
$3,300,000.00 |
$16,500.00 |
$3,283,500.00 |
|
(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 $995.00 per $1,000.00 in principal amount of Notes. |
|
(2) |
The underwriting discount per $1,000.00 in principal amount of Notes may be as high as $5.00, resulting
in proceeds, before expenses, to BofA Finance of as low as $995.00 per $1,000.00 in principal amount of Notes. The total underwriting
discount and proceeds, before expenses, to BofA Finance specified above reflect the aggregate of the underwriting discounts per $1,000.00
in principal amount of Notes. |
The Notes and the related guarantee:
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
|
Selling Agent |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Terms of the Notes
Issuer: |
BofA Finance |
Guarantor: |
BAC |
Denominations: |
The Notes will be issued in minimum denominations of $1,000.00 and whole multiples of $1,000.00 in excess thereof. |
Term: |
Approximately 15 months, unless previously automatically called. |
Underlyings: |
The Nasdaq-100® Index (Bloomberg symbol: “NDX”), a price return index, the Russell 2000® Index (Bloomberg symbol: “RTY”), a price return index and the VanEck® Gold Miners ETF (Bloomberg symbol: “GDX”). |
Pricing Date: |
July 8, 2024 |
Issue Date: |
July 11, 2024 |
Valuation Date: |
October 8, 2025, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” in the accompanying product supplement. |
Maturity Date: |
October 14, 2025 |
Starting Value: |
NDX: 20,439.54
RTY: 2,038.670
GDX: $36.10 |
Observation Value: |
With respect to the NDX on any day, its closing
level on such day.
With respect to the RTY on any day, its closing
level on such day.
With respect to the GDX on any day, its Closing
Market Price on such day, multiplied by its Price Multiplier. |
Ending Value: |
With respect to each Underlying, its Observation Value on the Valuation Date. |
Call Value: |
NDX: 20,439.54, which is 100.00% of its Starting
Value.
RTY: 2,038.670, which is 100.00% of its Starting
Value.
GDX: $36.10, which is 100.00% of its Starting Value. |
Price Multiplier: |
With respect to the GDX, 1, subject to adjustment for certain events as described in “Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-28 of the accompanying product supplement. |
Coupon Barrier: |
NDX: 14,307.68, which is 70.00% of its Starting
Value (rounded to two decimal places).
RTY: 1,427.069, which is 70.00% of its Starting
Value.
GDX: $25.27, which is 70.00% of its Starting Value. |
Threshold Value: |
NDX: 13,285.70, which is 65.00% of its Starting
Value (rounded to two decimal places).
RTY: 1,325.136, which is 65.00% of its Starting
Value (rounded to three decimal places).
GDX: $23.47, which is 65.00% of its Starting Value
(rounded to two decimal places). |
Knock-In Event: |
The Observation Value of any Underlying falls below its Threshold Value on any Trading Day during the Knock-In Period. |
Knock-In Period: |
The period from but excluding the pricing date to and including the Valuation Date, excluding any date or dates that the calculation agent determines is not a Trading Day with respect to any Underlying. |
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-2 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Contingent Coupon Payment: |
If, on any monthly Observation Date, the Observation Value of each Underlying is greater than or equal to its Coupon Barrier, we will pay a Contingent Coupon Payment of $12.50 per $1,000.00 in principal amount of Notes (equal to a rate of 1.25% per month or 15.00% per annum) on the applicable Contingent Payment Date (including the Maturity Date). |
Automatic Call: |
Beginning with the January 8, 2025 Call Observation Date, all (but not less than all) of the Notes will be automatically called if the Observation Value of each Underlying is greater than or equal to its Call Value on any Call Observation Date. If the Notes are automatically called, the Early Redemption Amount will be paid on the applicable Call Payment Date. No further amounts will be payable following an Automatic Call. |
Early Redemption Amount: |
For each $1,000.00 in principal amount of Notes, $1,000.00, plus the applicable Contingent Coupon Payment. |
Redemption Amount: |
If the Notes have not been automatically called
prior to maturity, the Redemption Amount per $1,000.00 in principal amount of Notes will be:
a) If a Knock-In Event does not occur during the
Knock-In Period:
b) If a Knock-In Event occurs during the Knock-In
Period but the Ending Value of the Least Performing Underlying is greater than or equal to its Starting Value:
c) If a Knock-In Event occurs during the Knock-In
Period and the Ending Value of the Least Performing Underlying is less than its Starting Value:
In this case, the Redemption Amount (excluding
any final Contingent Coupon Payment) will be less than the principal amount and you could lose up to 100.00% of your investment in the
Notes.
The Redemption Amount will also include a final
Contingent Coupon Payment if the Ending Value of the Least Performing Underlying is greater than or equal to its Coupon Barrier. |
Observation Dates: |
As set forth beginning on page PS-5 |
Contingent Payment Dates: |
As set forth beginning on page PS-5 |
Call Observation Dates: |
As set forth beginning on page PS-6 |
Call Payment Dates: |
As set forth beginning on page PS-6. Each Call Payment Date is also a Contingent Payment Date. |
Calculation Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
Selling Agent: |
BofAS |
CUSIP: |
09711DLJ9 |
Underlying Return: |
With respect to each Underlying,
|
Least Performing Underlying: |
The Underlying with the lowest Underlying Return. |
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-3 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
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” 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. We will also determine whether a final Contingent Coupon Payment is payable based upon the values of the Underlyings during the deemed Knock-In Period; any such final Contingent Coupon Payment will be prorated by the calculation agent to reflect the length of the final contingent payment period. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate. |
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-4 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Observation Dates, Contingent Payment Dates, Call Observation Dates
and Call Payment Dates
Observation Dates* |
Contingent Payment Dates |
August 8, 2024 |
August 13, 2024 |
September 9, 2024 |
September 12, 2024 |
October 8, 2024 |
October 11, 2024 |
November 8, 2024 |
November 14, 2024 |
December 9, 2024 |
December 12, 2024 |
January 8, 2025 |
January 13, 2025 |
February 10, 2025 |
February 13, 2025 |
March 10, 2025 |
March 13, 2025 |
April 8, 2025 |
April 11, 2025 |
May 8, 2025 |
May 13, 2025 |
June 9, 2025 |
June 12, 2025 |
July 8, 2025 |
July 11, 2025 |
August 8, 2025 |
August 13, 2025 |
September 8, 2025 |
September 11, 2025 |
October 8, 2025 (the “Valuation Date”) |
October 14, 2025 (the “Maturity Date”) |
* The Observation Dates are subject to postponement
as set forth in “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” beginning
on page PS-23 of the accompanying product supplement.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-5 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Call Observation Dates* |
Call Payment Dates |
January 8, 2025 |
January 13, 2025 |
April 8, 2025 |
April 11, 2025 |
July 8, 2025 |
July 11, 2025 |
* The Call Observation Dates are subject to postponement
as set forth in “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” beginning
on page PS-23 of the accompanying product supplement, with references to “Observation Dates” being read as references to “Call
Observation Dates.”
Any payments on the Notes depend on the credit risk
of BofA Finance, as Issuer, and BAC, as Guarantor, and on the performance of the Underlyings. The economic terms of the Notes are based
on BAC’s internal funding rate, which is the rate it would pay to borrow funds through the issuance of market-linked notes, and
the economic terms of certain related hedging arrangements BAC’s affiliates enter into. BAC’s internal funding rate is typically
lower than the rate it would pay when it issues conventional fixed or floating rate debt securities. This difference in funding rate,
as well as the underwriting discount, if any, and the hedging related charges described below (see “Risk Factors” beginning
on page PS-10), reduced the economic terms of the Notes to you and the initial estimated value of the Notes. Due to these factors, the
public offering price you are paying to purchase the Notes is greater than the initial estimated value of the Notes as of the pricing
date.
The initial estimated value of the Notes as of the
pricing date is set forth on the cover page of this pricing supplement. For more information about the initial estimated value and the
structuring of the Notes, see “Risk Factors” beginning on page PS-10 and “Structuring the Notes” on page PS-28.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-6 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Contingent Coupon Payment and Redemption Amount Determination
On
each Contingent Payment Date, if the Notes have not been previously called, you may receive a
Contingent
Coupon Payment per $1,000.00 in principal amount of Notes determined as follows:
Assuming
the Notes have not been automatically called, on the Maturity Date, you will receive a cash payment per $1,000.00 in principal amount
of Notes determined as follows:
All payments described above are subject to the
credit risk of BofA Finance, as Issuer, and BAC, as Guarantor.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-7 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Total Contingent Coupon Payment Examples
The table below illustrates the hypothetical total
Contingent Coupon Payments per $1,000.00 in principal amount of Notes over the term of the Notes, based on the Contingent Coupon Payment
of $12.50, depending on how many Contingent Coupon Payments are payable prior to an Automatic Call or maturity. Depending on the performance
of the Underlyings, you may not receive any Contingent Coupon Payments during the term of the Notes.
Number of Contingent Coupon Payments |
Total Contingent Coupon Payments |
0 |
$0.00 |
2 |
$25.00 |
4 |
$50.00 |
6 |
$75.00 |
8 |
$100.00 |
10 |
$125.00 |
12 |
$150.00 |
14 |
$175.00 |
15 |
$187.50 |
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-8 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Hypothetical Payout Profile and Examples of Payments at Maturity
Contingent Income Auto-Callable Yield Notes Table
The following table is for purposes of illustration
only. It assumes the Notes have not been automatically called prior to maturity and 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 Coupon Barrier of 70 for the Least Performing Underlying, a
hypothetical Threshold Value of 65 for the Least Performing Underlying, the Contingent Coupon Payment of $12.50 per $1,000.00 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, Coupon Barriers, Threshold Values, Observation Values and Ending Values of
the Underlyings, whether the Notes are automatically called prior to maturity, whether a Knock-In Event has occurred, and whether you
hold the Notes to maturity. The following examples do not take into account any tax consequences from investing in the Notes.
For recent actual values of the Underlyings, see
“The Underlyings” section below. The Ending Value of each Underlying will not include any income generated by dividends or
other distributions paid with respect to shares or units of that Underlying or on the securities included in that Underlying, as applicable.
In addition, all payments on the Notes are subject to Issuer and Guarantor credit risk.
Ending Value of the Least Performing Underlying |
Underlying Return of the Least Performing Underlying |
Redemption Amount per Note (including any final Contingent Coupon Payment), assuming a Knock-In Event has not occurred |
Return on the Notes, assuming a Knock-In Event has not occurred(1) |
Redemption Amount per Note (including the final Contingent Coupon Payment), assuming a Knock-In Event has occurred |
Return on the Notes, assuming a Knock-In Event has occurred(1) |
160.00 |
60.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
150.00 |
50.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
140.00 |
40.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
130.00 |
30.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
120.00 |
20.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
110.00 |
10.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
105.00 |
5.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
102.00 |
2.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
100.00(2) |
0.00% |
$1,012.50 |
1.25% |
$1,012.50 |
1.25% |
90.00 |
-10.00% |
$1,012.50 |
1.25% |
$912.50 |
-8.75% |
80.00 |
-20.00% |
$1,012.50 |
1.25% |
$812.50 |
-18.75% |
70.00(3) |
-30.00% |
$1,012.50 |
1.25% |
$712.50 |
-28.75% |
69.99 |
-30.01% |
$1,000.00 |
0.00% |
$699.90 |
-30.01% |
65.00(4) |
-35.00% |
$1,000.00 |
0.00% |
$650.00 |
-35.00% |
64.99 |
-35.01% |
N/A |
N/A |
$649.90 |
-35.01% |
60.00 |
-40.00% |
N/A |
N/A |
$600.00 |
-40.00% |
50.00 |
-50.00% |
N/A |
N/A |
$500.00 |
-50.00% |
0.00 |
-100.00% |
N/A |
N/A |
$0.00 |
-100.00% |
(1) |
The “Return on the Notes” is calculated based on the Redemption Amount and potential final Contingent Coupon Payment, not including any Contingent Coupon Payments paid prior to maturity. |
(2) |
The hypothetical Starting Value of 100 used in the table above has been chosen for illustrative purposes only. The actual Starting Value of each Underlying is set forth on page PS-2 above. |
(3) |
This is the hypothetical Coupon Barrier of the Least Performing Underlying. |
(4) |
This is the hypothetical Threshold Value of the Least Performing Underlying. |
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-9 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
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-33 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 Notes are not automatically called prior to maturity, a Knock-In
Event has occurred and the Ending Value of any Underlying is less than 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 and you will lose 1% of the principal amount
for each 1% that the Ending Value of the Least Performing Underlying is less than its Starting Value. In that case, you will lose a significant
portion or all of your investment in the Notes.
• Your return on the Notes is limited to the return represented by the Contingent Coupon Payments,
if any, over the term of the Notes. Your return on the Notes is limited to the Contingent Coupon Payments paid over the term of the
Notes, regardless of the extent to which the Observation Value or Ending Value of any Underlying exceeds its Coupon Barrier or Starting
Value, as applicable. Similarly, the amount payable at maturity or upon an Automatic Call will never exceed the sum of the principal amount
and the applicable Contingent Coupon Payment, regardless of the extent to which the Observation Value or Ending Value of any Underlying
exceeds its Starting Value. In contrast, a direct investment in an Underlying or in the securities included in one or more of the Underlyings, as applicable,
would allow you to receive the benefit of any appreciation in their values. 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 Notes are subject to a potential Automatic Call, which would limit your ability to receive
the Contingent Coupon Payments over the full term of the Notes. The Notes are subject to a potential Automatic Call. Beginning with
the January 8, 2025 Call Observation Date, the Notes will be automatically called if, on any Call Observation Date, the Observation Value
of each Underlying is greater than or equal to its Call Value. If the Notes are automatically called prior to the Maturity Date, you will
be entitled to receive the Early Redemption Amount on the applicable Call Payment Date, and no further amounts will be payable on the
Notes. In this case, you will lose the opportunity to continue to receive Contingent Coupon Payments after the date of the Automatic Call.
If the Notes are called prior to the Maturity Date, you may be unable to invest in other securities with a similar level of risk that
could provide a return that is similar to the Notes.
• You may not receive any Contingent Coupon Payments. The Notes do not provide for any regular
fixed coupon payments. Investors in the Notes will not necessarily receive any Contingent Coupon Payments on the Notes. If the Observation
Value of any Underlying is less than its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment applicable
to that Observation Date. If the Observation Value of any Underlying is less than its Coupon Barrier on all the Observation Dates during
the term of the Notes, you will not receive any Contingent Coupon Payments during the term of the Notes, and will not receive a positive
return on the Notes.
• Your return on the Notes may be less than the yield on a conventional debt security of comparable
maturity. Any return that you receive on the Notes may be less than the return you would earn if you purchased a conventional debt
security with the same Maturity Date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when
you consider factors, such as inflation, that affect the time value of money. In addition, if interest rates increase during the term
of the Notes, the Contingent Coupon Payment (if any) may be less than the yield on a conventional debt security of comparable maturity.
• The Knock-In Period will be the period from but excluding the pricing date to and including the
Valuation Date. The Redemption Amount, if applicable, will be determined, in part, by reference as to whether a Knock-In Event has
occurred. If a Knock-In Event occurs and the Ending Value of the Least Performing Underlying is less than its Starting Value, the Redemption
Amount will be less than the principal amount and you will lose a significant portion or all of your principal. Since the Knock-In Period
for the Notes encompasses the entire tenor of the Notes, you will have a greater number of opportunities for a Knock-In Event to occur,
therefore exposing you to a loss of principal, than similar Notes which have a shorter (or no) Knock-In Period.
• Because the Notes are linked to the least performing (and not the average performance) of the Underlyings,
you may not receive any return on the Notes and may lose a significant portion or all of your investment in the Notes even if the Observation
Value of one Underlying is always greater than or equal to its Coupon Barrier or Threshold Value or the Ending Value of one Underlying
is greater than or equal to its Starting Value, as applicable. 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 values of the other Underlyings. 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 values of the other Underlyings. 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 values of the other Underlyings. Even
if the Observation Value of an Underlying is at or above its Coupon Barrier on an Observation Date, you will not receive the Contingent
Coupon Payment with respect to that Observation Date if the Observation Value of another
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-10 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Underlying is below its Coupon Barrier
on that day. Similarly, even if the Observation Value of one Underlying is at or above its Threshold Value on every Trading Day during
the Knock-In Period, a Knock-In Event will occur if the Observation Value of the other Underlying(s) is below its Threshold Value on any
Trading Day during the Knock-In Period. The Redemption Amount will be determined by reference as to whether a Knock-In Event has occurred
and, if so, the Underlying Return of the Least Performing Underlying, but the Least Performing Underlying may not necessarily be the same
Underlying that triggered the Knock-In Event. Lastly, assuming a Knock-In Event has occurred, even if the Ending Value of one Underlying
is at or above its Starting Value, you will receive less than the principal amount and may lose a significant portion or all of your investment
in the Notes if the Ending Value of the Least Performing Underlying is below its Starting Value.
• Any payments on the Notes are subject to our credit risk and the credit risk of the Guarantor,
and any actual or perceived changes in our or the Guarantor’s creditworthiness are expected to affect the value of the Notes. The
Notes are our senior unsecured debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor.
The Notes are not guaranteed by any entity other than the Guarantor. As a result, your receipt of any payments on the Notes will be dependent
upon our ability and the ability of the Guarantor to repay our respective obligations under the Notes on the applicable payment date,
regardless of the performance of the Underlyings. 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 may adversely affect the market value of the Notes. However,
because your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective
obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce the
other investment risks related to the Notes.
• We are a finance subsidiary and, as such, have no independent assets, operations, or revenues. We are a finance subsidiary of the Guarantor, have no operations other than those related to the issuance, administration and repayment
of our debt securities that are guaranteed by the Guarantor, and are dependent upon the Guarantor and/or its other subsidiaries to meet
our obligations under the Notes in the ordinary course. Therefore, our ability to make payments on the Notes may be limited.
Valuation and Market-related Risks
• The public offering price you are paying for the Notes exceeds their initial estimated value. The
initial estimated value of the Notes that is provided on the cover page of this pricing supplement is an estimate only, determined as
of the pricing date by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and
variables, including our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging
transactions, expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes.
These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the
Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated value.
This is due to, among other things, changes in the values of the Underlyings, changes in the Guarantor’s internal funding rate,
and the inclusion in the public offering price of the underwriting discount, if any, and the hedging related charges, all as further described
in “Structuring the Notes” below. These factors, together with various credit, market and economic factors over the term of
the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value
of the Notes in complex and unpredictable ways.
• The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS
or any of our other affiliates would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value
of your Notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance
of the Underlyings, our and BAC’s creditworthiness and changes in market conditions.
• We cannot assure you that a trading market for your Notes will ever develop or be maintained. We
will not list the Notes on any securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that
market will be liquid or illiquid.
Conflict-related Risks
• Trading and hedging activities by us, the Guarantor and any of our other affiliates, including
BofAS, may create conflicts of interest with you and may affect your return on the Notes and their market value. We, the Guarantor
or one or more of our other affiliates, including BofAS, may buy or sell shares or units of the Underlyings or the securities or assets
held by or included in the Underlyings, as applicable, or futures or options contracts or exchange traded instruments on the Underlyings
or those securities, or other instruments whose value is derived from the Underlyings or those securities or assets. While we, the Guarantor
or one or more of our other affiliates, including BofAS, may from time to time own shares or units of the Underlyings or the securities
or assets 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
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-11 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
own or their own accounts, for business
reasons, or in connection with hedging our obligations under the Notes. These transactions may present a conflict of interest between
your interest in the Notes and the interests we, the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary
accounts, in facilitating transactions, including block trades, for our or their other customers, and in accounts under our or their management.
These transactions may adversely affect the values of the Underlyings in a manner that could be adverse to your investment in the Notes.
On or before the pricing date, any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or
their behalf (including those for the purpose of hedging some or all of our anticipated exposure in connection with the Notes), may have
affected the values of the Underlyings. Consequently, the values of the Underlyings may change subsequent to the pricing date, which may
adversely affect the market value of the Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, also may have engaged in hedging activities that could have
affected the values of the Underlyings on the pricing date. In addition, these hedging activities, including the unwinding of a hedge,
may decrease the market value of your Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or
one or more of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the Notes and may
hold or resell the Notes. For example, BofAS may enter into these transactions in connection with any market making activities in which
it engages. We cannot assure you that these activities will not adversely affect the values of the Underlyings, the market value of your
Notes prior to maturity or the amounts payable on the Notes.
• There may be potential conflicts of interest involving the calculation agent, which is an affiliate
of ours. We have the right to appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the
Notes and, as such, will make a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes.
Under some circumstances, these duties could result in a conflict of interest between its status as our affiliate and its responsibilities
as calculation agent.
Underlying-related Risks
• The Notes are subject to risks associated with small-size capitalization companies. The stocks
comprising the RTY are issued by companies with small-sized market capitalization. The stock prices of small-size companies may be more
volatile than stock prices of large capitalization companies. Small-size capitalization companies may be less able to withstand adverse
economic, market, trade and competitive conditions relative to larger companies. Small-size capitalization companies may also be more
susceptible to adverse developments related to their products or services.
• An investment in the Notes is subject to risks associated
with investing in stocks in the gold mining industry. All or substantially all of the
equity securities held by the GDX are issued by companies whose primary line of business is directly associated with the gold mining industry.
As a result, the value of the Notes may be subject to greater volatility and be more adversely affected by a single economic, political
or regulatory occurrence affecting these industries than a different investment linked to securities of a more broadly diversified group
of issuers. Investments related to gold are considered speculative and are affected by a variety of factors. Competitive pressures may
have a significant effect on the financial condition of gold mining companies. Also, gold mining companies are highly dependent on the
price of gold bullion, and may be adversely affected by a variety of worldwide economic, financial and political factors. The price of
gold has fluctuated in recent years and may continue to fluctuate substantially over short periods of time so the trading price of the
shares of the GDX may be more volatile than other types of investments. Fluctuation in the prices of gold may be due to a number of factors,
including changes in inflation and changes in industrial and commercial demand for metals. Additionally, increased environmental or labor
costs may depress the value of metal investments. In times of significant inflation or great economic uncertainty, gold, silver and other
precious metals may outperform traditional investments such as bonds and stocks. However, in times of stable economic growth, traditional
equity and debt investments could offer greater appreciation potential and the value of gold, silver and other precious metals may be
adversely affected, which could in turn affect the GDX’s returns. If a natural disaster or other event with a significant economic
impact occurs in a region where the companies in which the GDX invests operate, that disaster or event could negatively affect the profitability
of these companies and, in turn, the GDX’s investment in them. These factors could affect the gold mining industry and could affect
the value of the equity securities held by the GDX and the price of the GDX during the term of the Notes, which may adversely affect the
value of your Notes.
In
addition, the GDX is classified as “non-diversified” under the Investment Company Act of 1940, as amended. A non-diversified
fund generally may invest a larger percentage of its assets in the securities of a smaller number of issuers. As a result, the GDX may
be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence
affecting these companies.
• An investment in the Notes is subject to risks associated with foreign securities markets, including
emerging markets. Some of the securities held by the GDX and the NDX are issued by foreign companies and you should be aware that
investments in securities linked to the value of foreign equity securities involve particular risks. Foreign securities markets may have
less liquidity and may be more volatile than the U.S. securities markets, and market developments may affect foreign markets differently
than U.S. securities markets. Direct or indirect government intervention to stabilize a foreign securities market, as well as cross-shareholdings
in foreign companies, may affect trading prices and volumes in those markets. Also, there is generally less publicly available information
about non-U.S. companies that are not subject to the reporting requirements of the SEC, and non-U.S. companies are subject to accounting,
auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-12 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
The prices and performance of securities
of non-U.S. companies are subject to political, economic, financial, military and social factors which could negatively affect foreign
securities markets, including the possibility of recent or future changes in a foreign government’s economic, monetary and fiscal
policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies
or investments in foreign equity securities, the possibility of imposition of withholding taxes on dividend income, the possibility of
fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility or political instability and the possibility
of natural disaster or adverse public health developments. Moreover, the relevant non-U.S. economies may differ favorably or unfavorably
from the U.S. economy in important respects, such as growth of gross national product, rate of inflation, trade surpluses or deficits,
capital reinvestment, resources and self-sufficiency.
In
addition, the GDX may include companies in countries with emerging markets. Countries with emerging markets may have relatively unstable
governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation
of assets, and may have less protection of property rights than more developed countries. The economies of countries with emerging markets
may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions (due to economic dependence
upon commodity prices and international trade), and may suffer from extreme and volatile debt burdens, currency devaluations or inflation
rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of holdings difficult or impossible at times.
The
securities included in the GDX may be listed on a foreign stock exchange. A foreign stock exchange may impose trading limitations intended
to prevent extreme fluctuations in individual security prices and may suspend trading in certain circumstances. These actions could limit
variations in the Closing Price of the GDX which could, in turn, adversely affect the value of the Notes.
• The Notes are subject to foreign currency exchange rate risk. The
GDX holds securities traded outside of the United States. The Underlying's share price will fluctuate based upon its net asset value,
which will in turn depend in part upon changes in the value of the currencies in which the securities held by the GDX are traded. Accordingly,
investors in the Notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the securities held
by the GDX are traded. An investor’s net exposure will depend on the extent to which these currencies strengthen or weaken against
the U.S. dollar. If the dollar strengthens against these currencies, the net asset value of the applicable Underlying will be adversely
affected and the price of the GDX may decrease.
• The stocks held by the GDX are concentrated in one sector. The GDX
holds securities issued by companies in the gold miners sector. As a result, some of the stocks that will determine the performance of
the Notes are concentrated in one sector. Although an investment in the Notes will not give holders any ownership or other direct interests
in the securities held by the GDX, the return on an investment in the Notes will be subject to certain risks associated with a direct
equity investment in companies in this sector. Accordingly, by investing in the Notes, you will not benefit from the diversification which
could result from an investment linked to companies that operate in multiple sectors.
• The performance of the GDX may not correlate with the performance of its underlying index as well
as the net asset value per share or unit of the GDX, especially during periods of market volatility. The performance of the GDX and
that of its underlying index generally will vary due to, for example, transaction costs, management fees, certain corporate actions, and
timing variances. Moreover, it is also possible that the performance of the GDX may not fully replicate or may, in certain circumstances,
diverge significantly from the performance of its underlying index. This could be due to, for example, the GDX not holding all or substantially
all of the underlying assets included in its underlying index and/or holding assets that are not included in its underlying index, the
temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments held by the GDX,
differences in trading hours between the GDX (or the underlying assets held by the GDX) and its underlying index, or other circumstances.
This variation in performance is called the “tracking error,” and, at times, the tracking error may be significant. In addition,
because the shares or units of the GDX are traded on a securities exchange and are subject to market supply and investor demand, the market
price of one share or unit of the GDX may differ from its net asset value per share or unit; shares or units of the GDX may trade at,
above, or below its net asset value per share or unit. During periods of market volatility, securities held by the GDX may be unavailable
in the secondary market, market participants may be unable to calculate accurately the net asset value per share or unit of the GDX and
the liquidity of the GDX may be adversely affected. Market volatility may also disrupt the ability of market participants to trade shares
or units of the GDX. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are
willing to buy and sell shares or units of the GDX. As a result, under these circumstances, the market value of shares or units of the
GDX may vary substantially from the net asset value per share or unit of the GDX.
• The anti-dilution adjustments will be limited. The calculation agent may adjust the Price Multiplier
of the GDX and other terms of the Notes to reflect certain actions by the GDX, as described in the section “Description of the Notes—Anti-Dilution
and Discontinuance Adjustments Relating to ETFs” in the accompanying product supplement. The calculation agent will not be required
to make an adjustment for every event that may affect the GDX and will have broad discretion to determine whether and to what extent an
adjustment is required.
• The publisher or the sponsor or investment advisor of an Underlying may adjust that Underlying
in a way that affects its values, and the publisher or the sponsor or investment advisor has no obligation to consider your interests. The publisher or the sponsor or investment advisor of an Underlying can add, delete, or substitute the components included in that
Underlying or make other methodological changes that could change its value. Any of these actions could adversely affect the value of
your Notes.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-13 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Tax-related Risks
• The U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be
adverse to a holder of the Notes. No statutory, judicial, or administrative authority directly addresses the characterization of the
Notes or securities similar to the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the
Notes as contingent income-bearing single financial contracts, as described below under “U.S. Federal Income Tax Summary—General.”
If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the
timing and character of income, gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect
to the Notes and no assurance can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal
Income Tax Summary.” You are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax
consequences of investing in the Notes.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-14 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
The Underlyings
All disclosures contained in this pricing supplement
regarding the Underlyings, including, without limitation, their make-up, method of calculation, and changes in their components, have
been derived from publicly available sources. The information reflects the policies of, and is subject to change by, the sponsor of the
NDX, the sponsor of the RTY and the investment advisor of the GDX (collectively, the “Underlying Sponsors”). The Underlying
Sponsors, which license the copyright and all other rights to the respective Underlyings, have no obligation to continue to publish, and
may discontinue publication of, the Underlyings. The consequences of any Underlying Sponsor discontinuing publication of the applicable
Underlying are discussed in “Description of the Notes — Discontinuance of an Index” and “Description of the Notes
— Anti-Dilution and Discontinuance Adjustments Relating to ETFs — Discontinuance of or Material Change to an ETF” in
the accompanying product supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts any responsibility for the calculation,
maintenance or publication of any Underlying or any successor underlying. None of us, the Guarantor, BofAS or any of our other affiliates
makes any representation to you as to the future performance of the Underlyings. You should make your own investigation into the Underlyings.
The Nasdaq-100® Index
The NDX is intended to measure the performance of
the 100 largest domestic and international non-financial securities listed on The Nasdaq Stock Market ("NASDAQ") based on market
capitalization. The NDX reflects companies across major industry groups including computer hardware and software, telecommunications,
retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
The NDX began trading on January 31, 1985 at a base
value of 125.00. The NDX is calculated and published by Nasdaq, Inc. In administering the NDX, Nasdaq, Inc. will exercise reasonable discretion
as it deems appropriate.
Underlying Stock Eligibility Criteria
NDX eligibility is limited to specific security
types only. The security types eligible for the NDX include foreign or domestic common stocks, ordinary shares, ADRs and tracking stocks.
Security types not included in the NDX are closed-end funds, convertible debt securities, exchange traded funds, limited liability companies,
limited partnership interests, preferred stocks, rights, shares or units of beneficial interest, warrants, units, and other derivative
securities. The NDX does not contain securities of investment companies. For purposes of the NDX eligibility criteria, if the security
is a depositary receipt representing a security of a non-U.S. issuer, then references to the “issuer” are references to the
issuer of the underlying security.
Initial Eligibility Criteria
To be eligible for initial inclusion in the NDX,
a security must be listed on NASDAQ and meet the following criteria:
• the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq
Global Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such
listing);
• the security must be of a non-financial company;
• the security may not be issued by an issuer currently in bankruptcy proceedings;
• the security must have a minimum three-month average daily trading volume of at least 200,000 shares;
• if the issuer of the security is organized under the laws of a jurisdiction outside the U.S., then
such security must have listed options on a recognized options market in the U.S. or be eligible for listed-options trading on a recognized
options market in the U.S.;
• the issuer of the security may not have entered into a definitive agreement or other arrangement which
would likely result in the security no longer being eligible for inclusion in the NDX;
• the issuer of the security may not have annual financial statements with an audit opinion that is
currently withdrawn; and
• the issuer of the security must have “seasoned” on NASDAQ, the New York Stock Exchange
or NYSE Amex. Generally, a company is considered to be seasoned if it has been listed on a market for at least three full months (excluding
the first month of initial listing).
Continued Eligibility Criteria
In addition, to be eligible for continued inclusion
in the NDX, the following criteria apply:
• the security’s U.S. listing must be exclusively on the Nasdaq Global Select Market or the Nasdaq
Global Market;
• the security must be of a non-financial company;
• the security may not be issued by an issuer currently in bankruptcy proceedings;
• the security must have a minimum three-month average daily trading volume of at least 200,000 shares;
• if the issuer of the security is organized under the laws of a jurisdiction outside the U.S., then
such security must have listed options on a recognized options market in the U.S. or be eligible for listed-options trading on a recognized
options market in the U.S. (measured annually during the ranking review process);
• the security must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate
adjusted market capitalization of the NDX at each month-end. In the event a company does not meet this criterion for two consecutive month-ends,
it will be removed from
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-15 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
the NDX effective after the close of
trading on the third Friday of the following month; and
• the issuer of the security may not have annual financial statements with an audit opinion that is
currently withdrawn.
Computation of the NDX
The value of the NDX equals the aggregate value
of the NDX share weights (the “NDX Shares”) of each of the NDX securities multiplied by each such security’s last sale
price (last sale price refers to the last sale price on NASDAQ), and divided by the divisor of the NDX. If trading in an NDX security
is halted while the market is open, the last traded price for that security is used for all NDX computations until trading resumes. If
trading is halted before the market is open, the previous day’s last sale price is used. The formula for determining the NDX value
is as follows:
The NDX is ordinarily calculated without regard
to cash dividends on NDX securities. The NDX is calculated during the trading day and is disseminated once per second from 09:30:01 to
17:16:00 ET. The closing level of the NDX may change up until 17:15:00 ET due to corrections to the last sale price of the NDX securities.
The official closing value of the NDX is ordinarily disseminated at 17:16:00 ET.
NDX Maintenance
Changes to NDX Constituents
Changes to the NDX constituents may be made during
the annual ranking review. In addition, if at any time during the year other than the annual review, it is determined that an NDX security
issuer no longer meets the criteria for continued inclusion in the NDX, or is otherwise determined to have become ineligible for continued
inclusion in the NDX, it is replaced with the largest market capitalization issuer not currently in the NDX that meets the applicable
eligibility criteria for initial inclusion in the NDX.
Ordinarily, a security will be removed from the
NDX at its last sale price. However, if at the time of its removal the NDX security is halted from trading on its primary listing market
and an official closing price cannot readily be determined, the NDX security may, in Nasdaq, Inc.’s discretion, be removed at a
price of $0.00000001 (“zero price”). This zero price will be applied to the NDX security after the close of the market but
prior to the time the official closing value of the NDX is disseminated.
Divisor Adjustments
The divisor is adjusted to ensure that changes in
the NDX constituents either by corporate actions (that adjust either the price or shares of an NDX security) or NDX participation outside
of trading hours do not affect the value of the NDX. All divisor changes occur after the close of the applicable index security markets.
Quarterly NDX Rebalancing
The NDX will be rebalanced on a quarterly basis
if it is determined that (1) the current weight of the single NDX security with the largest market capitalization is greater than 24.0%
of the NDX or (2) the collective weight of those securities whose individual current weights are in excess of 4.5% exceeds 48.0% of the
NDX. In addition, a “special rebalancing” of the NDX may be conducted at any time if Nasdaq, Inc. determines it necessary
to maintain the integrity and continuity of the NDX. If either one or both of the above weight distribution conditions are met upon quarterly
review, or Nasdaq, Inc. determines that a special rebalancing is necessary, a weight rebalancing will be performed.
If the first weight distribution condition is met
and the current weight of the single NDX security with the largest market capitalization is greater than 24.0%, then the weights of all
securities with current weights greater than 1.0% (“large securities”) will be scaled down proportionately toward 1.0% until
the adjusted weight of the single largest NDX security reaches 20.0%.
If the second weight distribution condition is met
and the collective weight of those securities whose individual current weights are in excess of 4.5% (or adjusted weights in accordance
with the previous step, if applicable) exceeds 48.0% of the NDX, then the weights of all such large securities in that group will be scaled
down proportionately toward 1.0% until their collective weight, so adjusted, is equal to 40.0%.
The aggregate weight reduction among the large securities
resulting from either or both of the rebalancing steps above will then be redistributed to those securities with weightings of less than
1.0% (“small securities”) in the following manner. In the first iteration, the weight of the largest small security will be
scaled upwards by a factor which sets it equal to the average NDX weight of 1.0%. The weights of each of the smaller remaining small securities
will be scaled up by the same factor reduced in relation to each security’s relative ranking among the small securities such that
the smaller the NDX security in the ranking, the less its weight will be scaled upward. This is intended to reduce the market impact of
the weight rebalancing on the smallest component securities in the NDX.
In the second iteration of the small security rebalancing,
the weight of the second largest small security, already adjusted in the first iteration, will be scaled upwards by a factor which sets
it equal to the average NDX weight of 1.0%. The weights of each of the smaller remaining small securities will be scaled up by this same
factor reduced in relation to each security’s relative ranking among the small securities such that, once again, the smaller the
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-16 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
security in the ranking, the less its weight will
be scaled upward. Additional iterations will be performed until the accumulated increase in weight among the small securities equals the
aggregate weight reduction among the large securities that resulted from the rebalancing in accordance with the two weight distribution
conditions discussed above.
Finally, to complete the rebalancing process, once
the final weighting percentages for each NDX security have been set, the NDX Shares will be determined anew based upon the last sale prices
and aggregate capitalization of the NDX at the close of trading on the last calendar day in February, May, August and November. Changes
to the NDX Shares will be made effective after the close of trading on the third Friday in March, June, September and December, and an
adjustment to the divisor is made to ensure continuity of the NDX. Ordinarily, new rebalanced NDX Shares will be determined by applying
the above procedures to the current NDX Shares. However, Nasdaq, Inc. may, from time to time, determine rebalanced weights, if necessary,
by applying the above procedure to the actual current market capitalization of the NDX components. In such instances, Nasdaq, Inc. would
announce the different basis for rebalancing prior to its implementation.
During the quarterly rebalancing, data is cutoff
as of the previous month end and no changes are made to the NDX from that cutoff until the quarterly index share change effective date,
except in the case of changes due to corporate actions with an ex-date.
Adjustments for Corporate Actions
Changes in the price and/or NDX Shares driven by
corporate events such as stock dividends, splits, and certain spin-offs and rights issuances will be adjusted on the ex-date. If the change
in total shares outstanding arising from other corporate actions is greater than or equal to 10.0%, the change will be made as soon as
practicable. Otherwise, if the change in total shares outstanding is less than 10.0%, then all such changes are accumulated and made effective
at one time on a quarterly basis after the close of trading on the third Friday in each of March, June, September, and December. The NDX
Shares are derived from the security’s total shares outstanding. The NDX Shares are adjusted by the same percentage amount by which
the total shares outstanding have changed.
Historical Performance of the NDX
The following graph sets forth the daily historical
performance of the NDX in the period from January 2, 2019 through the pricing date. We obtained this historical data from Bloomberg L.P.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On the pricing date, the
closing level of the NDX was 20,439.54.
This historical data on the NDX is not necessarily
indicative of the future performance of the NDX or what the value of the Notes may be. Any historical upward or downward trend in the
closing level of the NDX during any period set forth above is not an indication that the closing level of the NDX is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult
publicly available sources for the closing levels of the NDX.
License Agreement
The Notes are not sponsored, endorsed, sold or promoted
by Nasdaq, Inc. or its affiliates (Nasdaq, Inc., with its affiliates, are referred to as the “Corporations”). The Corporations
have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-17 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
to, the Notes. The Corporations make no representation
or warranty, express or implied, to the owners of the Notes or any member of the public regarding the advisability of investing in securities
generally or in the Notes particularly, or the ability of the NDX to track general stock market performance. The Corporations’ only
relationship to our affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Licensee”) is in the licensing of
the NASDAQ®, OMX®, NASDAQ OMX®, and NDX registered trademarks, and certain trade names of
the Corporations or their licensor and the use of the NDX which is determined, composed and calculated by Nasdaq, Inc. without regard
to Licensee or the Notes. Nasdaq, Inc. has no obligation to take the needs of the Licensee or the owners of the Notes into consideration
in determining, composing or calculating the NDX. The Corporations are not responsible for and have not participated in the determination
of the timing of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the
Notes are to be converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of
the Notes.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR
UNINTERRUPTED CALCULATION OF THE NDX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NDX OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE NDX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS
HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-18 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
The Russell 2000® Index
The RTY was developed by Russell Investments (“Russell”)
before FTSE International Limited and Russell combined in 2015 to create FTSE Russell, which is wholly owned by London Stock Exchange
Group. Additional information on the RTY is available at the following website: http://www.ftserussell.com. No information on that website
is deemed to be included or incorporated by reference in this pricing supplement.
Russell began dissemination of the RTY on January
1, 1984. FTSE Russell calculates and publishes the RTY. The RTY was set to 135 as of the close of business on December 31, 1986. The RTY
is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index, the RTY consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
The RTY is determined, comprised, and calculated by FTSE Russell without regard to the Notes.
Selection of Stocks Comprising the RTY
Each company eligible for inclusion in the RTY must
be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated, has a stated
headquarters location, and trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible),
then the company is assigned to its country of incorporation. If any of the three factors are not the same, FTSE Russell defines three
Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country of the most liquid exchange
(as defined by a two-year average daily dollar trading volume) from all exchanges within a country. Using the HCIs, FTSE Russell compares
the primary location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs,
then the company is assigned to the primary location of its assets. If there is insufficient information to determine the country in which
the company’s assets are primarily located, FTSE Russell will use the country from which the company’s revenues are primarily
derived for the comparison with the three HCIs in a similar manner. FTSE Russell uses the average of two years of assets or revenues data
to reduce potential turnover. If conclusive country details cannot be derived from assets or revenues data, FTSE Russell will assign the
company to the country of its headquarters, which is defined as the address of the company’s principal executive offices, unless
that country is a Benefit Driven Incorporation (“BDI”) country, in which case the company will be assigned to the country
of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, Bonaire,
British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey,
Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies incorporated or
headquartered in a U.S. territory, including Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion in the RTY
must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the last trading
day in May to be eligible for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an existing
member’s closing price is less than $1.00 on the last day of May, it will be considered eligible if the average of the daily closing
prices (from its primary exchange) during the month of May is equal to or greater than $1.00. Initial public offerings are added each
quarter and must have a closing price at or above $1.00 on the last day of their eligibility period in order to qualify for index inclusion.
If an existing stock does not trade on the “rank day” (typically the last trading day in May but a confirmed timetable is
announced each spring) but does have a closing price at or above $1.00 on another eligible U.S. exchange, that stock will be eligible
for inclusion.
An important criterion used to determine the list
of securities eligible for the RTY is total market capitalization, which is defined as the market price as of the last trading day in
May for those securities being considered at annual reconstitution times the total number of shares outstanding. Where applicable, common
stock, non-restricted exchangeable shares and partnership units/membership interests are used to determine market capitalization. Any
other form of shares such as preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants
and rights, installment receipts or trust receipts, are excluded from the calculation. If multiple share classes of common stock exist,
they are combined. In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each class is
considered for inclusion separately. If multiple share classes exist, the pricing vehicle will be designated as the share class with the
highest two-year trading volume as of the rank day in May.
Companies with a total market capitalization of
less than $30 million are not eligible for the RTY. Similarly, companies with only 5% or less of their shares available in the marketplace
are not eligible for the RTY. Royalty trusts, limited liability companies, closed-end investment companies (companies that are required
to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development companies), blank check companies, special
purpose acquisition companies, and limited partnerships are also ineligible for inclusion. Bulletin board, pink sheets, and over-the-counter
traded securities are not eligible for inclusion. Exchange traded funds and mutual funds are also excluded.
Annual reconstitution is a process by which the
RTY is completely rebuilt. Based on closing levels of the company’s common stock on its primary exchange on the rank day of May
of each year, FTSE Russell reconstitutes the composition of the RTY using the then existing market capitalizations of eligible companies.
Reconstitution of the RTY occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs
on the prior Friday. In addition, FTSE Russell adds initial public offerings to the RTY on a quarterly basis based on total market capitalization
ranking within the market-adjusted capitalization breaks established during the most recent reconstitution. After membership is determined,
a security’s shares are adjusted to include only those shares available to the public. This is often referred to as “free
float.” The purpose of the adjustment is to exclude from market calculations the capitalization that is not available for purchase
and is not part of the investable opportunity set.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-19 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Historical Performance of the RTY
The following graph sets forth the daily historical
performance of the RTY in the period from January 2, 2019 through the pricing date. We obtained this historical data from Bloomberg L.P.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On the pricing date, the
closing level of the RTY was 2,038.670.
This historical data on the RTY is not necessarily
indicative of the future performance of the RTY or what the value of the Notes may be. Any historical upward or downward trend in the
closing level of the RTY during any period set forth above is not an indication that the closing level of the RTY is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult
publicly available sources for the closing levels of the RTY.
License Agreement
“Russell 2000®” and “Russell
3000®” are trademarks of FTSE Russell and have been licensed for use by our affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated. The Notes are not sponsored, endorsed, sold, or promoted by FTSE Russell, and FTSE Russell makes no representation
regarding the advisability of investing in the Notes.
FTSE Russell and Merrill Lynch, Pierce, Fenner &
Smith Incorporated have entered into a non-exclusive license agreement providing for the license to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and its affiliates, including us, in exchange for a fee, of the right to use indices owned and published by FTSE Russell
in connection with some securities, including the Notes. The license agreement provides that the following language must be stated in
this pricing supplement:
The Notes are not sponsored, endorsed, sold, or
promoted by FTSE Russell. FTSE Russell makes no representation or warranty, express or implied, to the holders of the Notes or any member
of the public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the RTY to
track general stock market performance or a segment of the same. FTSE Russell’s publication of the RTY in no way suggests or implies
an opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which the RTY is based. FTSE Russell’s
only relationship to Merrill Lynch, Pierce, Fenner & Smith Incorporated and to us is the licensing of certain trademarks and trade
names of FTSE Russell and of the RTY, which is determined, composed, and calculated by FTSE Russell without regard to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, us, or the Notes. FTSE Russell is not responsible for and has not reviewed the Notes nor any associated
literature or publications and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness,
or otherwise. FTSE Russell reserves the right, at any time and without notice, to alter, amend, terminate, or in any way change the RTY.
FTSE Russell has no obligation or liability in connection with the administration, marketing, or trading of the Notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, US, BAC, BOFAS, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RTY OR ANY DATA INCLUDED THEREIN.
FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-20 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE RTY OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL FTSE RUSSELL HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-21 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
The VanEck® Gold Miners ETF
We have derived the following information from publicly
available documents published by VanEck ETF Trust (the “Trust”) (or, with respect to its underlying index, NYSE Arca).
Information provided to or filed with the SEC relating
to the GDX under the Securities Exchange Act of 1934, as amended, can be located by reference to its Central Index Key, or CIK, 0001137360
through the SEC’s website at http://www.sec.gov. Additional information about the GDX may be obtained from other sources including,
but not limited to, press releases, newspaper articles and other publicly disseminated documents. We have not made any independent investigation
as to the accuracy or completeness of such information.
The GDX is an investment portfolio maintained, managed
and advised by the Trust. The GDX is an exchange traded fund that trades on NYSE Arca under the ticker symbol “GDX.” The GDX
seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the NYSE
Arca Gold Miners Index (the “Underlying Index”). The GDX utilizes a “passive” or “indexing” investment
approach in attempting to track the performance of the Underlying Index by investing in a portfolio of securities that generally replicates
the Underlying Index. The GDX will normally invest at least 80% of its total assets in common stocks that comprise the Underlying Index.
The Underlying Index
The Underlying Index is a modified market capitalization
weighted index comprised of securities issued by publicly traded companies involved primarily in the mining of gold or silver. The Underlying
Index is calculated, maintained and published by ICE Data Indices, LLC (“IDI”), the index sponsor.
Eligibility Criteria for Index Components
The Underlying Index includes common stocks, American
Depositary Receipts or Global Depositary Receipts of selected companies that are involved in mining for gold and silver and that are listed
for trading and electronically quoted on a major stock market that is accessible by foreign investors. Generally, this includes exchanges
in most developed markets and major emerging markets, and includes companies that are cross-listed, i.e., both U.S. and Canadian listings.
IDI will use its discretion to avoid exchanges and markets that are considered “frontier” in nature or have major restrictions
to foreign ownership. The universe of companies eligible for inclusion in the Underlying Index will specifically include those companies
that derive at least 50% of their revenues from gold mining and related activities (40% for companies that are already included in the
Underlying Index). Also, the Underlying Index will maintain an exposure to companies with a significant revenue exposure to silver mining
in addition to gold mining, which will not exceed 20% of the Underlying Index weight at each rebalance.
Further, both streaming companies and royalty companies
are eligible for inclusion in the Underlying Index. Companies that have not yet commenced production are also eligible for inclusion in
the Underlying Index, provided that they have tangible revenues that are related to the mining of either gold or silver ore. There are
no restrictions imposed on the index universe in how much a particular company has hedged in gold or silver production via futures, options
or forward contracts.
Only companies with a market capitalization of greater
than $750 million that have an average daily trading volume of at least 50,000 shares over the past three months and an average daily
value traded of at least $1 million over the past three months are eligible for inclusion in the Underlying Index. A buffer is enforced
for companies already in the Underlying Index. For companies already included in the Underlying Index, the market capitalization requirement
at each rebalance is $450 million, the average daily volume requirement is at least 30,000 shares over the past three months and the average
daily value traded requirement is at least $600,000 over the past three months.
IDI has the discretion to not include all companies
that meet the minimum criteria for inclusion.
Calculation of the Underlying Index
The Underlying Index is calculated by IDI on a net
total return basis. The calculation is based on the current modified market capitalization divided by a divisor. The divisor was determined
on the initial capitalization base of the Underlying Index and the base level and may be adjusted as a result of corporate actions and
composition changes, as described below. The level of the Underlying Index was set at 500.00 on December 19, 2002, which is the index
base date. The Underlying Index is calculated using the following formula:
Where:
t = Index Calculation Date t;
Dntr,t = the Index Divisor on
Index Calculation Date t;
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-22 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Pi,t = Price (in the Index Base Currency) of Index Constituent i on Index Calculation Date t;
Qi,t = number of Shares of Index
Constituent i on Index Calculation Date t;
Underlying Index Maintenance
Quarterly Index Rebalances
The Underlying Index is reviewed quarterly so that
the selection and weightings of the constituents continues to reflect as closely as possible the Underlying Index’s objective of
measuring the performance of highly capitalized companies in the gold mining industry. IDI may at any time and from time to time change
the number of securities comprising the Underlying Index by adding or deleting one or more securities, or replacing one or more securities
contained in the Underlying Index with one or more substitute securities of its choice, if, in IDI’s discretion, such addition,
deletion or substitution is necessary or appropriate to maintain the quality and/or character of the Underlying Index. A company will
be removed from the Underlying Index during the quarterly review if either (1) its market capitalization falls below $450 million or (2)
its average daily trading volume for the previous three months is less than 30,000 shares and its average daily traded value for the previous
three months is less than $600,000.
Weightings at Quarterly Index Rebalances
At the time of the quarterly rebalance, the component
security weights (also referred to as the multiplier or share quantities of each component security) will be modified to conform to the
following asset diversification requirements:
1. the
weight of any single component security may not account for more than 20% of the total value of the Underlying Index;
2. the
component securities are split into two subgroups-large and small, which are ranked by unadjusted market capitalization weight in the
Underlying Index. Large securities are defined as having a starting index weight greater than or equal to 5%. Small securities are defined
as having a starting index weight below 5%; and
3. the
final aggregate weight of those component securities which individually represent more than 4.5% of the total value of the Underlying
Index may not account for more than 45% of the total index value.
The weights of the components securities (taking
into account expected component changes and share adjustments) are modified in accordance with the Underlying Index’s diversification
rules.
Diversification Rule 1: If any component stock exceeds
20% of the total value of the Underlying Index, then all stocks greater than 20% of the Underlying Index are reduced to represent 20%
of the value of the Underlying Index. The aggregate amount by which all component stocks are reduced is redistributed proportionately
across the remaining stocks that represent less than 20% of the index value. After this redistribution, if any other stock then exceeds
20%, the stock is set to 20% of the index value and the redistribution is repeated.
Diversification Rule 2: The components are sorted
into two groups, large are components with a starting index weight of 5% or greater and small are components with a weight of under 5%
(after any adjustments for Diversification Rule 1). If there are no components that classify as large components after Diversification
Rule 1 is run, then Diversification Rule 2 is not executed. Alternatively, if the starting aggregate weight of the large components after
Diversification Rule 1 is run is not greater than 45% of the starting index weight, then Diversification Rule 2 is not executed. If Diversification
Rule 2 is executed, then the large group will represent in the aggregate 45% and the small group will represent 55% in the aggregate of
the final index weight. This will be adjusted through the following process: The weight of each of the large stocks will be scaled down
proportionately (with a floor of 5%) so that the aggregate weight of the large components will be reduced to represent 45% of the Underlying
Index. If any large component stock falls below a weight equal to the product of 5% and the proportion by which the stocks were scaled
down following this distribution, then the weight of the stock is set equal to 5% and the components with weights greater than 5% will
be reduced proportionately. The weight of each of the small components will be scaled up proportionately from the redistribution of the
large components. If any small component stock exceeds a weight equal to the product of 4.5% and the proportion by which the stocks were
scaled down following this distribution, then the weight of the stock is set equal to 4.5%. The redistribution of weight to the remaining
stocks is repeated until the entire amount has been redistributed.
Changes to the Underlying Index composition and/or
the component security weights in the Underlying Index are determined and announced prior to taking effect. These changes typically become
effective after the close of trading on the third Friday of each calendar quarter month in connection with the quarterly index rebalance.
Corporate Action-Related Adjustments
The Underlying Index may be adjusted in order to
maintain the continuity of the index level and the composition. The underlying aim is that the index continues to reflect as closely as
possible the value of the underlying portfolio. Adjustments take place in reaction to events that occur with constituents, in order to
mitigate or eliminate the effect of that event on the Underlying Index.
The Index Divisor will be adjusted for corporate
actions and any additions, deletions and share changes, as described in more detail below. The Index Divisor is calculated as follows:
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-23 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Where:
t
= Index Calculation Date t;
Dntr,t = the Index Divisor on Index Calculation Date t;
APCi,t = the Adjusted Previous Close Price (for net dividends going ex-dividend on Index Calculation Date t and corporate actions,
and denominated in the Index Base Currency) of Index Constituent i on Index Calculation Date t;
Qi,t = number of Shares of Index Constituent i on Index Calculation Date t;
Index(NTR)t-1 = the Underlying Index Level from Date t-1;
Adjustments take place in reaction to events that
occur with constituents in order to mitigate or eliminate the effect of that event on the performance of the Underlying Index as follow:
(1) Removal
of constituents. Any stock deleted from the Underlying Index as a result of a corporate action such as a merger, acquisition, spin-off,
delisting or bankruptcy is typically not replaced with a new constituent. The total number of stocks in the Underlying Index is reduced
by one every time a company is deleted. In certain circumstances, IDI may decide to add another constituent into the Underlying Index
as a result of the pending removal of a current constituent. If a company is removed from the Underlying Index, the divisor will be adapted
to maintain the index level.
a. Mergers
and acquisitions. In the event that a merger or acquisition occurs between members of the Underlying Index, the acquired company is deleted
and its market capitalization moves to the acquiring company’s stock. In the event that only one of the parties to a merger or acquisition
is a member of the Underlying Index, an acquiring member of the Underlying Index continues as a member of the Underlying Index and its
shares will be adjusted at the next rebalance while an acquired member of the Underlying Index is removed from the Underlying Index and
its market capitalization redistributed proportionately across the remaining constituents via a divisor adjustment, and the acquiring
company may be considered for inclusion at the next rebalance.
b. Suspensions
and company distress. Immediately upon a company’s filing for bankruptcy, an announcement will be made to remove the constituent
from the Underlying Index effective for the next trading day. If the constituent is trading on an over-the-counter market, the last trade
or price on that market is utilized as the deletion price on that day. If the stock does not trade on the relevant exchange between the
bankruptcy announcement and the current index business day, the stock may be deleted from the Underlying Index with a presumed market
value of $0.
c. Split-up
/ spin-off. The closing price of the index constituent is adjusted by the value of the spin-off and the shares of the index constituent
will not be adjusted.
(2) Dividends.
The Underlying Index will be adjusted for dividends that are special. To determine whether a dividend should be considered a special dividend,
the compiler will use the following criteria: (a) the declaration of a dividend additional to those dividends declared as part of a company’s
normal results and dividend reporting cycle; or (b) the identification of an element of a dividend paid in line with a company’s
normal results and dividend reporting cycle as an element that is unambiguously additional to the company’s normal payment.
(3) Rights
issues and other rights. In the event of a rights issue, the price is adjusted for the value of the right before the open on the ex-date,
and the shares are increased to maintain the constituent’s existing weighting within the Underlying Index. The adjustment assumes
that the rights issue is fully subscribed. The amount of the price adjustment is determined from the terms of the rights issue, including
the subscription price, and the price of the underlying security. IDI shall only enact adjustments if the rights represent a positive
value, or are in-the-money, or, alternatively, represent or can be converted into a tangible cash value.
(4) Bonus
issues, stock splits and reverse stock splits. For bonus issues, stock splits and reverse stock splits, the number of shares included
in the Underlying Index will be adjusted in accordance with the ratio given in the corporate action. Since the event won’t change
the value of the company included in the Underlying Index, the divisor will not be changed because of this.
(5) Changes
in number of shares. Changes in the number of shares outstanding, typically due to share repurchases, tenders or offerings, will not be
reflected in the Underlying Index.
Other Adjustments
In cases not expressly covered by the rules governing
the Underlying Index, operational adjustments will take place along the lines of the aim of the Underlying Index. Operational adjustments
may also take place if, in IDI’s opinion, it is desirable to do so to maintain a fair and orderly market in derivatives on the Underlying
Index and/or is in the best interests of the investors in products based on the Underlying Index and/or the proper functioning of the
markets. Any such modifications or exercise of expert judgment will also be governed by any applicable policies, procedures and
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-24 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
guidelines in place by IDI at such time.
Historical Performance of the GDX
The following graph sets forth the daily historical
performance of the GDX in the period from January 2, 2019 through the pricing date. We obtained this historical data from Bloomberg L.P.
We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On the pricing date, the
Closing Market Price of the GDX was $36.10.
This historical data on the GDX is not necessarily
indicative of the future performance of the GDX or what the value of the Notes may be. Any historical upward or downward trend in the
Closing Market Price of the GDX during any period set forth above is not an indication that the Closing Market Price of the GDX is more
or less likely to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult
publicly available sources for the Closing Market Prices and trading pattern of the GDX.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-25 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Supplement to the Plan of Distribution; Role of BofAS and Conflicts
of Interest
BofAS, a broker-dealer affiliate of ours, is a member
of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling agent in the distribution of
the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121. BofAS may not make sales in this
offering to any of its discretionary accounts without the prior written approval of the account holder.
We will deliver the Notes against payment therefor
in New York, New York on a date that is greater than one business day following the pricing date. Under Rule 15c6-1 of the Securities
Exchange Act of 1934, trades in the secondary market generally are required to settle in one business day, unless the parties to any such
trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes more than one business day prior to the original
issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
Under our distribution agreement with BofAS, BofAS
will purchase the Notes from us as principal at the public offering price indicated on the cover of this pricing supplement, less the
indicated underwriting discount, if any. BofAS will sell the Notes to other broker-dealers that will participate in the offering and that
are not affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may sell the Notes to one or more
additional broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer and that not all dealers will purchase
or repurchase the Notes at the same discount. 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 $995.00 per $1,000.00 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
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
materials have not been approved, by an authorized
person for the purposes of Section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the “FSMA”).
Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United
Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those persons in the United
Kingdom who have professional experience in matters relating to investments and who fall within the definition of investment professionals
(as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial
Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order, or who are any other persons to
whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together being referred to as “Relevant
Persons”). In the United Kingdom, the Notes offered hereby are only available to, and any investment or investment activity to which
this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement and the accompanying prospectus relates
will be engaged in only with, Relevant Persons. Any person in the United Kingdom that is not a relevant person should not act or rely
on this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus
or any of their contents.
Any invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only be communicated or
caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to BofA Finance, as Issuer, or BAC, as Guarantor.
All applicable provisions of the FSMA must be complied
with in respect to anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom.
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Structuring the Notes
The Notes are our debt securities, the return on
which is linked to the performance of the Underlyings. The related guarantee is BAC’s obligation. As is the case for all of our
and BAC’s respective debt securities, including our market-linked notes, the economic terms of the Notes reflect our and BAC’s
actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational,
funding and liability management costs to us and BAC, BAC typically borrows the funds under these types of notes at a rate, which we refer
to in this pricing supplement as BAC’s internal funding rate, that is more favorable to BAC than the rate that it might pay for
a conventional fixed or floating rate debt security. This generally relatively lower internal funding rate, which is reflected in the
economic terms of the Notes, along with the fees and charges associated with market-linked notes, resulted in the initial estimated value
of the Notes on the pricing date being less than their public offering price.
In order to meet our payment obligations on the
Notes, at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options
or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a number of factors, including our and BAC’s creditworthiness, interest
rate movements, the volatility of the Underlyings, the tenor of the Notes and the hedging arrangements. The economic terms of the Notes
and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements
will include hedging related charges, reflecting the costs associated with, and our affiliates’ profit earned from, these hedging
arrangements. Since hedging entails risk and may be influenced by unpredictable market forces, actual profits or losses from these hedging
transactions may be more or less than any expected amounts.
For further information, see “Risk Factors”
beginning on page PS-5 and “Supplemental Use of Proceeds” on page PS-19 of the accompanying product supplement.
Validity of the Notes
In the opinion of McGuireWoods LLP, as counsel to
BofA Finance, as issuer, and BAC, as guarantor, when the trustee has made the appropriate entries or notations on Schedule 1 to the master
global note that represents the Notes (the “Master Note”) identifying the Notes offered hereby as supplemental obligations
thereunder in accordance with the instructions of BofA Finance, and the Notes have been delivered against payment therefor as contemplated
in this pricing supplement and the related prospectus, prospectus supplement and product supplement, all in accordance with the provisions
of the indenture governing the Notes and the related guarantee, such Notes will be the legal, valid and binding obligations of BofA Finance,
and the related guarantee will be the legal, valid and binding obligation of BAC, subject, in each case, to the effects of applicable
bankruptcy, insolvency (including laws relating to preferences, fraudulent transfers and equitable subordination), reorganization, moratorium
and other similar laws affecting creditors’ rights generally, and to general principles of equity. This opinion is given as of the
date of this pricing supplement and is limited to the Delaware General Corporation Law and the Delaware Limited Liability Company Act
(including the statutory provisions, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting
either of the foregoing) and the laws of the State of New York as in effect on the date hereof. In addition, this opinion is subject to
customary assumptions about the trustee’s authorization, execution and delivery of the indenture governing the Notes and due authentication
of the Master Note, the validity, binding nature and enforceability of the indenture governing the Notes and the related guarantee with
respect to the trustee, the legal capacity of individuals, the genuineness of signatures, the authenticity of all documents submitted
to McGuireWoods LLP as originals, the conformity to original documents of all documents submitted to McGuireWoods LLP as copies thereof,
the authenticity of the originals of such copies and certain factual matters, all as stated in the opinion letter of McGuireWoods LLP
dated December 8, 2022, which has been filed as an exhibit to the Registration Statement (File Nos. 333-268718 and 333-268718-01) of BAC
and BofA Finance, filed with the SEC on December 8, 2022.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-28 |
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
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 discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and is not exhaustive
of all possible tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”),
regulations promulgated under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations),
rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect
and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that
the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. This
summary does not include any description of the tax laws of any state or local governments, or of any foreign government, that may be
applicable to a particular holder.
Although the Notes are issued by us, they will be
treated as if they were issued by BAC for U.S. federal income tax purposes. Accordingly throughout this tax discussion, references to
“we,” “our” or “us” are generally to BAC unless the context requires otherwise.
This summary is directed solely to U.S. Holders
and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the Notes upon original issuance and will hold the Notes
as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment, and that are not
excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor concerning
the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax consequences arising
under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax
laws.
General
Although there is no statutory, judicial, or administrative
authority directly addressing the characterization of the Notes, we intend to treat the Notes for all tax purposes as contingent income-bearing
single financial contracts with respect to the Underlyings and under the terms of the Notes, we and every investor in the Notes agree,
in the absence of an administrative determination or judicial ruling to the contrary, to treat the Notes in accordance with such characterization.
In the opinion of our counsel, Sidley Austin LLP, it is reasonable to treat the Notes as contingent income-bearing single financial contracts
with respect to the Underlyings. However, Sidley Austin LLP has advised us that it is unable to conclude that it is more likely than not
that this treatment will be upheld. This discussion assumes that the Notes constitute contingent income-bearing single financial contracts
with respect to the Underlyings for U.S. federal income tax purposes. If the Notes did not constitute contingent income-bearing single
financial contracts, the tax consequences described below would be materially different.
This characterization of the Notes is not binding
on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or
any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper
characterization and treatment. Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences
of an investment in the Notes are not certain, and no assurance can be given that the IRS or any court will agree with the characterization
and tax treatment described in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of
the U.S. federal income tax consequences of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following discussion
is based on the characterization described above. The discussion in this section assumes that there is a significant possibility of a
significant loss of principal on an investment in the Notes.
We will not attempt to ascertain whether the issuer
of 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 each 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.
U.S. Holders
Although the U.S. federal income tax treatment of
any Contingent Coupon Payment on the Notes is uncertain, we intend to take the position, and the following discussion assumes, that any
Contingent Coupon Payment constitutes taxable ordinary income to a U.S. Holder at the time received or accrued in accordance with the
U.S. Holder’s regular method of accounting. By purchasing the Notes you agree, in the absence of an administrative determination
or judicial ruling to the contrary, to treat any Contingent Coupon Payment as described in the preceding sentence.
Upon receipt of a cash payment at maturity or upon
a sale, exchange, or redemption of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the
difference between the amount realized (other than amounts representing any Contingent Coupon Payment, which would be taxed as described
above) and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes will equal the amount paid by
that holder to acquire them. Subject to the discussion below concerning the possible application of the “constructive ownership”
rules of Section 1260 of
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
the Code, this capital gain or loss generally will
be long-term capital gain or loss if the U.S. Holder held the Notes for more than one year. The deductibility of capital losses is subject
to limitations.
Possible Application of Section 1260 of the Code. Since one Underlying is the type of financial asset described under Section 1260 of the Code (including, among others, any equity
interest in pass-through entities such as exchange traded funds, regulated investment companies, real estate investment trusts, partnerships,
and passive foreign investment companies, each a “Section 1260 Financial Asset”), while the matter is not entirely clear,
there may exist a risk that an investment in the Notes will be treated , in whole or in part, as a “constructive ownership transaction”
to which Section 1260 of the Code applies. If Section 1260 of the Code applies, all or a portion of any long-term capital gain recognized
by a U.S. Holder in respect of the Notes will be recharacterized as ordinary income (the “Excess Gain”). In addition, an interest
charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in
gross income inclusion for the U.S. Holder in taxable years prior to the taxable year of the sale, exchange, redemption, or settlement
(assuming such income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange, redemption, or
settlement).
If an investment in the Notes is treated as a constructive
ownership transaction, it is not clear to what extent any long-term capital gain of a U.S. Holder in respect of the Notes will be recharacterized
as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary
income in respect of the Notes will equal the excess of (i) any long-term capital gain recognized by the U.S. Holder in respect of the
Notes and attributable to Section 1260 Financial Assets, over (ii) the “net underlying long-term capital gain” (as defined
in Section 1260 of the Code) such U.S. Holder would have had if such U.S. Holder had acquired an amount of the corresponding Section 1260
Financial Assets at fair market value on the original issue date for an amount equal to the portion of the issue price of the Notes attributable
to the corresponding Section 1260 Financial Assets and sold such amount of Section 1260 Financial Assets at maturity or upon sale, exchange
or redemption of the Notes at fair market value. Unless otherwise established by clear and convincing evidence, the net underlying long-term
capital gain is treated as zero and therefore it is possible that all long-term capital gain recognized by a U.S. Holder in respect of
the Notes will be recharacterized as ordinary income if Section 1260 of the Code applies to an investment in the Notes. U.S. Holders should
consult their tax advisors regarding the potential application of Section 1260 of the Code to an investment in the Notes.
As described below, the IRS, as indicated in Notice
2008-2 (the “Notice”), is considering whether Section 1260 of the Code generally applies or should apply to the Notes, including
in situations where the Underlyings are not the type of financial asset described under Section 1260 of the Code.
Alternative Tax Treatments. Due to the absence
of authorities that directly address the proper tax treatment of the Notes, prospective investors are urged to consult their tax advisors
regarding all possible alternative tax treatments of an investment in the Notes. In particular, the IRS could seek to subject the Notes
to the Treasury regulations governing contingent payment debt instruments. If the IRS were successful in that regard, the timing and character
of income on the Notes would be affected significantly. Among other things, a U.S. Holder would be required to accrue original issue discount
every year at a “comparable yield” determined at the time of issuance. In addition, any gain realized by a U.S. Holder at
maturity or upon a sale, exchange, or redemption of the Notes generally would be treated as ordinary income, and any loss realized at
maturity or upon a sale, exchange, or redemption of the Notes generally would be treated as ordinary loss to the extent of the U.S. Holder’s
prior accruals of original issue discount, and as capital loss thereafter.
In addition, it is possible that the Notes could
be treated as a unit consisting of a deposit and a put option written by the Note holder, in which case the timing and character of income
on the Notes would be affected significantly.
The Notice sought comments from the public on the
taxation of financial instruments currently taxed as “prepaid forward contracts.” This Notice addresses instruments such as
the Notes. According to the Notice, the IRS and Treasury are considering whether a holder of an instrument such as the Notes should be
required to accrue ordinary income on a current basis, regardless of whether any payments are made prior to maturity. It is not possible
to determine what guidance the IRS and Treasury will ultimately issue, if any. Any such future guidance may affect the amount, timing
and character of income, gain, or loss in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering additional
issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders
of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of the Code, concerning certain
“constructive ownership transactions,” generally applies or should generally apply to such instruments, and whether any of
these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations require
the accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble to the
regulations states that the “wait and see” method of accounting does not properly reflect the economic accrual of income on
those contracts, and requires current accrual of income for some contracts already in existence. While the proposed regulations do not
apply to prepaid forward contracts, the preamble to the proposed regulations expresses the view that similar timing issues exist in the
case of prepaid forward contracts. If the IRS or Treasury publishes future guidance requiring current economic accrual for contingent
payments on prepaid forward contracts, it is possible that you could be required to accrue income over the term of the Notes.
Because of the absence of authority regarding the
appropriate tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner that
results in tax consequences that are different from those described above. For example, the IRS could possibly assert that any gain or
loss that a holder may recognize at maturity or upon the sale, exchange, or redemption of the Notes should be treated as ordinary gain
or loss.
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Because some of the Underlyings are indices that
periodically rebalance, it is possible that the Notes could be treated as a series of contingent income-bearing single financial contracts,
each of which matures on the next rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be
treated as disposing of the Notes on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S.
Holder would accordingly likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s
tax basis in the Notes (which would be adjusted to take into account any prior recognition of gain or loss) and the fair market value
of the Notes on such date.
Non-U.S. Holders
Because the U.S. federal income tax treatment of
the Notes (including any Contingent Coupon Payment) is uncertain, we (or the applicable paying agent) will withhold U.S. federal income
tax at a 30% rate (or at a lower rate under an applicable income tax treaty) on the entire amount of any Contingent Coupon Payment made
unless such payments are effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (in which case,
to avoid withholding, the Non-U.S. Holder will be required to provide a Form W-8ECI). We (or the applicable paying agent) will not pay
any additional amounts in respect of such withholding. To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer
identification number and certify as to its eligibility under the appropriate treaty’s limitations on benefits article, if applicable.
In addition, special rules may apply to claims for treaty benefits made by Non-U.S. Holders that are entities rather than individuals.
The availability of a lower rate of withholding under an applicable income tax treaty will depend on whether such rate applies to the
characterization of the payments under U.S. federal income tax laws. A Non-U.S. Holder that is eligible for a reduced rate of U.S. federal
withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for
refund with the IRS.
Except as discussed below, a Non-U.S. Holder generally
will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes (not including, for the avoidance
of doubt, amounts representing any Contingent Coupon Payment which would be subject to the rules discussed in the previous paragraph)
upon the sale, exchange, or redemption of the Notes or their settlement at maturity, provided that the Non-U.S. Holder complies with applicable
certification requirements and that the payment is not effectively connected with the conduct by the Non-U.S. Holder of a U.S. trade or
business. Notwithstanding the foregoing, gain from the sale, exchange, or redemption of the Notes or their settlement at maturity may
be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S. for 183 days
or more during the taxable year of the sale, exchange, redemption, or settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in
the conduct of a trade or business within the U.S. and if any Contingent Coupon Payment and gain realized on the settlement at maturity,
or upon sale, exchange, or redemption of the Notes, is effectively connected with the conduct of such trade or business (and, if certain
tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder,
although exempt from U.S. federal withholding tax, generally will be subject to U.S. federal income tax on such Contingent Coupon Payment
and gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders should read the material under the
heading “—U.S. Holders,” for a description of the U.S. federal income tax consequences of acquiring, owning, and disposing
of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30%
(or such lower rate provided by any applicable tax treaty) of a portion of its earnings and profits for the taxable year that are effectively
connected with its conduct of a trade or business in the U.S., subject to certain adjustments.
A “dividend equivalent” payment is treated
as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid
to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”)
that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent
payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2027. 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.
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
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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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Index, the Russell 2000® Index and the VanEck® Gold Miners ETF
Where You Can Find More Information
The terms and risks of the Notes are contained in
this pricing supplement and in the following related product supplement, prospectus supplement and prospectus, which can be accessed at
the following links:
• Product Supplement EQUITY-1 dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315473/d429684d424b2.htm
• Series A MTN prospectus supplement dated December 30, 2022 and prospectus dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315195/d409418d424b3.htm
This pricing supplement and the accompanying product
supplement, prospectus supplement and prospectus have been filed as part of a registration statement with the SEC, which may, without
cost, be accessed on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should read
this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for information about us, BAC and
this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by this
pricing supplement and the accompanying product supplement, prospectus supplement and prospectus. Certain terms used but not defined in
this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus supplement. Unless otherwise
indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,”
or similar references are to BofA Finance, and not to BAC.
The Notes are our senior debt securities. Any payments
on the Notes are fully and unconditionally guaranteed by BAC. The Notes and the related guarantee are not insured by the Federal Deposit
Insurance Corporation or secured by collateral. The Notes will rank equally in right of payment with all of our other unsecured and unsubordinated
obligations, 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.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | | PS-33 |
Exhibit 107.1
The prospectus to which this Exhibit is attached is a final prospectus for the related offering. The maximum aggregate offering price for such offering is $3,300,000.00.
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