This pricing supplement, which is not complete and may
be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus are not an offer to sell these Notes in any country or jurisdiction where
such an offer would not be permitted.
Linked to the Least Performing
of the S&P 500® Index and the S&P MidCap 400® Index
|
•
|
Approximate
13 months term.
|
|
•
|
Payment
on the Notes will depend on the individual performance of the S&P 500® Index and the S&P MidCap 400® Index (each
an “Underlying”).
|
|
•
|
1-to-1
upside exposure to increases in the Least Performing Underlying if the Ending Value is greater than its Starting Value, subject
to the Max Return of $1,055.00 per $1,000 in principal amount of Notes.
|
|
•
|
1-to-1 downside exposure to decreases
in the level of the Least Performing Underlying beyond a 30% decline, with up to 70% of the principal at risk.
|
|
•
|
No periodic interest payments.
|
|
•
|
All
payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”) and Bank of America Corporation
(“BAC” or the “Guarantor”).
|
|
•
|
The
Notes are expected to price on July 9, 2020, expected to issue on July 13, 2020 and expected to mature on August 12, 2021.
|
|
•
|
The
Notes will not be listed on any securities exchange.
|
The
initial estimated value of the Notes as of the pricing date is expected to be between $950.00 and $980.00 per Note, which is less
than the public offering price listed below. The actual value of your Notes at any time will reflect many factors and
cannot be predicted with accuracy. See “Risk Factors” beginning on page PS-6 of this pricing supplement and “Structuring
the Notes” on page PS-17 of this pricing supplement for additional information.
Potential purchasers of the
Notes should consider the information in “Risk Factors” beginning on page PS-6 of this pricing supplement, page PS-5
of the accompanying product supplement, page S-5 of the accompanying prospectus supplement, and page 7 of the accompanying prospectus.
None of the Securities and Exchange
Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of
these securities or determined if this Note Prospectus (as defined on page PS-21) 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
|
Per Note
|
$1,000.00
|
$2.50
|
$997.50
|
Total
|
|
|
|
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(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 $997.50 per Note.
|
|
(2)
|
In
addition to the underwriting discount above, if any, an affiliate of BofA Finance will pay a referral fee of up to $5.00 per $1,000
in principal amount of the notes in connection with the distribution of the notes to other registered broker-dealers.
|
The Notes and the related
guarantee:
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
Selling Agent
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Terms of the Notes
The Buffered Notes Linked to the
Least Performing of the S&P 500® Index and the S&P MidCap 400® Index (the “Notes”) provide a 1:1 upside
exposure to increases in the Least Performing Underlying if its Ending Value is greater than its Starting Value, subject to the
Max Return of $1,055.00 per $1,000 in principal amount of Notes. If the Ending Value of the Least Performing Underlying is less
than or equal to its Starting Value but greater than or equal to its Threshold Value, at maturity, you will receive the principal
amount. However, if the Ending Value of the Least Performing Underlying is less than its Threshold Value, you will be exposed to
any decrease in the Underlying beyond the Threshold Value, and you will lose some or a significant portion of your investment in
the Notes. The Notes are not traditional debt securities and it is possible that you may lose some or a significant portion of
your principal amount at maturity. Any payments on the Notes will be calculated based on $1,000 in principal amount of Notes and
will depend on the performance of the Underlyings, subject to our and BAC’s credit risk.
Issuer:
|
BofA Finance
|
Guarantor:
|
BAC
|
Denominations:
|
The Notes will be issued in minimum denominations of $1,000 and whole multiples of $1,000 in excess thereof.
|
Term:
|
Approximately 13 months
|
Underlyings:
|
The S&P 500® Index (the “SPX”) (Bloomberg symbol: “SPX”) and the S&P MidCap 400® Index (the “MID”) (Bloomberg symbol: “MID”), each a price return index.
|
Pricing Date*:
|
July 9, 2020
|
Issue Date*:
|
July 13, 2020
|
Valuation Date*:
|
August 9, 2021, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” of the accompanying product supplement.
|
Maturity Date*:
|
August 12, 2021
|
Starting Value:
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With respect to each Underlying, its closing level on the pricing date.
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Ending Value:
|
With respect to each Underlying, its closing level on the Valuation Date, as determined by the calculation agent.
|
Threshold Value:
|
With respect to each Underlying, 70% of its Starting Value.
|
Max Return:
|
$1,055.00 per $1,000 in principal amount of Notes, which represents a return of 5.50% over the principal amount.
|
Redemption Amount:
|
At 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 its Starting Value:
,
subject to the Max Return
b)
If the Ending Value of the Least Performing Underlying
is equal to or less than its Starting Value but greater than or equal to its Threshold Value:
$1,000
c)
If the Ending Value of the Least Performing Underlying
is less than its Threshold Value:
In this case, the
Redemption Amount will be less than the principal amount and you will lose up to 70% of the principal amount.
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
Selling Agent:
|
BofAS
|
CUSIP:
|
09709TJ51
|
Underlying Return:
|
With respect to
each Underlying,
|
|
BUFFERED NOTES | PS-2
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Least Performing Underlying:
|
The Underlying
with the lowest Underlying Return.
|
Events of Default and Acceleration:
|
If an Event of Default, as defined in the senior indenture and in the section entitled “Description of Debt Securities—Events of Default and Rights of Acceleration” beginning on page 22 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption “Redemption Amount” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate.
|
*Subject to change.
|
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, referral fee and
the hedging related charges described below (see “Risk Factors” beginning on page PS-6), will reduce the economic terms
of the Notes to you and the initial estimated value of the Notes. Due to these factors, the public offering price you pay to purchase
the Notes will be greater than the initial estimated value of the Notes as of the pricing date.
The initial estimated value range
of the Notes as of the date of this pricing supplement is set forth on the cover page of this pricing supplement. The final pricing
supplement will set forth the initial estimated value of the Notes as of the pricing date. For more information about the initial
estimated value and the structuring of the Notes, see “Risk Factors” beginning on page PS-6 and “Structuring
the Notes” on page PS-17.
|
BUFFERED NOTES | PS-3
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Redemption Amount Determination
On the Maturity Date, you will
receive a cash payment per $1,000 in principal amount of Notes determined as follows:
All payments described above
are subject to Issuer and Guarantor credit risk.
|
BUFFERED NOTES | PS-4
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Hypothetical Payout Profile and Examples
of Payments at Maturity
Buffered Notes Table
The following table is for
purposes of illustration only. It is based on hypothetical values and shows hypothetical returns on the Notes. The
table illustrates the calculation of the Redemption Amount and the return on the Notes based on a hypothetical Starting Value of
100 for the Least Performing Underlying, a hypothetical Threshold Value of 70 for the Least Performing Underlying, the Max Return
of $1,055.00 and a range of hypothetical Ending Values of the Least Performing Underlying. The actual amount you receive and
the resulting return will depend on the actual Starting Values, Threshold Values and Ending Values of the Underlyings, the actual
Max Return 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 levels of the
Underlyings, see “The Underlyings” section below. Each Underlying is a price return index and as such its Ending Value
will not include any income generated by dividends paid on the stocks included in that Underlying, which you would otherwise be
entitled to receive if you invested in those stocks directly. In addition, all payments on the Notes are subject to Issuer and
Guarantor credit risk.
Ending Value of the
Least Performing Underlying
|
Underlying Return of the
Least Performing Underlying
|
Redemption Amount per Note
|
Return on the Notes
|
160.00
|
60.00%
|
$1,055.00(1)
|
5.50%
|
150.00
|
50.00%
|
$1,055.00
|
5.50%
|
140.00
|
40.00%
|
$1,055.00
|
5.50%
|
130.00
|
30.00%
|
$1,055.00
|
5.50%
|
120.00
|
20.00%
|
$1,055.00
|
5.50%
|
110.00
|
10.00%
|
$1,055.00
|
5.50%
|
105.00
|
5.00%
|
$1,050.00
|
5.00%
|
102.00
|
2.00%
|
$1,020.00
|
2.00%
|
100.00(2)
|
0.00%
|
$1,000.00
|
0.00%
|
95.00
|
-5.00%
|
$1,000.00
|
0.00%
|
90.00
|
-10.00%
|
$1,000.00
|
0.00%
|
70.00(3)
|
-30.00%
|
$1,000.00
|
0.00%
|
69.99
|
-30.01%
|
$999.90
|
-0.01%
|
60.00
|
-40.00%
|
$900.00
|
-10.00%
|
50.00
|
-50.00%
|
$800.00
|
-20.00%
|
25.00
|
-75.00%
|
$550.00
|
-45.00%
|
0.00
|
-100.00%
|
$300.00
|
-70.00%
|
|
(1)
|
The Redemption Amount
per $1,000 in principal amount of Notes cannot exceed the Max Return.
|
|
(2)
|
The hypothetical Starting
Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent a likely Starting Value
for any Underlying.
|
|
(3)
|
This is the hypothetical Threshold Value of
the Least Performing Underlying.
|
|
BUFFERED NOTES | PS-5
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Risk Factors
Your investment in the Notes entails significant
risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only
after carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors in light
of your particular circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about significant
elements of the Notes or financial matters in general. You should carefully review the more detailed explanation of risks relating
to the Notes in the “Risk Factors” sections beginning on page PS-5 of the accompanying product supplement, page S-5
of the accompanying prospectus supplement and page 7 of the accompanying prospectus, each as identified on page PS-21 below.
|
•
|
Your investment may
result in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount on the Notes at
maturity. If the Ending Value of any Underlying is less than its Threshold Value, at maturity, you will lose 1% of the principal
amount for each 1% that the Ending Value of the Least Performing Underlying is less than its Threshold Value. In that case, you
will lose some or a significant portion of your investment in the Notes.
|
|
•
|
The return on the
Notes will be limited to the Max Return. The return on the Notes will not exceed the Max Return, regardless of the performance
of either Underlying. Your return on the notes may be less than the return that you could have realized if you invested directly
in the Underlyings, and you will not receive the full benefit of any appreciation in the value of either Underlying beyond the
Max Return.
|
|
•
|
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.
|
|
•
|
Any payment on the
Notes is subject to the credit risk of BofA Finance and the Guarantor, and actual or perceived changes in BofA Finance or the Guarantor’s
creditworthiness are expected to affect the value of the Notes. The Notes are our senior unsecured debt securities. Any payment
on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed by any entity other than
the Guarantor. As a result, your receipt of the Redemption Amount will be dependent upon our ability and the ability of the Guarantor
to repay our respective obligations under the Notes on the Maturity Date, regardless of the Ending Value of the Least Performing
Underlying as compared to its Starting Value.
|
In addition, our credit ratings
and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations.
Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s
credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities
(the “credit spread”) prior to the Maturity Date of your Notes may adversely affect the market value of the Notes.
However, because your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay
our respective obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings
will not reduce the other investment risks related to the Notes.
|
•
|
We are a finance subsidiary and, as such, have
no independent assets, operations or revenues. We are a finance subsidiary of BAC, have no operations other than those related
to the issuance, administration and repayment of our debt securities that are guaranteed by the Guarantor, and are dependent upon
the Guarantor and/or its other subsidiaries to meet our obligations under the Notes in the ordinary course. Therefore, our ability
to make payments on the Notes may be limited.
|
|
•
|
The public offering
price you pay for the Notes will exceed their initial estimated value. The range of initial estimated values of the Notes that
is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the pricing date that
will be provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference
to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including
our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions,
expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes.
These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to
sell the Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial
estimated value. This is due to, among other things, changes in the levels of the Underlyings, changes in the Guarantor’s
internal funding rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charges,
all as further described in "Structuring the Notes" below. These factors, together with various credit, market and economic
factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary
market and will affect the value of the Notes in complex and unpredictable ways.
|
|
•
|
The initial estimated
value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any
time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlyings,
our and BAC’s creditworthiness and changes in market conditions.
|
|
•
|
We cannot assure
you that a trading market for your Notes will ever develop or be maintained. We will not list the Notes on any securities exchange.
We cannot predict how the Notes will trade in any secondary market or whether that market will be liquid or illiquid.
|
|
BUFFERED NOTES | PS-6
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
|
•
|
The Redemption Amount
will not reflect the levels of the Underlyings other than on the Valuation Date. The levels of the Underlyings during the term
of the Notes other than on the Valuation Date will not affect payment on the Notes. Notwithstanding the foregoing, investors should
generally be aware of the performance of the Underlyings while holding the Notes. The calculation agent will calculate the Redemption
Amount by comparing only the Starting Value or the Threshold Value, as applicable, to the Ending Value for each Underlying. No
other levels of the Underlyings will be taken into account. As a result, you will receive less than the principal amount at maturity
even if the level of each Underlying has increased at certain times during the term of the Notes before the Least Performing Underlying
decreases to a level that is less than its Threshold Value as of 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 of your principal amount even if the Ending Value of one Underlying is greater than or
equal to its Threshold Value. Your Notes are linked to the least performing of the Underlyings, and a change in the level of
one Underlying may not correlate with changes in the level of the other Underlying(s). The Notes are not linked to a basket composed
of the Underlyings, where the depreciation in the level of one Underlying could be offset to some extent by the appreciation in
the level of the other Underlying(s). In the case of the Notes, the individual performance of each Underlying would not be combined,
and the depreciation in the level of one Underlying would not be offset by any appreciation in the level of the other Underlying(s).
Even if the Ending Value of an Underlying is at or above its Threshold Value, you will lose some or a significant portion of your
principal if the Ending Value of the Least Performing Underlying is below its Threshold Value.
|
|
•
|
The Notes are subject
to risks associated with mid-size capitalization companies. The stocks comprising the MID are issued by companies with mid-sized
market capitalization. The stock prices of mid-size capitalization companies may be more volatile than stock prices of large capitalization
companies. Mid-size capitalization companies may be less able to withstand adverse economic, market, trade and competitive conditions
relative to larger companies. Mid-size capitalization companies may also be more susceptible to adverse developments related to
their products or services.
|
|
•
|
The publisher of
an Underlying may adjust that Underlying in a way that affects its levels, and the publisher has no obligation to consider your
interests. The publisher of an Underlying can add, delete, or substitute the components included in that Underlying or
make other methodological changes that could change its level. Any of these actions could adversely affect the value of your Notes.
|
|
•
|
Trading and hedging activities by us, the Guarantor
and any of our other affiliates, including BofAS, may create conflicts of interest with you and may affect your return on the Notes
and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell the securities
held by or included in the Underlyings, or futures or options contracts on the Underlyings or those securities, or other listed
or over-the-counter derivative instruments linked to the Underlyings or those securities. While we, the Guarantor or one or more
of our other affiliates, including BofAS, may from time to time own securities represented by the Underlyings, except to the extent
that BAC’s common stock may be included in the Underlyings, we, the Guarantor and our other affiliates, including BofAS,
do not control any company included in the Underlyings, and have not verified any disclosure made by any other company. We, the
Guarantor or one or more of our other affiliates, including BofAS, may execute such purchases or sales for our own or their own
accounts, for business reasons, or in connection with hedging our obligations under the Notes. These transactions may present a
conflict of interest between your interest in the Notes and the interests we, the Guarantor and our other affiliates, including
BofAS, may have in our or their proprietary accounts, in facilitating transactions, including block trades, for our or their other
customers, and in accounts under our or their management. These transactions may adversely affect the value of the Underlyings
in a manner that could be adverse to your investment in the Notes. On or before the pricing date, any purchases or sales by us,
the Guarantor or our other affiliates, including BofAS or others on its behalf (including for the purpose of hedging some or all
of our anticipated exposure in connection with the Notes), may affect the value of the Underlyings. Consequently, the value 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 expect to engage in hedging activities that could
affect the value of the Underlyings on the pricing date. In addition, these hedging activities, including the unwinding of a hedge,
may decrease the market value of your Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor
or one or more of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the Notes
and may hold or resell the Notes. For example, BofAS may enter into these transactions in connection with any market making activities
in which it engages. We cannot assure you that these activities will not adversely affect the value of the Underlyings, the market
value of your Notes prior to maturity or the amounts payable on the Notes.
|
|
•
|
There may be potential
conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right to appoint and remove
the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will make a variety of determinations
relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances, these duties could result
in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent.
|
|
•
|
The U.S. federal income tax consequences of an
investment in the Notes are uncertain, and may be adverse to a holder of the Notes. No statutory, judicial, or administrative
authority directly addresses the characterization of the Notes or securities similar to the Notes for U.S. federal income tax purposes.
As a result, significant aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. Under
the terms of the Notes, you will have agreed with us to treat the Notes as single financial contracts, as described below under
“U.S. Federal Income Tax Summary—General.” If the Internal Revenue Service (the “IRS”) were successful
in asserting an alternative characterization for the Notes, the timing and character of gain or loss with respect to the Notes
may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance can be given that the IRS will
agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.” You are urged to consult
with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the Notes.
|
|
BUFFERED NOTES | PS-7
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
The Underlyings
All disclosures contained in this
pricing supplement regarding the Underlyings, including, without limitation, their make-up, method of calculation, and changes
in their components, have been derived from publicly available sources. The information reflects the policies of, and is subject
to change by, each of S&P Dow Jones Indices LLC (“SPDJI”), the sponsor of the SPX and MID. We refer to SPDJI and
as the "Underlying Sponsor". The Underlying Sponsor, which licenses the copyright and all other rights to the Underlyings,
has no obligation to continue to publish, and may discontinue publication of, the Underlyings. The consequences of the Underlying
Sponsor discontinuing publication of the applicable Underlying are discussed in “Description of the Notes—Discontinuance
of an Index” in the accompanying product supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts any
responsibility for the calculation, maintenance or publication of any Underlying or any successor index. None of us, the Guarantor,
BofAS or any of our other affiliates makes any representation to you as to the future performance of the Underlyings. You should
make your own investigation into the Underlyings.
The S&P 500®
Index
The SPX includes a representative sample
of 500 companies in leading industries of the U.S. economy. The SPX is intended to provide an indication of the pattern of common
stock price movement. The calculation of the level of the SPX is based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943.
The
SPX includes companies from eleven main groups: Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials;
Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The Underlying Sponsor may from time to
time, in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives stated above.
Company additions to the SPX must have
an unadjusted company market capitalization of $8.2 billion or more (an increase from the previous requirement of an unadjusted
company market capitalization of $6.1 billion or more).
SPDJI calculates the SPX by reference
to the prices of the constituent stocks of the SPX without taking account of the value of dividends paid on those stocks. As a
result, the return on the Notes will not reflect the return you would realize if you actually owned the SPX constituent stocks
and received the dividends paid on those stocks.
Computation of the SPX
While the SPDJI sponsor currently
employs the following methodology to calculate the Underlying, no assurance can be given that the Underlying sponsor will not modify
or change this methodology in a manner that may affect the Redemption Amount.
Historically, the market value of any
component stock of the SPX was calculated as the product of the market price per share and the number of then outstanding shares
of such component stock. In March 2005, SPDJI began shifting the SPX halfway from a market capitalization weighted formula to a
float-adjusted formula, before moving the SPX to full float adjustment on September 16, 2005. SPDJI’s criteria for selecting
stocks for the SPX did not change with the shift to float adjustment. However, the adjustment affects each company’s weight
in the SPX.
Under float adjustment, the share counts
used in calculating the SPX reflect only those shares that are available to investors, not all of a company’s outstanding
shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government
agencies.
In September 2012, all shareholdings
representing more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed
from the float for purposes of calculating the SPX. Generally, these “control holders” will include officers and directors,
private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic
partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of
unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual
person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such
as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension
funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment
plans, will ordinarily be considered part of the float.
Treasury stock, stock options, restricted
shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares
held in a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable
shares are normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding,
shares in an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight
factor (“IWF”) is calculated by dividing the available float shares by the total shares outstanding. Available float
shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum
threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and
no other control group holds 5% of the company’s shares, SPDJI would assign that company an IWF of 1.00, as no control group
meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares and another
control group holds 20% of the company’s shares, SPDJI would assign an IWF of 0.77, reflecting the fact that 23% of the company’s
outstanding shares are considered to be held for control. As of July 31, 2017, companies with multiple share class lines are no
longer eligible for inclusion in the SPX. Constituents of the SPX prior to July 31, 2017 with multiple share class lines will be
grandfathered in and continue to be included in the SPX. If a constituent company of the SPX reorganizes into a multiple share
class line structure, that company will remain in the SPX at the discretion of the S&P Index Committee in order to minimize
turnover.
|
BUFFERED NOTES | PS-8
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Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
The SPX is calculated using a base-weighted
aggregate methodology. The level of the SPX reflects the total market value of all component stocks relative to the base period
of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in order to make the level
easier to work with and track over time. The actual total market value of the component stocks during the base period of the years
1941 through 1943 has been set to an indexed level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the
daily calculation of the SPX is computed by dividing the total market value of the component stocks by the “index divisor.”
By itself, the MID divisor is an arbitrary number. However, in the context of the calculation of the SPX, it serves as a link to
the original base period level of the SPX. The MID divisor keeps the SPX comparable over time and is the manipulation point for
all adjustments to the SPX, which is index maintenance.
Index Maintenance
Index maintenance includes monitoring
and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price
adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require
changes in the common shares outstanding and the stock prices of the companies in the SPX, and do not require index divisor adjustments.
To prevent the level of the SPX from
changing due to corporate actions, corporate actions which affect the total market value of the SPX require an index divisor adjustment.
By adjusting the MID divisor for the change in market value, the level of the SPX remains constant and does not reflect the corporate
actions of individual companies in the SPX. Index divisor adjustments are made after the close of trading and after the calculation
of the SPX closing level.
Changes in a company’s shares
outstanding of 5.00% or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers
are made as soon as reasonably possible. Share changes due to mergers or acquisitions of publicly held companies that trade
on a major exchange are implemented
when the transaction occurs, even if both of the companies are not in the same headline index, and regardless of the size of the
change. All other changes of 5.00% or more (due to, for example, company stock repurchases, private placements, redemptions, exercise
of options, warrants, conversion of preferred stock, Notes, debt, equity participation units, at-the-market offerings, or other
recapitalizations) are made weekly and are announced on Fridays for implementation after the close of trading on the following
Friday.
Changes of less than 5.00% are accumulated
and made quarterly on the third Friday of March, June, September, and December, and are usually announced two to five days prior.
If
a change in a company’s shares outstanding of 5.00% or more causes a company’s IWF to change by five percentage points
or more, the IWF is updated at the same time as the share change. IWF changes resulting from partial tender offers are considered
on a case by case basis.
Historical Performance of the SPX
The following graph sets forth
the daily historical performance of the SPX in the period from January 1, 2008 through July 7, 2020. We obtained this historical
data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg
L.P. The horizontal line in the graph represents the SPX’s hypothetical Threshold Value of 2,201.72 (rounded to two decimal
places), which is 70% of the SPX’s hypothetical Starting Value of 3,145.32, which was its closing level on July 7, 2020.
The actual Starting Value and Threshold Value will be determined on the pricing date.
This historical data on the SPX is
not necessarily indicative of the future performance of the SPX or what the value of the Notes may be. Any historical upward or
downward trend in the level of the SPX during any period set forth above is not an indication that the level of the SPX is more
or less likely to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you
should consult publicly available sources for the levels of the SPX.
|
BUFFERED NOTES | PS-9
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Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
License Agreement
S&P® is a registered
trademark of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered
trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P
Dow Jones Indices LLC. “Standard & Poor’s®,” “S&P 500®” and
“S&P®” are trademarks of S&P. These trademarks have been sublicensed for certain purposes by
Merrill Lynch, Pierce, Fenner and Smith Incorporated. The SPX is a product of S&P Dow Jones Indices LLC and/or its affiliates
and has been licensed for use by Merrill Lynch, Pierce, Fenner and Smith Incorporated.
The Notes are not sponsored, endorsed,
sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or any of their respective affiliates (collectively, “S&P
Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders of
the Notes or any member of the public regarding the advisability of investing in securities generally or in the Notes particularly
or the ability of the SPX to track general market performance. S&P Dow Jones Indices’ only relationship to Merrill Lynch,
Pierce, Fenner and Smith Incorporated with respect to the SPX is the licensing of the SPX and certain trademarks, service marks
and/or trade names of S&P Dow Jones Indices and/or its third party licensors. The SPX is determined, composed and calculated
by S&P Dow Jones Indices without regard to us, Merrill Lynch, Pierce, Fenner and Smith Incorporated, or the Notes. S&P
Dow Jones Indices have no obligation to take our needs, BAC’s needs or the needs of Merrill Lynch, Pierce, Fenner and Smith
Incorporated or holders of the Notes into consideration in determining, composing or calculating the SPX. S&P Dow Jones Indices
are not responsible for and have not participated in the determination of the prices, and amount of the Notes or the timing of
the issuance or sale of the Notes or in the determination or calculation of the equation by which the Notes are to be converted
into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration, marketing or trading
of the Notes. There is no assurance that investment products based on the SPX will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors. Inclusion of a security
or futures contract within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security or
futures contract, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group Inc. and its affiliates
may independently issue and/or sponsor financial products unrelated to the Notes currently being issued by us, but which may be
similar to and competitive with the Notes. In addition, CME Group Inc. and its affiliates may trade financial products which are
linked to the performance of the SPX. It is possible that this trading activity will affect the value of the Notes.
S&P
DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE SPX OR ANY DATA RELATED THERETO
OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT
THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN.
S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US, BAC, MERRILL LYNCH, PIERCE, FENNER AND SMITH INCORPORATED,
HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SPX OR WITH RESPECT TO ANY DATA
RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING,
IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL
DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES
OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND MERRILL LYNCH, PIERCE, FENNER AND SMITH INCORPORATED, OTHER
THAN THE LICENSORS OF S&P DOW JONES INDICES.
|
BUFFERED NOTES | PS-10
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
The S&P MidCap 400®
Index
The MID is intended to provide a benchmark
for the performance of publicly traded mid-sized U.S. companies. The MID tracks the stock price movement of 400 companies with
mid-sized market capitalizations, ranging from $1.6 billion to $6.8 billion. The calculation of the level of the MID is based on
the relative value of the aggregate market value of the common stocks of 400 companies as of a particular time compared to the
aggregate average market value of the common stocks of 400 similar companies on the base date of June 28, 1991.
Eleven main groups of companies constitute
the MID, with the approximate percentage of the market capitalization of the MID included in each group as of January 31, 2019
indicated in parentheses: Information Technology (16.2%); Industrials (16.0%); Financials (15.1%); Consumer Discretionary (14.4%);
Health Care (11.2%); Real Estate (9.9%); Materials (6.0%); Utilities (4.2%); Consumer Staples (3.8%); Communication Services (1.9%)
and Energy (1.4%). The MID sponsor may from time to time, in its sole discretion, add companies to, or delete companies from, the
MID to achieve the objectives stated above. As of the close of business on September 21, 2018, the MID Sponsor and MSCI, Inc. 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 subindustry (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 subindustry (which includes companies previously classified in the Home Entertainment Software
subindustry prior to September 21, 2018 (when the Home Entertainment Software subindustry was a subindustry in the Information
Technology sector), as well as producers of interactive gaming products, including mobile gaming applications). The Interactive
Media & Services industry and subindustry 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 MID as of the open of business on September 24, 2018 to coincide with the September 2018 quarterly rebalancing.
The MID sponsor calculates the MID
by reference to the prices of the constituent stocks of the MID without taking account of the value of dividends paid on those
stocks. As a result, the return on the notes will not reflect the return you would realize if you actually owned the MID constituent
stocks and received the dividends paid on those stocks.
Computation of the MID
While the MID sponsor currently employs
the following methodology to calculate the MID, no assurance can be given that the MID sponsor will not modify or change this methodology
in a manner that may affect the Redemption Amount.
Historically, the market value of any
component stock of the MID was calculated as the product of the market price per share and the number of then outstanding shares
of such component stock. In March 2005, the MID sponsor began shifting the MID halfway from a market capitalization weighted formula
to a float-adjusted formula, before moving the MID to full float adjustment on September 16, 2005. The MID sponsor’s criteria
for selecting stocks for the MID did not change with the shift to float adjustment. However, the adjustment affects each company’s
weight in the MID.
Under float adjustment, the share counts
used in calculating the MID reflect only those shares that are available to investors, not all of a company’s outstanding
shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government
agencies.
In September 2012, all shareholdings
representing more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed
from the float for purposes of calculating the MID. Generally, these “control holders” will include officers and directors,
private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic
partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of
unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual
person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such
as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension
funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment
plans, will ordinarily be considered part of the float.
Treasury stock, stock options, equity
participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust
to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are
normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding, shares
in an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight
factor (“IWF”) is calculated by dividing the available float shares by the total shares outstanding. Available float
shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum
threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and
no other control group holds 5% of the company’s shares, the MID sponsor would assign that company an IWF of 1.00, as no
control group meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares
and another control group holds 20% of the company’s shares, the MID sponsor would assign an IWF of 0.77, reflecting the
fact that 23% of the company’s outstanding shares are considered to be held for control. As of July 31, 2017, companies with
multiple share class lines are no longer eligible for inclusion in the MID. Constituents of the MID prior to July 31, 2017 with
multiple share class lines will be grandfathered in and continue to be included in the MID. If a constituent company of the MID
reorganizes into a multiple share class line structure, that company will remain in the MID at the discretion of the S&P Index
Committee in order to minimize turnover.
The MID is calculated using a base-weighted
aggregate methodology. The level of the MID reflects the total market value of all 400 component
|
BUFFERED NOTES | PS-11
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
stocks relative to the base date of
June 28, 1991. An indexed number is used to represent the results of this calculation in order to make the level easier to work
with and track over time. The actual total market value of the component stocks on the base date has been set to an indexed level
of 100. This is often indicated by the notation June 28, 1991 = 100. In practice, the daily calculation of the MID is computed
by dividing the total market value of the component stocks by the “index divisor.” By itself, the MID divisor is an
arbitrary number. However, in the context of the calculation of the MID, it serves as a link to the original base period level
of the MID. The MID divisor keeps the MID comparable over time and is the manipulation point for all adjustments to the MID, which
is index maintenance.
Index Maintenance
Index maintenance includes monitoring
and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price
adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require
changes in the common shares outstanding and the stock prices of the companies in the MID, and do not require index divisor adjustments.
To prevent the level of the MID from
changing due to corporate actions, corporate actions which affect the total market value of the MID require an index divisor adjustment.
By adjusting the MID divisor for the change in market value, the level of the MID remains constant and does not reflect the corporate
actions of individual companies in the MID. Index divisor adjustments are made after the close of trading and after the calculation
of the MID closing level.
Changes in a company’s shares
outstanding of 5.00% or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers
are made as soon as reasonably possible. Share changes due to mergers or acquisitions of publicly held companies that trade on
a major exchange are implemented when the transaction occurs, even if both of the companies are not in the same headline index,
and regardless of the size of the change. All other changes of 5.00% or more (due to, for example, company stock repurchases, private
placements, redemptions, exercise of options, warrants, conversion of preferred stock, notes, debt, equity participation units,
at-the-market offerings, or other recapitalizations) are made weekly and are announced on Fridays for implementation after the
close of trading on the following Friday. Changes of less than 5.00% are accumulated and made quarterly on the third Friday of
March, June, September, and December, and are usually announced two to five days prior.
If a change in a company’s shares
outstanding of 5.00% or more causes a company’s IWF to change by five percentage points or more, the IWF is updated at the
same time as the share change. IWF changes resulting from partial tender offers are considered on a case by case basis.
|
BUFFERED NOTES | PS-12
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Historical Performance of the
MID
The following graph sets
forth the daily historical performance of the MID in the
period from January 1, 2008 through July 7, 2020. We obtained this historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained from Bloomberg L.P. The horizontal line in the graph represents
the MID’s hypothetical Threshold Value of 1,234.04
(rounded to two decimal places), which is 70% of the MID’s
hypothetical Starting Value of 1,762.92, which was its closing level on July 7, 2020. The actual Starting Value and Threshold Value
will be determined on the pricing date.
This historical data on the MID
is not necessarily indicative of the future performance of the MID or what the value of the Notes may be. Any historical upward
or downward trend in the level of the MID during any period set forth above is not an indication that the level of the MID is more
or less likely to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you
should consult publicly available sources for the levels of the MID.
License
Agreement
S&P® is a registered trademark
of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow
Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P Dow Jones
Indices LLC. “Standard & Poor’s®,” “S&P 500®” and “S&P®” are
trademarks of S&P. These trademarks have been sublicensed for certain purposes by our affiliate, MLPF&S. The Index
is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by MLPF&S.
The notes are not sponsored, endorsed,
sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or any of their respective affiliates (collectively, “S&P
Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express or implied, to the holders
of the notes or any member of the public regarding the advisability of investing in securities generally or in the notes particularly
or the ability of the Index to track general market performance. S&P Dow Jones Indices’ only relationship to MLPF&S
with respect to the Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow
Jones Indices and/or its third party licensors. The Index is determined, composed and calculated by S&P Dow Jones Indices
without regard to us, MLPF&S, or the notes. S&P Dow Jones Indices have no obligation to take our needs, BAC’s
needs or the needs of MLPF&S or holders of the notes into consideration in determining, composing or calculating the Index.
S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount of the
notes or the timing of the issuance or sale of the notes or in the determination or calculation of the equation by which the notes are
to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration,
marketing or trading of the notes. There is no assurance that investment products based on the Index will accurately track
index performance or provide positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment
advisors. Inclusion of a security or futures contract within an index is not a recommendation by S&P Dow Jones Indices
to buy, sell, or hold such security or futures contract, nor is it considered to be investment advice. Notwithstanding
the foregoing, CME Group Inc. and its affiliates may independently issue and/or sponsor financial products unrelated to the notes
currently being issued by us, but which may be similar to and competitive with the notes. In addition, CME Group Inc. and
its affiliates may trade financial products which are linked to the performance of the Index. It is possible that this trading
activity will affect the value of the notes.
S&P DOW JONES INDICES DO NOT GUARANTEE
THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE MID OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING
BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW
JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW
JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US, BAC, MLPF&S, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE MID OR WITH RESPECT TO ANY DATA RELATED
|
BUFFERED NOTES | PS-13
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
THERETO. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE,
OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND MLPF&S, OTHER THAN THE LICENSORS
OF S&P DOW JONES INDICES.
|
BUFFERED NOTES | PS-14
|
Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
Supplement to the Plan of Distribution; Role
of BofAS and Conflicts of Interest
BofAS, a broker-dealer affiliate
of ours, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling
agent in the distribution of the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121.
BofAS may not make sales in this offering to any of its discretionary accounts without the prior written approval of the account
holder.
Under our distribution agreement
with BofAS, BofAS will purchase the Notes from us as principal at the public offering price indicated on the cover of this pricing
supplement, less the indicated underwriting discount. BofAS will sell the Notes to other broker-dealers that will participate in
the offering and that are not affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may
sell the Notes to one or more additional broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer
and that not all dealers will purchase or repurchase the Notes at the same discount. Certain dealers who purchase the Notes for
sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions. The public
offering price for investors purchasing the Notes in these fee-based advisory accounts may be as low as $997.50 per Note. In addition
to the underwriting discount above, if any, an affiliate of BofA Finance will pay a referral fee of up to $5.00 per $1,000 in principal
amount of the notes in connection with the distribution of the notes to other registered broker-dealers.
BofAS and any of our other broker-dealer
affiliates may use this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for offers
and sales in secondary market transactions and market-making transactions in the Notes. However, they are not obligated to engage
in such secondary market transactions and/or market-making transactions. The selling agent may act as principal or agent in these
transactions, and any such sales will be made at prices related to prevailing market conditions at the time of the sale.
At BofAS’s discretion, for
a short, undetermined initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary market
at a price that may exceed the initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based on
then-prevailing market conditions and other considerations, including the performance of the Underlyings and the remaining term
of the Notes. However, none of us, the Guarantor, BofAS or any of our other affiliates is obligated to purchase your Notes at any
price or at any time, and we cannot assure you that any party will purchase your Notes at a price that equals or exceeds the initial
estimated value of the Notes.
Any price that BofAS may pay to
repurchase the Notes will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction
costs. At certain times, this price may be higher than or lower than the initial estimated value of the Notes.
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.
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United Kingdom
The communication of this pricing supplement,
the accompanying product supplement, the accompanying prospectus supplement, the accompanying prospectus and any other document
or materials relating to the issue of the Notes offered hereby is not being made, and such documents and/or materials have not
been approved, by an authorized person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets
Act 2000, as amended (the “FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must
not be passed on to, the general public in the United Kingdom. The communication of such documents and/or materials as a financial
promotion is only being made to those persons in the United Kingdom who have professional experience in matters relating to investments
and who fall within the definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial Promotion Order”)), or who fall within Article
49(2)(a) to (d) of the Financial Promotion Order, or who are any other persons to whom it may otherwise lawfully be made under
the Financial Promotion Order (all such persons together being referred to as “relevant persons”). In the United Kingdom,
the Notes offered hereby are only available to, and any investment or investment activity to which this pricing supplement, the
accompanying product supplement, the accompanying prospectus supplement and the accompanying prospectus relates will be engaged
in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this pricing
supplement, the accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus or any of
their contents.
Any invitation or inducement to engage
in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only
be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to BofA Finance,
as Issuer, or BAC, as Guarantor.
All applicable provisions of the FSMA
must be complied with in respect to anything done by any person in relation to the Notes in, from or otherwise involving the United
Kingdom.
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Structuring the Notes
The Notes
are our debt securities, the return on which is linked to the performance of the Underlyings. The related guarantee is BAC’s
obligation. As is the case for all of our and BAC’s respective debt securities, including our market-linked notes, the economic
terms of the Notes reflect our and BAC’s actual or perceived creditworthiness at the time of pricing. In addition, because
market-linked notes result in increased operational, funding and liability management costs to us and BAC, BAC typically borrows
the funds under these types of notes at a rate, which we refer to in this pricing supplement as BAC’s internal funding rate,
that is more favorable to BAC than the rate that it might pay for a conventional fixed or floating rate debt security. This generally
relatively lower internal funding rate, which is reflected in the economic terms of the Notes, along with the fees and charges
associated with market-linked notes, typically results in the initial estimated value of the Notes on the pricing date being less
than their public offering price.
In order to meet our payment
obligations on the Notes, at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which may include
call options, put options or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging arrangements
are determined based upon terms provided by BofAS and its affiliates, and take into account a number of factors, including our
and BAC’s creditworthiness, interest rate movements, the volatility of the Underlyings, the tenor of the Notes and the hedging
arrangements. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has
advised us that the hedging arrangements will include hedging related charges, reflecting the costs associated with, and our affiliates’
profit earned from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces,
actual profits or losses from these hedging transactions may be more or less than any expected amounts.
For further
information, see “Risk Factors” beginning on page PS-6 above and “Supplemental Use of Proceeds” on page
PS-19 of the accompanying product supplement.
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BUFFERED NOTES | PS-17
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U.S. Federal Income Tax Summary
The following summary of the material U.S.
federal income tax considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent inconsistent
supersedes, the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and under
“U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive of all possible
tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations
promulgated under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations),
rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently
in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance
can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences
described below. This summary does not include any description of the tax laws of any state or local governments, or of any foreign
government, that may be applicable to a particular holder.
Although the Notes are issued by us, they
will be treated as if they were issued by BAC for U.S. federal income tax purposes. Accordingly throughout this tax discussion,
references to “we,” “our” or “us” are generally to BAC unless the context requires otherwise.
This summary is directed solely to U.S.
Holders and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the Notes upon original issuance and will
hold the Notes as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment,
and that are not excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor
concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax
consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes
in U.S. federal or other tax laws.
General
Although there is no statutory, judicial,
or administrative authority directly addressing the characterization of the Notes, in the opinion of our counsel, Sidley Austin
LLP, and based on certain factual representations received from us, the Notes should be treated as single financial contracts with
respect to the Underlyings and under the terms of the Notes, we and every investor in the Notes agree, in the absence of an administrative
determination or judicial ruling to the contrary, to treat the Notes in accordance with such characterization. This discussion
assumes that the Notes constitute single financial contracts with respect to the Underlyings for U.S. federal income tax purposes.
If the Notes did not constitute single financial contracts, the tax consequences described below would be materially different.
This characterization of the Notes is
not binding on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization
of the Notes or any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with
respect to their proper characterization and treatment. Due to the absence of authorities on point, significant aspects of the
U.S. federal income tax consequences of an investment in the Notes are not certain, and no assurance can be given that the IRS
or any court will agree with the characterization and tax treatment described in this pricing supplement. Accordingly, you are
urged to consult your tax advisor regarding all aspects of the U.S. federal income tax consequences of an investment in the Notes,
including possible alternative characterizations.
Unless otherwise stated, the following
discussion is based on the characterization described above. The discussion in this section assumes that there is a significant
possibility of a significant loss of principal on an investment in the Notes.
We will not attempt to ascertain whether
any issuer of a component stock included in an Underlying would be treated as a “passive foreign investment company”
(“PFIC”), within the meaning of Section 1297 of the Code, or a United States real property holding corporation, within
the meaning of Section 897(c) of the Code. If the issuer of one or more stocks included in an Underlying were so treated, certain
adverse U.S. federal income tax consequences could possibly apply to a holder of the Notes. You should refer to information filed
with the SEC by the issuers of the component stocks included in the Underlyings and consult your tax advisor regarding the possible
consequences to you, if any, if any issuer of a component stock included in the Underlyings is or becomes a PFIC or is or becomes
a United States real property holding corporation.
U.S. Holders
Upon receipt of a cash payment at maturity
or upon a sale or exchange of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to
the difference between the amount realized and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis
in the Notes will equal the amount paid by that holder to acquire them. 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.
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Alternative Tax Treatments. Due
to the absence of authorities that directly address the proper tax treatment of the Notes, prospective investors are urged to consult
their tax advisors regarding all possible alternative tax treatments of an investment in the Notes. In particular, the IRS could
seek to subject the Notes to the Treasury regulations governing contingent payment debt instruments. If the IRS were successful
in that regard, the timing and character of income on the Notes would be affected significantly. Among other things, a U.S. Holder
would be required to accrue original issue discount every year at a “comparable yield” determined at the time of issuance.
In addition, any gain realized by a U.S. Holder at maturity or upon a sale or exchange of the Notes generally would be treated
as ordinary income, and any loss realized at maturity or upon a sale or exchange of the Notes generally would be treated as ordinary
loss to the extent of the U.S. Holder’s prior accruals of original issue discount, and as capital loss thereafter.
The IRS released Notice 2008-2 (the “Notice”),
which sought comments from the public on the taxation of financial instruments currently taxed as “prepaid forward contracts.”
This Notice addresses instruments such as the Notes. According to the Notice, the IRS and Treasury are considering whether a holder
of an instrument such as the Notes should be required to accrue ordinary income on a current basis, regardless of whether any payments
are made prior to maturity. It is not possible to determine what guidance the IRS and Treasury will ultimately issue, if any. Any
such future guidance may affect the amount, timing and character of income, gain, or loss in respect of the Notes, possibly with
retroactive effect.
The IRS and Treasury are also considering
additional issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether
foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, whether Section 1260 of
the Code, concerning certain “constructive ownership transactions,” generally applies or should generally apply to
such instruments, and whether any of these determinations depend on the nature of the underlying asset.
In addition, proposed Treasury regulations
require the accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble
to the regulations states that the “wait and see” method of accounting does not properly reflect the economic accrual
of income on those contracts, and requires current accrual of income for some contracts already in existence. While the proposed
regulations do not apply to prepaid forward contracts, the preamble to the proposed regulations expresses the view that similar
timing issues exist in the case of prepaid forward contracts. If the IRS or Treasury publishes future guidance requiring current
economic accrual for contingent payments on prepaid forward contracts, it is possible that you could be required to accrue income
over the term of the Notes.
Because of the absence of authority regarding
the appropriate tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner
that results in tax consequences that are different from those described above. For example, the IRS could possibly assert that
any gain or loss that a holder may recognize at maturity or upon the sale or exchange of the Notes should be treated as ordinary
gain or loss.
Because each Underlying is an index that
periodically rebalances, it is possible that the Notes could be treated as a series of single financial contracts, each of which
matures on the next rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated
as disposing of the Notes on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S.
Holder would accordingly likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s
tax basis in the Notes (which would be adjusted to take into account any prior recognition of gain or loss) and the fair market
value of the Notes on such date.
Non-U.S. Holders
Except as discussed below, a Non-U.S. Holder
generally will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes provided that
the Non-U.S. Holder complies with applicable certification requirements and that the payment is not effectively connected with
the conduct by the Non-U.S. Holder of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale or exchange of
the Notes or their settlement at maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien
individual and is present in the U.S. for 183 days or more during the taxable year of the sale, exchange, or settlement and certain
other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged
in the conduct of a trade or business within the U.S. and if gain realized on the settlement at maturity, or upon sale or exchange
of the Notes, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is attributable
to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S. federal
withholding tax, generally will be subject to U.S. federal income tax on such gain on a net income basis in the same manner as
if it were a U.S. Holder. Such Non-U.S. Holders should read the material under the heading “—U.S. Holders,” for
a description of the U.S. federal income tax consequences of acquiring, owning, and disposing of the Notes. In addition, if such
Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30% (or such lower rate provided
by any applicable tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with
its conduct of a trade or business in the U.S., subject to certain adjustments.
A “dividend equivalent” payment
is treated as a dividend from sources within the United States and such payments generally would be subject to a
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Buffered Notes Linked to the Least Performing of the S&P 500® Index and the S&P MidCap 400® Index
30% U.S. withholding tax if paid to a Non-U.S.
Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”)
that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an
“underlying security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income
tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides
that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one instruments and that are
issued before January 1, 2023. Based on our determination that the Notes are not delta-one instruments, Non-U.S. Holders should
not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is possible that the Notes
could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the Underlyings
or the Notes, and following such occurrence the Notes could be treated as subject to withholding on dividend equivalent payments.
Non-U.S. Holders that enter, or have entered, into other transactions in respect of the Underlyings or the Notes should consult
their tax advisors as to the application of the dividend equivalent withholding tax in the context of the Notes and their other
transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the applicable paying agent) would
be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.
As discussed above, alternative characterizations
of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or
clarification of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax, tax
will be withheld at the applicable statutory rate. As discussed above, the IRS has indicated in the Notice that it is considering
whether income in respect of instruments such as the Notes should be subject to withholding tax. Prospective Non-U.S. Holders should
consult their own tax advisors regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax. Under current
law, while the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible
in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty
benefit, a Note is likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities
should consult their own tax advisors regarding the U.S. federal estate tax consequences of investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S.
Federal Income Tax Considerations — Taxation of Debt Securities — Backup Withholding and Information Reporting”
in the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules
to payments made on the Notes.
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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:
These documents (together, the
“Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed
on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should read the Note
Prospectus, including this pricing supplement, for information about us, BAC and this offering. Any prior or contemporaneous oral
statements and any other written materials you may have received are superseded by the Note Prospectus. Certain terms used but
not defined in this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus supplement.
Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,”
“our,” or similar references are to BofA Finance, and not to BAC.
The Notes are our senior
debt securities. Any payments on the Notes are fully and unconditionally guaranteed by BAC. The Notes and the related
guarantee are not insured by the Federal Deposit Insurance Corporation or secured by collateral. The Notes will rank
equally in right of payment with all of our other unsecured and unsubordinated obligations, and the related guarantee will rank
equally in right of payment with all of BAC’s other unsecured and unsubordinated obligations, in each case, except obligations
that are subject to any priorities or preferences by law. Any payments due on the Notes, including any repayment of the principal
amount, will be subject to the credit risk of BofA Finance, as Issuer, and BAC, as Guarantor.
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BUFFERED NOTES | PS-21
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