Linked to the Least Performing
of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration
& Production ETF
|
|
•
|
Approximate
3 year term if not called prior to maturity.
|
|
|
•
|
Payments
on the Notes will depend on the individual performance of the Energy Select Sector SPDR® Fund and the SPDR®
S&P® Oil & Gas Exploration & Production ETF (each an “Underlying”).
|
|
|
•
|
Contingent
coupon rate of 11.00% per annum (2.75% per quarter) payable quarterly if the Observation Value of each Underlying on the
applicable Observation Date is greater than or equal to 60% of its Starting Value.
|
|
|
•
|
Beginning
in February 2020, automatically callable quarterly for an amount equal to the principal amount plus the relevant contingent coupon
if the Observation Value of each Underlying is greater than or equal to its Starting Value on any Observation Date (other
than the final Observation Date).
|
|
|
•
|
Assuming
the Notes are not called prior to maturity, if either Underlying declines by more than 40% from its Starting Value, at maturity
your investment will be subject to a 1:1 downside, with up to 100% of the principal at risk; otherwise, at maturity investors will
receive the principal amount. At maturity the investor will also receive the final contingent coupon if the Observation Value of
each Underlying on the final Observation Date is greater than or equal to 60% of its Starting Value.
|
|
|
•
|
All
payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”) and Bank of America Corporation
(“BAC” or the “Guarantor”).
|
|
|
•
|
The
Notes priced on August 28, 2019, will issue on August 30, 2019 and will mature on September 1, 2022.
|
|
|
•
|
The
Notes will not be listed on any securities exchange.
|
The initial estimated value
of the Notes as of the pricing date is $962.20 per Note, which is less than the public offering price listed below. The actual
value of your Notes at any time will reflect many factors and cannot be predicted with accuracy. See “Risk Factors”
beginning on page PS-8 of this pricing supplement and “Structuring the Notes” on page PS-21 of this pricing supplement
for additional information.
Potential purchasers of
the Notes should consider the information in “Risk Factors” beginning on page PS- 8 of this pricing supplement, page
PS-5 of the accompanying product supplement, page S-4 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 Note Prospectus (as defined on page PS-26) is truthful or complete. Any representation to
the contrary is a criminal offense.
|
|
Public offering price(1)
|
Underwriting discount(1)
|
Proceeds, before expenses, to BofA Finance
|
|
Per Note
|
$1,000.00
|
$25.00
|
$975.00
|
|
Total
|
$1,505,000.00
|
$37,625.00
|
$1,467,375.00
|
|
|
(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 $975.00 per Note.
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 Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Terms of the Notes
The Contingent
Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR®
S&P® Oil & Gas Exploration & Production ETF (the “Notes”) provide a quarterly Contingent
Coupon Payment of $27.50 on the applicable Contingent Payment Date if, on any quarterly Observation Date, the Observation Value
of each Underlying is greater than or equal to its Coupon Barrier. Beginning in February 2020, if the Observation Value
of each Underlying is greater than or equal to its Starting Value on any Observation Date (other than the final Observation
Date), the Notes will be automatically called, in whole but not in part, at 100% of the principal amount, together with the relevant
Contingent Coupon Payment. No further amounts will be payable following an Automatic Call. If the Notes are not automatically called
prior to maturity and the Least Performing Underlying declines by more than 40% from its Starting Value, there is full exposure
to declines in the Least Performing Underlying, and you will lose a significant portion or all of your investment in the Notes.
Otherwise, at maturity you will receive the principal amount. At maturity you will also receive the final Contingent Coupon Payment
if the Observation Value of each Underlying on the final Observation Date is greater than or equal to its Coupon Barrier.
The Notes are not traditional debt securities and it is possible that the Notes will not pay any Contingent Coupon Payments, and
you may lose a significant portion or all of your principal amount at maturity. Any payments on the Notes will be calculated based
on $1,000 in principal amount of Notes and will depend on the performance of the Underlyings, subject to our and BAC’s credit
risk.
|
Issuer:
|
BofA Finance
|
|
Guarantor:
|
BAC
|
|
Denominations:
|
The Notes will be issued in minimum denominations of $1,000 and whole multiples of $1,000 in excess thereof.
|
|
Term:
|
Approximately 3 years, unless previously automatically called.
|
|
Underlyings:
|
The Energy Select Sector SPDR® Fund (Bloomberg symbol: “XLE”) and the SPDR® S&P® Oil & Gas Exploration & Production ETF (Bloomberg symbol: “XOP”)
|
|
Pricing Date:
|
August 28, 2019
|
|
Issue Date:
|
August 30, 2019
|
|
Valuation Date:
|
August 29, 2022, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” of the accompanying product supplement. If the Valuation Date is not a business day, the Valuation Date will be postponed to the next business day.
|
|
Maturity Date:
|
September 1, 2022
|
|
Starting Value:
|
XLE: $56.65
XOP: $21.25
|
|
Observation Value:
|
With respect to each Underlying, its Closing Market Price on the applicable Observation Date multiplied by its Price Multiplier, as determined by the calculation agent.
|
|
Ending Value:
|
With respect to each Underlying, its Observation Value on the Valuation Date.
|
|
Price Multiplier
|
With respect to each Underlying, 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-23 of the accompanying product supplement.
|
|
Coupon Barrier:
|
XLE: $33.99, which
is 60% of its Starting Value.
XOP: $12.75, which
is 60% of its Starting Value.
|
|
Threshold Value:
|
XLE: $33.99, which
is 60% of its Starting Value.
XOP: $12.75, which
is 60% of its Starting Value.
|
|
Contingent Coupon Payment:
|
If, on any quarterly 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 $27.50 per $1,000 in principal amount of Notes (equal to a rate of 2.75% per quarter or 11.00% per annum) on the applicable Contingent Payment Date (including the Maturity Date).
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-2
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
|
Automatic Call:
|
Beginning in February 2020, 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 Starting Value on any Observation Date (other than the final Observation Date). If the Notes are automatically called, the Early Redemption Amount will be paid on the applicable Contingent Payment Date. No further amounts will be payable following an Automatic Call.
|
|
Early Redemption Amount:
|
For each $1,000 in principal amount of Notes, $1,000 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 in principal amount of Notes will be:
a)
If the Ending Value of the Least Performing Underlying
is greater than or equal to its Threshold Value:
$1,000; or
b)
If the Ending Value of the Least Performing Underlying
is less than its Threshold Value:
$1,000 + ($1,000
x Underlying Return of the Least Performing Underlying). In this case, the Redemption Amount will be less than 60% of the principal
amount and could be zero.
The Redemption Amount
will also include the 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 on page PS-4.
|
|
Contingent Payment Dates:
|
As set forth on page PS-4.
|
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
|
Selling Agent:
|
BofAS
|
|
CUSIP:
|
09709TTH4
|
|
Underlying Return:
|
With respect to
each Underlying,
|
|
Least Performing Underlying:
|
The Underlying with the lowest Underlying Return.
|
|
Events of Default and Acceleration:
|
If an Event of Default, as defined in the senior indenture and in the section entitled “Events of Default and Rights of Acceleration” beginning on page 35 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 the final Contingent Coupon Payment is payable based upon the prices of the Underlyings on the deemed Valuation Date; any such final Contingent Coupon Payment will be prorated by the calculation agent to reflect the length of the final contingent payment period. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate.
|
|
|
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-3
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Observation Dates and Contingent Payment Dates
|
Observation Dates*
|
|
Contingent Payment Dates**
|
|
November 29, 2019
|
|
December 4, 2019
|
|
February 28, 2020
|
|
March 4, 2020
|
|
May 28, 2020
|
|
June 2, 2020
|
|
August 28, 2020
|
|
September 2, 2020
|
|
November 30, 2020
|
|
December 3, 2020
|
|
March 1, 2021
|
|
March 4, 2021
|
|
May 28, 2021
|
|
June 3, 2021
|
|
August 30, 2021
|
|
September 2, 2021
|
|
November 29, 2021
|
|
December 2, 2021
|
|
February 28, 2022
|
|
March 3, 2022
|
|
May 31, 2022
|
|
June 3, 2022
|
|
August 29, 2022 (the “Valuation Date”)
|
|
September 1, 2022 (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”
on page PS-19 of the accompanying product supplement. If an Observation Date is not a business day, such Observation Date will
be postponed to the next business day.
** Postponement of a quarterly Observation Date will
not cause the postponement of the Contingent Payment Date relating to such Observation Date.
Any payments on the Notes depend on the credit risk of BofA Finance, as issuer, and BAC, as guarantor, and on the performance of
the Underlyings. The economic terms of the Notes are based on BAC’s internal funding rate, which is the rate it would pay
to borrow funds through the issuance of market-linked notes, and the economic terms of certain related hedging arrangements BAC’s
affiliates enter into. BAC’s internal funding rate is typically lower than the rate it would pay when it issues conventional
fixed or floating rate debt securities. This difference in funding rate, as well as the underwriting discount and the hedging related
charges described below (see “Risk Factors” beginning on page PS-8), reduced the economic terms of the Notes to you
and the initial estimated value of the Notes. Due to these factors, the public offering price you are paying to purchase the Notes
is greater than the initial estimated value of the Notes as of the pricing date.
The initial
estimated value of the Notes as of the pricing date is set forth on the cover page of this pricing supplement. For more information
about the initial estimated value and the structuring of the Notes, see “Risk Factors” beginning on page PS-8 and “Structuring
the Notes” on page PS-21.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-4
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Contingent Coupon Payment and Redemption
Amount Determination
On each Contingent Payment
Date, you may receive a Contingent Coupon Payment per $1,000 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 in principal amount of Notes determined
as follows:
All payments described above
are subject to issuer and Guarantor credit risk.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-5
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Total Contingent Coupon Payment Examples
The
table below illustrates the hypothetical total Contingent Coupon Payments per $1,000 in principal amount of Notes over the term
of the Notes, based on the Contingent Coupon Payment of $27.50, 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
|
$55.00
|
|
4
|
$110.00
|
|
6
|
$165.00
|
|
8
|
$220.00
|
|
10
|
$275.00
|
|
12
|
$330.00
|
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-6
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production 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, a hypothetical Coupon Barrier of 60
for the Least Performing Underlying, a hypothetical Threshold Value of 60 for the Least Performing Underlying, the Contingent Coupon
Payment of $27.50 per $1,000 in principal amount of Notes and a range of hypothetical Ending Values of the Least Performing Underlying.
The actual amount you receive and the resulting return will depend on the actual Starting Values, Coupon Barriers, Threshold
Values, Observation Values and Ending Values of the Underlyings, whether the Notes are automatically called prior to maturity,
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 prices of the Underlyings, see “The Underlyings” section below. The Ending Value of each Underlying will not
include any income generated by dividends paid on the stocks represented by that Underlying, which you would otherwise be entitled
to receive if you invested in those stocks directly. In addition, all payments on the Notes are subject to issuer and guarantor
credit risk.
Ending Value of the
Least Performing Underlying
|
Underlying Return of the
Least Performing Underlying
|
Redemption Amount per Note (including any final Contingent Coupon Payment)
|
Return
on the Notes(1)
|
|
160.00
|
60.00%
|
$1,027.50(2)
|
2.75%
|
|
150.00
|
50.00%
|
$1,027.50
|
2.75%
|
|
140.00
|
40.00%
|
$1,027.50
|
2.75%
|
|
130.00
|
30.00%
|
$1,027.50
|
2.75%
|
|
120.00
|
20.00%
|
$1,027.50
|
2.75%
|
|
110.00
|
10.00%
|
$1,027.50
|
2.75%
|
|
105.00
|
5.00%
|
$1,027.50
|
2.75%
|
|
102.00
|
2.00%
|
$1,027.50
|
2.75%
|
|
100.00(3)
|
0.00%
|
$1,027.50
|
2.75%
|
|
90.00
|
-10.00%
|
$1,027.50
|
2.75%
|
|
80.00
|
-20.00%
|
$1,027.50
|
2.75%
|
|
70.00
|
-30.00%
|
$1,027.50
|
2.75%
|
|
60.00(4)
|
-40.00%
|
$1,027.50
|
2.75%
|
|
59.99
|
-40.01%
|
$599.90
|
-40.01%
|
|
50.00
|
-50.00%
|
$500.00
|
-50.00%
|
|
0.00
|
-100.00%
|
$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)
|
This amount represents
the sum of the principal amount and the final Contingent Coupon Payment.
|
|
|
(3)
|
The hypothetical
Starting Value of 100 used in the table above has been chosen for illustrative purposes only. The actual Starting Value for each
Underlying is set forth on page PS-2 above.
|
|
|
(4)
|
This is the hypothetical Coupon Barrier and
Threshold Value of the Least Performing Underlying.
|
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-7
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production 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-4 of the accompanying prospectus supplement and page 7 of the accompanying prospectus, each as identified on page PS-26
below.
|
|
•
|
Your
investment may result in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount on
the Notes at maturity. If the Notes are not automatically called prior to maturity and the Ending Value of any Underlying
is less than its Threshold Value, 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 Ending Value of any Underlying exceeds its Starting Value. 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 of any Underlying exceeds its Starting Value. In contrast, a direct investment in the securities included
in one or more of the Underlyings would allow you to receive the benefit of any appreciation in their prices. Thus, any return
on the Notes will not reflect the return you would realize if you actually owned those securities and received the dividends paid
or distributions made on them.
|
|
|
•
|
The
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 in February 2020, the Notes will
be automatically called if, on any Observation Date (other than the final Observation Date), the Observation Value of each Underlying
is greater than or equal to its Starting Value. If the Notes are automatically called, you will be entitled to receive the principal
amount and the Contingent Coupon Payment with respect to the applicable Observation Date. In this case, you will lose the opportunity
to continue to receive Contingent Coupon Payments after the date of 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 Payment 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.
|
|
|
•
|
Any
payments on the Notes are subject to the credit risk of BofA Finance and the Guarantor, and actual or perceived changes in BofA
Finance or the Guarantor’s creditworthiness are expected to affect the value of the Notes. The Notes are our senior unsecured
debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed
by any entity other than the Guarantor. As a result, your receipt of the Early Redemption Amount or the Redemption Amount at maturity,
as applicable, will be dependent upon our ability and the ability of the Guarantor to repay our respective obligations under the
Notes on the applicable Contingent Payment Date or the Maturity Date, regardless of the Ending Value of the Least Performing Underlying
as compared to its Starting Value.
|
In addition,
our credit ratings and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay
our obligations. Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our
or the Guarantor’s credit ratings or increases in the spread between the yield on our respective securities and the yield
on U.S. Treasury securities (the “credit spread”) prior to the Maturity Date may adversely affect the market value
of the Notes. However, because your return on the Notes depends upon factors in addition to our ability and the ability of the
Guarantor to pay our respective obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s
credit ratings will not reduce the other investment risks related to the Notes.
|
|
•
|
We
are a finance subsidiary and, as such, will have limited assets and operations. We are a finance subsidiary of BAC and will
have no assets, operations or revenues other than those related to the issuance, administration and repayment of our debt securities
that are guaranteed by the Guarantor. As a finance subsidiary, to meet our obligations under the Notes, we are dependent upon payment
or contribution of funds and/or repayment of outstanding loans from the Guarantor and/or its other subsidiaries. Therefore, our
ability to make payments on the Notes may be limited.
|
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-8
|
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
|
|
•
|
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 prices of the Underlyings, the Guarantor’s internal funding
rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charges, all as further
described in "Structuring the Notes" below. These factors, together with various credit, market and economic factors
over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market
and will affect the value of the Notes in complex and unpredictable ways.
|
|
|
•
|
The
initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any
time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlyings,
our and BAC’s creditworthiness and changes in market conditions.
|
|
|
•
|
We
cannot assure you that a trading market for your Notes will ever develop or be maintained. We will not list the Notes on any
securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that market will be liquid or
illiquid.
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The
Contingent Coupon Payment, Early Redemption Amount or Redemption Amount, as applicable, will not reflect the prices of the Underlyings
other than on the Observation Dates. The prices of the Underlyings during the term of the Notes other than on the Observation
Dates will not affect payments on the Notes. Notwithstanding the foregoing, investors should generally be aware of the performance
of the Underlyings while holding the Notes. The calculation agent will determine whether each Contingent Coupon Payment is payable
and will calculate the Early Redemption Amount or the Redemption Amount, as applicable, by comparing only the Starting Value, the
Coupon Barrier or the Threshold Value, as applicable, to the Observation Value or the Ending Value for each Underlying. No other
prices of the Underlyings will be taken into account. As a result, if the Notes are not automatically called prior to maturity,
you will receive less than the principal amount at maturity even if the price of each Underlying has increased at certain times
during the term of the Notes before the Least Performing Underlying decreases to a price that is less than its Threshold Value
as of the Valuation Date.
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Because
the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may not receive any return
on the Notes and may lose some or all of your principal amount even if the Observation Value or Ending Value of one Underlying
is always greater than or equal to its Coupon Barrier or Threshold Value, as applicable. Your Notes are linked to the least
performing of the Underlyings, and a change in the price of one Underlying may not correlate with changes in the price of the other
Underlying(s). The Notes are not linked to a basket composed of the Underlyings, where the depreciation in the price of one Underlying
could be offset to some extent by the appreciation in the price of the other Underlying(s). In the case of the Notes, the individual
performance of each Underlying would not be combined, and the depreciation in the price of one Underlying would not be offset by
any appreciation in the price of the other Underlying(s). 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 Underlying is below its Coupon Barrier on that day. In addition, even if the Ending Value of an Underlying
is at or above its Threshold Value, you will lose a portion of your principal if the Ending Value of the Least Performing Underlying
is below its Threshold Value.
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The
stocks held by each Underlying are concentrated in one sector. The Underlyings hold securities issued by companies in the energy
or the oil and gas exploration and production sector, respectively. As a result, the stocks that will determine the performance
of the Notes are concentrated in two sectors. Although an investment in the Notes will not give holders any ownership or other
direct interests in the securities held by the Underlyings, the return on an investment in the Notes will be subject to certain
risks associated with a direct equity investment in companies in these sectors. 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.
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The
stocks of companies in each of the energy sector and the oil and gas sector are subject to swift price fluctuations. The issuers
of the stocks held by each Underlying develop and produce, among other things, crude oil and natural gas, and provide, among other
things, drilling services and other services related to energy resources production and distribution. Stock prices for these types
of companies are affected by supply and demand both for their specific product or service and for energy products in general. The
price of oil and gas, exploration and production spending, government regulation, world events and economic conditions will likewise
affect the performance of these companies. Correspondingly, the stocks of companies in each of the energy sector and the oil and
gas sector are subject to swift price fluctuations caused by events relating to international politics, energy conservation, the
success of exploration projects and tax and other governmental regulatory policies. Weak demand for the companies’ products
or services or for energy products and services in general, as well as negative developments in these other areas, would adversely
impact the value of the stocks held by each Underlying and, therefore, the price of each Underlying and the value of the Notes.
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The
anti-dilution adjustments will be limited. The calculation agent may adjust the Price Multiplier of the Underlyings and other
terms of the
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-9
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Notes to reflect certain corporate
actions by the Underlyings, 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 Underlyings and will have broad discretion to determine whether and to what extent
an adjustment is required.
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The
sponsor or investment advisor of an Underlying may adjust that Underlying in a way that affects its prices, and the sponsor or
investment advisor has no obligation to consider your interests. 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
price. Any of these actions could adversely affect the value of your Notes.
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The
performance of an Underlying may not correlate with the performance of its underlying index as well as the net asset value per
share of the Underlying, especially during periods of market volatility. The performance of an Underlying 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 an Underlying 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 Underlying 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 Underlying, differences in trading hours between the Underlying (or the underlying assets held by the Underlying)
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 of each Underlying are traded on a securities
exchange and are subject to market supply and investor demand, the market price of one share of the Underlying may differ from
its net asset value per share; shares of the Underlying may trade at, above, or below its net asset value per share. During periods
of market volatility, securities held by an Underlying may be unavailable in the secondary market, market participants may be unable
to calculate accurately the net asset value per share of the Underlying and the liquidity of the Underlying may be adversely affected.
Market volatility may also disrupt the ability of market participants to trade shares of the Underlying. Further, market volatility
may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the Underlying.
As a result, under these circumstances, the market value of shares of the Underlying may vary substantially from the net asset
value per share of the Underlying.
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Trading and hedging
activities by us, the Guarantor and any of our other affiliates may create conflicts of interest with you and may affect your return
on the Notes and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or
sell shares of the Underlyings or the securities held by or included in the Underlyings, or futures or options contracts on the
Underlyings or those securities, or other listed or over-the-counter derivative instruments linked to the Underlyings or those
securities. While we, the Guarantor or one or more of our other affiliates, including BofAS, may from time to time own the Underlyings
or the securities represented by the Underlyings, except to the extent that BAC’s common stock may be included in the Underlyings,
we, the Guarantor and our other affiliates, including BofAS, do not control any company included in the Underlyings, and have not
verified any disclosure made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, may
execute such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations
under the Notes. These transactions may present a conflict of interest between your interest in the Notes and the interests we,
the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions,
including block trades, for our or their other customers, and in accounts under our or their management. These transactions may
affect the value 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 its behalf (including for
the purpose of hedging anticipated exposures), may have affected the value of the Underlyings. Consequently, the value of the Underlyings
may change subsequent to the pricing date, adversely affecting the market value of the Notes.
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We, the
Guarantor or one or more of our other affiliates, including BofAS, may have also engaged in hedging activities that could have
affected the value of the Underlyings on the pricing date. In addition, these activities may decrease the market value of your
Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or one or more of our other affiliates,
including BofAS, may purchase or otherwise acquire a long or short position in the Notes and may hold or resell the Notes. For
example, BofAS may enter into these transactions in connection with any market making activities in which it engages. We cannot
assure you that these activities will not adversely affect the value of the Underlyings, the market value of your Notes prior to
maturity or the amounts payable on the Notes.
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There
may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right to
appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will
make a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances,
these duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation
agent.
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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 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
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-10
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
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-11
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production 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 SSGA Funds Management, Inc. (“SSGA”), the advisor to the XLE and the XOP. We refer to SSGA
as the “Investment Advisor.” The Investment Advisor, which licenses the copyright and all other rights to the Underlyings,
has no obligation to continue to publish, and may discontinue publication of, the Underlyings. The consequences of the Investment
Advisor discontinuing publication of the applicable Underlying are discussed in “Description of the Notes—Anti-Dilution
and Discontinuance Adjustments Relating to ETFs—Discontinuance of 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 Energy Select Sector SPDR®
Fund
The shares of the XLE are issued
by Select Sector SPDR® Trust, a registered investment company. The XLE seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the Energy Select Sector Index. The Energy Select Sector
Index measures the performance of the energy sector of the U.S. equity market. The XLE is composed of equity securities of companies
in the oil, gas and consumable fuel, energy equipment and services industries. The XLE trades on the NYSE Arca under the ticker
symbol “XLE.”
Investment Approach
The XLE utilizes
a “passive” or “indexing” investment approach in attempting to track the performance of The Energy Select
Sector Index. The XLE will invest in substantially all of the securities which comprise The Energy Select Sector Index. The XLE
will normally invest at least 95% of its total assets in common stocks that comprise The Energy Select Sector Index.
Investment Objective and Strategy
The XLE seeks
to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Energy
Select Sector Index. The investment manager of the XLE uses a replication strategy to try to achieve the XLE’s investment
objective, which means that the XLE generally invests in substantially all of the securities represented in The Energy Select Sector
Index in approximately the same proportions as The Energy Select Sector Index. Under normal market conditions, the XLE generally
invests at least 95% of its total assets in the securities comprising The Energy Select Sector Index. In certain situations or
market conditions, the XLE may temporarily depart from its normal investment policies and strategies provided that the alternative
is consistent with the XLE’s investment objective and is in the best interest of the XLE. For example, if the XLE is unable
to invest directly in a component security or if a derivative investment may provide higher liquidity than other types of investments,
it may make larger than normal investments in derivatives to maintain exposure to The Energy Select Sector Index that it tracks.
Consequently, under such circumstances, the XLE may invest in a different mix of investments than it would under normal circumstances.
The XLE will provide shareholders with at least 60 days notice prior to any material change in its investment policies. The XLE
is managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities. This differs
from an actively managed underlying, which typically seeks to outperform a benchmark index.
Notwithstanding
the XLE’s investment objective, the return on your notes will not reflect any dividends paid on shares of the XLE, on the
securities purchased by the XLE or on the securities that comprise The Energy Select Sector Index.
The Select Sector Indices
The
Energy Select Sector Index is part of the Select Sector Indices. The Select Sector Indices are sub-indices of the S&P 500® Index.
Each stock in the S&P 500® Index is allocated to at least one Select Sector Index, and the combined companies
of the eleven Select Sector Indices represent all of the companies in the S&P 500® Index. The industry
indices are sub-categories within each Select Sector Index and represent a specific industry segment of the overall Select Sector
Index. The eleven Select Sector Indices seek to represent the eleven S&P 500® Index sectors. The index
compilation agent for these indices (the “Index Compilation Agent”) determines the composition of the Select Sector
Indices based on S&P’s sector classification methodology. (Sector designations are determined by the index sponsor using
criteria it has selected or developed. Index sponsors may use very different standards for determining sector designations. In
addition, many companies operate in a number of sectors, but are listed in only one sector and the basis on which that sector is
selected may also differ. As a result, sector comparisons between indices with different index sponsors may reflect differences
in methodology as well as actual differences in the sector composition of the indices.)
Each Select
Sector Index was developed and is maintained in accordance with the following criteria:
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Each of the component stocks in a Select Sector
Index (the “Component Stocks”) is a constituent company of the S&P 500® Index.
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The eleven Select Sector Indices together will
include all of the companies represented in the S&P 500® Index and each of the stocks in the S&P 500® Index
will be allocated to at least one of the Select Sector Indices.
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The Index Compilation Agent assigns each constituent
stock of the S&P 500® Index to a Select Sector Index. The Index Compilation Agent assigns a company’s
stock to a particular Select Sector Index based on S&P Dow Jones Indices’s sector classification methodology as set forth
in its
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-12
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Global
Industry Classification Standard.
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Each Select Sector Index is calculated by S&P
Dow Jones Indices using a modified “market capitalization” methodology. This design ensures that each of the Component
Stocks within a Select Sector Index is represented in a proportion consistent with its percentage with respect to the total market
capitalization of that Select Sector Index.
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For reweighting purposes, each Select Sector
Index is rebalanced quarterly after the close of business on the second to last calculation day of March, June, September and December
using the following procedures: (1) The rebalancing reference date is two business days prior to the last calculation day of each
quarter; and (2) With prices reflected on the rebalancing reference date, and membership, shares outstanding, additional weight
factor (capping factor) and investable weight factors (as described in the section “Computation of the S&P 500 Index®”
below) as of the rebalancing effective date, each company is weighted using the modified market capitalization methodology. Modifications
are made as defined below.
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(i)
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The indices are first evaluated to ensure none
of the indices breach the maximum allowable limits defined in rules (ii) and (v) below. If any of the allowable limits are breached,
the Component Stocks are reweighted based on their float-adjusted market capitalization weights.
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(ii)
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If any Component Stock has a weight greater than
24%, that Component Stock has its float-adjusted market capitalization weight capped at 23%. The 23% weight cap creates a 2% buffer
to ensure that no Component Stock exceeds 25% as of the quarter-end diversification requirement date.
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(iii)
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All excess weight is equally redistributed to
all uncapped Component Stocks within the relevant Select Sector Index.
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(iv)
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After this redistribution, if the float-adjusted
market capitalization weight of any other Component Stock(s) then breaches 23%, the process is repeated iteratively until no Component
Stock breaches the 23% weight cap.
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(v)
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The sum of the Component Stocks with weight greater
than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for a buffer below the 5% limit.
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(vi)
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If the rule in step (v) is breached, all the
Component Stocks are ranked in descending order of their float-adjusted market capitalization weights and the first Component Stock
that causes the 50% limit to be breached has its weight reduced to 4.6%.
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(vii)
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This excess weight is equally redistributed to
all Component Stocks with weights below 4.6%. This process is repeated iteratively until step (v) is satisfied.
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(viii)
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Index share amounts are assigned to each Component
Stock to arrive at the weights calculated above. Since index shares are assigned based on prices one business day prior to rebalancing,
the actual weight of each Component Stock at the rebalancing differs somewhat from these weights due to market movements.
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(ix)
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If necessary, the reweighting process may take
place more than once prior to the close on the last business day of March, June, September or December to ensure conformity with
all diversification requirements.
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Each Select Sector
Index is calculated using the same methodology utilized by S&P Dow Jones Indices in calculating the S&P 500® Index,
using a base-weighted aggregate methodology. The daily calculation of each Select Sector Index is computed by dividing the total
market value of the companies in the Select Sector Index by a number called the index divisor.
The Index Compilation
Agent at any time may determine that a Component Stock which has been assigned to one Select Sector Index has undergone such a
transformation in the composition of its business, and should be removed from that Select Sector Index and assigned to a different
Select Sector Index. In the event that the Index Compilation Agent notifies S&P Dow Jones Indices that a Component Stock’s
Select Sector Index assignment should be changed, S&P Dow Jones Indices will disseminate notice of the change following its
standard procedure for announcing index changes and will implement the change in the affected Select Sector Indices on a date no
less than one week after the initial dissemination of information on the sector change to the maximum extent practicable. It is
not anticipated that Component Stocks will change sectors frequently.
Component Stocks
removed from and added to the S&P 500® Index will be deleted from and added to the appropriate Select Sector
Index on the same schedule used by S&P Dow Jones Indices for additions and deletions from the S&P 500® Index
insofar as practicable.
The
S&P 500® Index
The S&P 500®
Index (the “SPX”) includes a representative sample of 500 companies in leading industries of the U.S. economy. The
SPX is intended to provide an indication of the pattern of common stock price movement. The calculation of the level of the SPX
is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular time compared
to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years 1941 through
1943.
The
SPX includes companies from eleven main groups: Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials;
Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The underlying sponsor may from time to
time, in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives stated above.
Company additions
to the SPX must have an unadjusted company market capitalization of $8.2 billion or more (an increase from the previous
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-13
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
requirement of an unadjusted company market capitalization
of $6.1 billion or more).
S&P Dow Jones
Indices LLC (“SPDJI”) calculates the SPX by reference to the prices of the constituent stocks of the SPX without taking
account of the value of dividends paid on those stocks. As a result, the return on the Notes will not reflect the return you would
realize if you actually owned the SPX constituent stocks and received the dividends paid on those stocks.
Computation
of the SPX
While SPDJI
currently employs the following methodology to calculate the SPX, no assurance can be given that SPDJI will not modify or change
this methodology in a manner that may affect the payments on the Notes.
Historically,
the market value of any Component Stock of the SPX was calculated as the product of the market price per share and the number of
then-outstanding shares of such Component Stock. In March 2005, SPDJI began shifting the SPX halfway from a market capitalization
weighted formula to a float-adjusted formula, before moving the SPX to full float adjustment on September 16, 2005. SPDJI’s
criteria for selecting stocks for the SPX did not change with the shift to float adjustment. However, the adjustment affects each
company’s weight in the SPX.
Under float adjustment,
the share counts used in calculating the SPX reflect only those shares that are available to investors, not all of a company’s
outstanding shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or
government agencies.
In September 2012,
all shareholdings representing more than 5% of a stock’s outstanding shares, other than holdings by “block owners,”
were removed from the float for purposes of calculating the SPX. Generally, these “control holders” will include officers
and directors, private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control,
strategic partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders
of unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any
individual person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block
owners, such as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension
funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment
plans, will ordinarily be considered part of the float.
Treasury stock,
stock options, restricted shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not
part of the float. Shares held in a trust to allow investors in countries outside the country of domicile, such as depositary shares
and Canadian exchangeable shares are normally part of the float unless those shares form a control block. If a company has multiple
classes of stock outstanding, shares in an unlisted or non-traded class are treated as a control block.
For each stock,
an investable weight factor (“IWF”) is calculated by dividing the available float shares by the total shares outstanding.
Available float shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject
to a 5% minimum threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s
shares, and no other control group holds 5% of the company’s shares, SPDJI would assign that company an IWF of 1.00, as no
control group meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares
and another control group holds 20% of the company’s shares, SPDJI would assign an IWF of 0.77, reflecting the fact that
23% of the company’s outstanding shares are considered to be held for control. As of July 31, 2017, companies with multiple
share class lines are no longer eligible for inclusion in the SPX. Constituents of the SPX prior to July 31, 2017 with multiple
share class lines will be grandfathered in and continue to be included in the SPX. If a constituent company of the SPX reorganizes
into a multiple share class line structure, that company will remain in the SPX at the discretion of the S&P Index Committee
in order to minimize turnover.
The SPX is calculated
using a base-weighted aggregate methodology. The level of the SPX reflects the total market value of all Component Stocks relative
to the base period of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in order
to make the level easier to work with and track over time. The actual total market value of the Component Stocks during the base
period of the years 1941 through 1943 has been set to an indexed level of 10. This is often indicated by the notation 1941- 43
= 10. In practice, the daily calculation of the SPX is computed by dividing the total market value of the Component Stocks by the
“index divisor.” By itself, the index divisor is an arbitrary number. However, in the context of the calculation of
the SPX, it serves as a link to the original base period level of the SPX. The index divisor keeps the SPX comparable over time
and is the manipulation point for all adjustments to the SPX, which is index maintenance.
Index
Maintenance
Index maintenance
includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends,
and stock price adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends,
require changes in the common shares outstanding and the stock prices of the companies in the SPX, and do not require index divisor
adjustments.
To prevent the
level of the SPX from changing due to corporate actions, corporate actions which affect the total market value of the SPX require
an index divisor adjustment. By adjusting the index divisor for the change in market value, the level of the SPX remains constant
and does not reflect the corporate actions of individual companies in the SPX. Index divisor adjustments are made after the close
of trading and after the calculation of the SPX closing level.
Changes in
a company’s shares outstanding of 5.00% or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions,
or exchange offers are made as soon as reasonably possible. Share changes due to mergers or acquisitions of publicly held companies
that trade on a major exchange are implemented when the transaction occurs, even if both of the companies are not in the same
headline index, and regardless of the size of the change. All other changes of 5.00% or more (due to, for example, company stock
repurchases, private placements, redemptions,
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-14
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
exercise of options, warrants, conversion of preferred
stock, notes, debt, equity participation units, at-the-market offerings, or other recapitalizations) are made weekly and are announced
on Fridays for implementation after the close of trading on the following Friday.
Changes of less
than 5.00% are accumulated and made quarterly on the third Friday of March, June, September, and December, and are usually announced
two to five days prior.
If
a change in a company’s shares outstanding of 5.00% or more causes a company’s IWF to change by five percentage points
or more, the IWF is updated at the same time as the share change. IWF changes resulting from partial tender offers are considered
on a case by case basis.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-15
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Historical Performance
of the XLE
The following graph sets forth
the daily historical performance of the XLE in the period from January 1, 2008 through the pricing date. We obtained this historical
data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg
L.P. The horizontal line in the graph represents the XLE’s Coupon Barrier and Threshold Value of $33.99, which is 60% of
the XLE’s Starting Value of $56.65.
This historical
data on the XLE is not necessarily indicative of the future performance of the XLE or what the price of the Notes may be. Any historical
upward or downward trend in the price of the XLE during any period set forth above is not an indication that the level of the XLE
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 prices and trading pattern of the XLE.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-16
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
The SPDR® S&P®
Oil & Gas Exploration & Production ETF
The
XOP seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of
the S&P® Oil & Gas Exploration & Production Select Industry® Index (the “underlying
index”). The underlying index represents the oil and gas exploration and production sub-industry portion of the Standard
& Poor’s (“S&P”) Total Market Index (“S&P TMI”), an index that measures the performance
of the U.S. equity market. The XOP is composed of companies that are in the oil and gas exploration and production sector. The
XOP trades on NYSE Arca under the ticker symbol “XOP.”
The
XOP utilizes a “replication” investment approach in attempting to track the performance of its underlying index. The
XOP typically invests in substantially all of the securities which comprise the underlying index in approximately the same proportions
as the underlying index. The XOP will normally invest at least 80% of its total assets in the common stocks that comprise the underlying
index.
The
S&P® Oil & Gas Exploration & Production Select Industry® Index
This
underlying index is an equal-weighted index that is designed to measure the performance of the oil and gas exploration and production
sub-industry portion of the S&P TMI. The S&P TMI includes all U.S. common equities listed on the New York Stock Exchange
(the “NYSE”) (including NYSE Arca), the NYSE MKT, the Nasdaq Global Select Market, and the Nasdaq Capital Market. Each
of the component stocks in the underlying index is a constituent company within the oil and gas sub-industry portion of the S&P
TMI.
To
be eligible for inclusion in the underlying index, companies must be in the S&P TMI and must be included in the relevant Global
Industry Classification Standard (GICS) sub-industry. The GICS was developed to establish a global standard for categorizing companies
into sectors and industries. In addition to the above, companies must satisfy one of the two following combined size and liquidity
criteria:
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float-adjusted market capitalization
above US$500 million and float-adjusted liquidity ratio above 90%; or
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float-adjusted market capitalization
above US$400 million and float-adjusted liquidity ratio above 150%.
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All
U.S. companies satisfying these requirements are included in the underlying index. The total number of companies in the underlying
index should be at least 35. If there are fewer than 35 stocks, stocks from a supplementary list of highly correlated sub-industries
that meet the market capitalization and liquidity thresholds above are included in order of their float-adjusted market capitalization
to reach 35 constituents. Minimum market capitalization requirements may be relaxed to ensure there are at least 22 companies in
the underlying index as of each rebalancing effective date.
Eligibility
factors include:
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Market Capitalization:
Float-adjusted market capitalization should be at least US$400 million for inclusion in the underlying index. Existing index components
must have a float-adjusted market capitalization of US$300 million to remain in the underlying index at each rebalancing.
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Liquidity: The liquidity
measurement used is a liquidity ratio, defined as dollar value traded over the previous 12-months divided by the float-adjusted
market capitalization as of the underlying index rebalancing reference date. Stocks having a float-adjusted market capitalization
above US$500 million must have a liquidity ratio greater than 90% to be eligible for addition to the underlying index. Stocks having
a float-adjusted market capitalization between US$400 and US$500 million must have a liquidity ratio greater than 150% to be eligible
for addition to the underlying index. Existing index constituents must have a liquidity ratio greater than 50% to remain in the
underlying index at the quarterly rebalancing. The length of time to evaluate liquidity is reduced to the available trading period
for IPOs or spin-offs that do not have 12 months of trading history.
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Takeover Restrictions:
At the discretion of S&P, constituents with shareholder ownership restrictions defined in company bylaws may be deemed ineligible
for inclusion in the underlying index. Ownership restrictions preventing entities from replicating the index weight of a company
may be excluded from the eligible universe or removed from the underlying index.
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Turnover: S&P believes
turnover in index membership should be avoided when possible. At times, a company may appear to temporarily violate one or more
of the addition criteria. However, the addition criteria are for addition to the underlying index, not for continued membership.
As a result, an index constituent that appears to violate the criteria for addition to the underlying index will not be deleted
unless ongoing conditions warrant a change in the composition of the underlying index.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-17
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Computation
of the underlying index
The
underlying index is calculated as the underlying index market value divided by the divisor. In an equal-weighted index like the
underlying index, the market capitalization of each stock used in the calculation of the index market value is redefined so that
each stock has an equal weight in the index on each rebalancing date. The adjusted market capitalization for each stock in the
index is calculated as the product of the stock price, the number of shares outstanding, the stock’s float factor and the
adjustment factor.
A
stock’s float factor refers to the number of shares outstanding that are available to investors. S&P indices exclude
shares closely held by control groups from the underlying index calculation because such shares are not available to investors.
For each stock, S&P calculates an Investable Weight Factor (IWF) which is the percentage of total shares outstanding that are
included in the underlying index calculation.
The
adjustment factor for each stock is assigned at each rebalancing date and is calculated by dividing a specific constant set for
the purpose of deriving the adjustment factor (often referred to as modified index shares) by the number of stocks in the underlying
index multiplied by the float adjusted market value of such stock on such rebalancing date.
Adjustments
are also made to ensure that no stock in the underlying index will have a weight that exceeds the value that can be traded in a
single day for a theoretical portfolio of $2 billion. Theoretical portfolio values are reviewed annually and any updates are made
at the discretion of the underlying index committee, as defined below. The maximum basket liquidity weight for each stock in the
underlying index will be calculated using the ratio of its three-month median daily value traded to the theoretical portfolio value
of $2 billion. Each stock’s weight in the underlying index is then compared to its maximum basket liquidity weight and is
set to the lesser of (1) its maximum basket liquidity weight or (2) its initial equal weight. All excess weight is redistributed
across the underlying index to the uncapped stocks. If necessary, a final adjustment is made to ensure that no stock in the underlying
index has a weight greater than 4.5%. No further adjustments are made if the latter step would force the weight of those stocks
limited to their maximum basket liquidity weight to exceed that weight. If the underlying index contains exactly 22 stocks as of
the rebalancing effective date, the underlying index will be equally weighted without basket liquidity constraints.
If
a company has more than one share class line in the S&P Total Market Index, such company will be represented once by the designated
listing (generally the share class with both (i) the highest one-year trading liquidity as defined by median daily value traded
and (ii) the largest float-adjusted market capitalization). S&P reviews designated listings on an annual basis and any changes
are implemented after the close of the third Friday in September. The last trading day in July is used as the reference date for
the liquidity and market capitalization data in such determination. Once a listed share class line is added to the underlying index,
it may be retained in the underlying index even though it may appear to violate certain constituent addition criteria. For companies
that issue a second publicly traded share class to underlying index share class holders, the newly issued share class line will
be considered for inclusion if the event is mandatory and the market capitalization of the distributed class is not considered
to be de minimis.
The
underlying index is calculated by using the divisor methodology used in all S&P equity indices. The initial divisor was set
to have a base value of 1,000 on June 20, 2003. The underlying index level is the underlying index market value divided by the
underlying index divisor. In order to maintain underlying index series continuity, it is also necessary to adjust the divisor at
each rebalancing. Therefore, the divisor (after rebalancing) equals the underlying index market value (after rebalancing) divided
by the underlying index value before rebalancing. The divisor keeps the underlying index comparable over time and is one manipulation
point for adjustments to the underlying index, which we refer to as maintenance of the underlying index.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-18
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Historical
Performance of the XOP
The following
graph sets forth the daily historical performance of the XOP in the period from January 1, 2008 through the pricing date. We obtained
this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained
from Bloomberg L.P. The horizontal line in the graph represents the XOP’s Coupon Barrier and Threshold Value of $12.75, which
is 60% of the XOP’s Starting Value of $21.25.
This historical data on the XOP is not
necessarily indicative of the future performance of the XOP or what the value of the Notes may be. Any historical upward or downward
trend in the price of the XOP during any period set forth above is not an indication that the price of the XOP 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 prices and trading pattern of the XOP.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-19
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production 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.
Under our
distribution agreement with BofAS, BofAS will purchase the Notes from us as principal at the public offering price indicated on
the cover of this pricing supplement, less the indicated underwriting discount. BofAS will sell the Notes to other broker-dealers
that will participate in the offering and that are not affiliated with us, at an agreed discount to the principal amount. Each
of those broker-dealers may sell the Notes to one or more additional broker-dealers. BofAS has informed us that these discounts
may vary from dealer to dealer and that not all dealers will purchase or repurchase the Notes at the same discount. Certain dealers
who purchase the Notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees
or commissions. The public offering price for investors purchasing the Notes in these fee-based advisory accounts may be as low
as $975.00 per Note.
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. The selling agent 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.
No Prospectus
(as defined in Directive 2003/71/EC, as amended (the “Prospectus Directive”)) will be prepared in connection with these
Notes. Accordingly, these Notes may not be offered to the public in any member state of the European Economic Area (the “EEA”),
and any purchaser of these Notes who subsequently sells any of these Notes in any EEA member state must do so only in accordance
with the requirements of the Prospectus Directive, as implemented in that member state.
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. For these purposes, 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 the Notes, and a “retail investor” means a person who is one (or more) of: (a) a retail
client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); (b) a customer,
within the meaning of Insurance Distribution Directive 2016/97/EU, as amended, where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in the Prospectus Directive.
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 has been prepared, and therefore,
offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs
Regulation.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-20
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production 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-8 above and “Supplemental Use of Proceeds”
on page PS-16 of the accompanying product supplement.
Validity of the Notes
In the opinion of McGuireWoods LLP,
as counsel to BofA Finance and BAC, when the trustee has made an appropriate entry on Schedule 1 to the Master Registered Global
Note dated November 4, 2016 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 legal, valid and binding
obligations of BofA Finance, and the related guarantee will be the legal, valid and binding obligations of BAC, subject, in each
case, to the effects of applicable bankruptcy, insolvency (including laws relating to preferences, fraudulent transfers and equitable
subordination), reorganization, moratorium and other similar laws affecting creditors’ rights generally, and to general principles
of equity. This opinion is given as of the date of this pricing supplement and is limited to the laws of the State of New York
and the Delaware Limited Liability Company Act and the Delaware General Corporation Law (including the statutory provisions, all
applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the foregoing) as in effect on
the date hereof. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution
and delivery of the indenture governing the Notes and due authentication of the Master Note, the validity, binding nature and enforceability
of the indenture governing the Notes and the related guarantee with respect to the trustee, the legal capacity of individuals,
the genuineness of signatures, the authenticity of all documents submitted to McGuireWoods LLP as originals, the conformity to
original documents of all documents submitted to McGuireWoods LLP as copies thereof, the authenticity of the originals of such
copies and certain factual matters, all as stated in the letter of McGuireWoods LLP dated August 23, 2016, which has been filed
as an exhibit to the Registration Statement of BofA Finance and BAC relating to the Notes and the related guarantees initially
filed with the Securities and Exchange Commission on August 23, 2016.
Sidley Austin LLP, New York, New York,
is acting as counsel to BofAS and as special tax counsel to BofA Finance and BAC.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-21
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
U.S. Federal Income Tax Summary
The following summary
of the material U.S. federal income tax considerations of the acquisition, ownership, and disposition of the Notes supplements,
and to the extent inconsistent supersedes, the discussions under “U.S. Federal Income Tax Considerations” in the accompanying
prospectus and under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and is not
exhaustive of all possible tax considerations. In addition, any reference to “Morrison & Foerster LLP” in the aforementioned
tax discussions in the accompanying prospectus and prospectus supplement should be read as a reference to “Sidley Austin
LLP.” 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 Bank of America Corporation for U.S. federal income tax purposes.
Accordingly throughout this tax discussion, references to “we,” “our” or “us” are generally
to Bank of America Corporation 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 either Underlying would be treated as a “passive foreign investment company” (“PFIC”),
within the meaning of Section 1297 of the Code, or a United States real property holding corporation, within the meaning of Section
897(c) of the Code. If the issuer of either Underlying were so treated, certain adverse U.S. federal income tax consequences could
possibly apply to a holder of the Notes. You should refer to information filed with the SEC by the issuers of the Underlyings and
consult your tax advisor regarding the possible consequences to you, if any, if the issuer of either Underlying 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
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-22
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
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 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 each 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
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-23
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
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.
Non-U.S. Holders
Because the U.S. federal
income tax treatment of the Notes (including any Contingent Coupon Payment) is uncertain, we 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 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, 2021. 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 | PS-24
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Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production ETF
Backup Withholding and Information Reporting
Please see the discussion
under “U.S. Federal Income Tax Considerations — Taxation of Debt Securities — Backup Withholding and Information
Reporting” in the accompanying prospectus for a description of the applicability of the backup withholding and information
reporting rules to payments made on the Notes.
Foreign Account Tax Compliance Act (“FATCA”)
The discussion in
the accompanying prospectus under “U.S. Federal Income Tax Considerations – Foreign Account Tax Compliance Act”
is hereby modified to reflect regulations proposed by Treasury indicating its intent to eliminate the requirements under FATCA
of withholding on gross proceeds from the sale, exchange, settlement at maturity or other disposition of relevant financial instruments.
Treasury has indicated that taxpayers may rely on these proposed regulations pending their finalization.
Contingent Income Auto-Callable Yield Notes Linked to the Least Performing of the Energy Select Sector SPDR® Fund and the SPDR® S&P® Oil & Gas Exploration & Production 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:
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•
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Product
Supplement EQUITY-1 dated January 24, 2017:
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https://www.sec.gov/Archives/edgar/data/70858/000119312517016445/d331325d424b5.htm
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•
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Series
A MTN prospectus supplement dated November 4, 2016 and prospectus dated November 4, 2016:
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https://www.sec.gov/Archives/edgar/data/70858/000119312516760144/d266649d424b3.htm
These documents
(together, the “Note 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 the Note Prospectus, including this pricing supplement, 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 the Note Prospectus. Capitalized 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.
As a result
of the completion of the reorganization of Bank of America’s U.S. broker-dealer business, references to Merrill Lynch, Pierce,
Fenner & Smith Incorporated (“MLPF&S”) in the accompanying product supplement, prospectus supplement and prospectus,
as such references relate to MLPF&S’s institutional services, should now be read as references to BofAS.
The Notes
are our senior debt securities. Any payments on the Notes are fully and unconditionally guaranteed by BAC. The
Notes and the related guarantee are not insured by the Federal Deposit Insurance Corporation or secured by collateral. The
Notes will rank equally in right of payment with all of our other unsecured and unsubordinated obligations, and the related guarantee
will rank equally in right of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations
that are subject to any priorities or preferences by law. Any payments due on the Notes, including any repayment of the principal
amount, will be subject to the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-25
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