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 Technology Select Sector SPDR® Fund and the SPDR® S&P® Biotech ETF
|
•
|
Approximate
7.5 year term if not called prior to maturity.
|
|
•
|
Payments
on the Notes will depend on the individual performance of the Technology Select Sector SPDR® Fund and the SPDR® S&P®
Biotech ETF (each an “Underlying”).
|
|
•
|
Contingent
coupon rate of between [7.25% and 9.25%] per annum (between [0.60417% and 0.77084%] per month) payable monthly if the closing price
of each Underlying on the applicable Observation Date is greater than or equal to 80% of its Starting Value. The actual coupon
will be determined on the pricing date.
|
|
•
|
Beginning
in June 2020, automatically callable quarterly for an amount equal to the principal amount plus the relevant contingent coupon
if the closing price of
each
Underlying is greater than or equal to its Starting Value on any Observation Date occurring
in March, June, September, December of each year, (other than the final Observation Date).
|
|
•
|
Assuming
the Notes are not called prior to maturity, if either Underlying declines by more than 20% from its Starting Value, the investor
will receive a 1:1 downside beyond a 20% decline, with up to 80% of the principal at risk; otherwise, investors will receive the
principal amount and, if payable, the applicable contingent coupon.
|
|
•
|
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 June 25, 2019, expected to issue on June 28, 2019 and expected to mature on December 31, 2026. The
Notes will not be listed on any securities exchange.
|
The initial estimated value of the Notes as of the pricing date is expected to be between $915 and $935 per Note, which is less
than the public offering price listed below.
See “Risk Factors” beginning on page PS-10 of this pricing supplement
and “Structuring the Notes” on page PS-22 of this pricing supplement for additional information. The actual value of
your Notes at any time will reflect many factors and cannot be predicted with accuracy.
Potential purchasers of the Notes should
consider the information in “Risk Factors” beginning on page PS-10 of this pricing supplement, page PS-5 of the accompanying
product supplement, page S-4 of the accompanying prospectus supplement, and page 7 of the accompanying prospectus.
None of
the Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has
approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or complete. Any
representation to the contrary is a criminal offense.
|
Public offering price
(1)
|
Underwriting discount
(1)
|
Proceeds, before expenses, to BofA Finance
|
Per Note
|
$1,000
|
$40
|
$960
|
Total
|
|
|
|
|
(1)
|
Certain dealers who purchase
the Notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions.
|
The
public offering price for investors purchasing the Notes in these fee-based advisory accounts may be as low as $960 per note.
The Notes and the related
guarantee:
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
Selling Agent
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
Terms
of the Notes
The
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR®
Fund and the SPDR® S&P® Biotech ETF (the “Notes”) provide a monthly Contingent Coupon Payment of between
[$6.0417% and $7.7084] on the applicable Contingent Payment Date if, on any monthly Observation Date, the Observation Value of
each
Underlying is greater than or equal to its Coupon Barrier. The actual Contingent Coupon Payment will be determined
on the pricing date. Beginning in June 2020, if the Observation Value of
each
Underlying is greater than or equal to its
Starting Value on any Observation Date occurring in March, June, September, December of each year, (other than the final Observation
Date), the Notes will be automatically called, in whole but not in part, at 100% of the principal amount, together with the relevant
Contingent Coupon Payment. No further amounts will be payable following an Automatic Call. If the Notes are not automatically
called and the Least Performing Underlying declines by more than 20.00% from its Starting Value, there is full exposure to declines
in the Least Performing Underlying beyond a 20% decline, and you will lose some or a significant portion of your investment in
the Notes. Otherwise, at maturity, you will receive the principal amount and, if payable, the final Contingent Coupon Payment.
The Notes are not traditional debt securities and it is possible that the Notes will not pay any Contingent Coupon Payments, and
you may lose some or a significant portion of your principal amount at maturity. Any payments on the Notes will be calculated
based on the $1,000 principal amount per Note 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 7.5 years, unless previously automatically called.
|
Underlyings:
|
The Technology Select Sector SPDR
®
Fund (the “XLK”) (Bloomberg symbol: “XLK”) and the SPDR® S&P® Biotech ETF (the “XBI”) (Bloomberg symbol: “XBI”).
|
Pricing Date*:
|
June 25, 2019
|
Issue Date*:
|
June 28, 2019
|
Valuation Date*:
|
December 28, 2026, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” of the accompanying product supplement. If the Valuation Date is not a business day, the Valuation Date will be postponed to the next business day.
|
Maturity Date*:
|
December 31, 2026
|
Starting Value:
|
With respect to each Underlying, its Closing Market Price on the pricing date.
|
Observation Value:
|
With respect to each Underlying, its Closing Market Price on the applicable Observation Date, multiplied by its Price Multiplier.
|
Ending Value:
|
With respect to each Underlying, its Closing Market Price on the Valuation Date, as determined by the Calculation Agent, multiplied by its Price Multiplier.
|
Price Multiplier:
|
With respect to each Underlying, 1, subject to adjustment for certain events as described in “Description of the Notes—Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-23 of product supplement EQUITY-1.
|
Coupon Barrier:
|
With respect to each Underlying, 80% of its Starting Value.
|
Threshold Value:
|
With respect to each Underlying, 80% of its Starting Value.
|
Contingent Coupon Payment:
|
If, on any monthly
Observation Date, the Observation Value of each Underlying is greater than or equal to its Coupon Barrier, we will pay a Contingent
Coupon Payment of between [$6.0417% and $7.7084] per $1,000 in principal amount (equal to a rate of between [0.60417% and 0.77084%]
per month or between [7.25% and 9.25%] per annum) on the applicable Contingent Payment Date. The actual Contingent Coupon Payment
will be determined on the pricing date.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
2
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
Automatic Call:
|
Beginning in June 2020, all (but not less than all) of the Notes will be automatically called if the Observation Value of
each
Underlying is greater than or equal to its Starting Value on any Observation Date, occurring in March, June, September, December of each year, (other than the final Observation Date). If the Notes are automatically called, the Early Redemption Amount will be paid on the applicable Contingent Payment Date. No further amounts will be payable following an Automatic Call.
|
Early Redemption
Amount:
|
For each $1,000 principal amount
of Notes, $1,000 plus the applicable Contingent Coupon Payment.
|
Redemption Amount:
|
If the Notes have
not been automatically called prior to maturity, the Redemption Amount per $1,000 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; plus,
if the Ending Value of the Least Performing Underlying is greater
than or equal
to its Coupon Barrier, the final Contingent Coupon Payment.
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 the principal amount and you could lose up to 80% of your principal amount.
|
Observation Dates*:
|
As set forth on
page PS-5. While Observation Dates occur monthly, the determination as to whether the notes will be automatically called occurs
quarterly. Please see “Automatic Call” above.
|
Contingent Payment Dates*:
|
As set forth on page PS-5.
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
Selling Agent:
|
BofAS
|
CUSIP:
|
09709TSQ5
|
Underlying Return:
|
With respect to
each Underlying,
|
Least Performing Underlying:
|
The Underlying with the lowest Underlying Return.
|
Events of Default and Acceleration:
|
If an Event of Default, as defined in the senior indenture and in the section entitled
“
Events of Default and Rights of Acceleration
”
beginning on page 35 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption
“—
Redemption Amount,
”
above, calculated as though the date of acceleration were the maturity date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. The calculation agent shall pro-rate the period of time elapsed between the issue date of the Notes and 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
|
Observation Dates and Contingent Payment
Dates
Observation Dates*
|
|
Contingent Payment
Dates**
|
July 25, 2019
|
|
July 30, 2019
|
August 26, 2019
|
|
August 29, 2019
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
3
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
September 25, 2019
|
|
September 30, 2019
|
October 25, 2019
|
|
October 30, 2019
|
November 25, 2019
|
|
November 29, 2019
|
December 26, 2019
|
|
December 31, 2019
|
January 27, 2020
|
|
January 30, 2020
|
February 25, 2020
|
|
February 28, 2020
|
March 25, 2020
|
|
March 30, 2020
|
April 27, 2020
|
|
April 30, 2020
|
May 26, 2020
|
|
May 29, 2020
|
June 25, 2020***
|
|
June 30, 2020
|
July 27, 2020
|
|
July 30, 2020
|
August 25, 2020
|
|
August 28, 2020
|
September 25, 2020***
|
|
September 30, 2020
|
October 26, 2020
|
|
October 29, 2020
|
November 25, 2020
|
|
December 1, 2020
|
December 28, 2020***
|
|
December 31, 2020
|
January 25, 2021
|
|
January 28, 2021
|
February 25, 2021
|
|
March 2, 2021
|
March 25, 2021***
|
|
March 30, 2021
|
April 26, 2021
|
|
April 29, 2021
|
May 25, 2021
|
|
May 28, 2021
|
June 25, 2021***
|
|
June 30, 2021
|
July 26, 2021
|
|
July 29, 2021
|
August 25, 2021
|
|
August 30, 2021
|
September 27, 2021***
|
|
September 30, 2021
|
October 25, 2021
|
|
October 28, 2021
|
November 26, 2021
|
|
December 1, 2021
|
December 27, 2021***
|
|
December 30, 2021
|
January 25, 2022
|
|
January 28, 2022
|
February 25, 2022
|
|
March 2, 2022
|
March 25, 2022***
|
|
March 30, 2022
|
April 25, 2022
|
|
April 28, 2022
|
May 25, 2022
|
|
May 31, 2022
|
June 27, 2022***
|
|
June 30, 2022
|
July 25, 2022
|
|
July 28, 2022
|
August 25, 2022
|
|
August 30, 2022
|
September 26, 2022***
|
|
September 29, 2022
|
October 25, 2022
|
|
October 28, 2022
|
November 25, 2022
|
|
November 30, 2022
|
December 27, 2022***
|
|
December 30, 2022
|
January 25, 2023
|
|
January 30, 2023
|
February 27, 2023
|
|
March 2, 2023
|
March 27, 2023***
|
|
March 30, 2023
|
April 25, 2023
|
|
April 28, 2023
|
May 25, 2023
|
|
May 31, 2023
|
June 26, 2023***
|
|
June 29, 2023
|
July 25, 2023
|
|
July 28, 2023
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
4
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
August 25, 2023
|
|
August 30, 2023
|
September 25, 2023***
|
|
September 28, 2023
|
October 25, 2023
|
|
October 30, 2023
|
November 27, 2023
|
|
November 30, 2023
|
December 26, 2023***
|
|
December 29, 2023
|
January 25, 2024
|
|
January 30, 2024
|
February 26, 2024
|
|
February 29, 2024
|
March 25, 2024***
|
|
March 28, 2024
|
April 25, 2024
|
|
April 30, 2024
|
May 28, 2024
|
|
May 31, 2024
|
June 25, 2024***
|
|
June 28, 2024
|
July 25, 2024
|
|
July 30, 2024
|
August 26, 2024
|
|
August 29, 2024
|
September 25, 2024***
|
|
September 30, 2024
|
October 25, 2024
|
|
October 30, 2024
|
November 25, 2024
|
|
November 29, 2024
|
December 26, 2024***
|
|
December 31, 2024
|
January 27, 2025
|
|
January 30, 2025
|
February 25, 2025
|
|
February 28, 2025
|
March 25, 2025***
|
|
March 28, 2025
|
April 25, 2025
|
|
April 30, 2025
|
May 27, 2025
|
|
May 30, 2025
|
June 25, 2025***
|
|
June 30, 2025
|
July 25, 2025
|
|
July 30, 2025
|
August 25, 2025
|
|
August 28, 2025
|
September 25, 2025***
|
|
September 30, 2025
|
October 27, 2025
|
|
October 30, 2025
|
November 25, 2025
|
|
December 1, 2025
|
December 26, 2025***
|
|
December 31, 2025
|
January 26, 2026
|
|
January 29, 2026
|
February 25, 2026
|
|
March 2, 2026
|
March 25, 2026***
|
|
March 30, 2026
|
April 27, 2026
|
|
April 30, 2026
|
May 26, 2026
|
|
May 29, 2026
|
June 25, 2026***
|
|
June 30, 2026
|
July 27, 2026
|
|
July 30, 2026
|
August 25, 2026
|
|
August 28, 2026
|
September 25, 2026***
|
|
September 30, 2026
|
October 26, 2026
|
|
October 29, 2026
|
November 25, 2026
|
|
December 1, 2026
|
12/28/2026( the "Valuation Date”)
|
|
12/31/2026 (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” on
page PS-19 of the accompanying product supplement EQUITY-1. If an Observation Date is not a business day, such Observation Date
will be postponed to the next business day.
** Postponement of a quarterly Observation Date, will not
cause the postponement of the Contingent Payment Date relating to such Observation Date.
*** The Notes will be automatically called on such date if the Observation Value of each Underlying is greater than or equal to
its Starting Value. If the Notes are
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
5
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
automatically called, the Early Redemption Amount will be
paid on the applicable Contingent Payment Date
Any payments
on the Notes depend on the credit risk of BofA Finance, as issuer, and BAC, as guarantor, and on the performance of the Underlyings.
The economic terms of the Notes are based on BAC’s internal funding rate, which is the rate it would pay to borrow funds
through the issuance of market-linked Notes, and the economic terms of certain related hedging arrangements BAC’s affiliates
enter into. BAC’s internal funding rate is typically lower than the rate it would pay when it issues conventional fixed or
floating rate debt securities. This difference in funding rate, as well as the underwriting discount and the hedging related charges
described below (see “Risk Factors” beginning on page PS-10), 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-10 and
“Structuring the Notes” on page PS-22.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
6
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
Contingent Coupon Payment and Redemption
Amount Determination
On each Contingent Payment
Date, you may receive a Contingent Coupon Payment determined as follows:
Assuming
the Notes have not been automatically called, on the Maturity Date, you will receive a cash payment per Note determined as follows:
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
7
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
Total Contingent Coupon Payment Examples
The
table below illustrates the hypothetical total Contingent Coupon Payments per $1,000 in principal amount over the term of the Notes,
based on a Contingent Coupon Payment of $6.87505 (the midpoint of the Contingent Coupon Payment range of between [$6.0417% and
$7.7084]) per Note, depending on how many Contingent Coupon Payments are payable prior to an Automatic Call or maturity. Depending
on the performance of the Underlyings, you may not receive any Contingent Coupon Payments during the term of the Notes.
Number of Contingent Coupon Payment
s
|
Total Contingent Coupon Payment
s
|
0
|
$0.000
|
6
|
$41.2503
|
12
|
$82.5006
|
18
|
$123.7509
|
24
|
$165.0012
|
30
|
$206.2515
|
36
|
$247.5018
|
42
|
$288.7521
|
48
|
$330.0024
|
54
|
$371.2527
|
60
|
$412.5030
|
66
|
$453.7533
|
72
|
$495.0036
|
78
|
$536.2539
|
84
|
$577.5042
|
90
|
$618.7545
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
8
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
Hypothetical Payout Profile and Examples
of Payments at Maturity
Contingent Income Auto-Callable
Yield Notes® Table
The following
table is for purposes of illustration only. It assumes the Notes have not been automatically called prior to maturity and is based
on
hypothetical
values and shows hypothetical returns on the Notes. The table illustrates the calculation of the Redemption
Amount and total return based on a hypothetical Starting Value of 100, a hypothetical Coupon Barrier of 80 for the Least Performing
Underlying, a hypothetical Threshold Value of 80 for the Least Performing Underlying, a Contingent Coupon Payment of $6.87505 (the
midpoint of the Contingent Coupon Payment range of between [$6.0417% and $7.7084]) per Note and a range of hypothetical Ending
Values of the Least Performing Underlying.
The actual amount you receive and the resulting total return will depend on the actual
Starting Values, Coupon Barriers, Threshold Values, Observation Values and Ending Values of the Underlyings, the actual Contingent
Coupon Payment, whether the Notes are automatically called prior to maturity, and whether you hold the Notes to maturity.
The
following examples do not take into account any tax consequences from investing in the Notes.
For recent
actual prices of the Underlyings, see “The Underlyings” section below. The Ending Value of each Underlying will not
include any income generated by dividends paid on the stocks represented by that Underlying, which you would otherwise be entitled
to receive if you invested in those stocks directly. In addition, all payments on the Notes are subject to issuer and guarantor
credit risk.
Ending Value of the
Least Performing Underlying
|
Underlying Return of the
Least Performing Underlying
|
Redemption
Amount per Note
|
Return
on the Notes
(1)
|
160.00
|
60.00%
|
$1,006.87505
2)
|
0.687505%
|
150.00
|
50.00%
|
$1,006.87505
|
0.687505%
|
140.00
|
40.00%
|
$1,006.87505
|
0.687505%
|
130.00
|
30.00%
|
$1,006.87505
|
0.687505%
|
120.00
|
20.00%
|
$1,006.87505
|
0.687505%
|
110.00
|
10.00%
|
$1,006.87505
|
0.687505%
|
105.00
|
5.00%
|
$1,006.87505
|
0.687505%
|
102.00
|
2.00%
|
$1,006.87505
|
0.687505%
|
100.00
(3)
|
0.00%
|
$1,006.87505
|
0.687505%
|
90.00
|
-10.00%
|
$1,006.87505
|
0.687505%
|
80.00
(4)
|
-20.00%
|
$1,006.87505
|
0.687505%
|
79.99
|
-20.01%
|
$999.99000
|
-0.010000%
|
70.00
|
-30.00%
|
$900.00000
|
-10.000000%
|
50.00
|
-50.00%
|
$700.00000
|
-30.000000%
|
0.00
|
-100.00%
|
$200.00000
|
-80.000000%
|
|
(1)
|
The “Return on the
Notes” is calculated based on the Redemption Amount and potential final Contingent Coupon Payment, not including any Contingent
Coupon Payments paid prior to maturity.
|
|
(2)
|
This amount represents
the sum of the principal amount and the final Contingent Coupon Payment.
|
|
(3)
|
The hypothetical Starting
Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent the actual Starting
Value for any Underlying.
|
|
(4)
|
This is the
hypothetical
Coupon Barrier and
Threshold Value of the Least Performing Underlying.
|
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
9
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
Risk Factors
Your investment in the Notes
entails significant risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes
should be made only after carefully considering the risks of an investment in the Notes, including those discussed below, with
your advisors in light of your particular circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable
about significant elements of the Notes or financial matters in general. You should carefully review the more detailed explanation
of risks relating to the Notes in the “Risk Factors” sections beginning on page PS-5 of the accompanying product supplement,
page S-4 of the accompanying prospectus supplement and page 7 of the accompanying prospectus, identified on page PS-27 below.
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•
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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 and the Ending Value of
any
Underlying is less than its Threshold Value,
you will lose 1% of the principal amount for each 1% that the Ending Value of the Least Performing Underlying is less than its
Threshold Value. In that case, you will lose some or a significant portion of your investment in the Notes.
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•
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Your
return on the Notes is limited to the return represented by the Contingent Coupon Payments, if any, over the term of the Notes.
Your return on the Notes is limited to the Contingent Coupon Payments paid over the term of the Notes, regardless of the extent
to which the Ending Value of any Underlying exceeds its Starting Value. Similarly, the amount payable at maturity or upon an Automatic
Call will never exceed the sum of the principal amount and the applicable Contingent Coupon Payment, regardless of the extent to
which the Observation Value of any Underlying exceeds its Starting Value. In contrast, a direct investment in the Underlyings or
the securities included in one or more of the Underlyings would allow you to receive the benefit of any appreciation in their prices.
Thus, any return on the Notes will not reflect the return you would realize if you actually owned those securities and received
the dividends paid or distributions made on them.
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•
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The
Notes are subject to a potential Automatic Call, which would limit your ability to receive the Contingent Coupon Payments over
the full term of the Notes.
The Notes are subject to a potential Automatic Call. Beginning in June 2020, the Notes will be
automatically called if, on any Observation Date occurring in March, June, September, December of each year, (other than the final
Observation Date), the Observation Value of each Underlying is greater than or equal to its Starting Value. If the Notes are automatically
called, you will be entitled to receive the principal amount and the Contingent Coupon Payment with respect to the applicable Observation
Date. In this case, you will lose the opportunity to continue to receive Contingent Coupon Payments after the date of the Automatic
Call. If the Notes are called prior to the maturity date, you may be unable to invest in other securities with a similar level
of risk that could provide a return that is similar to the Notes.
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•
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You
may not receive any Contingent Coupon Payments.
The Notes do not provide for any regular fixed coupon payments. Investors in
the Notes will not necessarily receive any Contingent Coupon Payments on the Notes. If the Observation Value of any Underlying
is less than its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment applicable to that Observation
Date. If the Observation Value of any Underlying is less than its Coupon Barrier on all the Observation Dates during the term of
the Notes, you will not receive any Contingent Coupon Payment during the term of the Notes, and will not receive a positive return
on the Notes.
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•
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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.
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•
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Any
payments on the Notes are subject to the credit risk of BofA Finance and the Guarantor, and actual or perceived changes in BofA
Finance or the Guarantor’s creditworthiness are expected to affect the value of the Notes
. The Notes are our senior unsecured
debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed
by any entity other than the Guarantor. As a result, your receipt of the Early Redemption Amount or the Redemption Amount at maturity,
as applicable, will be dependent upon our ability and the ability of the Guarantor to repay our respective obligations under the
Notes on the applicable Contingent Payment Date or the maturity date, regardless of the Observation Value or Ending Value of any
Underlying as compared to its Starting Value or Threshold Value.
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•
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We
are a finance subsidiary and, as such, will have limited assets and operations.
We are a finance subsidiary of BAC and will
have no assets, operations or revenues other than those related to the issuance, administration and repayment of our debt securities
that are guaranteed by the Guarantor. As a finance subsidiary, to meet our obligations under the Notes, we are dependent upon payment
or contribution of funds and/or repayment of outstanding loans from the Guarantor and/or its other subsidiaries. Therefore, our
ability to make payments on the Notes may be limited.
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•
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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 of this preliminary pricing supplement, and the initial estimated value as of the pricing
date that will be provided on the cover of the final pricing supplement, are each an estimate 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
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
10
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
events, which may prove
to be incorrect. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for
them and lower than their initial estimated value. This is due to, among other things, changes in the prices of the Underlyings,
the Guarantor’s internal funding rate, and the inclusion in the public offering price of the underwriting discount and the
hedging related charges, all as further described in "Structuring the Notes" below. These factors, together with various
credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell
the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways.
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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.
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•
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We
cannot assure you that a trading market for your Notes will ever develop or be maintained.
We will not list the Notes on any
securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that market will be liquid or
illiquid.
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•
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The
Contingent Coupon Payment or Redemption Amount, as applicable, will not reflect the prices of the Underlyings other than on the
Observation Dates or the Valuation Date, as applicable.
The prices of the Underlyings during the term of the Notes other than
on the Observation Dates will not affect payments on the Notes. Notwithstanding the foregoing, investors should generally be aware
of the performance of the Underlyings while holding the Notes. The calculation agent will determine whether each Contingent Coupon
Payment is payable and calculate the Contingent Coupon Payment or the Redemption Amount, as applicable, by comparing only the Starting
Value, the Coupon Barrier or the Threshold Value, as applicable, to the Observation Value or the Ending Value for each Underlying.
No other prices of the Underlyings will be taken into account. As a result, if the Notes are not automatically called prior to
maturity, you will receive less than the principal amount at maturity even if the price of each Underlying has increased at certain
times during the term of the Notes before the Least Performing Underlying decreases to a price that is less than its Threshold
Value as of the Valuation Date.
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•
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Because
the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may not receive any return
on the Notes and may lose some or all of your principal amount even if the Observation Value of one Underlying is always greater
than or equal to its Coupon Barrier or its Threshold Value, as applicable.
Your Notes are linked to the least performing of
the Underlyings, and a change in the price of one Underlying may not correlate with changes in the price of the other Underlying(s).
The Notes are not linked to a basket composed of the Underlyings, where the depreciation in the price of one Underlying could be
offset to some extent by the appreciation in the price of the other Underlying(s). In the case of the Notes, the individual performance
of each Underlying would not be combined, and the depreciation in the price of one Underlying would not be offset by any appreciation
in the price of the other Underlying(s). Even if the Observation Value of an Underlying is at or above its Coupon Barrier on an
Observation Date, you will not receive the Contingent Coupon Payment with respect to that Observation Date if the Observation Value
of the Least Performing Underlying is below its Coupon Barrier on that day. In addition, even if the Ending Value of an Underlying
is at or above its Threshold Value, you will lose a portion of your principal if the Ending Value of the Least Performing Underlying
is below its Threshold Value.
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•
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The
stocks held by each Underlying are concentrated in one sector
. Each of the Underlyings holds securities issued by companies
in the technology and biotechnology sectors, respectively. As a result, the stocks that will determine the performance of the Notes
are concentrated in a few sectors. Although an investment in the Notes will not give holders any ownership or other direct interests
in the securities held by the Underlyings, the return on an investment in the Notes will be subject to certain risks associated
with a direct equity investment in companies in these sectors. Accordingly, by investing in the Notes, you will not benefit from
the diversification which could result from an investment linked to companies that operate in multiple sectors.
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•
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Adverse
conditions in the technology sector may reduce your return on the notes.
All of the stocks held by the XLK are issued by companies
in the technology sector. Market or economic factors impacting technology companies and companies that rely heavily on technological
advances could have a major effect on the value of the XLK’s investments. The prices of stocks of technology companies and
companies that rely heavily on technology are particularly vulnerable to rapid changes in technology product cycles, rapid product
obsolescence, government regulation and competition, both domestically and internationally, including competition from foreign
competitors with lower production costs. Stocks of technology companies and companies that rely heavily on technology, especially
those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Technology companies are heavily dependent
on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally, companies
in the technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of
qualified personnel. Any of these factors may have an adverse effect on the return on the notes. Accordingly, by investing in the
notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in
multiple sectors.
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•
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Adverse
conditions in the biotechnology sector may reduce your return on the notes.
All of the stocks held by the XBI are issued by
companies whose primary lines of business are directly associated with the biotechnology sector. The profitability of these companies
is largely dependent on, among other things, demand for the companies’ products, regulatory influences on the biotechnology
market (including healthcare reform and receipt of regulatory approvals and compliance with complex regulatory requirements), pricing
and reimbursement from third party payors, continued innovation and successful development of new products, talent attraction and
retention, maintaining intellectual property rights and industry competition. Any adverse developments affecting the biotechnology
sector could adversely affect the price of the XBI and, in turn, the value of the notes.
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•
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The
anti-dilution adjustments will be limited.
The calculation agent may adjust the Price Multiplier of the Underlyings and other
terms of the
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|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
11
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
notes to reflect certain
corporate actions by the Underlyings, as described in the section “Description of the Notes—Anti-Dilution and Discontinuance
Adjustments Relating to ETFs” in the accompanying product supplement. The calculation agent will not be required to make
an adjustment for every event that may affect the Underlyings and will have broad discretion to determine whether and to what extent
an adjustment is required.
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•
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The
sponsor or investment advisor of an Underlying may adjust that Underlying in a way that affects its prices, and the sponsor or
investment advisor has no obligation to consider your interests.
The sponsor or investment advisor of an Underlying can
add, delete, or substitute the components included in that Underlying or make other methodological changes that could change its
price. Any of these actions could adversely affect the value of your Notes.
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•
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The
performance of each Underlying may not correlate with the performance of its underlying index (each, an “Underlying Index”)
as well as the net asset value per share of the Underlying, especially during periods of market volatility.
The performance
of each Underlying and that of its Underlying Index generally will vary due to, for example, transaction costs, management fees,
certain corporate actions, and timing variances. Moreover, it is also possible that the performance of an Underlying may not fully
replicate or may, in certain circumstances, diverge significantly from the performance of its Underlying Index. This could be due
to, for example, the Underlying not holding all or substantially all of the underlying assets included in the Underlying Index
and/or holding assets that are not included in the Underlying Index, the temporary unavailability of certain securities in the
secondary market, the performance of any derivative instruments held by the Underlying, differences in trading hours between the
Underlying (or the underlying assets held by the Underlying) and 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 of each Underlying are traded on a securities exchange and are subject to market supply and investor demand, the market
price of one share of the Underlying may differ from its net asset value per share; shares of the Underlying may trade at, above,
or below its net asset value per share. During periods of market volatility, securities held by each Underlying may be unavailable
in the secondary market, market participants may be unable to calculate accurately the net asset value per share of the Underlying
and the liquidity of the Underlying may be adversely affected. Market volatility may also disrupt the ability of market participants
to trade shares of the Underlying. Further, market volatility may adversely affect, sometimes materially, the prices at which market
participants are willing to buy and sell shares of the Underlying. As a result, under these circumstances, the market value of
shares of the Underlying may vary substantially from the net asset value per share of the Underlying.
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•
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Trading and hedging activities by us, the Guarantor
and any of our other affiliates may create conflicts of interest with you and may affect your return on the Notes and their market
value.
We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell shares of the Underlyings
or the securities held by or included in the Underlyings, or futures or options contracts on the Underlyings or those securities,
or other listed or over-the-counter derivative instruments linked to the Underlyings or those securities. While we, the Guarantor
or one or more of our other affiliates, including BofAS, may from time to time own the Underlyings or the securities represented
by the Underlyings, except to the extent that BAC’s common stock may be included in the Underlyings, we, the Guarantor and
our other affiliates, including BofAS, do not control any company included in the Underlyings, and have not verified any disclosure
made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, may execute such purchases
or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations under the Notes.
These transactions may present a conflict of interest between your interest in the Notes and the interests we, the Guarantor and
our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions, including block
trades, for our or their other customers, and in accounts under our or their management. These transactions may affect the price
of the Underlyings in a manner that could be adverse to your investment in the Notes. On or before the pricing date, any purchases
or sales by us, the Guarantor or our other affiliates, including BofAS or others on its behalf (including for the purpose of hedging
anticipated exposures), may affect the price of the Underlyings. Consequently, the price of the Underlyings may change subsequent
to the pricing date, adversely affecting the market value of the Notes.
|
We, the
Guarantor or one or more of our other affiliates, including BofAS, may also engage in hedging activities that could affect the
price of the Underlyings on the pricing date. In addition, these activities may decrease the market value of your Notes prior to
maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or one or more of our other affiliates, including
BofAS, may purchase or otherwise acquire a long or short position in the Notes and may hold or resell the Notes. For example, BofAS
may enter into these transactions in connection with any market making activities in which it engages. We cannot assure you that
these activities will not adversely affect the price of the Underlyings, the market value of your Notes prior to maturity or the
amounts payable on the Notes.
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There
may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours.
We have the right to
appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will
make a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes, including whether
the Notes will be automatically called and the amounts that will be paid on the Notes. Under some circumstances, these duties could
result in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent.
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The
U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be adverse to a holder of the Notes.
No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or securities similar
to the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences
of an investment in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes as
contingent income-bearing single financial contracts, as described 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
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
12
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
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.
|
CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
13
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
The Underlyings
All disclosures
contained in this pricing supplement regarding the Underlyings, including, without limitation, their make-up, method of calculation,
and changes in their components, have been derived from publicly available sources. The information reflects the policies of, and
is subject to change by SSGA Funds Management, Inc. (“SSGA”) the advisor to the XLK and XBI. We refer to SSGA as the
“Investment Advisor”. The Investment Advisor, which licenses the copyright and all other rights to the Underlyings,
has no obligation to continue to publish, and may discontinue publication of, the Underlyings. The consequences of the Investment
Advisor discontinuing publication of the applicable Underlying are discussed in “Description of the Notes— Anti-Dilution
and Discontinuance Adjustments Relating to ETFs—Discontinuance of an ETF” in the accompanying product supplement. None
of us, the Guarantor, the calculation agent, or BofAS accepts any responsibility for the calculation, maintenance or publication
of any Underlying or any successor Underlying. None of us, the Guarantor, BofAS or any of our other affiliates makes any representation
to you as to the future performance of the Underlyings. You should make your own investigation into the Underlyings.
The Technology Select Sector
SPDR
®
Fund
The shares of the XLK are issued
by Select Sector SPDR
®
Trust, a registered investment company. The XLK seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the Technology Select Sector Index (the “underlying
index”). The XLK measures the performance of the technology and telecom sector of the U.S. equity market. The XLK is composed
of equity securities of companies from technology hardware, storage, and peripherals; software; diversified telecommunication services;
communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment,
instruments and components; and wireless telecommunication services. The XLK trades on the NYSE Arca under the ticker symbol “XLK.”
Investment Approach
The XLK utilizes a “passive”
or “indexing” investment approach in attempting to track the performance of the Technology Select Sector Index. The
XLK will invest in all of the securities which comprise the underlying index. The XLK will normally invest at least 95% of its
total assets in common stocks that comprise the index.
Investment Objective and Strategy
The XLK seeks
to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Technology
Select Sector Index. SSGA uses a replication strategy to try to achieve the XLK’s investment objective, which means that
the XLK generally invests in substantially all of the securities represented in the index in approximately the same proportions
as the Index. In certain situations or market conditions, the XLK may temporarily depart from their normal investment policies
and strategies provided that the alternative is consistent with the XLK’s investment objective and is in the best interest
of the XLK. For example, if the XLK is unable to invest directly in a component security or if a derivative investment may provide
higher liquidity than other types of investments, it may make larger than normal investments in derivatives to maintain exposure
to the index that it tracks. Consequently, under such circumstances, the XLK may invest in a different mix of investments than
it would under normal circumstances. The XLK is managed with a passive investment strategy, attempting to track the performance
of an unmanaged index of securities. This differs from an actively managed Underlying, which typically seeks to outperform a benchmark
index.
Notwithstanding
the XLK’s investment objective, the return on your notes will not reflect any dividends paid on the XLK’s shares, on
the securities purchased by the XLK or on the securities that comprise the Index.
Replication Strategy
The XLK uses a replication strategy
to attempt to track the performance of its Index. This strategy involves investing in substantially all of the securities represented
in the index in approximately the same proportions as the index. Under normal market conditions, the XLK generally invests at least
95% of its total assets in the securities comprising the Index. The XLK will provide shareholders with at least 60 days notice
prior to any material change in their respective investment policies.
The Select Sector Indices
The underlying
index for the XLK is part of the Select Sector Indices. The Select Sector Indices are sub-indices of the S&P 500
®
Index.
Each stock in the S&P 500
®
Index is allocated to at least one Select Sector Index, and the combined companies
of the ten Select Sector Indices represent all of the companies in the S&P 500
®
Index. The industry indices
are sub-categories within each Select Sector Index and represent a specific industry segment of the overall Select Sector Index.
The ten Select Sector Indices seek to represent the eleven S&P 500
®
Index sectors. The S&P 500
®
Index
sectors, with the approximate percentage of the market capitalization of the S&P 500
®
Index included in
each sector as of July 31, 2018 indicated in parentheses: Communication Services; Consumer Discretionary; Consumer Staples; Energy;
Financials; Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The index compilation agent
for these indices (the “Index Compilation Agent”) determines the composition of the Select Sector Indices based on
S&P’s sector classification methodology. (Sector designations are determined by the index sponsor using criteria it has
selected or developed. Index sponsors may use very different standards for determining sector designations. In addition, many companies
operate in a number of sectors, but are listed in only one sector and the basis on which that sector is selected may also differ.
As a result, sector comparisons between indices with different index sponsors may reflect differences in methodology as well as
actual differences in the sector
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
14
|
Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the Technology Select Sector SPDR
®
Fund and the SPDR
®
S&P
®
Biotech ETF
composition
of the indices.)
Each Select
Sector Index was developed and is maintained in accordance with the following criteria:
|
·
|
Each of the component
stocks in a Select Sector Index (the “Component Stocks”) is a constituent company of the S&P 500
®
Index.
|
|
·
|
The ten Select
Sector Indices together will include all of the companies represented in the S&P 500
®
Index and each of
the stocks in the S&P 500
®
Index will be allocated to at least one of the Select Sector Indices.
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|
·
|
The Index Compilation
Agent assigns each constituent stock of the S&P 500
®
Index to a Select Sector Index. The Index Compilation
Agent assigns a company’s stock to a particular Select Sector Index based on S&P Dow Jones Indices’s sector classification
methodology as set forth in its Global Industry Classification Standard.
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·
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Each Select Sector
Index is calculated by S&P Dow Jones Indices using a modified “market capitalization” methodology. This design
ensures that each of the component stocks within a Select Sector Index is represented in a proportion consistent with its percentage
with respect to the total market capitalization of that Select Sector Index.
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·
|
For reweighting
purposes, each Select Sector Index is rebalanced quarterly after the close of business on the second to last calculation day of
March, June, September and December using the following procedures: (1) The rebalancing reference date is two business days prior
to the last calculation day of each quarter; (2) With prices reflected on the rebalancing reference date, and membership, shares
outstanding, additional weight factor (capping factor) and investable weight factors (as described in the section “Computation
of the S&P 500 Index
®
” below) as of the rebalancing effective date, each company is weighted using the
modified market capitalization methodology. Modifications are made as defined below.
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(i)
|
The indices are
first evaluated to ensure none of the indices breach the maximum allowable limits defined in rules (ii) and (v) below. If any of
the allowable limits are breached, the component stocks are reweighted based on their float-adjusted market capitalization weights
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(ii)
|
If any component
stock has a weight greater than 24%, that component stock has its float-adjusted market capitalization weight capped at 23%. The
23% weight cap creates a 2% buffer to ensure that no component stock exceeds 25% as of the quarter-end diversification requirement
date.
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(iii)
|
All excess weight
is equally redistributed to all uncapped component stocks within the relevant Select Sector Index.
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(iv)
|
After this redistribution,
if the float-adjusted market capitalization weight of any other component stock(s) then breaches 23%, the process is repeated iteratively
until no component stock s breaches the 23% weight cap.
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(v)
|
The sum of the
component stocks with weight greater than 4.8% cannot exceed 50% of the total index weight. These caps are set to allow for a buffer
below the 5% limit.
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(vi)
|
If the rule in
step (v) is breached, all the component stocks are ranked in descending order of their float-adjusted market capitalization weights
and the first component stock that causes the 50% limit to be breached has its weight reduced to 4.6%.
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(vii)
|
This excess weight
is equally redistributed to all component stocks with weights below 4.6%. This process is repeated iteratively until step (v) is
satisfied.
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(viii)
|
Index share amounts
are assigned to each component stock to arrive at the weights calculated above. Since index shares are assigned based on prices
one business day prior to rebalancing, the actual weight of each component stock at the rebalancing differs somewhat from these
weights due to market movements.
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(ix)
|
If necessary, the
reweighting process may take place more than once prior to the close on the last business day of March, June, September or December
to ensure conformity with all diversification requirements.
|
Each Select
Sector Index is calculated using the same methodology utilized by S&P Dow Jones Indices in calculating the S&P 500
®
Index,
using a base-weighted aggregate methodology. The daily calculation of each Select Sector Index is computed by dividing the total
market value of the companies in the Select Sector Index by a number called the index divisor.
The Index
Compilation Agent at any time may determine that a Component Stock which has been assigned to one Select Sector Index has undergone
such a transformation in the composition of its business, and should be removed from that Select Sector Index and assigned to a
different Select Sector Index. In the event that the Index Compilation Agent notifies S&P Dow Jones Indices that a Component
Stock’s Select Sector Index assignment should be changed, S&P Dow Jones Indices will disseminate notice of the change
following its standard procedure for announcing index changes and will implement the change in the affected Select Sector Indices
on a date no less than one week after the initial dissemination of information on the sector change to the maximum extent practicable.
It is not anticipated that Component Stocks will change sectors frequently.
Component
Stocks removed from and added to the S&P 500
®
Index will be deleted from and added to the appropriate Select
Sector Index on the same schedule used by S&P Dow Jones Indices for additions and deletions from the S&P 500
®
Index
insofar as practicable.
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CONTINGENT INCOME AUTO-CALLABLE YIELD NOTES | PS-
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®
Fund and the SPDR
®
S&P
®
Biotech ETF
The S&P 500® Index
The S&P
500
®
Index includes a representative sample of 500 companies in leading industries of the U.S. economy. The
S&P 500
®
Index is intended to provide an indication of the pattern of common stock price movement. The
calculation of the level of the S&P 500
®
Index 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.
Effective
March 10, 2017, company additions to the S&P 500
®
Index must have an unadjusted company market capitalization
of $6.1 billion or more (an increase from the previous requirement of an unadjusted company market capitalization of $5.3 billion
or more).
The index sponsor calculates the
S&P 500
®
Index by reference to the prices of the constituent stocks of the S&P 500
®
Index
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 index constituent stocks and received the dividends paid on those stocks.
Computation of the S&P 500® Index
While the
index sponsor currently employs the following methodology to calculate the S&P 500
®
Index, no assurance
can be given that the index 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 S&P 500
®
Index 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 index sponsor began shifting
the S&P 500
®
Index halfway from a market capitalization weighted formula to a float-adjusted formula, before
moving the S&P 500
®
Index to full float adjustment on September 16, 2005. The index sponsor’s criteria
for selecting stocks for the S&P 500
®
Index did not change with the shift to float adjustment. However,
the adjustment affects each company’s weight in the S&P 500
®
Index.
Under float
adjustment, the share counts used in calculating the S&P 500
®
Index 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 S&P 500
®
Index. 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, the index 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 index 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 S&P 500
®
Index. Constituents
of the S&P 500
®
Index prior to July 31, 2017 with multiple share class lines will be grandfathered in and
continue to be included in the S&P 500
®
Index. If a constituent company of the S&P 500
®
Index
reorganizes into a multiple share class line structure, that company will remain in the S&P 500
®
Index
at the discretion of the S&P Index Committee in order to minimize turnover.
The S&P
500
®
Index is calculated using a base-weighted aggregate methodology. The level of the S&P 500
®
Index
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 S&P 500
®
Index
is computed by dividing the total market value of the component stocks by the “index divisor.” By itself, the
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Fund and the SPDR
®
S&P
®
Biotech ETF
index divisor
is an arbitrary number. However, in the context of the calculation of the S&P 500
®
Index, it serves as
a link to the original base period level of the S&P 500
®
Index. The index divisor keeps the S&P 500
®
Index
comparable over time and is the manipulation point for all adjustments to the S&P 500
®
Index, 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 S&P 500
®
Index,
and do not require index divisor adjustments.
To prevent
the level of the S&P 500
®
Index from changing due to corporate actions, corporate actions which affect
the total market value of the S&P 500
®
Index require an index divisor adjustment. By adjusting the index
divisor for the change in market value, the level of the S&P 500
®
Index remains constant and does not reflect
the corporate actions of individual companies in the S&P 500
®
Index. Index divisor adjustments are made
after the close of trading and after the calculation of the index 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..
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®
Fund and the SPDR
®
S&P
®
Biotech ETF
Historical
Performance of the XLK
The following
graph shows the daily historical performance of the XLK in the period from January 1, 2008 through May 30, 2019. 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 its hypothetical Coupon Barrier and Threshold Value of $58.49 (rounded
to two decimal places), which is 80% of its hypothetical Starting Value of $73.11, which was its closing price on May 30, 2019.
The actual Starting Value, Coupon Barrier and Threshold Value will be determined on the pricing date.
This historical
data on the XLK is not necessarily indicative of the future performance of the XLK or what the value of the Notes may be. Any historical
upward or downward trend in the price of the XLK during any period set forth above is not an indication that the price of the XLK
is more or less likely to increase or decrease at any time over the term of the Notes.
Before investing
in the Notes, you should consult publicly available sources for the prices and trading pattern of the XLK.
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®
S&P
®
Biotech ETF
The
SPDR
®
S&P
®
Biotech ETF
The XBI seeks
to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P
®
Biotechnology Select Industry
®
Index (the “underlying index”). The underlying index represents the biotechnology
sub-industry portion of the Standard & Poor’s (“S&P”) Total Market Index (“S&P TMI”),
an index that measures the performance of the U.S. equity market. The XBI is composed of companies that are in the biotechnology
sector. The XBI trades on NYSE Arca under the ticker symbol “XBI.”
The XBI utilizes
a “replication” investment approach in attempting to track the performance of its underlying index. The XBI typically
invests in substantially all of the securities which comprise the underlying index in approximately the same proportions as the
underlying index. The XBI will normally invest at least 80% of its total assets in the common stocks that comprise the underlying
index.
The S&P
®
Biotechnology Select Industry
®
Index
This underlying
index is an equal-weighted index that is designed to measure the performance of the biotechnology sub-industry portion of the S&P
TMI. The S&P TMI includes all U.S. common equities listed on the New York Stock Exchange (the “NYSE”) (including
NYSE Arca), the NYSE MKT, the Nasdaq Global Select Market, and the Nasdaq Capital Market. Each of the component stocks in the underlying
index is a constituent company within the biotechnology sub-industry portion of the S&P TMI.
To be eligible
for inclusion in the underlying index, companies must be in the S&P TMI and must be included in the relevant Global Industry
Classification Standard (GICS) sub-industry. The GICS was developed to establish a global standard for categorizing companies into
sectors and industries. In addition to the above, companies must satisfy one of the two following combined size and liquidity criteria:
|
·
|
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 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.
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®
Fund and the SPDR
®
S&P
®
Biotech ETF
Historical Performance of
the XBI
The following graph shows the
daily historical performance of the XBI in the period from January 1, 2008 through May 30, 2019. 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 its hypothetical Coupon Barrier and Threshold Value of $64.66 (rounded to two
decimal places), which is 80% of its hypothetical Starting Value of $80.83, which was its closing price on May 30, 2019. The actual
Starting Value, Coupon Barrier and Threshold Value will be determined on the pricing date.
This historical
data on the XBI is not necessarily indicative of the future performance of the XBI or what the value of the Notes may be. Any historical
upward or downward trend in the price of the XBI during any period set forth above is not an indication that the price of the XBI
is more or less likely to increase or decrease at any time over the term of the Notes.
Before investing
in the Notes, you should consult publicly available sources for the prices and trading pattern of the XBI.
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®
Fund and the SPDR
®
S&P
®
Biotech ETF
Supplement to the Plan of Distribution; Role
of MLPF&S 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 $960.00 per note.
We expect
to 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, if the initial settlement
of the Notes occurs more than two business days from the pricing date, 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.
BofAS and
any of our other broker-dealer affiliates, may use this pricing supplement, and the accompanying product supplement, prospectus
supplement and prospectus for offers and sales in secondary market transactions and market-making transactions in the Notes. However,
they are not obligated to engage in such secondary market transactions and/or market-making transactions. The selling agent may
act as principal or agent in these transactions, and any such sales will be made at prices related to prevailing market conditions
at the time of the sale.
At BofAS’s
discretion, for a short, undetermined initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary
market at a price that may exceed the initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based
on then-prevailing market conditions and other considerations, including the performance of the Underlyings and the remaining term
of the Notes. However, none of us, the Guarantor, BofAS or any of our other affiliates is obligated to purchase your Notes at any
price or at any time, and we cannot assure you that any party will purchase your Notes at a price that equals or exceeds the initial
estimated value of the Notes.
Any price
that BofAS may pay to repurchase the Notes will depend upon then prevailing market conditions, the creditworthiness of us and the
Guarantor, and transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of
the Notes.
No Prospectus
(as defined in Directive 2003/71/EC, as amended (the “Prospectus Directive”)) will be prepared in connection with these
Notes. Accordingly, these Notes may not be offered to the public in any member state of the European Economic Area (the “EEA”),
and any purchaser of these Notes who subsequently sells any of these Notes in any EEA member state must do so only in accordance
with the requirements of the Prospectus Directive, as implemented in that member state.
The Notes
are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available
to, any retail investor in the EEA. For these purposes, the expression “offer" includes the communication in any form
and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to
decide to purchase or subscribe the Notes, and a “retail investor” means a person who is one (or more) of: (a) a retail
client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); or (b) a customer,
within the meaning of Insurance Distribution Directive 2016/97/EU, as amended, where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in the Prospectus Directive.
Consequently, no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”),
for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared, and therefore,
offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs
Regulation.
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Fund and the SPDR
®
S&P
®
Biotech 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, 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 MLP&S 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-10 above and Supplemental Use of Proceeds” on page
PS-16 of the accompanying product supplement.
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®
Fund and the SPDR
®
S&P
®
Biotech ETF
U.S. Federal Income Tax Summary
The following summary of the material
U.S. federal income tax considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent
inconsistent supersedes, the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus
and under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive
of all possible tax considerations. In addition, any reference to “Morrison & Foerster LLP” in the aforementioned
tax discussions in the accompanying prospectus and prospectus supplement should be read as a reference to “Sidley Austin
LLP.” This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated
under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations), rulings,
current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect
and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given
that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described
below. This summary does not include any description of the tax laws of any state or local governments, or of any foreign government,
that may be applicable to a particular holder.
Although the Notes are issued by us,
they will be treated as if they were issued by Bank of America Corporation for U.S. federal income tax purposes. Accordingly throughout
this tax discussion, references to “we,” “our” or “us” are generally to Bank of America Corporation
unless the context requires otherwise.
This summary is directed solely to U.S.
Holders and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the Notes upon original issuance and will
hold the Notes as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment,
and that are not excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor
concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax
consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes
in U.S. federal or other tax laws.
General
Although there is no statutory, judicial,
or administrative authority directly addressing the characterization of the Notes, we intend to treat the Notes for all tax purposes
as contingent income-bearing single financial contracts with respect to the Underlyings and under the terms of the Notes, we and
every investor in the Notes agree, in the absence of an administrative determination or judicial ruling to the contrary, to treat
the Notes in accordance with such characterization. In the opinion of our counsel, Sidley Austin LLP, it is reasonable to treat
the Notes as contingent income-bearing single financial contracts with respect to the Underlyings. However, Sidley Austin LLP has
advised us that it is unable to conclude that it is more likely than not that this treatment will be upheld. This discussion assumes
that the Notes constitute contingent income-bearing single financial contracts with respect to the Underlyings for U.S. federal
income tax purposes. If the Notes did not constitute contingent income-bearing single financial contracts, the tax consequences
described below would be materially different.
This characterization of the Notes
is not binding on the IRS or the courts. No statutory, judicial, or administrative authority directly addresses the characterization
of the Notes or any similar instruments for U.S. federal income tax purposes, and no ruling is being requested from the IRS with
respect to their proper characterization and treatment. Due to the absence of authorities on point, significant aspects of the
U.S. federal income tax consequences of an investment in the Notes are not certain, and no assurance can be given that the IRS
or any court will agree with the characterization and tax treatment described in this pricing supplement. Accordingly, you are
urged to consult your tax advisor regarding all aspects of the U.S. federal income tax consequences of an investment in the Notes,
including possible alternative characterizations.
Unless otherwise stated, the following
discussion is based on the characterization described above. The discussion in this section assumes that there is a significant
possibility of a significant loss of principal on an investment in the Notes.
We will not attempt
to ascertain whether the issuer of either Underlying would be treated as a “passive foreign investment company” (“PFIC”),
within the meaning of Section 1297 of the Code, or a United States real property holding corporation, within the meaning of Section
897(c) of the Code. If the issuer of either Underlying were so treated, certain adverse U.S. federal income tax consequences could
possibly apply to a holder of the Notes. You should refer to information filed with the SEC by the issuers of the Underlyings and
consult your tax advisor regarding the possible consequences to you, if any, if the issuer of either Underlying is or becomes a
PFIC or is or becomes a United States real property holding corporation.
U.S. Holders
Although the U.S.
federal income tax treatment of any Contingent Coupon Payment on the Notes is uncertain, we intend to take the position, and the
following discussion assumes, that any Contingent Coupon Payment constitutes taxable ordinary income to a U.S. Holder at the time
received or
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®
S&P
®
Biotech ETF
accrued in accordance
with the U.S. Holder’s regular method of accounting. By purchasing the Notes you agree, in the absence of an administrative
determination or judicial ruling to the contrary, to treat any Contingent Coupon Payment as described in the preceding sentence.
Upon receipt of
a cash payment at maturity or upon a sale, exchange, or redemption of the Notes prior to maturity, a U.S. Holder generally will
recognize capital gain or loss equal to the difference between the amount realized (other than amounts representing any Contingent
Coupon Payment, which would be taxed as described above) and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s
tax basis in the Notes will equal the amount paid by that holder to acquire them. Subject to the discussion below concerning the
possible application of the “constructive ownership” rules of Section 1260 of 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 the 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 Underlying is 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,
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and whether any of these determinations
depend on the nature of the underlying asset.
In addition, proposed Treasury regulations
require the accrual of income on a current basis for contingent payments made under certain notional principal contracts. The preamble
to the regulations states that the “wait and see” method of accounting does not properly reflect the economic accrual
of income on those contracts, and requires current accrual of income for some contracts already in existence. While the proposed
regulations do not apply to prepaid forward contracts, the preamble to the proposed regulations expresses the view that similar
timing issues exist in the case of prepaid forward contracts. If the IRS or Treasury publishes future guidance requiring current
economic accrual for contingent payments on prepaid forward contracts, it is possible that you could be required to accrue income
over the term of the Notes.
Because of the absence of authority regarding
the appropriate tax characterization of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner
that results in tax consequences that are different from those described above. For example, the IRS could possibly assert that
any gain or loss that a holder may recognize at maturity or upon the sale, exchange, or redemption of the Notes should be treated
as ordinary gain or loss.
Non-U.S. Holders
Because the U.S. federal income tax treatment
of the Notes (including any Contingent Coupon Payment) is uncertain, we will withhold U.S. federal income tax at a 30% rate (or
at a lower rate under an applicable income tax treaty) on the entire amount of any Contingent Coupon Payment made unless such payments
are effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (in which case, to avoid withholding,
the Non-U.S. Holder will be required to provide a Form W-8ECI). We will not pay any additional amounts in respect of such withholding.
To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer identification number and certify as to
its eligibility under the appropriate treaty’s limitations on benefits article, if applicable. In addition, special rules
may apply to claims for treaty benefits made by Non-U.S. Holders that are entities rather than individuals. The availability of
a lower rate of withholding under an applicable income tax treaty will depend on whether such rate applies to the characterization
of the payments under U.S. federal income tax laws. A Non-U.S. Holder that is eligible for a reduced rate of U.S. federal withholding
tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.
Except as discussed below, a Non-U.S. Holder
generally will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes (not including,
for the avoidance of doubt, amounts representing any Contingent Coupon Payment which would be subject to the rules discussed in
the previous paragraph) upon the sale, exchange or redemption of the Notes or their settlement at maturity, provided that the Non-U.S.
Holder complies with applicable certification requirements and that the payment is not effectively connected with the conduct by
the Non-U.S. Holder of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale, exchange, or redemption of
the Notes or their settlement at maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien
individual and is present in the U.S. for 183 days or more during the taxable year of the sale, exchange, redemption, or settlement
and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged
in the conduct of a trade or business within the U.S. and if any Contingent Coupon Payment and gain realized on the settlement
at maturity, or upon sale, exchange, or redemption of the Notes, is effectively connected with the conduct of such trade or business
(and, if certain tax treaties apply, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.),
the Non-U.S. Holder, although exempt from U.S. federal withholding tax, generally will be subject to U.S. federal income tax on
such Contingent Coupon Payment and gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders
should read the material under the heading “—U.S. Holders,” for a description of the U.S. federal income tax
consequences of acquiring, owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation, it
may also be subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion
of its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the
U.S., subject to certain adjustments.
A “dividend equivalent” payment
is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding
tax if paid to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked
instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified
ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation
for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However,
IRS guidance provides that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one
instruments and that are issued before January 1, 2021. Based on our determination that the Notes are not delta-one instruments,
Non-U.S. Holders should not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is
possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain
events affecting the Underlyings or the Notes, and following such occurrence the Notes could be treated as subject to withholding
on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions in respect of the Underlyings
or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context
of the Notes and their other
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transactions. If any payments are treated
as dividend equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without
being required to pay any additional amounts with respect to amounts so withheld.
As discussed above, alternative characterizations
of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or
clarification of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax in addition
to the withholding tax described above, tax will be withheld at the applicable statutory rate. Prospective Non-U.S. Holders should
consult their own tax advisors regarding the tax consequences of such alternative characterizations.
U.S. Federal Estate Tax.
Under current
law, while the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible
in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty
benefit, a note is likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities
should consult their own tax advisors regarding the U.S. federal estate tax consequences of investing in a note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S.
Federal Income Tax Considerations — Taxation of Debt Securities — Backup Withholding and Information Reporting”
in the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules
to payments made on the Notes.
Foreign Account Tax Compliance Act (“FATCA”)
The discussion in the accompanying prospectus
under “U.S. Federal Income Tax Considerations – Foreign Account Tax Compliance Act” is hereby modified to reflect
regulations proposed by Treasury indicating its intent to eliminate the requirements under FATCA of withholding on gross proceeds
from the sale, exchange, settlement at maturity or other disposition of relevant financial instruments. Treasury has indicated
that taxpayers may rely on these proposed regulations pending their finalization.
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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:
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•
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Product
Supplement EQUITY-1 dated January 24, 2017:
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https://www.sec.gov/Archives/edgar/data/70858/000119312517016445/d331325d424b5.htm
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 as indicated at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest,
you should read the Note Prospectus, including this pricing supplement, for information about us, BAC and this offering. Any prior
or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus.
Capitalized terms used but not defined in this pricing supplement have the meanings set forth in the accompanying product supplement
or prospectus supplement. Unless otherwise indicated or unless the context requires otherwise, all references in this document
to “we,” “us,” “our,” or similar references are to BofA Finance, and not to BAC.
As a result
of of the completion of the reorganization of Bank of America’s U.S. broker-dealer business, references to Merrill Lynch,
Pierce, Fenner & Smith Incorporated (“MLPF&S”) in the accompanying product supplement, prospectus supplement
and prospectus, as such references relate to MLPF&S’s institutional services, should now be read as references to BofAS.
The Notes
are our senior debt securities. Any payments on the Notes are fully and unconditionally guaranteed by BAC. The
Notes and the related guarantee are not insured by the Federal Deposit Insurance Corporation or secured by collateral. The
notes will rank equally with all of our other senior unsecured debt, and the related guarantee will rank equally with all of BAC’s
other senior unsecured debt. 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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