Linked to a Basket of
Three Indices
|
● |
Maturity of approximately 13
months. |
|
● |
The Notes are linked to a basket
comprised of the Dow Jones Industrial Average®, the
Russell 2000® Index and the Nasdaq-100® Index
(the “Basket”). The Dow Jones Industrial Average® has
been given an initial weight of 33.33%, the Russell
2000® Index has been given an initial weight of 33.33%,
and the Nasdaq-100® Index has been given an initial
weight of 33.34%. |
|
● |
300% upside exposure to increases
in the value of the Basket, subject to the Max Return of
15.30%. |
|
● |
1-to-1 downside exposure to
decreases in the value of the Basket beyond a 10% decline with up
to 90% of the principal at risk. |
|
● |
All payments on the Notes are
subject to the credit risk of BofA Finance LLC (“BofA Finance”), as
issuer of the Notes, and Bank of America Corporation (“BAC” or the
“Guarantor”), as guarantor of the Notes. |
|
● |
No periodic interest payments. |
|
● |
The Basket Component Starting
Values of the Basket Components were determined on January 24, 2023
(the “Strike Date”). The Basket Component Starting Value of each of
the Dow Jones Industrial Average® Basket Component and
the Russell 2000® Index Basket Component is lower than
its respective closing level on the pricing date. The Basket
Component Starting Value of the Nasdaq-100® Index Basket
Component is higher than its respective closing level on the
pricing date. |
|
● |
The Capped Buffered Enhanced Return
Notes Linked to a Basket of Three Indices, due February 29, 2024
(the “Notes”) priced on January 25, 2023 and will issue on January
30, 2023. |
|
● |
The Notes will not be listed on any
securities exchange. |
The initial estimated value of the Notes as of the pricing date
is $991.50 in principal amount of Notes, which is less than the
public offering price listed below. The actual value of your
Notes at any time will reflect many factors and cannot be predicted
with accuracy. See “Risk Factors” beginning on page PS-8 of this
pricing supplement and “Structuring the Notes” on page PS-24 of
this pricing supplement for additional information.
There are important differences between the Notes and a
conventional debt security. Potential purchasers of the Notes
should consider the information in “Risk Factors” beginning on page
PS-8 of this pricing supplement, page PS-5 of the accompanying
product supplement, page S-6 of the accompanying prospectus
supplement, and page 7 of the accompanying prospectus.
None of the Securities and Exchange Commission (the “SEC”), any
state securities commission, or any other regulatory body has
approved or disapproved of these securities or determined if this
pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
|
|
Public offering price(1) |
Underwriting discount(1)(2) |
Proceeds, before expenses, to BofA Finance(2) |
|
Per Note |
$1,000.00 |
$2.20 |
$997.80 |
|
Total |
$1,715,000.00 |
$3,773.00 |
$1,711,227.00 |
|
(1) |
Certain dealers who purchase the Notes for sale to certain
fee-based advisory accounts may forgo some or all of their selling
concessions, fees or commissions. The public offering price for
investors purchasing the Notes in these fee-based advisory accounts
may be as low as $997.80 per $1,000 in principal amount of the
Notes. |
|
|
|
(2) |
The underwriting discount per $1,000 in principal amount of Notes
may be as high as $2.20, resulting in proceeds, before expenses, to
BofA Finance of as low as $997.80 per $1,000 in principal amount of
Notes. The total underwriting discount and proceeds, before
expenses, to BofA Finance specified above reflect the aggregate of
the underwriting discounts per $1,000 in principal amount of
Notes.
|
The Notes and the related guarantee:
|
Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
 |
|
Selling Agent |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Terms of the Notes
The Notes provide you a leveraged return, subject to the Max
Return, if the Ending Value of the Basket is greater than its
Starting Value. If the Ending Value of the Basket is equal to or
less than its Starting Value but greater than or equal to its
Threshold Value, you will receive the principal amount of your
Notes at maturity. If the Ending Value of the Basket is less than
its Threshold Value, there is full exposure to declines in the
Basket
beyond its Threshold Value, and you will lose some or a significant
portion of your investment in the Notes. 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 Basket, subject to our and
BAC’s credit risk.
|
Issuer: |
BofA Finance |
|
Guarantor: |
BAC |
|
Denominations: |
The Notes will be issued in minimum denominations of $1,000 and
whole multiples of $1,000 in excess thereof. |
|
Term: |
Approximately 13 months. |
|
Basket: |
A
basket consisting of the following (each an “Underlying” or a
“Basket Component”) and their respective weightings:
Basket Component Starting Values
The
Dow Jones Industrial Average®
The
Basket Component Starting Value of each of the INDU and the RTY is
lower than its respective closing level on the pricing date. The
Basket Component Starting Value of the NDX is higher than its
respective closing level on the pricing date.
|
|
Strike
Date: |
January 24, 2023 |
|
Pricing
Date: |
January 25, 2023 |
|
Issue
Date: |
January 30, 2023 |
|
Valuation
Date: |
February 26, 2024, subject to postponement as described under
“Description of the Notes—Certain Terms of the Notes—Events
Relating to Calculation Days” in the accompanying product
supplement. |
|
Maturity
Date: |
February 29, 2024 |
|
Starting
Value: |
100.00. |
|
Ending
Value: |
100.00 × (1 + the sum of the Weighted Basket Component Returns), as
determined by the calculation agent |
|
Upside
Participation Rate: |
300% |
|
Max
Return: |
$1,153.00 per Note, which represents a return of 15.30% over the
principal amount. |
|
Threshold
Value: |
90% of the Starting Value. |
|
Threshold
Rate: |
100% |
|
Basket Component
Starting Value: |
With respect to each Basket Component, its closing level on the
Strike Date, as set forth above. |
|
Basket Component
Ending Value: |
With respect to each Basket Component, its closing level on the
Valuation Date. |
|
Redemption
Amount: |
The Redemption Amount per $1,000 in principal amount of Notes will
be: |
|
a) |
If the Ending Value of the Basket is greater than its Starting
Value: |
 |
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-2 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
|
|
|
|
$1,000 +
|
|
b) |
If the Ending Value of the Basket is equal to or less than its
Starting Value but greater than or equal to its Threshold
Value: |
|
|
|
 |
|
c) |
If the Ending Value of the Basket 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 90% of your principal amount. |
|
Calculation
Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
|
Selling
Agent: |
BofAS |
|
CUSIP: |
09709VFL5 |
|
Basket Component
Return: |
For each Basket Component,
|
|
Basket
Return: |
|
|
Weighted Basket
Component Return: |
For each Basket Component, its weighting multiplied by its Basket
Component Return. |
|
Events of Default
and Acceleration: |
If an Event of Default, as defined in the senior indenture relating
to the Notes and in the section entitled “Description of Debt
Securities of BofA Finance LLC—Events of Default and Rights of
Acceleration; Covenant Breaches” on page 54 of the accompanying
prospectus, with respect to the Notes occurs and is continuing, the
amount payable to a holder of the Notes upon any acceleration
permitted under the senior indenture will be equal to the amount
described under the caption “Redemption Amount” above, calculated
as though the date of acceleration were the Maturity Date of the
Notes and as though the Valuation Date were the third trading day
prior to the date of acceleration. 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. |
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 Basket. The economic terms of the Notes are based on BAC’s
internal funding rate, which is the rate it would pay to borrow
funds through the issuance of market-linked notes, and the economic
terms of certain related hedging arrangements BAC’s affiliates
enter into. BAC’s internal funding rate is typically lower than the
rate it would pay when it issues conventional fixed or floating
rate debt securities. This difference in funding rate, as well as
the underwriting discount, if any, and the hedging related charges
described below (see “Risk Factors” beginning on page PS-8),
reduced the economic terms of the Notes to you and the initial
estimated value of the Notes. Due to these factors, the public
offering price you are paying to purchase the Notes is greater than
the initial estimated value of the Notes as of the pricing
date.
The initial estimated value of the Notes as of the pricing date is
set forth on the cover page of this pricing supplement For more
information about the initial estimated value and the structuring
of the Notes, see “Risk Factors” beginning on page PS-8 and
“Structuring the Notes” on page PS-24.
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-3 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Redemption Amount Determination
On the Maturity Date, you will
receive a cash payment per $1,000 in principal amount of Notes
determined as follows:
All payments described above are subject to the credit risk of BofA
Finance, as issuer, and BAC, as guarantor.
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-4 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Hypothetical Payout Profile and Examples of Payments at
Maturity
Capped Buffered Enhanced Return
Notes Table
The following table, graph 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 the return on the Notes based on the Starting Value of 100 for
the Basket, the Threshold Value of 90, the Upside Participation
Rate of 300%, the Threshold Rate of 100%, the Max Return of
$1,153.00 per $1,000 in principal amount of Notes and a range of
hypothetical Ending Values of the Basket. The actual amount you
receive and the resulting return will depend on the actual Ending
Value of the Basket, and whether you hold the Notes to
maturity. The following examples do not take into account any
tax consequences from investing in the Notes.
The Basket is designed to allow investors to participate in the
percentage changes in the levels of the Basket Components, as
reflected in the value of the Basket, from the pricing date to the
Valuation Date. The Basket Components are described in the section
“The Basket Components” below. The Basket Component Ending Value of
each Basket Component will not include any income generated by
dividends paid on the Basket Component, as applicable, or on the
securities included in or represented by that Basket Component,
which you would otherwise be entitled to receive if you invested in
those securities directly. All payments on the Notes are
subject to Issuer and Guarantor credit risk.
|
Ending Value of the
Basket
|
Basket Return
|
Redemption Amount per
Note
|
Return on the
Notes
|
|
160.00 |
60.00% |
$1,153.00 |
15.30% |
|
150.00 |
50.00% |
$1,153.00 |
15.30% |
|
140.00 |
40.00% |
$1,153.00 |
15.30% |
|
130.00 |
30.00% |
$1,153.00 |
15.30% |
|
120.00 |
20.00% |
$1,153.00 |
15.30% |
|
110.00 |
10.00% |
$1,153.00 |
15.30% |
|
105.10 |
5.10% |
$1,153.00(1) |
15.30% |
|
105.00 |
5.00% |
$1,150.00 |
15.00% |
|
102.00 |
2.00% |
$1,060.00 |
6.00% |
|
100.00(2) |
0.00% |
$1,000.00 |
0.00% |
|
90.00(3) |
-10.00% |
$1,000.00 |
0.00% |
|
89.99 |
-10.01% |
$999.90 |
-0.01% |
|
80.00 |
-20.00% |
$900.00 |
-10.00% |
|
70.00 |
-30.00% |
$800.00 |
-20.00% |
|
50.00 |
-50.00% |
$600.00 |
-40.00% |
|
0.00 |
-100.00% |
$100.00 |
-90.00% |
|
(1) |
The
Redemption Amount per Note cannot exceed the Max
Return. |
|
(2) |
The
Starting Value was set to 100.00 on the Strike Date. |
|
(3) |
This is
the Threshold Value. |
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-5 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Hypothetical Payout Profile and Examples of Payments at
Maturity
This graph reflects the return on the Notes based on the Upside
Participation Rate of 300%, the Threshold Value of 90% of the
Starting Value, the Threshold Rate of 100% and the Max Return of
$1,153.00 per $1,000 in principal amount of Notes. The green line
reflects the return on the Notes, while the dotted gray line
reflects the returns of a direct investment in the Basket,
excluding dividends.
This graph has been prepared for purposes of illustration only.
Redemption Amount Calculation
Examples
Example 1
The Ending Value of the Basket is 110.00, or 110.00% of its
Starting Value:
|
Starting Value of the Basket: |
100.00 |
|
|
Ending Value of the Basket: |
110.00 |
|
|
|
|
|
Example 2
The Ending Value of the Basket is 102.00, or 102.00% of its
Starting Value:
|
Starting Value of the Basket: |
100.00 |
|
|
Ending Value of the Basket: |
102.00 |
|
|
|
|
|
Example 3
The Ending Value of the Basket is 95.00, or 95.00% of its Starting
Value:
|
Starting Value of the Basket: |
100.00 |
|
|
Threshold Value of the Basket: |
90.00 |
|
|
Ending Value of the Basket: |
95.00 |
|
|
|
|
|
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-6 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Example 4
The Ending Value of the Basket is 50.00, or 50.00% of its Starting
Value:
|
Starting Value of the Basket: |
100.00 |
|
|
Threshold Value of the Basket: |
90.00 |
|
|
Ending Value of the Basket: |
50.00 |
|
|
|
|
|
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-7 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Risk Factors
Your investment in the Notes entails significant risks, many of
which differ from those of a conventional debt security. Your
decision to purchase the Notes should be made only after carefully
considering the risks of an investment in the Notes, including
those discussed below, with your advisors in light of your
particular circumstances. The Notes are not an appropriate
investment for you if you are not knowledgeable about significant
elements of the Notes or financial matters in general. You should
carefully review the more detailed explanation of risks relating to
the Notes in the “Risk Factors” sections beginning on page PS-5 of
the accompanying product supplement, page S-6 of the accompanying
prospectus supplement and page 7 of the accompanying prospectus,
each as identified on page PS-28 below.
Structure-related Risks
|
● |
Your investment may result in a loss; there is no guaranteed
return of principal. There is no fixed principal repayment
amount on the Notes at maturity. If the Ending Value of the Basket
is less than its Threshold Value, at maturity, your investment will
be subject to 1:1 downside exposure to decreases in the value of
the Basket and you will lose 1% of the principal amount for each 1%
that the Ending Value of the Basket is less than its Threshold
Value. In that case, you will lose some or a significant portion of
your investment in the Notes. |
|
● |
Your return on the Notes may be less than the yield on a
conventional debt security of comparable maturity. Any return
that you receive on the Notes may be less than the return you would
earn if you purchased a conventional debt security with the same
Maturity Date. As a result, your investment in the Notes may not
reflect the full opportunity cost to you when you consider factors,
such as inflation, that affect the time value of money. |
|
● |
The return on the Notes will be limited to the Max
Return. The return on the Notes will not exceed the Max Return,
regardless of the performance of Basket. Your return on the Notes
may be less than the return that you could have realized if you
invested directly in the Basket Components, and you will not
receive the full benefit of any appreciation in the value of the
Basket beyond the Max Return. |
|
● |
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 Basket exceeds its Starting Value or Threshold Value. |
|
● |
The Redemption Amount will not reflect changes in the levels
of the Basket other than on the Valuation Date. Changes in the
levels of the Basket during the term of the Notes other than on the
Valuation Date will not be reflected in the calculation of the
Redemption Amount. No other levels of the Basket will be taken into
account. Notwithstanding the foregoing, investors should generally
be aware of the performance of the Basket while holding the Notes.
As a result, you will receive less than the principal amount at
maturity even if the level of the Basket has increased at certain
times during the term of the Notes before decreasing to a level on
the Valuation Date that is less than its Threshold Value. |
|
● |
Changes in the level of one of the Basket Components may be
offset by changes in the levels or prices of the other Basket
Components. The Notes are linked to a Basket. Changes in the
level of one or more of the Basket Components may not correlate
with changes in the levels or prices of one or more of the other
Basket Components. The levels or prices of one or more Basket
Components may increase, while the levels or prices of one or more
of the other Basket Components may decrease or not increase as
much. Therefore, in calculating the value of the Basket, increases
in the level of one Basket Component may be moderated or wholly
offset by decreases or lesser increases in the level of one or more
of the other Basket Components. Due to the different weightings of
the Basket Components, adverse changes in the level of the Basket
Components which are more heavily weighted will have a greater
impact on the value of your Notes at any time or the Redemption
Amount than changes in the level of lower weighted Basket
Components. |
|
● |
Any payments on the Notes are subject to our credit risk and
the credit risk of the Guarantor, and any actual or perceived
changes in our or the Guarantor’s creditworthiness are expected to
affect the value of the Notes. The Notes are our senior
unsecured debt securities. Any payment on the Notes will be fully
and unconditionally guaranteed by the Guarantor. The Notes are not
guaranteed by any entity other than the Guarantor. As a result,
your receipt of the 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 Ending Value of the Basket as compared to its
Starting Value. No assurance can be given as to what our financial
condition or the financial condition of the Guarantor will be at
any time after the pricing date of the Notes. If we and the
Guarantor become unable to meet our respective financial
obligations as they become due, you may not receive the amount(s)
payable under the terms of the Notes.
In addition, our credit ratings and the credit ratings of the
Guarantor are assessments by ratings agencies of our respective
abilities to pay our obligations. Consequently, our or the
Guarantor’s perceived creditworthiness and actual or anticipated
decreases in our or the Guarantor’s credit ratings or increases in
the spread between the yield on our respective securities and the
yield on U.S. Treasury securities (the “credit spread”) prior to
the Maturity Date may adversely affect the market value of the
Notes. However, because your return on the Notes depends upon
factors in addition to our ability and the ability of the Guarantor
to pay our respective obligations, such as the value of the Basket,
an improvement in our or the Guarantor’s credit ratings will not
reduce the other investment risks related to the Notes. |
|
● |
We are a finance subsidiary and, as such, have no
independent assets, operations, or revenues. We are a finance
subsidiary of the Guarantor, have no operations other than those
related to the issuance, administration and repayment of our debt
securities that are guaranteed by the Guarantor, and are dependent
upon the Guarantor and/or its other subsidiaries to meet our
obligations under the Notes in the ordinary course. Therefore, our
ability to make payments on the Notes may be limited. |
Valuation- and Market-related Risks
|
● |
The public offering price you are paying for the Notes
exceeds their initial estimated value. The initial estimated
value of the Notes that is provided on the cover page of this
pricing supplement is an estimate only, determined as of the
pricing date by reference to our and our affiliates’ pricing
models. These pricing models consider certain assumptions and
variables, including our credit spreads and those of the Guarantor,
the Guarantor’s internal funding rate, mid-market terms on hedging
transactions, expectations on interest rates, dividends and
volatility, price- |
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-8 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
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 value of
the Basket, changes in the Guarantor’s internal funding rate, and
the inclusion in the public offering price of the underwriting
discount, if any, and the hedging related charges, all as further
described in “Structuring the Notes” below. These factors, together
with various credit, market and economic factors over the term of
the Notes, are expected to reduce the price at which you may be
able to sell the Notes in any secondary market and will affect the
value of the Notes in complex and unpredictable ways.
|
● |
The initial estimated value does not represent a minimum or
maximum price at which we, BAC, BofAS or any of our other
affiliates would be willing to purchase your Notes in any secondary
market (if any exists) at any time. The value of your Notes at
any time after issuance will vary based on many factors that cannot
be predicted with accuracy, including the performance of the
Basket, our and BAC’s creditworthiness and changes in market
conditions. |
|
● |
We cannot assure you that a trading market for your Notes
will ever develop or be maintained. We will not list the Notes
on any securities exchange. We cannot predict how the Notes will
trade in any secondary market or whether that market will be liquid
or illiquid. |
Conflict-related Risks
|
● |
Trading and hedging activities by us, the Guarantor and any
of our other affiliates, including BofAS, may create conflicts of
interest with you and may affect your return on the Notes and their
market value. We, the Guarantor or one or more of our other
affiliates, including BofAS, may buy or sell the securities held by
or included in the Basket Components, or futures or options
contracts or exchange traded instruments on the Basket Components
or those securities, or other instruments whose value is derived
from the Basket Components or those securities. While we, the
Guarantor or one or more of our other affiliates, including BofAS,
may from time to time own securities represented by the Basket
Components, except to the extent that BAC’s common stock may be
included in the Basket Components, we, the Guarantor and our other
affiliates, including BofAS, do not control any company included in
the Basket Components, and have not verified any disclosure made by
any other company. We, the Guarantor or one or more of our other
affiliates, including BofAS, may execute such purchases or sales
for our own or their own accounts, for business reasons, or in
connection with hedging our obligations under the Notes. These
transactions may present a conflict of interest between your
interest in the Notes and the interests we, the Guarantor and our
other affiliates, including BofAS, may have in our or their
proprietary accounts, in facilitating transactions, including block
trades, for our or their other customers, and in accounts under our
or their management. These transactions may adversely affect the
levels of the Basket Components in a manner that could be adverse
to your investment in the Notes. On or before the Strike Date, any
purchases or sales by us, the Guarantor or our other affiliates,
including BofAS or others on our or their behalf (including those
for the purpose of hedging some or all of our anticipated exposure
in connection with the Notes), have affected the levels of the
Basket Components. Consequently, the levels of the Basket
Components may change subsequent to the Strike Date, which may
adversely affect the market value of the Notes.
We, the Guarantor or one or more of our other affiliates, including
BofAS, may also have engaged in hedging activities that could have
affected the levels of the Basket Components on the Strike Date. In
addition, these hedging activities, including the unwinding of a
hedge, may decrease the market value of your Notes prior to
maturity, and may affect the amounts to be paid on the Notes. We,
the Guarantor or one or more of our other affiliates, including
BofAS, may purchase or otherwise acquire a long or short position
in the Notes and may hold or resell the Notes. For example, BofAS
may enter into these transactions in connection with any market
making activities in which it engages. We cannot assure you that
these activities will not adversely affect the levels of the Basket
Components, the market value of your Notes prior to maturity or the
amounts payable on the Notes. |
|
● |
There may be potential conflicts of interest involving the
calculation agent, which is an affiliate of ours. We have the
right to appoint and remove the calculation agent. One of our
affiliates will be the calculation agent for the Notes and, as
such, will make a variety of determinations relating to the Notes,
including the amounts that will be paid on the Notes. Under some
circumstances, these duties could result in a conflict of interest
between its status as our affiliate and its responsibilities as
calculation agent. |
Underlying-related Risks
|
● |
The Notes are subject to risks associated with small-size
capitalization companies. The stocks comprising the RTY are
issued by companies with small-sized market capitalization. The
stock prices of small-size companies may be more volatile than
stock prices of large capitalization companies. Small-size
capitalization companies may be less able to withstand adverse
economic, market, trade and competitive conditions relative to
larger companies. Small-size capitalization companies may also be
more susceptible to adverse developments related to their products
or services. |
|
● |
The publisher of an Underlying may adjust that Underlying in
a way that affects its levels, and the publisher has no obligation
to consider your interests. The publisher of an Underlying can
add, delete, or substitute the components included in that
Underlying or make other methodological changes that could change
its level. Any of these actions could adversely affect the value of
your Notes. |
|
● |
The Notes are subject to risks associated with foreign
securities markets. The NDX includes certain foreign equity
securities. You should be aware that investments in securities
linked to the value of foreign equity securities involve particular
risks. The foreign securities markets comprising the NDX may have
less liquidity and may be more volatile than U.S. or other
securities markets and market developments may affect foreign
markets differently from U.S. or other securities markets. Direct
or indirect government intervention to stabilize these foreign
securities markets, as well as cross-shareholdings in foreign
companies, may affect trading prices and volumes in these markets.
Also, there is generally less publicly available information about
foreign companies than about those U.S. companies that are subject
to the reporting requirements of the SEC, and foreign companies are
subject to accounting, auditing and financial reporting standards
and requirements that differ from those applicable to U.S.
reporting companies.
Prices of securities in foreign countries are subject to political,
economic, financial and social factors that apply in those
geographical regions. |
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-9 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
These factors, which could negatively affect those securities
markets, include the possibility of recent or future changes in a
foreign government’s economic and fiscal policies, the possible
imposition of, or changes in, currency exchange laws or other laws
or restrictions applicable to foreign companies or investments in
foreign equity securities and the possibility of fluctuations in
the rate of exchange between currencies, the possibility of
outbreaks of hostility and political instability and the
possibility of natural disaster or adverse public health
developments in the region. Moreover, foreign economies may differ
favorably or unfavorably from the U.S. economy in important
respects such as growth of gross national product, rate of
inflation, capital reinvestment, resources and
self-sufficiency.
Tax-related Risks
|
● |
The U.S. federal income tax consequences of an investment in
the Notes are uncertain, and may be adverse to a holder of the
Notes. No statutory, judicial, or administrative authority
directly addresses the characterization of the Notes or securities
similar to the Notes for U.S. federal income tax purposes. As a
result, significant aspects of the U.S. federal income tax
consequences of an investment in the Notes are not certain. Under
the terms of the Notes, you will have agreed with us to treat the
Notes as single financial contracts, as described below under “U.S.
Federal Income Tax Summary—General.” If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative
characterization for the Notes, the timing and character of gain or
loss with respect to the Notes may differ. No ruling will be
requested from the IRS with respect to the Notes and no assurance
can be given that the IRS will agree with the statements made in
the section entitled “U.S. Federal Income Tax Summary.” You are
urged to consult with your own tax advisor regarding all aspects of
the U.S. federal income tax consequences of investing in the
Notes. |
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-10 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Hypothetical Historical Performance of the Basket
While actual historical information on the Basket did not exist
before the Strike Date, the following graph sets forth the
hypothetical historical daily performance of the Basket from
January 2, 2018 through the Strike Date. The graph is based upon
actual daily historical levels or prices of the Basket Components
based on the closing levels of the Basket Components as of the
Strike Date, and a Basket value of 100.00 as of that date. This
hypothetical historical data on the Basket is not necessarily
indicative of the future performance of the Basket or what the
value of the Notes may be. Any hypothetical historical upward or
downward trend in the value of the Basket during any period set
forth below is not an indication that the value of the Basket is
more or less likely to increase or decrease at any time over the
term of the Notes.
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-11 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
The
Underlyings
All disclosures contained in this pricing supplement regarding the
Underlyings, including, without limitation, their make-up, method
of calculation, and changes in their components, have been derived
from publicly available sources. The information reflects the
policies of, and is subject to change by, the sponsor of the NDX,
the sponsor of the RTY, and the sponsor of the INDU (collectively,
the “Underlying Sponsors”). The Underlying Sponsors, which license
the copyright and all other rights to the respective Underlyings,
have no obligation to continue to publish, and may discontinue
publication of, the Underlyings. The consequences of any Underlying
Sponsor discontinuing publication of the applicable Underlying are
discussed in “Description of the Notes — Discontinuance of an
Index” in the accompanying product supplement. None of us, the
Guarantor, the calculation agent, or BofAS accepts any
responsibility for the calculation, maintenance or publication of
any Underlying or any successor index. None of us, the Guarantor,
BofAS or any of our other affiliates makes any representation to
you as to the future performance of the Underlyings. You should
make your own investigation into the Underlyings.
The Nasdaq-100®
Index
The NDX is intended to measure the performance of the 100 largest
domestic and international non-financial securities listed on The
Nasdaq Stock Market ("NASDAQ") based on market capitalization. The
NDX reflects companies across major industry groups including
computer hardware and software,
telecommunications, retail/wholesale trade and biotechnology. It
does not contain securities of financial companies including
investment companies.
The NDX began trading on January 31, 1985 at a base value of
125.00. The NDX is calculated and published by Nasdaq, Inc. In
administering the NDX, Nasdaq, Inc. will exercise reasonable
discretion as it deems appropriate.
Underlying Stock Eligibility Criteria
NDX eligibility is limited to specific security types only. The
security types eligible for the NDX include foreign or domestic
common stocks, ordinary shares, ADRs and tracking stocks. Security
types not included in the NDX are closed-end funds, convertible
debt securities, exchange traded funds, limited liability
companies, limited partnership interests, preferred stocks, rights,
shares or units of beneficial interest, warrants, units, and other
derivative securities. The NDX does not contain securities of
investment companies. For purposes of the NDX eligibility criteria,
if the security is a depositary receipt representing a security of
a non-U.S. issuer, then references to the “issuer” are references
to the issuer of the underlying security.
Initial Eligibility Criteria
To be eligible for initial inclusion in the NDX, a security must be
listed on NASDAQ and meet the following criteria:
|
● |
the security’s
U.S.
listing must be exclusively on the Nasdaq Global Select Market or
the Nasdaq Global Market (unless the security was dually listed on
another U.S. market prior to January 1, 2004 and has continuously
maintained such listing); |
|
● |
the security must be of a
non-financial company; |
|
● |
the security may not be
issued by an issuer currently in bankruptcy
proceedings; |
|
● |
the security must have a
minimum three-month average daily trading volume of at least
200,000 shares; |
|
● |
if the issuer of the security
is organized under the laws of a jurisdiction outside the U.S.,
then such security must have listed options on a recognized options
market in the U.S. or be eligible for listed-options trading on a
recognized options market in the U.S.; |
|
● |
the issuer of the security
may not have entered into a definitive agreement or other
arrangement which would likely result in the security no longer
being eligible for inclusion in the NDX; |
|
● |
the issuer of the security
may not have annual financial statements with an audit opinion that
is currently withdrawn; and |
|
● |
the issuer of the security
must have “seasoned” on NASDAQ, the New York Stock Exchange or NYSE
Amex. Generally, a company is considered to be seasoned if it has
been listed on a market for at least three full months (excluding
the first month of initial listing). |
Continued Eligibility Criteria
In addition,
to be eligible for continued inclusion in the NDX, the following
criteria apply:
|
● |
the security’s U.S. listing
must be exclusively on the Nasdaq Global Select Market or the
Nasdaq Global Market; |
|
● |
the security must be of a
non-financial company; |
|
● |
the security may not be
issued by an issuer currently in bankruptcy
proceedings; |
|
● |
the security must have a
minimum three-month average daily trading volume of at least
200,000 shares; |
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-12 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
|
● |
if the issuer of the security
is organized under the laws of a jurisdiction outside the U.S.,
then such security must have listed options on a recognized options
market in the U.S. or be eligible for listed-options trading on a
recognized options market in the U.S. (measured annually during the
ranking review process); |
|
● |
the security must have an
adjusted market capitalization equal to or exceeding 0.10% of the
aggregate adjusted market capitalization of the NDX at each
month-end. In the event a company does not meet this criterion for
two consecutive month-ends, it will be removed from the NDX
effective after the close of trading on the third Friday of the
following month; and |
|
● |
the issuer of the security
may not have annual financial statements with an audit opinion that
is currently withdrawn. |
Computation of the NDX
The value of
the NDX equals the aggregate value of the NDX share weights (the
“NDX Shares”) of each of the NDX securities multiplied by each such
security’s last sale price (last sale price refers to the last sale
price on NASDAQ), and divided by the divisor of the NDX. If trading
in an NDX security is halted while the market is open, the last
traded price for that security is used for all NDX computations
until trading resumes. If trading is halted before the market is
open, the previous day’s last sale price is used. The formula for
determining the NDX value is as follows:
The NDX is ordinarily calculated without regard to cash dividends
on NDX securities. The NDX is calculated during the trading day and
is disseminated once per second from 09:30:01 to 17:16:00 ET. The
closing level of the NDX may change up until 17:15:00 ET due to
corrections to the last sale price of the NDX securities. The
official closing value of the NDX is ordinarily disseminated at
17:16:00 ET.
NDX Maintenance
Changes to NDX Constituents
Changes to the NDX constituents may be made during the annual
ranking review. In addition, if at any time during the year other
than the annual review, it is determined that an NDX security
issuer no longer meets the criteria for continued inclusion in the
NDX, or is otherwise determined to have become ineligible for
continued inclusion in the NDX, it is replaced with the largest
market capitalization issuer not currently in the NDX that meets
the applicable eligibility criteria for initial inclusion in the
NDX.
Ordinarily, a security will be removed from the NDX at its last
sale price. However, if at the time of its removal the NDX security
is halted from trading on its primary listing market and an
official closing price cannot readily be determined, the NDX
security may, in Nasdaq, Inc.’s discretion, be removed at a price
of $0.00000001 (“zero price”). This zero price will be applied to
the NDX security after the close of the market but prior to the
time the official closing value of the NDX is disseminated.
Divisor Adjustments
The divisor is adjusted to ensure that changes in the NDX
constituents either by corporate actions (that adjust either the
price or shares of an NDX security) or NDX participation outside of
trading hours do not affect the value of the NDX. All divisor
changes occur after the close of the applicable index security
markets.
Quarterly NDX Rebalancing
The NDX will be rebalanced on a quarterly basis if it is determined
that (1) the current weight of the single NDX security with the
largest market capitalization is greater than 24.0% of the NDX or
(2) the collective weight of those securities whose individual
current weights are in excess of 4.5% exceeds 48.0% of the NDX. In
addition, a “special rebalancing” of the NDX may be conducted at
any time if Nasdaq, Inc. determines it necessary to maintain the
integrity and continuity of the NDX. If either one or both of the
above weight distribution conditions are met upon quarterly review,
or Nasdaq, Inc. determines that a special rebalancing is necessary,
a weight rebalancing will be performed.
If the first weight distribution condition is met and the current
weight of the single NDX security with the largest market
capitalization is greater than 24.0%, then the weights of all
securities with current weights greater than 1.0% (“large
securities”) will be scaled down proportionately toward 1.0% until
the adjusted weight of the single largest NDX security reaches
20.0%.
If the second weight distribution condition is met and the
collective weight of those securities whose individual current
weights are in excess of 4.5% (or adjusted weights in accordance
with the previous step, if applicable) exceeds 48.0% of the NDX,
then the weights of all such large securities in that group will be
scaled down proportionately toward 1.0% until their collective
weight, so adjusted, is equal to 40.0%.
The aggregate weight reduction among the large securities resulting
from either or both of the rebalancing steps above will then be
redistributed to those securities with weightings of less than 1.0%
(“small securities”) in the following manner. In the first
iteration, the weight of the largest small security will be scaled
upwards by a factor which sets it equal to the average NDX weight
of 1.0%. The weights of each of the smaller remaining small
securities will be scaled up by the same factor reduced in relation
to each security’s relative ranking among the small securities such
that the smaller
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-13 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
the NDX security in the ranking, the less its weight will be scaled
upward. This is intended to reduce the market impact of the weight
rebalancing on the smallest component securities in the NDX.
In the second iteration of the small security rebalancing, the
weight of the second largest small security, already adjusted in
the first iteration, will be scaled upwards by a factor which sets
it equal to the average NDX weight of 1.0%. The weights of each of
the smaller remaining small securities will be scaled up by this
same factor reduced in relation to each security’s relative ranking
among the small securities such that, once again, the smaller the
security in the ranking, the less its weight will be scaled upward.
Additional iterations will be performed until the accumulated
increase in weight among the small securities equals the aggregate
weight reduction among the large securities that resulted from the
rebalancing in accordance with the two weight distribution
conditions discussed above.
Finally, to complete the rebalancing process, once the final
weighting percentages for each NDX security have been set, the NDX
Shares will be determined anew based upon the last sale prices and
aggregate capitalization of the NDX at the close of trading on the
last calendar day in February, May, August and November. Changes to
the NDX Shares will be made effective after the close of trading on
the third Friday in March, June, September and December, and an
adjustment to the divisor is made to ensure continuity of the NDX.
Ordinarily, new rebalanced NDX Shares will be determined by
applying the above procedures to the current NDX Shares. However,
Nasdaq, Inc. may, from time to time, determine rebalanced weights,
if necessary, by applying the above procedure to the actual current
market capitalization of the NDX components. In such instances,
Nasdaq, Inc. would announce the different basis for rebalancing
prior to its implementation.
During the quarterly rebalancing, data is cutoff as of the previous
month end and no changes are made to the NDX from that cutoff until
the quarterly index share change effective date, except in the case
of changes due to corporate actions with an ex-date.
Adjustments for Corporate Actions
Changes in the price and/or NDX Shares driven by corporate events
such as stock dividends, splits, and certain spin-offs and rights
issuances will be adjusted on the ex-date. If the change in total
shares outstanding arising from other corporate actions is greater
than or equal to 10.0%, the change will be made as soon as
practicable. Otherwise, if the change in total shares outstanding
is less than 10.0%, then all such changes are accumulated and made
effective at one time on a quarterly basis after the close of
trading on the third Friday in each of March, June, September, and
December. The NDX Shares are derived from the security’s total
shares outstanding. The NDX Shares are adjusted by the same
percentage amount by which the total shares outstanding have
changed.
Historical Performance of the NDX
The following graph sets forth the
daily historical performance of the NDX in the period from January
2, 2018 through the Strike Date. We obtained this historical data
from Bloomberg L.P. We have not independently verified the
accuracy or completeness of the information obtained from Bloomberg
L.P. The horizontal line in the graph represents the NDX’s
Threshold Value of 10,661.98 (rounded to two decimal places), which
is 90% of the NDX’s Starting Value of 11,846.64, which was its
closing level on the Strike Date.
This historical data on the NDX is not necessarily indicative of
the future performance of the NDX or what the value of the Notes
may be. Any historical upward or downward trend in the closing
level of the NDX during any period set forth above is not an
indication that the closing level of the NDX is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the closing levels of the NDX.
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-14 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
License Agreement
The Notes are not sponsored, endorsed,
sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, Inc.,
with its affiliates, are referred to as the “Corporations”). The
Corporations have not passed on the legality or suitability of, or
the accuracy or adequacy of descriptions and disclosures relating
to, the Notes. The Corporations make no representation or warranty,
express or implied, to the owners 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 NDX
to track general stock market performance. The Corporations’ only
relationship to our affiliate, Merrill Lynch, Pierce, Fenner &
Smith Incorporated (“Licensee”) is in the licensing of the
NASDAQ®,
OMX®, NASDAQ
OMX®, and NDX
registered trademarks, and certain trade names of the Corporations
or their licensor and the use of the NDX which is determined,
composed and calculated by Nasdaq, Inc. without regard to Licensee
or the Notes. Nasdaq, Inc. has no obligation to take the needs of
the Licensee or the owners of the Notes into consideration in
determining, composing or calculating the NDX. The Corporations are
not responsible for and have not participated in the
determination of the timing of, prices at, or quantities of the
Notes to be issued or in the determination or calculation of the
equation by which the Notes are to be converted into cash. The
Corporations have no liability in connection with the
administration, marketing or trading of the Notes.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE NDX OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE NDX OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NDX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
|
|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-15 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
The Russell 2000®
Index
The RTY was developed by Russell Investments (“Russell”) before
FTSE International Limited and Russell combined in 2015 to create
FTSE Russell, which is wholly owned by London Stock Exchange Group.
Additional information on the RTY is available at the following
website: http://www.ftserussell.com. No information on that website
is deemed to be included or incorporated by reference in this
pricing supplement.
Russell began dissemination of the RTY (Bloomberg L.P. index symbol
“RTY”) on January 1, 1984. FTSE Russell calculates and publishes
the RTY. The RTY was set to 135 as of the close of business on
December 31, 1986. The RTY is designed to track the performance of
the small capitalization segment of the U.S. equity market. As a
subset of the Russell 3000® Index,
the RTY consists of the smallest 2,000 companies included in the
Russell 3000® Index.
The Russell 3000® Index
measures the performance of the largest 3,000 U.S. companies,
representing approximately 98% of the investable U.S. equity
market. The RTY is determined, comprised, and calculated by FTSE
Russell without regard to the Notes.
Selection of Stocks Comprising the RTY
Each company eligible for inclusion in the RTY must be classified
as a U.S. company under FTSE Russell’s country-assignment
methodology. If a company is incorporated, has a stated
headquarters location, and trades in the same country (American
Depositary Receipts and American Depositary Shares are not
eligible), then the company is assigned to its country of
incorporation. If any of the three factors are not the same, FTSE
Russell defines three Home Country Indicators (“HCIs”): country of
incorporation, country of headquarters, and country of the most
liquid exchange (as defined by a two-year average daily dollar
trading volume) from all exchanges within a country. Using the
HCIs, FTSE Russell compares the primary location of the company’s
assets with the three HCIs. If the primary location of its assets
matches any of the HCIs, then the company is assigned to the
primary location of its assets. If there is insufficient
information to determine the country in which the company’s assets
are primarily located, FTSE Russell will use the country from which
the company’s revenues are primarily derived for the comparison
with the three HCIs in a similar manner. FTSE Russell uses the
average of two years of assets or revenues data to reduce potential
turnover. If conclusive country details cannot be derived from
assets or revenues data, FTSE Russell will assign the company to
the country of its headquarters, which is defined as the address of
the company’s principal executive offices, unless that country is a
Benefit Driven Incorporation (“BDI”) country, in which case the
company will be assigned to the country of its most liquid stock
exchange. BDI countries include: Anguilla, Antigua and Barbuda,
Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin
Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao,
Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia,
Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and
Turks and Caicos Islands. For any companies incorporated or
headquartered in a U.S. territory, including Puerto Rico, Guam, and
U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion in the RTY must trade on a
major U.S. exchange. Stocks must have a closing price at or above
$1.00 on their primary exchange on the last trading day in May to
be eligible for inclusion during annual reconstitution. However, in
order to reduce unnecessary turnover, if an existing member’s
closing price is less than $1.00 on the last day of May, it will be
considered eligible if the average of the daily closing prices
(from its primary exchange) during the month of May is equal to or
greater than $1.00. Initial public offerings are added each quarter
and must have a closing price at or above $1.00 on the last day of
their eligibility period in order to qualify for index inclusion.
If an existing stock does not trade on the “rank day” (typically
the last trading day in May but a confirmed timetable is announced
each spring) but does have a closing price at or above $1.00 on
another eligible U.S. exchange, that stock will be eligible for
inclusion.
An important criterion used to determine the list of securities
eligible for the RTY is total market capitalization, which is
defined as the market price as of the last trading day in May for
those securities being considered at annual reconstitution times
the total number of shares outstanding. Where applicable, common
stock, non-restricted exchangeable shares and partnership
units/membership interests are used to determine market
capitalization. Any other form of shares such as preferred stock,
convertible preferred stock, redeemable shares, participating
preferred stock, warrants and rights, installment receipts or trust
receipts, are excluded from the calculation. If multiple share
classes of common stock exist, they are combined. In cases where
the common stock share classes act independently of each other
(e.g., tracking stocks), each class is considered for inclusion
separately. If multiple share classes exist, the pricing vehicle
will be designated as the share class with the highest two-year
trading volume as of the rank day in May.
Companies with a total market capitalization of less than $30
million are not eligible for the RTY. Similarly, companies with
only 5% or less of their shares available in the marketplace are
not eligible for the RTY. Royalty trusts, limited liability
companies, closed-end investment companies (companies that are
required to report Acquired Fund Fees and Expenses, as defined by
the SEC, including business development companies), blank check
companies, special purpose acquisition companies, and limited
partnerships are also ineligible for inclusion. Bulletin board,
pink sheets, and over-the-counter traded securities are not
eligible for inclusion. Exchange traded funds and mutual funds are
also excluded.
Annual reconstitution is a process by which the RTY is completely
rebuilt. Based on closing levels of the company’s common stock on
its primary exchange on the rank day of May of each year, FTSE
Russell reconstitutes the composition of the RTY using the then
existing market capitalizations of eligible companies.
Reconstitution of the RTY occurs on the last Friday in June or,
when the last Friday in June is the 29th or 30th, reconstitution
occurs on the prior Friday. In addition, FTSE Russell adds initial
public offerings to the RTY on a quarterly basis based on total
market capitalization ranking within the market-adjusted
capitalization breaks established during the most recent
reconstitution. After membership is determined, a security’s shares
are adjusted to include only those shares available to the public.
This is often referred to as “free float.” The purpose of the
adjustment is to exclude from market calculations the
capitalization that is not available for purchase and is not part
of the investable opportunity set.
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|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-16 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Historical Performance of the RTY
The following graph sets forth the daily historical performance of
the RTY in the period from January 2, 2018 through the Strike Date.
We obtained this historical data from Bloomberg L.P. We have not
independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P. The horizontal line in the
graph represents the RTY’s Threshold Value of 1,697.050 (rounded to
three decimal places), which is 90% of the RTY’s Starting Value of
1,885.611, which was its closing level on the Strike Date.
This historical data on the RTY is not necessarily indicative of
the future performance of the RTY or what the value of the Notes
may be. Any historical upward or downward trend in the closing
level of the RTY during any period set forth above is not an
indication that the closing level of the RTY is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the closing levels of the RTY.
License Agreement
“Russell 2000®” and
“Russell 3000®” are
trademarks of FTSE Russell and have been licensed for use by our
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Notes are not sponsored, endorsed, sold, or promoted by FTSE
Russell, and FTSE Russell makes no representation regarding the
advisability of investing in the Notes.
FTSE Russell and Merrill Lynch, Pierce, Fenner & Smith
Incorporated have entered into a non-exclusive license agreement
providing for the license to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and its affiliates, including us, in exchange
for a fee, of the right to use indices owned and published by FTSE
Russell in connection with some securities, including the Notes.
The license agreement provides that the following language must be
stated in this pricing supplement:
The Notes are not sponsored, endorsed, sold, or promoted by FTSE
Russell. FTSE Russell makes no representation or warranty, express
or implied, to the holders of the Notes or any member of the public
regarding the advisability of investing in securities generally or
in the Notes particularly or the ability of the RTY to track
general stock market performance or a segment of the same. FTSE
Russell’s publication of the RTY in no way suggests or implies an
opinion by FTSE Russell as to the advisability of investment in any
or all of the securities upon which the RTY is based. FTSE
Russell’s only relationship to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and to us is the licensing of certain trademarks
and trade names of FTSE Russell and of the RTY, which is
determined, composed, and calculated by FTSE Russell without regard
to Merrill Lynch, Pierce, Fenner & Smith Incorporated, us, or
the Notes. FTSE Russell is not responsible for and has not reviewed
the Notes nor any associated literature or publications and FTSE
Russell makes no representation or warranty express or implied as
to their accuracy or completeness, or otherwise. FTSE Russell
reserves the right, at any time and without notice, to alter,
amend, terminate, or in any way change the RTY. FTSE Russell has no
obligation or liability in connection with the administration,
marketing, or trading of the Notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE
RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, US, BAC, BOFAS, HOLDERS OF THE
NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RTY OR ANY
DATA INCLUDED THEREIN. FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE RTY OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL FTSE RUSSELL HAVE ANY
LIABILITY FOR ANY
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-17 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
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|
CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-18 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
The Dow Jones Industrial
Average®
Unless otherwise stated, all information on the INDU provided in
this pricing supplement is derived from Dow Jones Indexes, the
marketing name and a licensed trademark of S&P Dow Jones
Indices LLC (“SPDJI”). The INDU is a price-weighted index, which
means an underlying stock’s weight in the INDU is based on its
price per share rather than the total market capitalization of the
issuer. The INDU is designed to provide an indication of the
composite performance of 30 common stocks of corporations
representing a broad cross-section of U.S. industry. The
corporations represented in the INDU tend to be market leaders in
their respective industries and their stocks are typically widely
held by individuals and institutional investors.
The INDU is maintained by an Averages Committee comprised of three
representatives of SPDJI and two representatives of The Wall
Street Journal (the “WSJ”). Generally, composition changes
occur only after mergers, corporate acquisitions or other dramatic
shifts in a component's core business. When such an event
necessitates that one component be replaced, the entire INDU is
reviewed. As a result, when changes are made they typically involve
more than one component. While there are no rules for component
selection, a stock typically is added only if it has an excellent
reputation, demonstrates sustained growth, is of interest to a
large number of investors and accurately represents the sector(s)
covered by the average.
Changes in the composition of the INDU are made entirely by the
Averages Committee without consultation with the corporations
represented in the INDU, any stock exchange, any official agency or
us. Unlike most other indices, which are reconstituted according to
a fixed review schedule, constituents of the INDU are reviewed on
an as-needed basis. Changes to the common stocks included in the
INDU tend to be made infrequently, and the underlying stocks of the
INDU may be changed at any time for any reason. The companies
currently represented in the INDU are incorporated in the United
States and its territories and their stocks are listed on the New
York Stock Exchange and The Nasdaq Stock Market.
The INDU initially consisted of 12 common stocks and was first
published in the WSJ in 1896. The INDU was increased to include 20
common stocks in 1916 and to include 30 common stocks in 1928. The
number of common stocks in the INDU has remained at 30 since 1928,
and, in an effort to maintain continuity, the constituent
corporations represented in the INDU have been changed on a
relatively infrequent basis. The INDU includes companies from nine
main groups: Basic Materials; Consumer Goods; Consumer Services;
Financials; Healthcare; Industrials; Oil & Gas; Technology; and
Telecommunications.
Computation of the INDU
The level of the INDU is the sum of the primary exchange prices of
each of the 30 component stocks included in the INDU, divided by a
divisor that is designed to provide a meaningful continuity in the
level of the INDU. Because the INDU is price-weighted, stock splits
or changes in the component stocks could result in distortions in
the INDU level. In order to prevent these distortions related to
extrinsic factors, the divisor is periodically changed in
accordance with a mathematical formula that reflects adjusted
proportions within the INDU. The current divisor of the INDU is
published daily in the WSJ and other publications. In addition,
other statistics based on the INDU may be found in a variety of
publicly available sources.
Historical Performance of the INDU
T The following graph sets forth the
daily historical performance of the INDU in the period from January
2, 2018 through the Strike Date. We obtained this historical data
from Bloomberg L.P. We have not independently verified the accuracy
or completeness of the information obtained from Bloomberg L.P. The
horizontal line in the graph represents the INDU’s Threshold
Value of 30,360.56 (rounded to two decimal places), which is 90% of
the INDU’s Starting Value of 33,733.96, which was its closing level
on the Strike Date.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-19 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
This historical data on the INDU is not necessarily indicative of
the future performance of the INDU or what the value of the Notes
may be. Any historical upward or downward trend in the closing
level of the INDU during any period set forth above is not an
indication that the closing level of the INDU is more or less
likely to increase or decrease at any time over the term of the
Notes.
Before investing in the Notes, you should consult publicly
available sources for the closing levels of the INDU.
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®,” “Dow
Jones Industrial Average®” and
“S&P®” are
trademarks of S&P. These trademarks have been sublicensed for
certain purposes by our affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated. The INDU is a product of S&P Dow
Jones Indices LLC and/or its affiliates and has been licensed for
use by Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Notes are not sponsored, endorsed, sold or promoted by S&P
Dow Jones Indices LLC, Dow Jones, S&P or any of their
respective affiliates (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices make no representation or warranty,
express or implied, to the holders of the Notes or any member of
the public regarding the advisability of investing in securities
generally or in the Notes particularly or the ability of the INDU
to track general market performance. S&P Dow Jones Indices’
only relationship to Merrill Lynch, Pierce, Fenner & Smith
Incorporated with respect to the INDU is the licensing of the INDU
and certain trademarks, service marks and/or trade names of S&P
Dow Jones Indices and/or its third party licensors. The INDU is
determined, composed and calculated by S&P Dow Jones Indices
without regard to us, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, or the Notes. S&P Dow Jones Indices have no
obligation to take our needs, BAC’s needs or the needs of Merrill
Lynch, Pierce, Fenner & Smith Incorporated or holders of the
Notes into consideration in determining, composing or calculating
the INDU. 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 INDU 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, SPDJI 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, SPDJI and its affiliates may trade financial products
which are linked to the performance of the INDU. It is possible
that this trading activity will affect the value of the Notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY,
TIMELINESS AND/OR THE COMPLETENESS OF THE INDU OR ANY DATA RELATED
THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH
RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO
ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO
RESULTS TO BE OBTAINED BY US, BAC, MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED, HOLDERS OF THE NOTES, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDU OR WITH RESPECT TO ANY DATA
RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST
TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR
OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS
OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-20 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Supplement to the Plan of Distribution; Role of BofAS and Conflicts
of Interest
BofAS, a broker-dealer affiliate of ours, is a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”) and will
participate as selling agent in the distribution of the Notes.
Accordingly, the offering of the Notes will conform to the
requirements of FINRA Rule 5121. BofAS may not make sales in this
offering to any of its discretionary accounts without the prior
written approval of the account holder.
We will deliver the Notes against payment therefor in New York, New
York on a date that is greater than two business days following the
pricing date. Under Rule 15c6-1 of the Securities Exchange Act of
1934, trades in the secondary market generally are required to
settle in two business days, unless the parties to any such trade
expressly agree otherwise. Accordingly, purchasers who wish to
trade the Notes more than two business days prior to the original
issue date will be required to specify alternative settlement
arrangements to prevent a failed settlement.
Under our distribution agreement with BofAS, BofAS will purchase
the Notes from us as principal at the public offering price
indicated on the cover of this pricing supplement, less the
indicated underwriting discount, if any. BofAS will sell the Notes
to other broker-dealers that will participate in the offering and
that are not affiliated with us, at an agreed discount to the
principal amount. Each of those broker-dealers may sell the Notes
to one or more additional broker-dealers. BofAS has informed us
that these discounts may vary from dealer to dealer and that not
all dealers will purchase or repurchase the Notes at the same
discount. Certain dealers who purchase the Notes for sale to
certain fee-based advisory accounts may forgo some or all of their
selling concessions, fees or commissions. The public offering price
for investors purchasing the Notes in these fee-based advisory
accounts may be as low as $997.80 per $1,000 in principal amount of
Notes.
BofAS and any of our other broker-dealer affiliates may use this
pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus for offers and sales in
secondary market transactions and market-making transactions in the
Notes. However, they are not obligated to engage in such secondary
market transactions and/or market-making transactions. These
broker-dealer affiliates may act as principal or agent in these
transactions, and any such sales will be made at prices related to
prevailing market conditions at the time of the sale.
At BofAS’s discretion, for a short, undetermined initial period
after the issuance of the Notes, BofAS may offer to buy the Notes
in the secondary market at a price that may exceed the initial
estimated value of the Notes. Any price offered by BofAS for the
Notes will be based on then-prevailing market conditions and other
considerations, including the performance of the Basket 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.
Sales Outside of the United States
The Notes have not been approved for public sale in any
jurisdiction outside of the United States. There has been no
registration or filing as to the Notes with any regulatory,
securities, banking, or local authority outside of the United
States and no action has been taken by BofA Finance, BAC, BofAS or
any other affiliate of BAC, to offer the Notes in any jurisdiction
other than the United States. As such, these Notes are made
available to investors outside of the United States only in
jurisdictions where it is lawful to make such offer or sale and
only under circumstances that will result in compliance with
applicable laws and regulations, including private placement
requirements.
Further, no offer or sale of the Notes is being made to residents
of:
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-21 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
You are urged to carefully review the selling restrictions that may
be applicable to your jurisdiction beginning on page S-56 of the
accompanying prospectus supplement.
European Economic Area and United Kingdom
None of this pricing supplement, the accompanying product
supplement, the accompanying prospectus or the accompanying
prospectus supplement is a prospectus for the purposes of the
Prospectus Regulation (as defined below). This pricing supplement,
the accompanying product supplement, the accompanying prospectus
and the accompanying prospectus supplement have been prepared on
the basis that any offer of Notes in any Member State of the
European Economic Area (the “EEA”) or in the United Kingdom (each,
a “Relevant State”) will only be made to a legal entity which is a
qualified investor under the Prospectus Regulation (“Qualified
Investors”). Accordingly any person making or intending to make an
offer in that Relevant State of Notes which are the subject of the
offering contemplated in this pricing supplement, the accompanying
product supplement, the accompanying prospectus and the
accompanying prospectus supplement may only do so with respect to
Qualified Investors. Neither BofA Finance nor BAC has authorized,
nor does it authorize, the making of any offer of Notes other than
to Qualified Investors. The expression “Prospectus Regulation”
means Regulation (EU) 2017/1129.
PROHIBITION OF SALES TO EEA AND UNITED KINGDOM RETAIL
INVESTORS – The Notes are not intended to be offered, sold or
otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the EEA or in
the United Kingdom. For these purposes: (a) a retail investor means
a person who is one (or more) of: (i) a retail client as defined in
point (11) of Article 4(1) of Directive 2014/65/EU, as amended
(“MiFID II”); or (ii) a customer within the meaning of Directive
(EU) 2016/97 (the Insurance Distribution Directive) where that
customer would not qualify as a professional client as defined in
point (10) of Article 4(1) of MiFID II; or (iii) not a qualified
investor as defined in the Prospectus Regulation; and (b) the
expression “offer” includes the communication in any form and by
any means of sufficient information on the terms of the offer and
the Notes to be offered so as to enable an investor to decide to
purchase or subscribe for the Notes. Consequently no key
information document required by Regulation (EU) No 1286/2014, as
amended (the “PRIIPs Regulation”) for offering or selling the Notes
or otherwise making them available to retail investors in the EEA
or in the United Kingdom has been prepared and therefore offering
or selling the Notes or otherwise making them available to any
retail investor in the EEA or in the United Kingdom may be unlawful
under the PRIIPs Regulation.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-22 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
United Kingdom
The communication of this pricing supplement, the accompanying
product supplement, the accompanying prospectus supplement, the
accompanying prospectus and any other document or materials
relating to the issue of the Notes offered hereby is not being
made, and such documents and/or materials have not been approved,
by an authorized person for the purposes of section 21 of the
United Kingdom’s Financial Services and Markets Act 2000, as
amended (the “FSMA”). Accordingly, such documents and/or materials
are not being distributed to, and must not be passed on to, the
general public in the United Kingdom. The communication of such
documents and/or materials as a financial promotion is only being
made to those persons in the United Kingdom who have professional
experience in matters relating to investments and who fall within
the definition of investment professionals (as defined in Article
19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the “Financial Promotion
Order”)), or who fall within Article 49(2)(a) to (d) of the
Financial Promotion Order, or who are any other persons to whom it
may otherwise lawfully be made under the Financial Promotion Order
(all such persons together being referred to as “relevant
persons”). In the United Kingdom, the Notes offered hereby are only
available to, and any investment or investment activity to which
this pricing supplement, the accompanying product supplement, the
accompanying prospectus supplement and the accompanying prospectus
relates will be engaged in only with, relevant persons. Any person
in the United Kingdom that is not a relevant person should not act
or rely on this pricing supplement, the accompanying product
supplement, the accompanying prospectus supplement or the
accompanying prospectus or any of their contents.
Any invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) in connection with
the issue or sale of the Notes may only be communicated or caused
to be communicated in circumstances in which Section 21(1) of the
FSMA does not apply to BofA Finance, as issuer, or BAC, as
guarantor.
All applicable provisions of the FSMA must be complied with in
respect to anything done by any person in relation to the Notes in,
from or otherwise involving the United Kingdom.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-23 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Structuring the Notes
The Notes are our debt securities, the return on which is linked to
the performance of the Basket. The related guarantee is BAC’s
obligation. As is the case for all of our and BAC’s respective debt
securities, including our market-linked notes, the economic terms
of the Notes reflect our and BAC’s actual or perceived
creditworthiness at the time of pricing. In addition, because
market-linked notes result in increased operational, funding and
liability management costs to us and BAC, BAC typically borrows the
funds under these types of notes at a rate, which we refer to in
this pricing supplement as BAC’s internal funding rate, that is
more favorable to BAC than the rate that it might pay for a
conventional fixed or floating rate debt security. This generally
relatively lower internal funding rate, which is reflected in the
economic terms of the Notes, along with the fees and charges
associated with market-linked notes, resulted in the initial
estimated value of the Notes on the pricing date being less than
their public offering price.
In order to meet our payment obligations on the Notes, at the time
we issue the Notes, we may choose to enter into certain hedging
arrangements (which may include call options, put options or other
derivatives) with BofAS or one of our other affiliates. The terms
of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a
number of factors, including our and BAC’s creditworthiness,
interest rate movements, the volatility of the Basket, the tenor of
the Notes and the hedging arrangements. The economic terms of the
Notes and their initial estimated value depend in part on the terms
of these hedging arrangements.
BofAS has advised us that the hedging arrangements will include
hedging related charges, reflecting the costs associated with, and
our affiliates’ profit earned from, these hedging arrangements.
Since hedging entails risk and may be influenced by unpredictable
market forces, actual profits or losses from these hedging
transactions may be more or less than any expected amounts.
For further information, see “Risk Factors” beginning on page PS-8
above and “Supplemental Use of Proceeds” on page PS-20 of the
accompanying product supplement.
Validity of the Notes
In the opinion of McGuireWoods LLP, as counsel to BofA Finance, as
issuer, and BAC, as guarantor, when the trustee has made the
appropriate entries or notations on Schedule 1 to the master global
note that represents the Notes (the “Master Note”) identifying the
Notes offered hereby as supplemental obligations thereunder in
accordance with the instructions of BofA Finance, and the Notes
have been delivered against payment therefor as contemplated in
this pricing supplement and the related prospectus, prospectus
supplement and product supplement, all in accordance with the
provisions of the indenture governing the Notes and the related
guarantee, such Notes will be the legal, valid and binding
obligations of BofA Finance, and the related guarantee will be the
legal, valid and binding obligation of BAC, subject, in each case,
to the effects of applicable bankruptcy, insolvency (including laws
relating to preferences, fraudulent transfers and equitable
subordination), reorganization, moratorium and other similar laws
affecting creditors’ rights generally, and to general principles of
equity. This opinion is given as of the date of this pricing
supplement and is limited to the Delaware General Corporation Law
and the Delaware Limited Liability Company Act (including the
statutory provisions, all applicable provisions of the Delaware
Constitution and reported judicial decisions interpreting either of
the foregoing) and the laws of the State of New York as in effect
on the date hereof. In addition, this opinion is subject to
customary assumptions about the trustee’s authorization, execution
and delivery of the indenture governing the Notes and due
authentication of the Master Note, the validity, binding nature and
enforceability of the indenture governing the Notes and the related
guarantee with respect to the trustee, the legal capacity of
individuals, the genuineness of signatures, the authenticity of all
documents submitted to McGuireWoods LLP as originals, the
conformity to original documents of all documents submitted to
McGuireWoods LLP as copies thereof, the authenticity of the
originals of such copies and certain factual matters, all as stated
in the opinion letter of McGuireWoods LLP dated December 8,
2022, which has been filed as an exhibit to the Registration
Statement (File Nos. 333-268718 and 333-268718-01) of BAC and BofA
Finance, filed with the SEC on December 8, 2022.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-24 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
U.S. Federal Income Tax Summary
The following summary of the material U.S. federal income and
estate tax considerations of the acquisition, ownership, and
disposition of the Notes supplements, and to the extent
inconsistent supersedes, the discussion under “U.S. Federal Income
Tax Considerations” in the accompanying prospectus and is not
exhaustive of all possible tax considerations. This summary is
based upon the Internal Revenue Code of 1986, as amended (the
“Code”), regulations promulgated under the Code by the U.S.
Treasury Department (“Treasury”) (including proposed and temporary
regulations), rulings, current administrative interpretations and
official pronouncements of the IRS, and judicial decisions, all as
currently in effect and all of which are subject to differing
interpretations or to change, possibly with retroactive effect. No
assurance can be given that the IRS would not assert, or that a
court would not sustain, a position contrary to any of the tax
consequences described below. This summary does not include any
description of the tax laws of any state or local governments, or
of any foreign government, that may be applicable to a particular
holder.
Although the Notes are issued by us, they will be treated as if
they were issued by BAC for U.S. federal income tax purposes.
Accordingly throughout this tax discussion, references to “we,”
“our” or “us” are generally to BAC unless the context requires
otherwise.
This summary is directed solely to U.S. Holders and Non-U.S.
Holders that, except as otherwise specifically noted, will purchase
the Notes upon original issuance and will hold the Notes as capital
assets within the meaning of Section 1221 of the Code, which
generally means property held for investment, and that are not
excluded from the discussion under “U.S. Federal Income Tax
Considerations” in the accompanying prospectus.
You should consult your own tax advisor concerning the U.S. federal
income tax consequences to you of acquiring, owning, and disposing
of the Notes, as well as any tax consequences arising under the
laws of any state, local, foreign, or other tax jurisdiction and
the possible effects of changes in U.S. federal or other tax
laws.
General
Although there is no statutory, judicial, or administrative
authority directly addressing the characterization of the Notes, in
the opinion of our counsel, Sidley Austin LLP, and based on certain
factual representations received from us, the Notes should be
treated as single financial contracts with respect to the
Underlyings and under the terms of the Notes, we and every investor
in the Notes agree, in the absence of an administrative
determination or judicial ruling to the contrary, to treat the
Notes in accordance with such characterization. This discussion
assumes that the Notes constitute single financial contracts with
respect to the Underlyings for U.S. federal income tax purposes. If
the Notes did not constitute single financial contracts, the tax
consequences described below would be materially different.
This characterization of the Notes is not binding on the IRS or
the courts. No statutory, judicial, or administrative authority
directly addresses the characterization of the Notes or any similar
instruments for U.S. federal income tax purposes, and no ruling is
being requested from the IRS with respect to their proper
characterization and treatment. Due to the absence of authorities
on point, significant aspects of the U.S. federal income tax
consequences of an investment in the Notes are not certain, and no
assurance can be given that the IRS or any court will agree with
the characterization and tax treatment described in this pricing
supplement. Accordingly, you are urged to consult your tax advisor
regarding all aspects of the U.S. federal income tax consequences
of an investment in the Notes, including possible alternative
characterizations.
Unless otherwise stated, the following discussion is based on the
characterization described above. The discussion in this section
assumes that there is a significant possibility of a significant
loss of principal on an investment in the Notes.
We will not attempt to ascertain whether the issuer of a component
stock included in an Underlying would be treated as a “passive
foreign investment company” (“PFIC”), within the meaning of Section
1297 of the Code, or a United States real property holding
corporation, within the meaning of Section 897(c) of the Code. If
the issuer of one or more stocks included in an Underlying were so
treated, certain adverse U.S. federal income tax consequences could
possibly apply to a holder of the Notes. You should refer to
information filed with the SEC by the issuers of the component
stocks included in the Underlyings and consult your tax advisor
regarding the possible consequences to you, if any, if any issuer
of a component stock included in an Underlying is or becomes a PFIC
or is or becomes a United States real property holding
corporation.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-25 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
U.S. Holders
Upon receipt of a cash payment at maturity or upon a sale or
exchange of the Notes prior to maturity, a U.S. Holder generally
will recognize capital gain or loss equal to the difference between
the amount realized and the U.S. Holder’s tax basis in the Notes. A
U.S. Holder’s tax basis in the Notes will equal the amount paid by
that holder to acquire them. This capital gain or loss generally
will be long-term capital gain or loss if the U.S. Holder held the
Notes for more than one year. The deductibility of capital losses
is subject to limitations.
Alternative Tax Treatments. Due to the absence of
authorities that directly address the proper tax treatment of the
Notes, prospective investors are urged to consult their tax
advisors regarding all possible alternative tax treatments of an
investment in the Notes. In particular, the IRS could seek to
subject the Notes to the Treasury regulations governing contingent
payment debt instruments. If the IRS were successful in that
regard, the timing and character of income on the Notes would be
affected significantly. Among other things, a U.S. Holder would be
required to accrue original issue discount every year at a
“comparable yield” determined at the time of issuance. In addition,
any gain realized by a U.S. Holder at maturity or upon a sale or
exchange of the Notes generally would be treated as ordinary
income, and any loss realized at maturity or upon a sale or
exchange of the Notes generally would be treated as ordinary loss
to the extent of the U.S. Holder’s prior accruals of original issue
discount, and as capital loss thereafter.
The IRS released Notice 2008-2 (the “Notice”), which sought
comments from the public on the taxation of financial instruments
currently taxed as “prepaid forward contracts.” This Notice
addresses instruments such as the Notes. According to the Notice,
the IRS and Treasury are considering whether a holder of an
instrument such as the Notes should be required to accrue ordinary
income on a current basis, regardless of whether any payments are
made prior to maturity. It is not possible to determine what
guidance the IRS and Treasury will ultimately issue, if any. Any
such future guidance may affect the amount, timing and character of
income, gain, or loss in respect of the Notes, possibly with
retroactive effect.
The IRS and Treasury are also considering additional issues,
including whether additional gain or loss from such instruments
should be treated as ordinary or capital, whether foreign holders
of such instruments should be subject to withholding tax on any
deemed income accruals, whether Section 1260 of the Code,
concerning certain “constructive ownership transactions,” generally
applies or should generally apply to such instruments, and whether
any of these determinations depend on the nature of the underlying
asset.
In addition, proposed Treasury regulations require the accrual of
income on a current basis for contingent payments made under
certain notional principal contracts. The preamble to the
regulations states that the “wait and see” method of accounting
does not properly reflect the economic accrual of income on those
contracts, and requires current accrual of income for some
contracts already in existence. While the proposed regulations do
not apply to prepaid forward contracts, the preamble to the
proposed regulations expresses the view that similar timing issues
exist in the case of prepaid forward contracts. If the IRS or
Treasury publishes future guidance requiring current economic
accrual for contingent payments on prepaid forward contracts, it is
possible that you could be required to accrue income over the term
of the Notes.
Because of the absence of authority regarding the appropriate tax
characterization of the Notes, it is also possible that the IRS
could seek to characterize the Notes in a manner that results in
tax consequences that are different from those described above. For
example, the IRS could possibly assert that any gain or loss that a
holder may recognize at maturity or upon the sale or exchange of
the Notes should be treated as ordinary gain or loss.
Because each Underlying is an index that periodically rebalances,
it is possible that the Notes could be treated as a series of
single financial contracts, each of which matures on the next
rebalancing date. If the Notes were properly characterized in such
a manner, a U.S. Holder would be treated as disposing of the Notes
on each rebalancing date in return for new Notes that mature on the
next rebalancing date, and a U.S. Holder would accordingly likely
recognize capital gain or loss on each rebalancing date equal to
the difference between the holder’s tax basis in the Notes (which
would be adjusted to take into account any prior recognition of
gain or loss) and the fair market value of the Notes on such
date.
Non-U.S. Holders
Except as discussed below, a Non-U.S. Holder generally will not be
subject to U.S. federal income or withholding tax for amounts paid
in respect of the Notes provided that the Non-U.S. Holder complies
with applicable certification requirements and that the payment is
not effectively connected with the conduct by the Non-U.S. Holder
of a U.S. trade or business. Notwithstanding the foregoing, gain
from the sale or exchange of the Notes or their settlement at
maturity may be subject to U.S. federal income tax if that Non-U.S.
Holder is a non-resident alien individual and is present in the
U.S. for 183 days or more during the taxable year of the sale,
exchange, or settlement and certain other conditions are
satisfied.
If a Non-U.S. Holder of the Notes is engaged in the conduct of a
trade or business within the U.S. and if gain realized on the
settlement at maturity, or upon sale or exchange of the Notes, is
effectively connected with the conduct of such trade or business
(and, if certain tax treaties apply, is attributable to a permanent
establishment maintained by the Non-U.S. Holder in the U.S.), the
Non-U.S. Holder, although exempt from U.S. federal withholding tax,
generally will be subject to U.S. federal income tax on such gain
on a net income basis in the same manner as if it were a U.S.
Holder. Such Non-U.S. Holders should read the material under the
heading “—U.S. Holders,” for a description of the U.S. federal
income tax consequences of acquiring, owning, and disposing of the
Notes. In addition, if such Non-U.S. Holder is a foreign
corporation, it may also be subject to a branch profits tax equal
to 30% (or such lower rate provided by any applicable tax treaty)
of a portion of its earnings and profits for the taxable year that
are effectively connected with its conduct of a trade or business
in the U.S., subject to certain adjustments.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-26 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
A “dividend equivalent” payment is treated as a dividend from
sources within the United States and such payments generally would
be subject to a 30% U.S. withholding tax if paid to a Non-U.S.
Holder. Under Treasury regulations, payments (including deemed
payments) with respect to equity-linked instruments (“ELIs”) that
are “specified ELIs” may be treated as dividend equivalents if such
specified ELIs reference an interest in an “underlying security,”
which is generally any interest in an entity taxable as a
corporation for U.S. federal income tax purposes if a payment with
respect to such interest could give rise to a U.S. source dividend.
However, IRS guidance provides that withholding on dividend
equivalent payments will not apply to specified ELIs that are not
delta-one instruments and that are issued before January 1, 2025.
Based on our determination that the Notes are not delta-one
instruments, Non-U.S. Holders should not be subject to withholding
on dividend equivalent payments, if any, under the Notes. However,
it is possible that the Notes could be treated as deemed reissued
for U.S. federal income tax purposes upon the occurrence of certain
events affecting the Underlyings or the Notes, and following such
occurrence the Notes could be treated as subject to withholding on
dividend equivalent payments. Non-U.S. Holders that enter, or have
entered, into other transactions in respect of the Underlyings or
the Notes should consult their tax advisors as to the application
of the dividend equivalent withholding tax in the context of the
Notes and their other transactions. If any payments are treated as
dividend equivalents subject to withholding, we (or the applicable
paying agent) would be entitled to withhold taxes without being
required to pay any additional amounts with respect to amounts so
withheld.
As discussed above, alternative characterizations of the Notes for
U.S. federal income tax purposes are possible. Should an
alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the
Notes to become subject to withholding tax, tax will be withheld at
the applicable statutory rate. As discussed above, the IRS has
indicated in the Notice that it is considering whether income in
respect of instruments such as the Notes should be subject to
withholding tax. Prospective Non-U.S. Holders should consult their
own tax advisors regarding the tax consequences of such alternative
characterizations.
U.S. Federal Estate Tax. Under current law, while the matter
is not entirely clear, individual Non-U.S. Holders, and entities
whose property is potentially includible in those individuals’
gross estates for U.S. federal estate tax purposes (for example, a
trust funded by such an individual and with respect to which the
individual has retained certain interests or powers), should note
that, absent an applicable treaty benefit, a Note is likely to be
treated as U.S. situs property, subject to U.S. federal estate tax.
These individuals and entities should consult their own tax
advisors regarding the U.S. federal estate tax consequences of
investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal Income Tax
Considerations — General — Backup Withholding and Information
Reporting” in the accompanying prospectus for a description of the
applicability of the backup withholding and information reporting
rules to payments made on the Notes.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-27 |
Capped Buffered Enhanced Return Notes Linked to a Basket of Three
Indices
Where You Can Find More Information
The terms and risks of the Notes are contained in this pricing
supplement and in the following related product supplement,
prospectus supplement and prospectus, which can be accessed at the
following links:
This pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus have been filed as part of a
registration statement with the SEC, which may, without cost, be
accessed on the SEC website at www.sec.gov or obtained from BofAS
by calling 1-800-294-1322. Before you invest, you should read this
pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus for information about us, BAC
and this offering. Any prior or contemporaneous oral statements and
any other written materials you may have received are superseded by
this pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus. Certain terms used but not
defined in this pricing supplement have the meanings set forth in
the accompanying product supplement or prospectus supplement.
Unless otherwise indicated or unless the context requires
otherwise, all references in this document to “we,” “us,” “our,” or
similar references are to BofA Finance, and not to BAC.
The Notes are our senior debt securities. Any payments on the Notes
are fully and unconditionally guaranteed by BAC. The Notes and the
related guarantee are not insured by the Federal Deposit Insurance
Corporation or secured by collateral. The Notes will rank equally
in right of payment with all of our other unsecured and
unsubordinated obligations, except obligations that are subject to
any priorities or preferences by law. The related guarantee will
rank equally in right of payment with all of BAC’s other unsecured
and unsubordinated obligations, except obligations that are subject
to any priorities or preferences by law, and senior to its
subordinated obligations. Any payments due on the Notes, including
any repayment of the principal amount, will be subject to the
credit risk of BofA Finance, as issuer, and BAC, as guarantor.
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CAPPED BUFFERED ENHANCED RETURN
NOTES | PS-28 |
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