Linked to the Least Performing of the iShares®
MSCI EAFE ETF, the Russell 2000® Index and the SPDR®
S&P® Regional Banking ETF
| ● | Approximate 3 year term if not called
prior to maturity. |
| ● | Payments on the Notes will depend on the individual performance of the iShares®
MSCI EAFE ETF, the Russell 2000® Index and the SPDR®
S&P® Regional Banking ETF (each an “Underlying”). |
| ● | Contingent coupon rate of 13.10% per
annum (3.275% per quarter) payable quarterly if
the Observation Value of each Underlying on the applicable Observation Date is greater than
or equal to 62% of its Starting Value. |
| ● | Beginning on January 2, 2024, callable quarterly at
our option for an amount equal to the principal amount plus the relevant contingent coupon payment, if otherwise payable. |
| ● | Assuming the Notes are not called prior to maturity, if any
Underlying declines by more than 40% from its Starting Value, at maturity
your investment will be subject to 1:1 downside exposure to decreases in the value of the Least Performing Underlying, with
up to 100% of the principal at risk; otherwise, at maturity 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 62%
of its Starting Value. |
| ● | All payments on the Notes are subject to the credit risk of BofA Finance
LLC (“BofA Finance”), as issuer of the Notes, and Bank of America Corporation (“BAC” or the “Guarantor”),
as guarantor of the Notes. |
| ● | The Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares®
MSCI EAFE ETF, the Russell 2000® Index and the SPDR®
S&P® Regional Banking ETF, due July 2, 2026 (the
“Notes”) priced on June 27, 2023 and will issue on June
30, 2023. |
| ● | The Notes will not be listed on any securities exchange. |
The initial estimated value of the Notes as of the
pricing date is $962.10 per $1,000 in principal amount of Notes, which is less than the public offering price listed below. The actual
value of your Notes at any time will reflect many factors and cannot be predicted with accuracy. See “Risk Factors” beginning
on page PS-8 of this pricing supplement and “Structuring the Notes” on page PS-22 of this pricing supplement for additional
information.
There are important differences between the Notes
and a conventional debt security. Potential purchasers of the Notes should consider the information in “Risk Factors” beginning
on page PS-8 of this pricing supplement, page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus supplement,
and page 7 of the accompanying prospectus.
None of the Securities and Exchange Commission (the
“SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined
if this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
| |
Public offering price(1) |
Underwriting discount(1)(2) |
Proceeds, before expenses, to BofA Finance(2) |
| Per Note |
$1,000.00 |
$17.50 |
$982.50 |
| Total |
$9,355,000.00 |
$163,712.50 |
$9,191,287.50 |
| (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 $982.50 per $1,000 in principal amount of Notes. |
| (2) |
The underwriting discount per $1,000 in principal amount of Notes may be as high as $17.50, resulting in proceeds, before expenses, to BofA
Finance of as low as $982.50 per $1,000 in principal amount of Notes. The total underwriting discount and proceeds, before expenses, to BofA Finance specified above reflect the aggregate of the underwriting discounts per $1,000 in principal amount of Notes.
|
The Notes and the related guarantee:
| Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
 |
| Selling Agent |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Terms of the Notes
The Notes provide a quarterly Contingent Coupon Payment
of $32.75 per $1,000 in principal amount of Notes on the applicable Contingent Payment Date if, on the related quarterly Observation Date,
the Observation Value of each Underlying is greater than or equal to its Coupon Barrier.
Prior to the maturity date, beginning on January 2,
2024 and on each quarterly Call Date thereafter, we have the right to call all, but not less than all, of the Notes at 100% of the principal
amount, together with the relevant Contingent Coupon Payment, if otherwise payable. No further amounts will be payable following an Optional
Early Redemption. If the Notes are not 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. It is possible that the Notes will not pay any Contingent Coupon Payments, and you may lose a significant portion
or all of your investment in the Notes 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 called. |
| Underlyings: |
The iShares® MSCI EAFE ETF (Bloomberg symbol: “EFA”), the Russell 2000® Index (Bloomberg symbol: “RTY”), a price return index, and the SPDR® S&P® Regional Banking ETF (Bloomberg symbol: “KRE”). |
| Pricing Date: |
June 27, 2023 |
| Issue Date: |
June 30, 2023 |
| Valuation Date: |
June 29, 2026, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” in the accompanying product supplement. |
| Maturity Date: |
July 2, 2026 |
| Starting Value: |
EFA: $71.67
RTY: 1,849.930
KRE: $40.76 |
| Observation Value: |
With respect to the EFA, its Closing Market Price on the applicable Observation Date multiplied by its Price Multiplier.
With respect to the RTY, its closing level on the applicable Observation Date.
With respect to the KRE, its Closing Market Price on the applicable Observation Date multiplied by its Price Multiplier. |
| Ending Value: |
With respect to each Underlying, its Observation Value on the Valuation Date. |
| Price Multiplier: |
With respect to each of the EFA and KRE, 1, subject to adjustment for certain events as described in “Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-28 of the accompanying product supplement. |
| Coupon Barrier: |
EFA: $44.44, which is 62% of its Starting Value (rounded to two decimal places).
RTY: 1,146.957, which is 62% of its Starting Value (rounded to three decimal places).
KRE: $25.27, which is 62% of its Starting Value (rounded to two decimal places). |
| Threshold Value: |
EFA: $43.00, which is 60% of its Starting Value (rounded to two decimal places).
RTY: 1,109.958, which is 60% of its Starting Value.
KRE: $24.46, which is 60% of its Starting Value (rounded to two decimal places). |
|
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 $32.75 per $1,000 in principal amount of Notes |
 |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-2 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
|
|
(equal to a rate of 3.275% per quarter or 13.10% per annum) on the applicable Contingent Payment Date (including the Maturity Date). |
|
Optional Early
Redemption: |
On any Call Date, we have the right to redeem all (but not less than all) of the Notes at the Early Redemption Amount. No further amounts will be payable following an Optional Early Redemption. We will give notice to the trustee at least five business days but not more than 60 calendar days before the applicable Call Date. |
|
Early Redemption
Amount: |
For each $1,000 in principal amount of Notes, $1,000. The Early Redemption Amount will also include the applicable Contingent Coupon Payment if the Observation Value of each Underlying on the corresponding Observation Date is greater than or equal to its Coupon Barrier. |
| Redemption Amount: |
If the Notes have not been 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: |
| |
|
 |
| |
In this case, the Redemption Amount will be less than 60% of the principal amount and you could lose up to 100% of your investment in the Notes. |
| 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. |
| Call Dates: |
The quarterly Contingent Payment Dates beginning on January 2, 2024 and ending on April 1, 2026. |
| Calculation Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
| Selling Agent: |
BofAS |
| CUSIP: |
09711A5A2 |
| Underlying Return: |
With respect to each Underlying,
|
| Least Performing Underlying: |
The Underlying with the lowest Underlying Return. |
| Events of Default and Acceleration: |
If an Event of Default, as defined in the senior indenture relating to the Notes and in the section entitled “Description of Debt Securities of BofA Finance LLC—Events of Default and Rights of Acceleration; Covenant Breaches” on page 54 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption “Redemption Amount” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. We will also determine whether the final Contingent Coupon Payment is payable based upon the values 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 ISSUER CALLABLE YIELD NOTES | PS-3 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Observation Dates and Contingent Payment Dates
| |
Observation Dates* |
|
Contingent Payment Dates |
|
| |
September 27, 2023 |
|
October 2, 2023 |
|
| |
December 27, 2023 |
|
January 2, 2024 |
|
| |
March 27, 2024 |
|
April 2, 2024 |
|
| |
June 27, 2024 |
|
July 2, 2024 |
|
| |
September 27, 2024 |
|
October 2, 2024 |
|
| |
December 27, 2024 |
|
January 2, 2025 |
|
| |
March 27, 2025 |
|
April 1, 2025 |
|
| |
June 27, 2025 |
|
July 2, 2025 |
|
| |
September 29, 2025 |
|
October 2, 2025 |
|
| |
December 29, 2025 |
|
January 2, 2026 |
|
| |
March 27, 2026 |
|
April 1, 2026 |
|
| |
June 29, 2026 (the “Valuation Date”) |
|
July 2, 2026 (the “Maturity Date”) |
|
* The Observation Dates are subject
to postponement as set forth in “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation
Dates” beginning on page PS-23 of the accompanying product supplement.
Any payments on the Notes depend on the credit risk
of BofA Finance, as Issuer, and BAC, as Guarantor, and on the performance of the Underlyings. The economic terms of the Notes are based
on BAC’s internal funding rate, which is the rate it would pay to borrow funds through the issuance of market-linked notes, and
the economic terms of certain related hedging arrangements BAC’s affiliates enter into. BAC’s internal funding rate is typically
lower than the rate it would pay when it issues conventional fixed or floating rate debt securities. This difference in funding rate,
as well as the underwriting discount, if any, and the hedging related charges described below (see “Risk Factors” beginning
on page PS-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-22.
|
|
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-4 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking 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
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 the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
|
|
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-5 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking 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 $32.75,
depending on how many Contingent Coupon Payments are payable prior to an Optional Early Redemption 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 |
|
$65.50 |
|
| |
4 |
|
$131.00 |
|
| |
6 |
|
$196.50 |
|
| |
8 |
|
$262.00 |
|
| |
10 |
|
$327.50 |
|
| |
12 |
|
$393.00 |
|
|
|
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-6 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Hypothetical Payout Profile and Examples of Payments at Maturity
Contingent Income Issuer Callable Yield Notes
Table
The following table is for purposes of illustration
only. It assumes the Notes have not been called prior to maturity and is based on hypothetical values and shows hypothetical
returns on the Notes. The table illustrates the calculation of the Redemption Amount and the return on the Notes based on a hypothetical
Starting Value of 100 for the Least Performing Underlying, a hypothetical Coupon Barrier of 62 for the Least Performing Underlying, a
hypothetical Threshold Value of 60 for the Least Performing Underlying, the Contingent Coupon Payment of $32.75 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 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 values of the Underlyings, see “The
Underlyings” section below. The Ending Value of each Underlying will not include any income generated by dividends or other distributions
paid with respect to shares or units of that Underlying or on the securities included in that Underlying, as applicable. In addition,
all payments on the Notes are subject to Issuer and Guarantor credit risk.
|
Ending Value of the Least Performing
Underlying
|
Underlying Return of the Least
Performing Underlying
|
Redemption Amount per Note (including
any final Contingent Coupon Payment)
|
Return on the Notes(1)
|
| 160.00 |
60.00% |
$1,032.75 |
3.275% |
| 150.00 |
50.00% |
$1,032.75 |
3.275% |
| 140.00 |
40.00% |
$1,032.75 |
3.275% |
| 130.00 |
30.00% |
$1,032.75 |
3.275% |
| 120.00 |
20.00% |
$1,032.75 |
3.275% |
| 110.00 |
10.00% |
$1,032.75 |
3.275% |
| 105.00 |
5.00% |
$1,032.75 |
3.275% |
| 102.00 |
2.00% |
$1,032.75 |
3.275% |
| 100.00(2) |
0.00% |
$1,032.75 |
3.275% |
| 90.00 |
-10.00% |
$1,032.75 |
3.275% |
| 80.00 |
-20.00% |
$1,032.75 |
3.275% |
| 70.00 |
-30.00% |
$1,032.75 |
3.275% |
| 62.00(3) |
-38.00% |
$1,032.75 |
3.275% |
| 61.99 |
-38.01% |
$1,000.00 |
0.000% |
| 60.00(4) |
-40.00% |
$1,000.00 |
0.000% |
| 59.99 |
-40.01% |
$599.90 |
-40.010% |
| 50.00 |
-50.00% |
$500.00 |
-50.000% |
| 0.00 |
-100.00% |
$0.00 |
-100.000% |
| (1) |
The “Return on the Notes” is calculated based on the Redemption Amount and potential final Contingent Coupon Payment, not including any Contingent Coupon Payments paid prior to maturity. |
| (2) |
The hypothetical Starting Value of 100 used in the table above has been chosen for illustrative purposes only. The actual Starting Value of each Underlying is set forth on page PS-2 above. |
| (3) |
This is the hypothetical Coupon Barrier of the Least Performing Underlying. |
| (4) |
This is the hypothetical Threshold Value of the Least Performing Underlying. |
|
|
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-7 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Risk Factors
Your investment in the Notes entails significant
risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after
carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors in light of your particular
circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the Notes
or financial matters in general. You should carefully review the more detailed explanation of risks relating to the Notes in the “Risk
Factors” sections beginning on page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus supplement
and page 7 of the accompanying prospectus, each as identified on page PS-27 below.
Structure-related Risks
| ● | Your investment may result in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount
on the Notes at maturity. If the Notes are not called prior to maturity and the Ending Value of any Underlying is less than its
Threshold Value, at maturity, your investment will be subject to 1:1 downside exposure to decreases in the value of the Least Performing
Underlying and you will lose 1% of the principal amount for each 1% that the Ending Value of the Least Performing Underlying is less than
its Starting Value. In that case, you will lose a significant portion or all of your investment in the Notes. |
| ● | Your return on the Notes is limited to the return represented by the Contingent Coupon Payments, if any, over the term of the Notes.
Your return on the Notes is limited to the Contingent Coupon Payments paid over the term of the Notes, regardless of the extent to which
the Observation Value or the Ending Value of any Underlying exceeds its Coupon Barrier or Starting Value, as applicable. Similarly, the
amount payable at maturity or upon an Optional Early Redemption will never exceed the sum of the principal amount and the applicable Contingent
Coupon Payment, regardless of the extent to which the Observation Value or the Ending Value of any Underlying exceeds its Starting Value.
In contrast, a direct investment in an Underlying or in the securities included in one or more of the Underlyings, as applicable, would
allow you to receive the benefit of any appreciation in their values. Any return on the Notes will not reflect the return you would realize
if you actually owned those securities and received the dividends paid or distributions made on them. |
| ● | The Notes are subject to Optional Early Redemption, which would limit your ability to receive the Contingent Coupon Payments over
the full term of the Notes. On each Call Date, at our option, we may call your Notes in whole, but not in part. If the Notes are called
prior to the Maturity Date, you will be entitled to receive the Early Redemption Amount. In this case, you will lose the opportunity to
continue to receive Contingent Coupon Payments after the date of the Optional Early Redemption. 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. Even if we do not exercise our option to call your Notes, our ability to do so may adversely affect the market value of your Notes.
It is our sole option whether to call your Notes prior to maturity on any such Call Date and we may or may not exercise this option for
any reason. Because of this Optional Early Redemption potential, the term of your Notes could be anywhere between six and thirty-six months. |
| ● | You may not receive any Contingent Coupon Payments. The Notes do not provide for any regular fixed coupon payments. Investors
in the Notes will not necessarily receive any Contingent Coupon Payments on the Notes. If the Observation Value of any Underlying is less
than its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment applicable to that Observation Date.
If the Observation Value of any Underlying is less than its Coupon Barrier on all the Observation Dates during the term of the Notes,
you will not receive any Contingent Coupon Payments during the term of the Notes, and will not receive a positive return on the Notes. |
| ● | Your return on the Notes may be less than the yield on a conventional debt security of comparable maturity. Any return that
you receive on the Notes may be less than the return you would earn if you purchased a conventional debt security with the same Maturity
Date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when you consider factors, such as inflation,
that affect the time value of money. In addition, if interest rates increase during the term of the Notes, the Contingent Coupon Payment
(if any) may be less than the yield on a conventional debt security of comparable maturity. |
| ● | The Contingent Coupon Payment, Early Redemption Amount or Redemption Amount, as applicable, will not reflect changes in the values
of the Underlyings other than on the Observation Dates. The values of the Underlyings during the term of the Notes other than on the
Observation Dates will not affect payments on the Notes. Notwithstanding the foregoing, investors should generally be aware of the performance
of the Underlyings while holding the Notes, as the performance of the Underlyings may influence the market value of the Notes. The calculation
agent will determine whether each Contingent Coupon Payment is payable and will calculate the 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 values of the Underlyings will be taken into account. As a result, if the Notes
are not called prior to maturity and the Ending Value of the Least Performing Underlying is less than its Threshold Value, you will receive
less than the principal amount at maturity even if the value of each Underlying was always above its Threshold Value prior to the Valuation
Date. |
| ● | Because the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may not receive
any return on the Notes and may lose a significant portion or all of your investment in the Notes even if the Observation Value or Ending
Value of one Underlying is 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 value of one Underlying may not correlate with changes in the value of the
other Underlyings. The Notes are not linked to a basket composed of the Underlyings, where the depreciation in the value of one Underlying
could be offset to some extent by the appreciation in the value of the other Underlyings. In the case of the Notes, the individual performance
of each Underlying would not be combined, and the depreciation in the value of one Underlying would not be offset by any appreciation
in the value of the other Underlyings. Even if the Observation Value of an Underlying is at or above its Coupon Barrier on an Observation
Date, you will not receive the Contingent Coupon Payment with respect to that Observation Date if the Observation Value of another 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 significant portion or all of your investment in the Notes if the Ending Value of the Least Performing Underlying is below
its Threshold Value. |
|
|
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-8 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
| ● | Any payments on the Notes are subject to our credit risk and the credit risk of the Guarantor, and any actual or perceived changes
in our or the Guarantor’s creditworthiness are expected to affect the value of the Notes. The Notes are our senior unsecured
debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed
by any entity other than the Guarantor. As a result, your receipt of the 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 Call Date or the Maturity Date, regardless of the Ending Value of the Least Performing Underlying
as compared to its Starting Value. No assurance can be given as to what our financial condition or the financial condition of the Guarantor
will be at any time after the pricing date of the Notes. If we and the Guarantor become unable to meet our respective financial obligations
as they become due, you may not receive the amount(s) payable under the terms of the Notes.
In addition, our credit ratings and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities
to pay our obligations. Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our
or the Guarantor’s credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S.
Treasury securities (the “credit spread”) prior to the Maturity Date may adversely affect the market value of the Notes. However,
because your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective
obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce the
other investment risks related to the Notes. |
| ● | We are a finance subsidiary and, as such, have no independent assets, operations, or revenues. We are a finance subsidiary
of the Guarantor, have no operations other than those related to the issuance, administration and repayment of our debt securities that
are guaranteed by the Guarantor, and are dependent upon the Guarantor and/or its other subsidiaries to meet our obligations under the
Notes in the ordinary course. Therefore, our ability to make payments on the Notes may be limited. |
Valuation- and Market-related
Risks
| ● | The public offering price you are paying for the Notes exceeds their initial estimated value. The initial estimated value of
the Notes that is provided on the cover page of this pricing supplement is an estimate only, determined as of the pricing date by reference
to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit
spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions, expectations
on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes. These pricing models
rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the Notes prior to maturity,
their market value may be lower than the price you paid for them and lower than their initial estimated value. This is due to, among other
things, changes in the values of the Underlyings, changes in the Guarantor’s internal funding rate, and the inclusion in the public
offering price of the underwriting discount, if any, and the hedging related charges, all as further described in “Structuring the
Notes” below. These factors, together with various credit, market and economic factors over the term of the Notes, are expected
to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex
and unpredictable ways. |
| ● | The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any time after
issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlyings, our and
BAC’s creditworthiness and changes in market conditions. |
| ● | We cannot assure you that a trading market for your Notes will ever develop or be maintained. We will not list the Notes on
any securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that market will be liquid or illiquid. |
Conflict-related Risks
| ● | Trading and hedging activities by us, the Guarantor and any of our other affiliates, including BofAS, may create conflicts of interest
with you and may affect your return on the Notes and their market value. We, the Guarantor or one or more of our other affiliates,
including BofAS, may buy or sell shares or units of the Underlyings or the securities held by or included in the Underlyings, as applicable,
or futures or options contracts or exchange traded instruments on the Underlyings or those securities, or other instruments whose value
is derived from the Underlyings or those securities. While we, the Guarantor or one or more of our other affiliates, including BofAS,
may from time to time own shares or units of the Underlyings or the securities represented by the Underlyings, as applicable, except to
the extent that BAC’s common stock may be included in the Underlyings, we, the Guarantor and our other affiliates, including BofAS,
do not control any company included in the Underlyings, and have not verified any disclosure made by any other company. We, the Guarantor
or one or more of our other affiliates, including BofAS, may execute such purchases or sales for our own or their own accounts, for business
reasons, or in connection with hedging our obligations under the Notes. These transactions may present a conflict of interest between
your interest in the Notes and the interests we, the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary
accounts, in facilitating transactions, including block trades, for our or their other customers, and in accounts under our or their management.
These transactions may adversely affect the values of the Underlyings in a manner that could be adverse to your investment in the Notes.
On or before the pricing date, any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or
their behalf (including those for the purpose of hedging some or all of our anticipated exposure in connection with the Notes), may have
affected the values of the Underlyings. Consequently, the values of the Underlyings may change subsequent to the pricing date, which may
adversely affect the market value of the Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, also may have engaged in hedging activities that could have
affected the values of the Underlyings on the pricing date. In addition, these hedging activities, including the unwinding of a hedge,
may decrease the market value of your Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or
one or more of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the Notes and may
hold or resell the Notes. For |
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-9 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
example, BofAS may enter into these transactions
in connection with any market making activities in which it engages. We cannot assure you that these activities will not adversely affect
the values of the Underlyings, the market value of your Notes prior to maturity or the amounts payable on the Notes.
| ● | There may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right
to appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will make
a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances, these
duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent. |
Underlying-related Risks
| ● | The Notes are subject to risks associated with small-size
capitalization companies. The stocks comprising the RTY are issued by companies with small-sized market capitalization. The stock
prices of small-size companies may be more volatile than stock prices of large capitalization companies. Small-size capitalization companies
may be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small-size capitalization
companies may also be more susceptible to adverse developments related to their products or services. |
| ● | The Notes are subject to risks associated with the banking
industry. All of the stocks held by the KRE are issued by companies in the banking industry. The performance of companies in the banking
industry are influenced by many complex and unpredictable factors, including industry competition, interest rates, geopolitical events,
the ability of borrowers to repay loans, government regulation, and supply and demand for the products and services offered by such companies.
Any adverse development in the banking industry may have a material adverse effect on the stocks held by the KRE, and as a result, on
the value of the notes. The Notes may be subject to greater volatility and be more adversely affected by a single positive or negative
economic, political or regulatory occurrence affecting this industry than a different investment linked to securities of a more broadly
diversified group of issuers. |
| ● | The Notes are subject to risks associated with foreign securities
markets. The EFA includes certain foreign equity securities. You should be aware that investments in securities linked to the value
of foreign equity securities involve particular risks. The foreign securities markets comprising the EFA may have less liquidity and may
be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S. or other
securities markets. Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings
in foreign companies, may affect trading prices and volumes in these markets. Also, there is generally less publicly available information
about foreign companies than about those U.S. companies that are subject to the reporting requirements of the SEC, and foreign companies
are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting
companies.
Prices of securities in foreign countries are subject to political, economic, financial and social factors that apply in those geographical
regions. These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in
a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other
laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in
the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural
disaster or adverse public health developments in the region. Moreover, foreign economies may differ favorably or unfavorably from the
U.S. economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency. |
| ● | The Notes are subject to foreign currency exchange rate risk.
The EFA holds securities traded outside of the United States. The EFA’s share price will fluctuate based upon its net asset
value, which will in turn depend in part upon changes in the value of the currencies in which the securities held by the EFA are traded.
Accordingly, investors in the Notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the
securities held by the EFA are traded. An investor’s net exposure will depend on the extent to which these currencies strengthen
or weaken against the U.S. dollar. If the dollar strengthens against these currencies, the net asset value of the EFA will be adversely
affected and the price of the EFA may decrease. |
| ● | The stocks held by the KRE are concentrated in one sector.
The KRE holds securities issued by companies in the regional banking sector. As a result, some of the stocks that will determine the performance
of the Notes are concentrated in one sector. Although an investment in the Notes will not give holders any ownership or other direct interests
in the securities held by the Underlyings, the return on an investment in the Notes will be subject to certain risks associated with a
direct equity investment in companies in this sector. Accordingly, by investing in the Notes, you will not benefit from the diversification
which could result from an investment linked to companies that operate in multiple sectors. |
| ● | The performance of the EFA or the KRE may not correlate with
the performance of its respective underlying index (each, an “underlying index”) as well as its respective net asset value
per share or unit, especially during periods of market volatility. The performance of the EFA or the KRE and that of its respective
underlying index generally will vary due to, for example, transaction costs, management fees, certain corporate actions, and timing variances.
Moreover, it is also possible that the performance of the EFA or the KRE 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 EFA or the KRE 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 EFA or the KRE, differences in trading hours between the EFA or the KRE (or its underlying assets) and the underlying index, or
due to other circumstances. This variation in performance is called the “tracking error,” and, at times, the tracking error
may be significant. In addition, because the shares or units of each of the EFA and the KRE are traded on a securities exchange and are
subject to market supply and investor demand, the market price of one share or unit may differ from its respective net asset value per
share or unit; shares or units of the EFA or the KRE may trade at, above, or below its respective net asset value per share or unit. During
periods of market volatility, securities held by the EFA or the KRE may be unavailable in the secondary market, market participants may
be unable to calculate accurately the respective net asset value per share or unit and the liquidity of the EFA or the KRE may be adversely
affected. Market volatility may also disrupt the ability of market participants to trade shares or units of the EFA or the KRE. Further,
market volatility may adversely affect, sometimes |
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-10 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
materially, the prices at which market participants are
willing to buy and sell shares or units of the EFA or the KRE. As a result, under these circumstances, the market value of shares or units
of the EFA or the KRE may vary substantially from its respective net asset value per share or unit.
| ● | The anti-dilution adjustments will be limited. The calculation
agent may adjust the Price Multiplier of an Underlying that is an ETF and other terms of the Notes to reflect certain actions by an Underlying
that is an ETF, 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 an Underlying that is an ETF and will have broad discretion to determine whether and to what extent an adjustment is required. |
| ● | The publisher or the sponsor or investment advisor of an Underlying may adjust that Underlying
in a way that affects its values, and the publisher or the sponsor or investment advisor has no obligation to consider your interests.
The publisher or the sponsor or investment advisor of an Underlying can add, delete, or substitute the components included in that Underlying
or make other methodological changes that could change its value. Any of these actions could adversely affect the value of your Notes. |
Tax-related Risks
| ● | The U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be adverse to a holder of the Notes.
No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or securities similar to
the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment
in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes as contingent income-bearing
single financial contracts, as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the timing and character of
income, gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance
can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.” You
are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the Notes. |
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-11 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
The Underlyings
All disclosures contained in this pricing supplement
regarding the Underlyings, including, without limitation, their make-up, method of calculation, and changes in their components, have
been derived from publicly available sources. The information reflects the policies of, and is subject to change by, the investment advisor
of the EFA, the sponsor of the RTY, and the investment advisor of the KRE (collectively, the “Underlying Sponsors”). The Underlying
Sponsors, which license the copyright and all other rights to the respective Underlyings, have no obligation to continue to publish, and
may discontinue publication of, the Underlyings. The consequences of any Underlying Sponsor discontinuing publication of the applicable
Underlying are discussed in “Description of the Notes — Discontinuance of an Index” and “Description of the Notes
— Anti-Dilution and Discontinuance Adjustments Relating to ETFs — Discontinuance of or Material Change to an ETF” in
the accompanying product supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts any responsibility for the calculation,
maintenance or publication of any Underlying or any successor underlying. None of us, the Guarantor, BofAS or any of our other affiliates
makes any representation to you as to the future performance of the Underlyings. You should make your own investigation into the Underlyings.
The iShares®
MSCI EAFE ETF
The EFA seeks investment results that correspond generally
to the price and yield performance, before fees and expenses, of its Underlying Index. The EFA typically earns income dividends from securities
included in the Underlying. These amounts, net of expenses and taxes (if applicable), are passed along to the EFA’s shareholders
as “ordinary income.” In addition, the EFA realizes capital gains or losses whenever it sells securities. Net long-term capital
gains are distributed to shareholders as “capital gain distributions.” However, because the Notes are linked only to the share
price of the EFA, you will not be entitled to receive income, dividend, or capital gain distributions from the EFA or any equivalent payments.
The shares of the iShares® MSCI EAFE ETF trade on the NYSE Arca under the symbol “EFA”.
The shares of the EFA are registered under the Exchange
Act. Accordingly, information filed with the SEC relating to the EFA, including its periodic financial reports, may be found on the SEC
website.
The Underlying Index
The Underlying Index is intended to measure equity market
performance in developed market countries, excluding the U.S. and Canada. The Underlying Index is a free float-adjusted market capitalization
equity index with a base date of December 31, 1969 and an initial value of 100. The Underlying Index is calculated daily in U.S. dollars
and published in real time every 60 seconds during market trading hours.
The Underlying Index is part of the MSCI Regional Equity
Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices.
As of the close of business on September 21, 2018, MSCI
and S&P Dow Jones Indices LLC updated the Global Industry Classification Sector (“GICS”) structure. Among other things,
the update broadened the Telecommunications Services sector and renamed it the Communication Services sector. The renamed sector includes
the previously existing Telecommunication Services Industry group, as well as the Media Industry group, which was moved from the Consumer
Discretionary sector and renamed the Media & Entertainment Industry group. The Media & Entertainment Industry group contains three
industries: Media, Entertainment and Interactive Media & Services. The Media industry continues to consist of the Advertising, Broadcasting,
Cable & Satellite and Publishing sub-industries. The Entertainment industry contains the Movies & Entertainment sub-industry (which
includes online entertainment streaming companies in addition to companies previously classified in such industry prior to September 21,
2018) and the Interactive Home Entertainment sub-industry (which includes companies previously classified in the Home Entertainment Software
sub-industry prior to September 21, 2018 (when the Home Entertainment Software sub-industry was a sub-industry in the Information Technology
sector)), as well as producers of interactive gaming products, including mobile gaming applications). The Interactive Media & Services
industry and sub-industry includes companies engaged in content and information creation or distribution through proprietary platforms,
where revenues are derived primarily through pay-per-click advertisements, and includes search engines, social media and networking platforms,
online classifieds and online review companies. The GICS structure changes were effective for the Underlying Index as of the open of business
on December 3, 2018 to coincide with the November 2018 semi-annual index review.
The Country Indices
Each country’s index included in an MSCI Index
is referred to as a “Country Index.” Under the MSCI methodology, each Country Index is an “MSCI Global Standard Index.”
The components of each Country Index used to be selected by the index sponsor from among the universe of securities eligible for inclusion
in the relevant Country Index so as to target an 85% free float-adjusted market representation level within each of a number of industry
groups, subject to adjustments to (i) provide for sufficient liquidity, (ii) reflect foreign investment restrictions (only those securities
that can be held by non-residents of the country corresponding to the relevant Country Index are included) and (iii) meet certain other
investibility criteria. Following a change in the index sponsor’s methodology implemented in May 2008, the 85% target is now measured
at the level of the country universe of eligible securities rather than the industry group level—so each Country Index will seek
to include the securities that represent 85% of the free float-adjusted market capitalization of all securities eligible for inclusion—but
will still be subject to liquidity, foreign investment restrictions and other investibility adjustments. The index sponsor defines “free
float” as total shares excluding shares held by strategic investors such as governments, corporations, controlling shareholders
and management, and shares subject to foreign ownership restrictions.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-12 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Calculation of the Country Indices
Each Country Index is a free float-adjusted market capitalization
index that is designed to measure the market performance, including price performance, of the equity securities in that country. Each
Country Index is calculated in the relevant local currency as well as in U.S. dollars, with price, gross and net returns.
Each component is included in the relevant Country Index
at a weight that reflects the ratio of its free float-adjusted market capitalization (i.e., free public float multiplied by price) to
the free float-adjusted market capitalization of all the components in that Country Index. The index sponsor defines the free float of
a security as the proportion of shares outstanding that is deemed to be available for purchase in the public equity markets by international
investors.
Calculation of the MSCI Indices
The performance of an MSCI Index on any given day represents
the weighted performance of all of the components included in all of the Country Indices. Each component in an MSCI Index is included
at a weight that reflects the ratio of its free float-adjusted market capitalization (i.e., free public float multiplied by price) to
the free float-adjusted market capitalization of all the components included in all of the Country Indices.
Maintenance of and Changes to the MSCI Indices
The index sponsor maintains the MSCI Indices with the
objective of reflecting, on a timely basis, the evolution of the underlying equity markets and segments. In maintaining the indices, emphasis
is also placed on continuity, continuous investibility of the constituents, replicability, index stability and low turnover in the indices.
As part of the changes to the index sponsor’s
methodology which became effective in May 2008, maintenance of the indices falls into three broad categories:
| ● | semi-annual reviews, which will occur each May and November and will involve
a comprehensive reevaluation of the market, the universe of eligible securities and other factors involved in composing the indices; |
| ● | quarterly reviews, which will occur each February, May, August and November
and will focus on significant changes in the market since the last semi-annual review and on including significant new eligible securities
(such as IPOs, which were not eligible for earlier inclusion in the indices); and |
| ● | ongoing event-related changes, which will generally be reflected in the indices at the time of the event
and will include changes resulting from mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events. |
Based on these reviews, additional components may be
added, and current components may be removed, at any time. The index sponsor generally announces all changes resulting from semi-annual
reviews, quarterly reviews and ongoing events in advance of their implementation, although in exceptional cases they may be announced
during market hours for same or next day implementation.
Neither we nor any of our affiliates, or MLPF&S,
accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the MSCI
Indices. The index sponsor does not guarantee the accuracy or the completeness of the MSCI Indices or any data included in the MSCI Indices.
The index sponsor assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the MSCI Indices.
The index sponsor disclaims all responsibility for any errors or omissions in the calculation and dissemination of the MSCI Indices or
the manner in which the MSCI Indices is applied in determining the amount payable on the Notes at maturity.
Prices and Exchange Rates
Prices
The prices used to calculate the MSCI Indices are the
official exchange closing prices or those figures accepted as such. The index sponsor reserves the right to use an alternative pricing
source on any given day.
Exchange Rates
The index sponsor uses the closing spot rates published
by WM / Reuters at 4:00 p.m., London time. The index sponsor uses WM / Reuters rates for all countries for which it provides indices.
In case WM/Reuters does not provide rates for specific
markets on given days (for example Christmas Day and New Year’s Day), the previous business day’s rates are normally used.
The index sponsor independently monitors the exchange rates on all its indices and may, under exceptional circumstances, elect to use
an alternative exchange rate if the WM / Reuters rates are not available, or if the index sponsor determines that the WM / Reuters rates
are not reflective of market circumstances for a given currency on a particular day. In such circumstances, an announcement would be sent
to clients with the related information. If appropriate, the index sponsor may conduct a consultation with the investment community to
gather feedback on the most relevant exchange rate.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-13 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Historical Performance of the EFA
The following graph sets forth the daily historical
performance of the EFA in the period from January 2, 2018 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 crimson
line in the graph represents the EFA’s Coupon Barrier of $44.44 (rounded to two decimal places), which is 62% of the EFA’s
Starting Value of $71.67. The horizontal gray line in the graph represents the EFA’s Threshold Value of $43.00 (rounded to two decimal
places), which is 60% of the EFA’s Starting Value.
This historical data on the EFA is not necessarily indicative
of the future performance of the EFA or what the value of the Notes may be. Any historical upward or downward trend in the Closing Market
Price of the EFA during any period set forth above is not an indication that the Closing Market Price of the EFA is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the Closing Market Prices and trading pattern of the EFA.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-14 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
The Russell 2000®
Index
The RTY was developed by Russell Investments (“Russell”)
before FTSE International Limited and Russell combined in 2015 to create FTSE Russell, which is wholly owned by London Stock Exchange
Group. Additional information on the RTY is available at the following website: http://www.ftserussell.com. No information on that website
is deemed to be included or incorporated by reference in this pricing supplement.
Russell began dissemination of the RTY (Bloomberg L.P.
index symbol “RTY”) on January 1, 1984. FTSE Russell calculates and publishes the RTY. The RTY was set to 135 as of the close
of business on December 31, 1986. The RTY is designed to track the performance of the small capitalization segment of the U.S. equity
market. As a subset of the Russell 3000® Index, the RTY consists of the smallest 2,000
companies included in the Russell 3000® Index. The Russell 3000®
Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
The RTY is determined, comprised, and calculated by FTSE Russell without regard to the Notes.
Selection of Stocks Comprising the RTY
Each company eligible for inclusion in the RTY must
be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated, has a stated
headquarters location, and trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible),
then the company is assigned to its country of incorporation. If any of the three factors are not the same, FTSE Russell defines three
Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country of the most liquid exchange
(as defined by a two-year average daily dollar trading volume) from all exchanges within a country. Using the HCIs, FTSE Russell compares
the primary location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs,
then the company is assigned to the primary location of its assets. If there is insufficient information to determine the country in which
the company’s assets are primarily located, FTSE Russell will use the country from which the company’s revenues are primarily
derived for the comparison with the three HCIs in a similar manner. FTSE Russell uses the average of two years of assets or revenues data
to reduce potential turnover. If conclusive country details cannot be derived from assets or revenues data, FTSE Russell will assign the
company to the country of its headquarters, which is defined as the address of the company’s principal executive offices, unless
that country is a Benefit Driven Incorporation (“BDI”) country, in which case the company will be assigned to the country
of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, Bonaire,
British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey,
Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies incorporated or
headquartered in a U.S. territory, including Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion in the RTY must
trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the last trading day in
May to be eligible for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an existing member’s
closing price is less than $1.00 on the last day of May, it will be considered eligible if the average of the daily closing prices (from
its primary exchange) during the month of May is equal to or greater than $1.00. Initial public offerings are added each quarter and must
have a closing price at or above $1.00 on the last day of their eligibility period in order to qualify for index inclusion. If an existing
stock does not trade on the “rank day” (typically the last trading day in May but a confirmed timetable is announced each
spring) but does have a closing price at or above $1.00 on another eligible U.S. exchange, that stock will be eligible for inclusion.
An important criterion used to determine the list of
securities eligible for the RTY is total market capitalization, which is defined as the market price as of the last trading day in May
for those securities being considered at annual reconstitution times the total number of shares outstanding. Where applicable, common
stock, non-restricted exchangeable shares and partnership units/membership interests are used to determine market capitalization. Any
other form of shares such as preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants
and rights, installment receipts or trust receipts, are excluded from the calculation. If multiple share classes of common stock exist,
they are combined. In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each class is
considered for inclusion separately. If multiple share classes exist, the pricing vehicle will be designated as the share class with the
highest two-year trading volume as of the rank day in May.
Companies with a total market capitalization of less
than $30 million are not eligible for the RTY. Similarly, companies with only 5% or less of their shares available in the marketplace
are not eligible for the RTY. Royalty trusts, limited liability companies, closed-end investment companies (companies that are required
to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development companies), blank check companies, special
purpose acquisition companies, and limited partnerships are also ineligible for inclusion. Bulletin board, pink sheets, and over-the-counter
traded securities are not eligible for inclusion. Exchange traded funds and mutual funds are also excluded.
Annual reconstitution is a process by which the RTY
is completely rebuilt. Based on closing levels of the company’s common stock on its primary exchange on the rank day of May of each
year, FTSE Russell reconstitutes the composition of the RTY using the then existing market capitalizations of eligible companies. Reconstitution
of the RTY occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs on the prior
Friday. In addition, FTSE Russell adds initial public offerings to the RTY on a quarterly basis based on total market capitalization ranking
within the market-adjusted capitalization breaks established during the most recent reconstitution. After membership is determined, a
security’s shares are adjusted to include only those shares available to the public. This is often referred to as “free float.”
The purpose of the adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not
part of the investable opportunity set.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-15 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Historical Performance of the RTY
The following graph sets forth the daily historical
performance of the RTY in the period from January 2, 2018 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 crimson
line in the graph represents the RTY’s Coupon Barrier of 1,146.957 (rounded to three decimal places), which is 62% of the RTY’s
Starting Value of 1,849.930. The horizontal gray line in the graph represents the RTY’s Threshold Value of 1,109.958, which is 60%
of the RTY’s Starting Value.
This historical data on the RTY is not necessarily indicative
of the future performance of the RTY or what the value of the Notes may be. Any historical upward or downward trend in the closing level
of the RTY during any period set forth above is not an indication that the closing level of the RTY is more or less likely to increase
or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the closing levels of the RTY.
License Agreement
“Russell 2000®”
and “Russell 3000®” are trademarks of FTSE Russell and have been licensed
for use by our affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Notes are not sponsored, endorsed, sold, or promoted
by FTSE Russell, and FTSE Russell makes no representation regarding the advisability of investing in the Notes.
FTSE Russell and Merrill Lynch, Pierce, Fenner &
Smith Incorporated have entered into a non-exclusive license agreement providing for the license to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and its affiliates, including us, in exchange for a fee, of the right to use indices owned and published by FTSE Russell
in connection with some securities, including the Notes. The license agreement provides that the following language must be stated in
this pricing supplement:
The Notes are not sponsored, endorsed, sold, or promoted
by FTSE Russell. FTSE Russell makes no representation or warranty, express or implied, to the holders of the Notes or any member of the
public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the RTY to track
general stock market performance or a segment of the same. FTSE Russell’s publication of the RTY in no way suggests or implies an
opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which the RTY is based. FTSE Russell’s
only relationship to Merrill Lynch, Pierce, Fenner & Smith Incorporated and to us is the licensing of certain trademarks and trade
names of FTSE Russell and of the RTY, which is determined, composed, and calculated by FTSE Russell without regard to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, us, or the Notes. FTSE Russell is not responsible for and has not reviewed the Notes nor any associated
literature or publications and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness,
or otherwise. FTSE Russell reserves the right, at any time and without notice, to alter, amend, terminate, or in any way change the RTY.
FTSE Russell has no obligation or liability in connection with the administration, marketing, or trading of the Notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, US, BAC, BOFAS, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RTY OR ANY DATA INCLUDED THEREIN.
FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE RTY OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL FTSE RUSSELL
HAVE ANY LIABILITY FOR ANY
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-16 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-17 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
The SPDR® S&P® Regional
Banking ETF
The KRE seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the S&P Regional Banks Select Industry Index (the “Underlying
Index”). The Underlying Index represents the regional banks industry portion of the S&P® Total
Market Index (“S&P TMI”), an index that measures the performance of the U.S. equity market. The KRE is composed of companies
that are regional banks.
The KRE utilizes a “replication” investment
approach in attempting to track the performance of the Underlying Index. The KRE typically invests in substantially all of the securities
which comprise the Underlying Index in approximately the same proportions as the Underlying Index. The KRE will normally invest at least
80% of its total assets in the common stocks that comprise the Underlying Index. The returns of the KRE may be affected by certain management
fees and other expenses, which are detailed in its prospectus.
The S&P Regional Banks Select Industry Index
This Underlying Index is an equal-weighted index that
is designed to measure the performance of the regional banks portion of the S&P TMI. The S&P TMI includes all U.S. common equities
listed on the New York Stock Exchange (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 regional banks 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) 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:
| ● | float-adjusted market capitalization above US$500 million and float-adjusted liquidity ratio above 90%; or |
| ● | float-adjusted market capitalization above US$400 million and float-adjusted liquidity ratio above 150%. |
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 the 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:
| ● | 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. |
| ● | 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. |
| ● | 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. |
| ● | 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. |
Historical Performance of the KRE
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-18 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
The following graph sets forth the daily historical
performance of the KRE in the period from January 2, 2018 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 crimson
line in the graph represents the KRE’s Coupon Barrier of $25.27 (rounded to two decimal places), which is 62% of the KRE’s
Starting Value of $40.76. The horizontal gray line in the graph represents the KRE’s Threshold Value of $24.46 (rounded to two decimal
places), which is 60% of the KRE’s Starting Value.
This historical data on the KRE is not necessarily indicative
of the future performance of the KRE or what the value of the Notes may be. Any historical upward or downward trend in the Closing Market
Price of the KRE during any period set forth above is not an indication that the Closing Market Price of the KRE is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the Closing Market Prices and trading pattern of the KRE.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-19 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Supplement to the Plan of Distribution; Role of BofAS and Conflicts
of Interest
BofAS, a broker-dealer affiliate of ours, is a member
of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling agent in the distribution of
the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121. BofAS may not make sales in this
offering to any of its discretionary accounts without the prior written approval of the account holder.
We will deliver the Notes against payment therefor in
New York, New York on a date that is greater than two business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange
Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes more than two business days prior to the original issue
date will be required to specify alternative settlement arrangements to prevent a failed settlement.
Under our distribution agreement with BofAS, BofAS will
purchase the Notes from us as principal at the public offering price indicated on the cover of this pricing supplement, less the indicated
underwriting discount, if any. BofAS will sell the Notes to other broker-dealers that will participate in the offering and that are not
affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may sell the Notes to one or more additional
broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer and that not all dealers will purchase or repurchase
the Notes at the same discount. 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 $982.50 per $1,000 in principal amount of Notes.
BofAS and any of our other broker-dealer affiliates
may use this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for offers and sales in
secondary market transactions and market-making transactions in the Notes. However, they are not obligated to engage in such secondary
market transactions and/or market-making transactions. These broker-dealer affiliates may act as principal or agent in these transactions,
and any such sales will be made at prices related to prevailing market conditions at the time of the sale.
At BofAS’s discretion, for a short, undetermined
initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary market at a price that may exceed the
initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based on then-prevailing market conditions and
other considerations, including the performance of the Underlyings and the remaining term of the Notes. However, none of us, the Guarantor,
BofAS or any of our other affiliates is obligated to purchase your Notes at any price or at any time, and we cannot assure you that any
party will purchase your Notes at a price that equals or exceeds the initial estimated value of the Notes.
Any price that BofAS may pay to repurchase the Notes
will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction costs. At certain times,
this price may be higher than or lower than the initial estimated value of the Notes.
European Economic Area and United Kingdom
None of this pricing supplement, the accompanying product
supplement, the accompanying prospectus or the accompanying prospectus supplement is a prospectus for the purposes of the Prospectus Regulation
(as defined below). This pricing supplement, the accompanying product supplement, the accompanying prospectus and the accompanying prospectus
supplement have been prepared on the basis that any offer of Notes in any Member State of the European Economic Area (the “EEA”)
or in the United Kingdom (each, a “Relevant State”) will only be made to a legal entity which is a qualified investor under
the Prospectus Regulation (“Qualified Investors”). Accordingly any person making or intending to make an offer in that Relevant
State of Notes which are the subject of the offering contemplated in this pricing supplement, the accompanying product supplement, the
accompanying prospectus and the accompanying prospectus supplement may only do so with respect to Qualified Investors. Neither BofA Finance
nor BAC has authorized, nor does it authorize, the making of any offer of Notes other than to Qualified Investors. The expression “Prospectus
Regulation” means Regulation (EU) 2017/1129.
PROHIBITION OF SALES TO EEA AND UNITED KINGDOM RETAIL
INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the EEA or in the United Kingdom. For these purposes: (a) a retail investor means a
person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID
II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (the Insurance Distribution Directive) where that customer
would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as
defined in the Prospectus Regulation; and (b) the expression “offer” includes the communication in any form and by any means
of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe
for the Notes. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”)
for offering or selling the Notes or otherwise making them available to retail investors in the EEA or in the United Kingdom has been
prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA or in the United
Kingdom may be unlawful under the PRIIPs Regulation.
United Kingdom
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-20 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
The communication of this pricing supplement, the accompanying
product supplement, the accompanying prospectus supplement, the accompanying prospectus and any other document or materials relating to
the issue of the Notes offered hereby is not being made, and such documents and/or materials have not been approved, by an authorized
person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the “FSMA”).
Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United
Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those persons in the United
Kingdom who have professional experience in matters relating to investments and who fall within the definition of investment professionals
(as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial
Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order, or who are any other persons to
whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together being referred to as “relevant
persons”). In the United Kingdom, the Notes offered hereby are only available to, and any investment or investment activity to which
this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement and the accompanying prospectus relates
will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely
on this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus
or any of their contents.
Any invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only be communicated or
caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to BofA Finance, as issuer, or BAC, as guarantor.
All applicable provisions of the FSMA must be complied
with in respect to anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-21 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking 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-20 of the accompanying product supplement.
Validity of the Notes
In the opinion of McGuireWoods LLP,
as counsel to BofA Finance, as issuer, and BAC, as guarantor, when the trustee has made the appropriate entries or notations on Schedule
1 to the master global note that represents the Notes (the “Master Note”) identifying the Notes offered hereby as supplemental
obligations thereunder in accordance with the instructions of BofA Finance, and the Notes have been delivered against payment therefor
as contemplated in this pricing supplement and the related prospectus, prospectus supplement and product supplement, all in accordance
with the provisions of the indenture governing the Notes and the related guarantee, such Notes will be the legal, valid and binding obligations
of BofA Finance, and the related guarantee will be the legal, valid and binding obligation of BAC, subject, in each case, to the effects
of applicable bankruptcy, insolvency (including laws relating to preferences, fraudulent transfers and equitable subordination), reorganization,
moratorium and other similar laws affecting creditors’ rights generally, and to general principles of equity. This opinion is given
as of the date of this pricing supplement and is limited to the Delaware General Corporation Law and the Delaware Limited Liability Company
Act (including the statutory provisions, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting
either of the foregoing) and the laws of the State of New York as in effect on the date hereof. In addition, this opinion is subject to
customary assumptions about the trustee’s authorization, execution and delivery of the indenture governing the Notes and due authentication
of the Master Note, the validity, binding nature and enforceability of the indenture governing the Notes and the related guarantee with
respect to the trustee, the legal capacity of individuals, the genuineness of signatures, the authenticity of all documents submitted
to McGuireWoods LLP as originals, the conformity to original documents of all documents submitted to McGuireWoods LLP as copies thereof,
the authenticity of the originals of such copies and certain factual matters, all as stated in the opinion letter of McGuireWoods LLP
dated December 8, 2022, which has been filed as an exhibit to the Registration Statement (File Nos. 333-268718 and 333-268718-01) of BAC
and BofA Finance, filed with the SEC on December 8, 2022.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-22 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
U.S. Federal Income Tax Summary
The following summary of the material U.S. federal income
and estate tax considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent inconsistent
supersedes, the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and is not exhaustive
of all possible tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”),
regulations promulgated under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations),
rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect
and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that
the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. This
summary does not include any description of the tax laws of any state or local governments, or of any foreign government, that may be
applicable to a particular holder.
Although the Notes are issued by us, they will be treated
as if they were issued by BAC for U.S. federal income tax purposes. Accordingly throughout this tax discussion, references to “we,”
“our” or “us” are generally to BAC unless the context requires otherwise.
This summary is directed solely to U.S. Holders and
Non-U.S. Holders that, except as otherwise specifically noted, will purchase the Notes upon original issuance and will hold the Notes
as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment, and that are not
excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor concerning the
U.S. federal income tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax consequences arising
under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax
laws.
General
Although there is no statutory, judicial, or administrative
authority directly addressing the characterization of the Notes, we intend to treat the Notes for all tax purposes as contingent income-bearing
single financial contracts with respect to the Underlyings and under the terms of the Notes, we and every investor in the Notes agree,
in the absence of an administrative determination or judicial ruling to the contrary, to treat the Notes in accordance with such characterization.
In the opinion of our counsel, Sidley Austin LLP, it is reasonable to treat the Notes as contingent income-bearing single financial contracts
with respect to the Underlyings. However, Sidley Austin LLP has advised us that it is unable to conclude that it is more likely than not
that this treatment will be upheld. This discussion assumes that the Notes constitute contingent income-bearing single financial contracts
with respect to the Underlyings for U.S. federal income tax purposes. If the Notes did not constitute contingent income-bearing single
financial contracts, the tax consequences described below would be materially different.
This characterization of the Notes is not binding
on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or
any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper
characterization and treatment. Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences
of an investment in the Notes are not certain, and no assurance can be given that the IRS or any court will agree with the characterization
and tax treatment described in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of
the U.S. federal income tax consequences of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following discussion is
based on the characterization described above. The discussion in this section assumes that there is a significant possibility of a significant
loss of principal on an investment in the Notes.
We will not attempt to ascertain whether the issuer
of an Underlying or the issuer of any component stock included in an Underlying that is an index would be treated as a “passive
foreign investment company” (“PFIC”), within the meaning of Section 1297 of the Code, or a United States real property
holding corporation, within the meaning of Section 897(c) of the Code. If the issuer of an Underlying or the issuer of one or more stocks
included in an Underlying that is an index were so treated, certain adverse U.S. federal income tax consequences could possibly apply
to a holder of the Notes. You should refer to information filed with the SEC by the issuer of an Underlying or the issuers of the component
stocks included in an Underlying that is an index and consult your tax advisor regarding the possible consequences to you, if any, if
the issuer of an Underlying or the issuer of any component stock included in an Underlying that is an index is or becomes a PFIC or is
or becomes a United States real property holding corporation.
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.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-23 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
Upon receipt of a cash payment at maturity or upon a
sale, exchange, or redemption of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the
difference between the amount realized (other than amounts representing any Contingent Coupon Payment, which would be taxed as described
above) and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes will equal the amount paid by
that holder to acquire them. Subject to the discussion below concerning the possible application of the “constructive ownership”
rules of Section 1260 of 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
some Underlyings are 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
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-24 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
forward contracts. If the IRS or Treasury publishes
future guidance requiring current economic accrual for contingent payments on prepaid forward contracts, it is possible that you could
be required to accrue income over the term of the Notes.
Because of the absence of authority regarding the appropriate
tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner that results in tax
consequences that are different from those described above. For example, the IRS could possibly assert that any gain or loss that a holder
may recognize at maturity or upon the sale, exchange, or redemption of the Notes should be treated as ordinary gain or loss.
Because one Underlying is an index that periodically
rebalances, it is possible that the Notes could be treated as a series of contingent income-bearing single financial contracts, each of
which matures on the next rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated
as disposing of the Notes on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S. Holder
would accordingly likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s tax
basis in the Notes (which would be adjusted to take into account any prior recognition of gain or loss) and the fair market value of the
Notes on such date.
Non-U.S. Holders
Because the U.S. federal income tax treatment of the
Notes (including any Contingent Coupon Payment) is uncertain, we (or the applicable paying agent) will withhold U.S. federal income tax
at a 30% rate (or at a lower rate under an applicable income tax treaty) on the entire amount of any Contingent Coupon Payment made unless
such payments are effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (in which case, to
avoid withholding, the Non-U.S. Holder will be required to provide a Form W-8ECI). We (or the applicable paying agent) will not pay any
additional amounts in respect of such withholding. To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer
identification number and certify as to its eligibility under the appropriate treaty’s limitations on benefits article, if applicable.
In addition, special rules may apply to claims for treaty benefits made by Non-U.S. Holders that are entities rather than individuals.
The availability of a lower rate of withholding under an applicable income tax treaty will depend on whether such rate applies to the
characterization of the payments under U.S. federal income tax laws. A Non-U.S. Holder that is eligible for a reduced rate of U.S. federal
withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for
refund with the IRS.
Except as discussed below, a Non-U.S. Holder generally
will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes (not including, for the avoidance
of doubt, amounts representing any Contingent Coupon Payment which would be subject to the rules discussed in the previous paragraph)
upon the sale, exchange, or redemption of the Notes or their settlement at maturity, provided that the Non-U.S. Holder complies with applicable
certification requirements and that the payment is not effectively connected with the conduct by the Non-U.S. Holder of a U.S. trade or
business. Notwithstanding the foregoing, gain from the sale, exchange, or redemption of the Notes or their settlement at maturity may
be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S. for 183 days
or more during the taxable year of the sale, exchange, redemption, or settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in the
conduct of a trade or business within the U.S. and if any Contingent Coupon Payment and gain realized on the settlement at maturity, or
upon sale, exchange, or redemption of the Notes, is effectively connected with the conduct of such trade or business (and, if certain
tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder,
although exempt from U.S. federal withholding tax, generally will be subject to U.S. federal income tax on such Contingent Coupon Payment
and gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders should read the material under the
heading “—U.S. Holders,” for a description of the U.S. federal income tax consequences of acquiring, owning, and disposing
of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30%
(or such lower rate provided by any applicable tax treaty) of a portion of its earnings and profits for the taxable year that are effectively
connected with its conduct of a trade or business in the U.S., subject to certain adjustments.
A “dividend equivalent” payment is treated
as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid
to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”)
that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent
payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2025. Based on our
determination that the Notes are not delta-one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the Underlyings or the Notes, and following such occurrence the Notes could
be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions
in respect of the Underlyings or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-25 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking ETF
As discussed above, alternative characterizations of
the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax in addition to the withholding
tax described above, tax will be withheld at the applicable statutory rate. Prospective Non-U.S. Holders should consult their own tax
advisors regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax. Under current law, while
the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible in those individuals’
gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual
has retained certain interests or powers), should note that, absent an applicable treaty benefit, a Note is likely to be treated as U.S.
situs property, subject to U.S. federal estate tax. These individuals and entities should consult their own tax advisors regarding the
U.S. federal estate tax consequences of investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal
Income Tax Considerations — General — Backup Withholding and Information Reporting” in the accompanying prospectus for
a description of the applicability of the backup withholding and information reporting rules to payments made on the Notes.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-26 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the iShares® MSCI EAFE ETF, the Russell 2000® Index and the SPDR® S&P® Regional Banking 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:
This pricing supplement and the accompanying product
supplement, prospectus supplement and prospectus have been filed as part of a registration statement with the SEC, which may, without
cost, be accessed on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should read
this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for information about us, BAC and
this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by this
pricing supplement and the accompanying product supplement, prospectus supplement and prospectus. Certain terms used but not defined in
this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus supplement. Unless otherwise
indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,”
or similar references are to BofA Finance, and not to BAC.
The Notes are our senior debt securities. Any payments
on the Notes are fully and unconditionally guaranteed by BAC. The Notes and the related guarantee are not insured by the Federal Deposit
Insurance Corporation or secured by collateral. The Notes will rank equally in right of payment with all of our other unsecured and unsubordinated
obligations, except obligations that are subject to any priorities or preferences by law. The related guarantee will rank equally in right
of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations that are subject to any priorities
or preferences by law, and senior to its subordinated obligations. Any payments due on the Notes, including any repayment of the principal
amount, will be subject to the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
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CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-27 |
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