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.
None of the Securities and Exchange
Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of
these securities or determined if this Note Prospectus (as defined on page PS-20) is truthful or complete. Any representation to
the contrary is a criminal offense.
The Notes provide you a 1:1 return if
the Ending Value of the Underlying, which is the S&P 500® Daily Risk Control 5% USD Excess Return Index, is greater than
the Starting Value. If the Ending Value is equal to or less than the Starting Value, you will receive the principal amount. The
Notes are not traditional debt securities and it is possible that you may not earn a return on your investment. Any payments on
the Notes will be calculated based on $1,000 in principal amount of Notes and will depend on the performance of the Underlying,
subject to our and BAC’s credit risk.
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
Underlying. The economic terms of the Notes are based on BAC’s internal funding rate, which is the rate it would pay to borrow
funds
through the issuance of market-linked notes, and the economic
terms of certain related hedging arrangements BAC’s affiliates enter into. BAC’s internal funding rate is typically
lower than the rate it would pay when it issues conventional fixed or floating rate debt securities. This difference in funding
rate, as well as the underwriting discount and the hedging related charges described below (see “Risk Factors” beginning
on page PS-8), 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-7 and “Structuring
the Notes” on page PS-18.
On the Maturity Date, you
will receive a cash payment per $1,000 in principal amount of Notes determined as follows:
All payments described above
are subject to Issuer and Guarantor credit risk.
The following table and Redemption
Amount Calculation Examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical
returns on the Notes. They illustrate the calculation of the Redemption Amount and return based on a hypothetical Starting Value
of 100 and a range of hypothetical Ending Values. The actual amount you receive and the resulting return will depend on the
actual Starting Value, Ending Value and whether you hold the Notes to maturity. The following examples do not take into account
any tax consequences from investing in the Notes.
For recent actual levels of the
Underlying, see “The Underlying” section below. All payments on the Notes are subject to Issuer and Guarantor credit
risk.
Risk Factors
Your investment in the Notes entails
significant risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes should
be made only after carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors
in light of your particular circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about
significant elements of the Notes or financial matters in general. You should carefully review the more detailed explanation of
risks relating to the Notes in the “Risk Factors” sections beginning on page PS-5 of the accompanying product supplement,
page S-4 of the accompanying prospectus supplement and page 7 of the accompanying prospectus, each as identified on page PS-21
below.
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You may not earn
a return on your investment. The payment you will receive at maturity will depend on whether the level of the Underlying increases
from the Starting Value to the Ending Value. If the level of the Underlying decreases from the Starting Value to the Ending Value
(or if the level of the Underlying is unchanged), you will not receive any positive return on the Notes and will only receive the
principal amount.
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The Notes do not
bear interest. Unlike a conventional debt security, no interest payments will be paid over the term of the Notes, regardless
of the extent to which the Ending Value of the Underlying exceeds the Starting Value.
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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.
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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 Redemption Amount at maturity will be dependent upon our ability and
the ability of the Guarantor to repay our respective obligations under the Notes on the Maturity Date, regardless of the performance
of the Underlying.
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In addition, our credit ratings
and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations.
Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s
credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities
(the “credit spread”) prior to the Maturity Date may adversely affect the market value of the Notes. However, because
your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective
obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce
the other investment risks related to the Notes.
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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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The public offering
price you pay for the Notes will exceed their initial estimated value. The range of initial estimated values of the Notes that
is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the pricing date that
will be provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference
to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our
credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions,
expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes. These
pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the
Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated
value. This is due to, among other things, changes in the level of the Underlying, 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 Underlying,
our and BAC’s creditworthiness and changes in market conditions.
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NOTES | PS-7
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NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
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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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The Redemption Amount
will not reflect changes in the level of the Underlying other than on the Valuation Date. The levels of the Underlying during
the term of the Notes other than on the Valuation Date will not be reflected in the calculation of the Redemption Amount. Notwithstanding
the foregoing, investors should generally be aware of the performance of the Underlying while holding the Notes. The calculation
agent will calculate the Redemption Amount by comparing only the Starting Value to the Ending Value. No other levels of the Underlying
will be taken into account. As a result, you will not receive a return on your investment at maturity even if the level of the
Underlying has increased at certain times during the term of the Notes before decreasing to a level that is equal to or less than
the Starting Value on the Valuation Date.
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The publisher of
the S&P 500® Index and the Underlying may adjust the S&P 500® Index or the Underlying in a way that affects the
levels of the Underlying, and the publisher has no obligation to consider your interests. S&P Dow Jones Indices LLC is
the publisher of both the Underlying and the S&P 500® Index (which is used to construct the Underlying). S&P Dow Jones
Indices LLC can add, delete, or substitute the components included in the S&P 500® Index that could change its level. A
new security included in the S&P 500® Index may perform significantly better or worse than the replaced security, and the
performance will impact the level of the S&P 500® Index. This in turn could impact the level of the Underlying. S&P
Dow Jones Indices LLC can also make other methodological changes that could change the level of the Underlying or the level of
the S&P 500® Index. Additionally, S&P Dow Jones Indices LLC may alter, discontinue, or suspend calculation or dissemination
of the Underlying. Any of these actions could adversely affect the value of your Notes. S&P Dow Jones Indices LLC will have
no obligation to consider your interests in calculating or revising the S&P 500® Index or the Underlying.
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Notwithstanding that
the title of the Underlying includes the phrase “Risk Control,” the Underlying may underperform the S&P 500®
Total Return Index and there is no guarantee that the Underlying will achieve the 5% volatility target. Although the title
of the Underlying includes the phrase “Risk Control,” the Underlying may decrease significantly more or increase significantly
less than the S&P 500® Total Return Index, and the Notes are not necessarily less risky than, and will not necessarily
have better returns than, notes linked to the S&P 500® Total Return Index. The Underlying dynamically adjusts its notional
exposure to the S&P 500® Total Return Index based on observed volatility in an attempt to maintain volatility approximately
equal to the target volatility of 5%, subject to a maximum exposure of 150% and a minimum exposure of 0% (as described below under
“The Underlying”). This volatility-targeting feature of the Underlying may cause the Underlying to reduce its exposure
to the S&P 500® Total Return Index in periods of high volatility, even if the S&P 500® Total Return Index generally
is performing positively. If the Underlying’s notional exposure to the S&P 500 Total Return Index is less than 100%,
the difference will not be notionally invested and will earn no return. The performance of the Underlying may be negative or less
positive than the performance of the S&P 500® Total Return Index during such periods, and therefore the return on the Notes
may be less, and may be significantly less, than an investment based on the performance of the S&P 500® Total Return Index.
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The Underlying is rebalanced
at the close of each index calculation day. Due to the method used to determine the Underlying’s exposure to the S&P
500® Total Return Index (as further described in “The Underlying” below), however, there is a lag of two index
calculation days between the calculation of exposure to the S&P 500® Total Return Index and the rebalancing of the Underlying
in accordance with that calculation. Due to this two-day lag and the fact that volatility can fluctuate significantly during this
period, the Underlying will not reflect the most current volatility of the S&P 500® Total Return Index.
In addition, because the exposure
of the Underlying to the S&P 500® Total Return Index is subject to a maximum leverage factor of 150%, the Underlying may
not be able to fully participate in the appreciation of the S&P 500® Total Return Index during times of low volatility
when achieving a volatility target of 5% would require an exposure in excess of 150%. Therefore, there is no guarantee that the
Underlying will achieve the 5% volatility target.
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The Underlying may
be subject to increased volatility due to the use of leverage. The Underlying employs a risk-control strategy that uses mathematical
equations to target 5% volatility, as described below under “The Underlying”. When the volatility of the S&P 500®
Total Return Index is less than the Underlying’s target volatility of 5%, the Underlying will employ leverage to increase
the exposure of the Underlying to the S&P 500® Total Return Index, up to maximum exposure of 150%. When the Underlying
is leveraged, any movements in value of the S&P 500® Total Return Index may result in greater changes in the value of the
Underlying than if leverage were not used. In particular, the use of leverage will magnify any negative performance of the S&P
500® Total Return Index. For example, if exposure to the S&P 500® Total Return Index is 130%, a 1% decrease in the
value of the S&P 500® Total Return Index on such day would cause the Underlying to fall by 1.30%.
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The Underlying may
be subject to borrowing costs due to the use of leverage, which will reduce the return on the Underlying relative to the S&P
500® Total Return Index. The Underlying employs a risk-control strategy that uses mathematical equations to target 5% volatility,
as described below under “The Underlying”. The Underlying may employ leverage to increase the exposure of the Underlying
to the S&P 500® Total Return Index. Exposure in excess of 100% (i.e., leverage) is achieved by hypothetically borrowing
cash at a rate of overnight U.S.
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NOTES | PS-8
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NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
dollar LIBOR, which will reduce any positive return and will
increase any negative return relative to the S&P 500® Total Return Index. As leverage increases, borrowing costs increase.
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Controlled volatility
does not mean the Underlying will have lower volatility than the S&P 500® Total Return Index. The Underlying employs
a risk-control strategy that uses mathematical equations to target 5% volatility, as described below under “The Underlying”.
However, controlled volatility does not mean that the Underlying will have lower volatility than the S&P 500® Total Return
Index. The realized volatility of the S&P 500® Total Return Index may be less than the Underlying’s volatility target
of 5% over extended periods of time, in which case the Underlying’s exposure to the S&P 500® Total Return Index will
be increased in an attempt to raise the volatility of the Underlying to 5%. In this situation the exposure to the S&P 500®
Total Return Index may increase above 100%, meaning that the Underlying would be more volatile than the S&P 500® Total
Return Index.
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In addition, the Underlying
is rebalanced at the close of each index calculation day. Due to the method used to determine the Underlying’s exposure to
the S&P 500® Total Return Index (as further described in “The Underlying” below), however, there is a lag of
two index calculation days between the calculation of exposure to the S&P 500® Total Return Index and the rebalancing of
the Underlying in accordance with that calculation. Due to this two-day lag and the fact that volatility can fluctuate significantly
during this period, the Underlying will not reflect the most current volatility of the S&P 500® Total Return Index. This
could result in a situation where the volatility of the Underlying is higher than the volatility of the S&P 500® Total
Return Index.
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Low volatility does
not necessarily mean low risk. The Underlying employs a risk-control strategy that uses mathematical equations to target 5%
volatility, as described below under “The Underlying”. Even if the Underlying successfully reduces the risk of large
fluctuations as compared to the S&P 500® Total Return Index, the level of the S&P 500® Total Return Index, and
thus the Underlying, may remain stable or steadily decrease over time.
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The Underlying may
not outperform the S&P 500® Total Return Index. The Underlying employs a risk-control strategy that uses mathematical
equations to target 5% volatility. There is no guarantee that the 5% volatility target will successfully reduce the volatility
of the Underlying. If there is a rapid and severe decline in the level of the S&P 500® Total Return Index, the Underlying
may not adjust its exposure to the S&P 500® Total Return Index until the Underlying has declined by a substantial amount.
In such case the return of the Underlying will be lower than that of the S&P 500® Total Return Index. No assurance can
be given that this risk-control strategy will be successful or that the Underlying will outperform the S&P 500® Total Return
Index.
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There may be overexposure
to the S&P 500® Total Return Index in bear markets or underexposure in bull markets. The Underlying is designed to
achieve a volatility target of 5% regardless of the direction of price movements in the market. Therefore, in bull markets (when
markets are appreciating), if realized volatility is higher than the volatility target, the exposure to the daily return of the
S&P 500® Total Return Index will be less than 100%, the Underlying will be exposed to less than the full gains in the S&P
500® Total Return Index and the Underlying will experience lower returns than the S&P 500® Total Return Index. In contrast,
if realized volatility is less than the volatility target, in a bear market (when markets are depreciating), the exposure to the
daily return of the S&P 500® Total Return Index will be greater than 100%, the Underlying will be exposed to more than
100% of the losses in the S&P 500® Total Return Index and the Underlying will experience lower returns than the S&P
500® Total Return Index.
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The Underlying is
an excess return index and therefore its performance will reflect borrowing costs. The Underlying is an excess return version
of the S&P 500® Total Return Index, meaning that it is designed to measure the return on a hypothetical investment in the
S&P 500® Total Return Index that is made with borrowed funds (subject to a risk-control strategy as described below under
“The Underlying”). Borrowing costs for these funds are assessed at a rate of overnight U.S. dollar LIBOR. Such borrowing
costs will be deducted in calculating the return of the Underlying and therefore will reduce any positive return and will increase
any negative return relative to the S&P 500® Total Return Index. Investing in the Notes may, therefore, not generate the
same return as one would obtain from investing directly in a “total return” version of the Underlying.
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The cost of borrowing
is ignored when determining how much money to borrow, even if a prudent investor would choose not to borrow money to invest in
the S&P 500® Total Return Index at such time. The cost of borrowing may exceed the return from the S&P 500®
Total Return Index if such return decreases or if interest rates increase (or both).
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The Underlying has
limited actual historical information. The Underlying has a launch date of September 10, 2009. Because the Underlying is of
recent origin and limited actual historical performance data exists with respect to it, your investment in the Notes may involve
a greater risk than investing in notes linked to an Underlying with a more established record of performance.
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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 the securities held by or
included in the Underlying, or futures or options contracts on the Underlying or those securities, or other listed or
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NOTES | PS-9
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NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
over-the-counter derivative instruments linked to the Underlying
or those securities. While we, the Guarantor or one or more of our other affiliates, including BofAS, may from time to time own
the securities represented by the Underlying, except to the extent that BAC’s common stock may be included in the Underlying,
we, the Guarantor and our other affiliates, including BofAS, do not control any company included in the Underlying, and have not
verified any disclosure made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, may
execute such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations
under the Notes. These transactions may present a conflict of interest between your interest in the Notes and the interests we,
the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions,
including block trades, for our or their other customers, and in accounts under our or their management. These transactions may
affect the value of the Underlying 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 value of the Underlying. Consequently, the value of the Underlying
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 value of the Underlying 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 securities represented by the Underlying and may hold or resell the Notes. For example,
BofAS may enter into these transactions in connection with any market making activities in which it engages. We cannot assure you
that these activities will not adversely affect the value of the Underlying, the market value of your Notes prior to maturity or
the amounts payable on the Notes.
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There may be potential conflicts of interest involving
the calculation agent, which is an affiliate of ours. We have the right to appoint and remove the calculation agent. One of
our affiliates will be the calculation agent for the Notes and, as such, will make a variety of determinations relating to the
Notes, including the amounts that will be paid on the Notes. Under some circumstances, these duties could result in a conflict
of interest between its status as our affiliate and its responsibilities as calculation agent.
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The U.S. federal income tax consequences of an
investment in the Notes are uncertain, and may be adverse to a holder of the Notes. No statutory, judicial, or administrative
authority directly addresses the characterization of the Notes or securities similar to the Notes for U.S. federal income tax purposes.
As a result, significant aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. We
intend to treat the Notes as debt instruments for U.S. federal income tax purposes. Accordingly, you should consider the tax consequences
of investing in the Notes, aspects of which are uncertain. See the section entitled “U.S. Federal Income Tax Summary”
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You may be required to include income on the Notes
over their term, even though you will not receive any payments until maturity. The notes will be considered to be issued with
original issue discount. You will be required to include income on the Notes over their term based upon a comparable yield, even
though you will not receive any payments until maturity. You are urged to review the section entitled “U.S. Federal Income
Tax Summary” and consult your own tax advisor.
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NOTES | PS-10
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NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
The Underlying
All disclosures contained in this pricing
supplement regarding the Underlying, including, without limitation, its make-up, method of calculation, and changes in its components,
have been derived from publicly available sources. The information reflects the policies of, and is subject to change by, S&P
Dow Jones Indices LLC (“SPDJI”), the sponsor of the Underlying, the S&P 500® Total Return Index and the S&P
500® Index (“SPX”). We refer to SPDJI as the “Underlying Sponsor”. The Underlying Sponsor, which licenses
the copyright and all other rights to the Underlying, has no obligation to continue to publish, and may discontinue publication
of, the Underlying. The consequences of the Underlying Sponsor discontinuing publication of the Underlying are discussed in “Description
of the Notes—Discontinuance of an Index” in the accompanying product supplement. None of us, the Guarantor, the calculation
agent, or BofAS accepts any responsibility for the calculation, maintenance or publication of the Underlying or any successor index.
None of us, the Guarantor, BofAS or any of our other affiliates makes any representation to you as to the future performance of
the Underlying. You should make your own investigation into the Underlying.
The S&P 500® Daily
Risk Control 5% USD Excess Return Index
The S&P 500® Daily Risk Control
5% USD Excess Return Index (the “SPXT5UE”) is a volatility controlled excess return version of its underlying index,
the S&P 500® Total Return Index, meaning that it is designed to measure the return on a hypothetical investment in the
S&P 500® Total Return Index that is made with borrowed funds, subject to a risk control strategy that seeks to maintain
a 5% volatility level by dynamically adjusting exposure to the S&P 500® Total Return Index on a daily basis. Notwithstanding
that the title of the SPXT5UE includes the phrase “Risk Control”, the SPXT5UE may decrease significantly more or increase
significantly less than the S&P 500® Total Return Index.
The SPXT5UE’s exposure to the
S&P 500® Total Return Index can be greater than, less than or equal to 100%. An exposure greater than 100% of the daily
return of the S&P 500® Total Return Index is a leveraged position where the exposure to the S&P 500® Total Return
Index is increased by hypothetically borrowing cash (and paying interest on such cash as described below) and investing the proceeds
in the S&P 500® Total Return Index. An exposure less than 100% of the daily return of the S&P 500® Total Return
Index is a deleveraged position where the exposure to the S&P 500® Total Return Index is decreased by hypothetically selling
some of the exposure, which results in a hypothetical cash position. An exposure equal to 100% of the daily return of the S&P
500® Total Return Index has the same daily return as the S&P 500® Total Return Index. Interest cost accrues on the
amount of any hypothetical cash loan and interest gain accrues on the amount of any hypothetical cash position. The rate of overnight
U.S. dollar LIBOR is used to calculate the interest cost or gain. SPDJI may use other successor interest rates if overnight
U.S. dollar LIBOR is unavailable, and a 360-day year is assumed for the interest calculations in accordance with U.S. banking
practices.
The “leverage factor” is
used to determine whether the exposure to the S&P 500® Total Return Index should be greater than, less than or equal to
100% of the daily return of the S&P 500® Total Return Index. Each index calculation day (“T”), SPDJI calculates
the leverage factor for the following index calculation day (“T + 1”) as follows: the volatility target divided by
the “realized volatility” (as defined below) for the second preceding index calculation day (“T - 2”),
subject to a maximum leverage factor of 150% and a minimum leverage factor of 0%. Although the SPXT5UE is rebalanced at the close
of each index calculation day, because of how the leverage factor is calculated, there is a lag of two index calculation days between
the calculation of the leverage factor and the rebalancing of the SPXT5UE in accordance with that calculation.
“Realized volatility” is
a measurement of risk based on the changes to the historical daily return of the S&P 500® Total Return Index over time,
taking into account the borrowing costs of the SPXT5UE as described below. Realized volatility is calculated as the greater of
short-term volatility and long-term volatility. Both short-term volatility and long-term volatility are calculated using exponentially
weighted moving averages that assign greater importance to more recent changes to the historical daily return through the use of
a decay factor that determines the weight of each historical daily return in the calculation of realized volatility. When volatility
increases (or decreases), short-term volatility will increase (or decrease) more quickly than long-term volatility. If realized
volatility is less than 5%, the leverage factor will be greater than one and the exposure to the daily return of the S&P 500®
Total Return Index will be greater than 100%, minus interest costs. If realized volatility is greater than 5%, the leverage factor
will be less than one and the exposure to the daily return of the S&P 500® Total Return Index will be less than 100%, plus
interest gain. If realized volatility is equal to 5%, the leverage factor will be equal to one and exposure to the daily return
of the S&P 500® Total Return Index will be equal to 100% and there will be no interest cost or gain.
Borrowing costs for these funds are
generally assessed at a rate of overnight U.S. dollar LIBOR. Thus the return of an excess return index will be equal to that of
its underlying index less the associated borrowing costs. The level of the SPXT5UE on an index calculation day (“T”)
is equal to the product of (a) the level of the SPXT5UE on the previous index calculation day (“T – 1”) multiplied
by (b) (i) the return of the S&P 500® Total Return Index on the index calculation day (“T”) minus (ii) the
borrowing costs. The SPXT5UE had a launch date of September 10, 2009, with a base value of 100 as of its base date, December 31,
1990. Additional information is available on the following website: us.spindices.com/indices/strategy/sp-500-daily-risk-control-5-usd-excess-return-index.
We are not incorporating
The SPX includes a representative sample
of 500 companies in leading industries of the U.S. economy. The SPX is intended to provide an indication of the pattern of common
stock price movement. The calculation of the level of the SPX is based on the relative value of the aggregate market value
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NOTES | PS-11
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NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
of the common stocks of 500 companies
as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during the
base period of the years 1941 through 1943.
The
SPX includes companies from eleven main groups: Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials;
Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The Underlying Sponsor may from time to
time, in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives stated above.
Company additions to the SPX must have
an unadjusted company market capitalization of $8.2 billion or more (an increase from the previous requirement of an unadjusted
company market capitalization of $6.1 billion or more).
SPDJI calculates the SPX by reference
to the prices of the constituent stocks of the SPX without taking account of the value of dividends paid on those stocks. As a
result, the return on the Notes will not reflect the return you would realize if you actually owned the SPX constituent stocks
and received the dividends paid on those stocks.
The S&P 500® Total Return Index
The S&P 500® Total Return Index
is a total return-based calculation of the S&P 500® Index. The S&P 500® Total Return Index represents the total
return earned in a portfolio that tracks the S&P 500® Index and reinvests dividend income in the overall index, not in
the specific stock paying the dividend. The S&P 500® Total Return Index is built from the price return version of the S&P
500® Index but accounts for daily total dividend returns. The first step is to calculate the total dividend paid on a given
day. A total daily dividend amount is calculated as the aggregate of (a) the number of shares of each stock in the S&P 500®
Index times (b) the dividend per share paid for such stock. This calculation is performed for each trading day. Ordinary cash dividends
are applied on the ex-dividend date in calculating the total return index. The S&P 500® Total Return Index reflects both
ordinary and special cash dividends. S&P Dow Jones Indices will generally consider the third consecutive instance of a non-ordinary
dividend (in terms of timing, not amount) to be ordinary for index calculation purposes as a third consecutive instance will now
be considered to be part of the normal payment pattern established by the company.
The total daily dividend amount calculated
above is converted to index points by dividing such amount by the divisor for the price return version of the S&P 500®
Index. The daily total return for the S&P 500® Total Return Index is then determined by calculating (a) the sum of
(i) the level of the price return version of the S&P 500® Index on that day plus (ii) the index points reflecting the total
daily dividend amount on such day divided by (b) the level of the price return version of the S&P 500® Index for the
previous day minus (c) one. The daily total return is used to update the S&P 500® Total Return Index level from one
day to the next by calculating the product of (a) the level of the S&P 500® Total Return Index from the previous day
times (b) the sum of (i) one plus (ii) the daily total return for the given day.
Additional
information is available on the following website: us.spindices.com/indices/equity/sp-500. We are not incorporating by reference
the website or any material it includes in this pricing supplement.
The S&P 500® Index
The SPX includes a representative sample
of 500 companies in leading industries of the U.S. economy. The SPX is intended to provide an indication of the pattern of common
stock price movement. The calculation of the level of the SPX is based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943.
The
SPX includes companies from eleven main groups: Communication Services; Consumer Discretionary; Consumer Staples; Energy; Financials;
Health Care; Industrials; Information Technology; Real Estate; Materials; and Utilities. The Underlying Sponsor may from time to
time, in its sole discretion, add companies to, or delete companies from, the SPX to achieve the objectives stated above.
Company additions to the SPX must have
an unadjusted company market capitalization of $8.2 billion or more (an increase from the previous requirement of an unadjusted
company market capitalization of $6.1 billion or more).
SPDJI calculates the SPX by reference
to the prices of the constituent stocks of the SPX without taking account of the value of dividends paid on those stocks. As a
result, the return on the Notes will not reflect the return you would realize if you actually owned the SPX constituent stocks
and received the dividends paid on those stocks.
Computation
of the SPX
While the SPDJI sponsor currently
employs the following methodology to calculate the Underlying, no assurance can be given that the Underlying sponsor will not modify
or change this methodology in a manner that may affect the Redemption Amount.
Historically, the market value of any
component stock of the SPX was calculated as the product of the market price per share and the number of then outstanding shares
of such component stock. In March 2005, SPDJI began shifting the SPX halfway from a market capitalization weighted formula to a
float-adjusted formula, before moving the SPX to full float adjustment on September 16, 2005. SPDJI’s criteria for selecting
stocks for the SPX did not change with the shift to float adjustment. However, the adjustment affects each company’s weight
in the SPX.
|
NOTES | PS-12
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
Under float adjustment, the share counts
used in calculating the SPX reflect only those shares that are available to investors, not all of a company’s outstanding
shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government
agencies.
In September 2012, all shareholdings
representing more than 5% of a stock’s outstanding shares, other than holdings by “block owners,” were removed
from the float for purposes of calculating the SPX. Generally, these “control holders” will include officers and directors,
private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic
partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of
unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual
person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such
as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension
funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment
plans, will ordinarily be considered part of the float.
Treasury stock, stock options, restricted
shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares
held in a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable
shares are normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding,
shares in an unlisted or non-traded class are treated as a control block.
For each stock, an investable weight
factor (“IWF”) is calculated by dividing the available float shares by the total shares outstanding. Available float
shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum
threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and
no other control group holds 5% of the company’s shares, SPDJI would assign that company an IWF of 1.00, as no control group
meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares and another
control group holds 20% of the company’s shares, SPDJI would assign an IWF of 0.77, reflecting the fact that 23% of the company’s
outstanding shares are considered to be held for control. As of July 31, 2017, companies with multiple share class lines are no
longer eligible for inclusion in the SPX. Constituents of the SPX prior to July 31, 2017 with multiple share class lines will be
grandfathered in and continue to be included in the SPX. If a constituent company of the SPX reorganizes into a multiple share
class line structure, that company will remain in the SPX at the discretion of the S&P Index Committee in order to minimize
turnover.
The SPX is calculated using a base-weighted
aggregate methodology. The level of the SPX reflects the total market value of all component stocks relative to the base period
of the years 1941 through 1943. An indexed number is used to represent the results of this calculation in order to make the level
easier to work with and track over time. The actual total market value of the component stocks during the base period of the years
1941 through 1943 has been set to an indexed level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the
daily calculation of the SPX is computed by dividing the total market value of the component stocks by the “index divisor.”
By itself, the index divisor is an arbitrary number. However, in the context of the calculation of the SPX, it serves as a link
to the original base period level of the SPX. The index divisor keeps the SPX comparable over time and is the manipulation point
for all adjustments to the SPX, which is index maintenance.
Index Maintenance
Index maintenance includes monitoring
and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price
adjustments due to company restructuring or spinoffs. Some corporate actions, such as stock splits and stock dividends, require
changes in the common shares outstanding and the stock prices of the companies in the SPX, and do not require index divisor adjustments.
To prevent the level of the SPX from
changing due to corporate actions, corporate actions which affect the total market value of the SPX require an index divisor adjustment.
By adjusting the index divisor for the change in market value, the level of the SPX remains constant and does not reflect the corporate
actions of individual companies in the SPX. Index divisor adjustments are made after the close of trading and after the calculation
of the SPX closing level.
Changes in a company’s shares
outstanding of 5.00% or more due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers
are made as soon as reasonably possible. Share changes due to mergers or acquisitions of publicly held companies that trade on
a major exchange are implemented when the transaction occurs, even if both of the companies are not in the same headline index,
and regardless of the size of the change. All other changes of 5.00% or more (due to, for example, company stock repurchases, private
placements, redemptions, 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.
|
NOTES | PS-13
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
Historical Performance
of the SPX5UE
The
following graph sets forth the daily historical performance of the SPX5UE in the period from September 10, 2009 (the date the Underlying
was launched) through November 5, 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. On November 5, 2019, the closing level of the Underlying
was 147.308. The actual Starting Value will be determined on the pricing date.
This historical
data on the SPX5UE is not necessarily indicative of the future performance of the SPX5UE or what the value of the Notes may be.
Any historical upward or downward trend in the level of the SPX5UE during any period set forth above is not an indication that
the level of the SPX5UE is more or less likely to increase or decrease at any time over the term of the Notes.
Before investing in the Notes,
you should consult publicly available sources for the levels of the SPX5UE.
License Agreement
S&P®
is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a
registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use
by S&P Dow Jones Indices LLC. “Standard & Poor’s®,” “S&P 500®” and “S&P®”
are trademarks of S&P. These trademarks have been sublicensed for certain purposes by our affiliate, Merrill, Lynch, Fenner,
Pierce & Smith (“MLPF&S”). The SPX is a product of S&P Dow Jones Indices LLC and/or its affiliates and
has been licensed for use by MLPF&S.
The Notes
are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or any of their respective affiliates
(collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices make no representation or warranty, express
or implied, to the holders of the Notes or any member of the public regarding the advisability of investing in securities generally
or in the Notes particularly or the ability of the SPX to track general market performance. S&P Dow Jones Indices’ only
relationship to MLPF&S with respect to the SPX is the licensing of the SPX and certain trademarks, service marks and/or trade
names of S&P Dow Jones Indices and/or its third party licensors. The SPX is determined, composed and calculated by S&P
Dow Jones Indices without regard to us, MLPF&S, or the Notes. S&P Dow Jones Indices have no obligation to take our needs,
BAC’s needs or the needs of MLPF&S or holders of the Notes into consideration in determining, composing or calculating
the SPX. S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount
of the Notes or the timing of the issuance or sale of the Notes or in the determination or calculation of the equation by which
the Notes are to be converted into cash. S&P Dow Jones Indices have no obligation or liability in connection with the administration,
marketing or trading of the Notes. There is no assurance that investment products based on the SPX will accurately track index
performance or provide positive investment returns. S&P Dow Jones Indices LLC and its subsidiaries are not investment advisors.
Inclusion of a security or futures contract within an index is not a recommendation by S&P Dow Jones Indices to buy, sell,
or hold such security or futures contract, nor is it considered to be investment advice. Notwithstanding the foregoing, CME Group
Inc. and its affiliates may independently issue and/or sponsor financial products unrelated to the Notes currently being issued
by us, but which may be similar to and competitive with the Notes. In addition, CME Group Inc. and its affiliates may trade financial
products which are linked to the performance of the SPX. It is possible that this trading activity will affect the value of the
Notes.
|
NOTES | PS-14
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
S&P
DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED
THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)
WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY
FOR
ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS
ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY US, BAC, MLPF&S,
HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF
THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE
NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND MLPF&S, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
|
NOTES | PS-15
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
Supplement to the Plan of Distribution; Role
of BofAS and Conflicts of Interest
BofAS, a broker-dealer
affiliate of ours, is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate
as selling agent in the distribution of the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA
Rule 5121. BofAS may not make sales in this offering to any of its discretionary accounts without the prior written approval of
the account holder.
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.
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 $970.00 per Note.
BofAS and
any of our other broker-dealer affiliates may use this pricing supplement and the accompanying product supplement, prospectus supplement
and prospectus for offers and sales in secondary market transactions and market-making transactions in the Notes. However, they
are not obligated to engage in such secondary market transactions and/or market-making transactions. The selling agent may act
as principal or agent in these transactions, and any such sales will be made at prices related to prevailing market conditions
at the time of the sale.
At BofAS’s
discretion, for a short, undetermined initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary
market at a price that may exceed the initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based
on then-prevailing market conditions and other considerations, including the performance of the Underlying and the remaining term
of the Notes. However, none of us, the Guarantor, BofAS or any of our other affiliates is obligated to purchase your Notes at any
price or at any time, and we cannot assure you that any party will purchase your Notes at a price that equals or exceeds the initial
estimated value of the Notes.
Any price
that BofAS may pay to repurchase the Notes will depend upon then prevailing market conditions, the creditworthiness of us and the
Guarantor, and transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of
the Notes.
European
Economic Area
None of this
pricing supplement, the accompanying product supplement, the accompanying prospectus or the accompanying prospectus supplement
is a prospectus for the purposes of the Prospectus Regulation (as defined below). This pricing supplement, the accompanying product
supplement, the accompanying prospectus and the accompanying prospectus supplement have been prepared on the basis that any offer
of Notes in any Member State of the European Economic Area (the “EEA”) which has implemented the Prospectus Regulation
(each, a “Relevant Member State”) will only be made to a legal entity which is a qualified investor under the Prospectus
Regulation (“Qualified Investors”). Accordingly any person making or intending to make an offer in that Relevant Member
State of Notes which are the subject of the offering contemplated in this pricing supplement, the accompanying product supplement,
the accompanying prospectus and the accompanying prospectus supplement may only do so with respect to Qualified Investors. Neither
BofA Finance nor BAC have authorized, nor do they authorize, the making of any offer of Notes other than to Qualified Investors.
The expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
PROHIBITION
OF SALES TO EEA RETAIL INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and
should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes: (a) a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as
amended (“MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (the Insurance Distribution Directive),
as amended or superseded, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1)
of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation; and (b) the expression “offer”
includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be
offered so as to enable an investor to decide to purchase or subscribe for the Notes. Consequently no key information document
required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”) for offering or selling the Notes or
otherwise making them available to retail investors in the EEA 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.
The communication
of this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement, the accompanying prospectus
and any other document or materials relating to the issue of the Notes offered hereby is not being made, and such documents and/or
materials have not been approved, by an authorized person for the purposes of section 21 of the United Kingdom’s Financial
|
NOTES | PS-16
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
Services and Markets Act 2000, as amended (the
“FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the
general public in the United Kingdom. The communication of such documents and/or materials as a financial promotion is only being
made to those persons in the United Kingdom who have professional experience in matters relating to investments and who fall within
the definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the “Financial Promotion Order”)), or who fall within Article 49(2)(a) to (d) of
the Financial Promotion Order, or who are any other persons to whom it may otherwise lawfully be made under the Financial Promotion
Order (all such persons together being referred to as “relevant persons”). In the United Kingdom, the Notes offered
hereby are only available to, and any investment or investment activity to which this pricing supplement, the accompanying product
supplement, the accompanying prospectus supplement and the accompanying prospectus relates will be engaged in only with, relevant
persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this pricing supplement, the
accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus or any of their contents.
Any invitation or inducement
to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes
may only be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to the
Issuer or the Guarantor.
All applicable provisions
of the FSMA must be complied with in respect to anything done by any person in relation to the Notes in, from or otherwise involving
the United Kingdom.
|
NOTES | PS-17
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
Structuring the Notes
The Notes are our
debt securities, the return on which is linked to the performance of the Underlying. The related guarantee is BAC’s obligation.
As is the case for all of our and BAC’s respective debt securities, including our market-linked notes, the economic terms
of the Notes reflect our and BAC’s actual or perceived creditworthiness at the time of pricing. In addition, because market-linked
notes result in increased operational, funding and liability management costs to us and BAC, BAC typically borrows the funds under
these types of notes at a rate, which we refer to in this pricing supplement as BAC’s internal funding rate, that is more
favorable to BAC than the rate that it might pay for a conventional fixed or floating rate debt security. This generally relatively
lower internal funding rate, which is reflected in the economic terms of the Notes, along with the fees and charges associated
with market-linked notes, typically results in the initial estimated value of the Notes on the pricing date being less than their
public offering price.
In order to meet our
payment obligations on the Notes, at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which
may include call options, put options or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging
arrangements are determined based upon terms provided by BofAS and its affiliates, and take into account a number of factors, including
our and BAC’s creditworthiness, interest rate movements, the volatility of the Underlying, the tenor of the Notes and the
hedging arrangements. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging
arrangements.
BofAS has advised
us that the hedging arrangements will include hedging related charges, reflecting the costs associated with, and our affiliates’
profit earned from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces,
actual profits or losses from these hedging transactions may be more or less than any expected amounts.
For further information,
see “Risk Factors” beginning on page PS-8 above and “Supplemental Use of Proceeds” on page PS-16 of the
accompanying product supplement.
|
NOTES | PS-18
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
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 Internal Revenue Service (“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.
This discussion does not address the tax consequences applicable to holders subject to Section 451(b) of the Code. This summary
assumes that the issue price of the Notes, as determined for U.S. federal income tax purposes, equals the principal amount thereof.
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
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, certain aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. We intend
to treat the Notes as “contingent payment debt instruments” for U.S. federal income tax purposes, subject to taxation
under the “noncontingent bond method.” The balance of this discussion assumes that this characterization is proper
and will be respected.
U.S. Holders
If the Notes are properly characterized
as contingent payment debt instruments for U.S. federal income tax purposes, such notes generally will be subject to Treasury regulations
governing contingent payment debt instruments. Under those regulations, and as further described under “U.S Federal Income
Tax Considerations—Taxation of Debt Securities—Consequences to U.S. Holders—Debt Securities Subject to Contingences”
in the accompanying prospectus, a U.S. Holder will be required to report original issue discount (“OID”) or interest
income based on a “comparable yield” and a “projected payment schedule,” established by us for determining
interest accruals and adjustments with respect to the Notes. A U.S. Holder of the Notes generally will be required to include in
income OID in excess of actual cash payments received for certain taxable years.
The following table is based upon a hypothetical
projected payment schedule (including a hypothetical Redemption Amount) and a hypothetical comparable yield equal to 2.1886% per
annum (compounded semi-annually). The hypothetical comparable yield is our current estimate of the comparable yield based upon
market conditions as of the date of this preliminary pricing supplement. It has been determined by us for purposes of illustrating
the application of the Code and the Treasury regulations to the Notes as if the Notes had been issued on November 27, 2019 and
were scheduled to mature on November 28, 2024. This tax accrual table is based upon a hypothetical projected payment schedule per
$1,000.00 principal amount of the Notes, which would consist of a single payment of $1,121.2085 at maturity. The following table
is for tax purposes only, and we make no representations or predictions as to what the actual Redemption Amount will be. The actual
“projected payment schedule” will be completed on the pricing date, and included in the final pricing supplement.
|
NOTES | PS-19
|
NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index
Accrual Period
|
Interest Deemed to Accrue During Accrual Period
(per $1,000 principal amount of the Notes)
|
Total Interest Deemed to Have Accrued from Original Issue Date (per $1,000 principal amount of the Notes)
|
November 27, 2019 through December 31, 2019
|
$2.1083
|
$2.1083
|
January 1, 2020 through December 31, 2020
|
$23.1805
|
$25.2888
|
January 1, 2021 through December 31, 2021
|
$23.7173
|
$49.0061
|
January 1, 2022 through December 31, 2022
|
$24.2659
|
$73.2720
|
January 1, 2023 through December 31, 2023
|
$24.8272
|
$98.0992
|
January 1, 2024 through November 28, 2024
|
$23.1093
|
$121.2085
|
Hypothetical Projected Redemption Amount
= $1,121.2085 per note.
Upon a sale, exchange, retirement, or
other disposition of the Notes, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the
amount realized and that holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes generally will equal
the cost of the Notes, increased by the amount of OID previously accrued by the holder for the Notes. A U.S. Holder generally will
treat any gain as interest income, and will treat any loss as ordinary loss to the extent of the previous interest inclusions in
respect of the notes, and the balance as long-term or short-term capital loss depending upon the U.S. Holder’s holding period
for the note. The deductibility of capital losses by a U.S. Holder is subject to limitations.
Non-U.S. Holders
Please see the discussion under “U.S.
Federal Income Tax Considerations—Taxation of Debt Securities—Consequences to Non-U.S. Holders” in the accompanying
prospectus for the material U.S. federal income tax consequences that will apply to Non-U.S. Holders of the Notes, except that
the following disclosure supplements the discussion in the prospectus.
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 Underlying 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 Underlying
or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context
of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the
applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
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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NOTES | PS-20
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NOTES Linked to the S&P 500® Daily Risk Control 5% USD Excess Return Index