This pricing supplement, which is not complete and may
be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus are not an offer to sell these Notes in any country or jurisdiction where
such an offer would not be permitted.
Linked to the NASDAQ-100® Index
|
•
|
Maturity
of approximately 13 months.
|
|
•
|
1.05-to-1
upside exposure to increases in the Underlying, subject to a Max Return of 10.00%.
|
|
•
|
1-to-1
downside exposure to decreases in the Underlying beyond a 10% decline, with up to 90% of your investment at risk.
|
|
•
|
All
payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”) and Bank of America Corporation
(“BAC” or the “Guarantor”).
|
|
•
|
No
periodic interest payments.
|
|
•
|
The
Enhanced Return Notes linked to the NASDAQ-100® Index (the “Notes”) are expected to price on September 25, 2019,
expected to issue on September 30, 2019 and expected to mature on October 29, 2020.
|
|
•
|
The
Notes will not be listed on any securities exchange.
|
The initial
estimated value of the Notes as of the pricing date is expected to be between $950 and $980 per Note, which is less than the public
offering price listed below. The actual value of your Notes at any time will reflect many factors and cannot be predicted with
accuracy. See “Risk Factors” beginning on page PS-7 of this pricing supplement and “Structuring the Notes”
on page PS-15 of this pricing supplement for additional information. Potential purchasers of the Notes should consider the information
in “Risk Factors” beginning on page PS-7 of this pricing supplement, page PS-5 of the accompanying product supplement,
page S-4 of the accompanying prospectus supplement, and page 7 of the accompanying prospectus.
None of the Securities and Exchange
Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of
these securities or determined if this Note Prospectus (as defined on page PS-18) is truthful or complete. Any representation to
the contrary is a criminal offense.
|
Public offering price(1)
|
Underwriting discount(1)
|
Proceeds, before expenses, to BofA Finance
|
Per Note
|
$1,000.00
|
$15.00
|
$985.00
|
Total
|
|
|
|
|
(1)
|
Certain dealers who purchase the Notes for sale to
certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions. The public offering
price for investors purchasing the Notes in these fee-based advisory accounts may be as low as $985.00 per Note
|
The Notes and the related
guarantee:
Are
Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
Selling Agent
ENHANCED RETURN NOTES Linked
to the NASDAQ-100® Index
Terms of the Notes
The Notes provide you a leveraged
return, subject to the Max Return, if the Ending Value of the Underlying, which is the NASDAQ-100® Index, is greater than the
Starting Value. If the Ending Value is equal to or less than the Starting Value but greater than or equal to the Threshold Value,
you will receive the principal amount. If the Ending Value is less than the Threshold Value, you will lose 1% of the principal
amount for each 1% that the Ending Value is less than the Threshold Value and will lose some or a significant portion of your investment.
Any payments on the Notes will be calculated based on $1,000 in principal amount of Notes and will depend on the performance of
the Underlying, subject to our and BAC’s credit risk.
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
|
Underlying:
|
The NASDAQ-100® Index (Bloomberg symbol: “NDX”), a price return index
|
Pricing Date*:
|
September 25, 2019
|
Issue Date*:
|
September 30, 2019
|
Valuation Date*:
|
October 26, 2020, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Calculation Days” of the accompanying product supplement. If the Valuation Date is not a business day, the Valuation Date will be postponed to the next business day.
|
Maturity Date*:
|
October 29, 2020
|
Starting Value:
|
The closing level of the Underlying on the Pricing Date.
|
Ending Value:
|
The closing level of the Underlying on the Valuation Date, as determined by the calculation agent.
|
Upside Participation Rate:
|
105%.
|
Max Return:
|
$1,100.00 per Note, which represents a return of 10.00% over the principal amount.
|
Threshold Value
|
90% of the Starting Value
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
Selling Agent:
|
BofAS.
|
CUSIP:
|
09709TUZ2
|
Underlying Return:
|
|
Events of Default and Acceleration:
|
If an Event of Default, as defined in the Senior Indenture and in the section entitled “Events of Default and Rights of Acceleration” beginning on page 35 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the Senior Indenture will be equal to the amount described under the section “Redemption Amount Determination” below, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. The calculation agent shall pro-rate the period of time elapsed between the issue date of the Notes and the date of acceleration. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate.
|
*Subject to change.
|
Any payments on the Notes
depend on the credit risk of BofA Finance, as Issuer, and BAC, as Guarantor, and on the performance of the Underlying. The economic
terms of the Notes are based on BAC’s internal funding rate, which is the rate it would pay to borrow funds through the issuance
of market-linked notes, and the economic terms of certain related hedging arrangements BAC’s affiliates enter into. BAC’s
internal funding rate is typically lower than the rate it would pay when it issues conventional fixed or floating rate debt securities.
This difference in funding rate, as well as the underwriting discount and the hedging related charges described below (see “Risk
Factors” beginning on page PS-7), will reduce the economic terms of the Notes to you and the initial estimated value of the
Notes. Due to these factors, the public offering price you pay to purchase the Notes will be greater than the initial estimated
value of the
Notes as of the pricing date.
|
ENHANCED RETURN NOTES® | PS-2
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
The initial estimated value
range of the Notes as of the date of this pricing supplement is set forth on the cover page of this pricing supplement. The final
pricing supplement will set forth the initial estimated value of the Notes as of the pricing date. For more information about the
initial estimated value and the structuring of the Notes, see “Risk Factors” beginning on page PS-7 and “Structuring
the Notes” on page PS-15.
|
ENHANCED RETURN NOTES® | PS-3
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
Redemption Amount Determination
On the Maturity Date, you
will receive a cash payment per $1,000 in principal amount of Notes determined as follows:
All payments described above are subject to Issuer and Guarantor credit risk.
|
ENHANCED RETURN NOTES® | PS-4
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
Hypothetical Payout Profile and Examples of Payments at Maturity
Enhanced Return Notes Table
The following table and Redemption
Amount Calculation Examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical
returns on the Notes. They illustrate the calculation of the Redemption Amount and return based on a hypothetical Starting
Value of 100, a hypothetical Threshold Value of 90, the Participation Rate of 105%, the Max Return of $1,100.00 per Note and a
range of hypothetical Ending Values. The actual amount you receive and the resulting return will depend on the actual Starting
Value, Threshold Value and Ending Value, and whether you hold the Notes to maturity. The following examples do not take into
account any tax consequences from investing in the Notes.
For recent actual levels of the
Underlying, see “The Underlying” section below. The Underlying is a price return index and as such the Ending Value
will not include any income generated by dividends paid on the stocks included in the Underlying, which you would otherwise be
entitled to receive if you invested in those stocks directly. In addition, all payments on the Notes are subject to Issuer and
Guarantor credit risk.
Ending Value
|
Percentage
Change from the Starting Value to the Ending Value
|
Redemption
Amount per Note
|
Return on the
Notes
|
160.00
|
60.00%
|
$1,100.00
|
10.00%
|
150.00
|
50.00%
|
$1,100.00
|
10.00%
|
140.00
|
40.00%
|
$1,100.00
|
10.00%
|
130.00
|
30.00%
|
$1,100.00
|
10.00%
|
120.00
|
20.00%
|
$1,100.00
|
10.00%
|
109.53
|
9.53%
|
$1,100.00(1)
|
10.00%
|
105.00
|
5.00%
|
$1,052.50
|
5.25%
|
102.00
|
2.00%
|
$1,021.00
|
2.10%
|
100.00(2)
|
0.00%
|
$1,000.00
|
0.00%
|
95.00
|
-5.00%
|
$1,000.00
|
0.00%
|
90.00(3)
|
-10.00%
|
$1,000.00
|
0.00%
|
85.00
|
-15.00%
|
$950.00
|
-5.00%
|
80.00
|
-20.00%
|
$900.00
|
-10.00%
|
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 hypothetical Max Return.
|
|
(2)
|
The hypothetical Starting
Value of 100 used in these examples has been chosen for illustrative purposes only and does not represent a likely Starting Value
|
|
(3)
|
This is the hypothetical
Threshold Value.
|
|
ENHANCED RETURN NOTES® | PS-5
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
Hypothetical Payout Profile and Examples
of Payments at Maturity
Redemption Amount Calculation
Examples
Example 1
The Ending Value is 130.00,
or 130.00% of the Starting Value: Starting Value: 100.00
Ending Value: 130.00
= $1,365.00, however because the Redemption Amount for the Notes cannot exceed the Max Return, the Redemption Amount will be $1,100.00
per Note.
Example 2
The Ending Value is 102.00,
or 102.00% of the Starting Value: Starting Value: 100.00
Ending Value: 102.00
= $1,021.00 Redemption Amount per Note
Example 3
The Ending Value is 95.00, or
95.00% of the Starting Value: Starting Value: 100.00
Threshold Value: 90.00
Ending Value: 95.00
$1,000.00 Redemption
Amount per Note, since the Ending Value is less than the Starting Value but greater than or equal to the Threshold Value.
Example 4
The Ending Value is 80.00, or
80.00% of the Starting Value: Starting Value: 100.00
Threshold Value: 90.00
Ending Value: 80.00
= $900.00 Redemption Amount per Note
|
ENHANCED RETURN NOTES® | PS-6
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
Risk Factors
Your investment in the Notes entails significant risks,
many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after
carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors in light of
your particular circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about significant
elements of the Notes or financial matters in general. You should carefully review the more detailed explanation of risks relating
to the Notes in the “Risk Factors” sections beginning on page PS-5 of the accompanying product supplement, page S-4
of the accompanying prospectus supplement and page 7 of the accompanying prospectus, each as identified on page PS-19 below.
|
•
|
Your investment may
result in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount on the Notes at
maturity. The return on the Notes will be based on the performance of the Underlying. If the Ending Value is less than the Threshold
Value, you will lose 1% of the principal amount for each 1% that the Ending Value is less than the Threshold Value. In that case,
you will lose some or a significant portion of your investment if the value of the Underlying decreases over the term of the Notes.
|
|
•
|
The return on the
Notes will be limited to the Max Return. The return on the Notes will not exceed the Max Return, regardless of the performance
of the Underlying.
|
|
•
|
The Notes do not
bear interest. Unlike a conventional debt security, no interest payments will be paid over the term of the Notes, regardless
of the extent to which the Ending Value of the Underlying exceeds the Starting Value or Threshold Value.
|
|
•
|
Your return on the Notes may be less than the yield on a conventional
debt security of comparable maturity. Any return that you receive on the Notes may be less than the return you would earn if
you purchased a conventional debt security with the same Maturity Date. As a result, your investment in the Notes may not reflect
the full opportunity cost to you when you consider factors, such as inflation, that affect the time value of money.
|
|
•
|
Any payments on the
Notes are subject to the credit risk of BofA Finance and the Guarantor, and actual or perceived changes in BofA Finance or the
Guarantor’s creditworthiness are expected to affect the value of the Notes. The Notes are our senior unsecured debt securities.
Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed by any entity
other than the Guarantor. As a result, your receipt of the Redemption Amount at maturity will be dependent upon our ability and
the ability of the Guarantor to repay our respective obligations under the Notes on the Maturity Date, regardless of the Ending
Value of the Underlying as compared to the Starting Value.
|
In addition, our credit ratings
and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations.
Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s
credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities
(the “credit spread”) prior to the Maturity Date may adversely affect the market value of the Notes. However, because
your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective
obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce
the other investment risks related to the Notes.
|
•
|
We are a finance
subsidiary and, as such, will have limited assets and operations. We are a finance subsidiary of BAC and will have no assets,
operations or revenues other than those related to the issuance, administration and repayment of our debt securities that are guaranteed
by the Guarantor. As a finance subsidiary, to meet our obligations under the Notes, we are dependent upon payment or contribution
of funds and/or repayment of outstanding loans from the Guarantor and/or its other subsidiaries. Therefore, our ability to make
payments on the Notes may be limited.
|
|
•
|
The public offering
price you pay for the Notes will exceed their initial estimated value. The range of initial estimated values of the Notes that
is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the pricing date that
will be provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference
to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our
credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions,
expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes. These
pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the
Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated
value. This is due to, among other things, changes in the level of the Underlying, the Guarantor’s internal funding rate,
and the inclusion in the public offering price of the underwriting discount and the hedging related charges, all as further described
in "Structuring the Notes" below. These factors, together with various credit, market and economic factors over the term
of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect
the value of the Notes in complex and unpredictable ways.
|
|
•
|
The initial estimated
value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any
time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlying,
our and BAC’s creditworthiness and changes in market conditions.
|
|
•
|
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.
|
|
ENHANCED RETURN NOTES® | PS-7
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
|
•
|
The Redemption Amount
will not reflect changes in the level of the Underlying other than on the Valuation Date. Changes in the level of the Underlying
during the term of the Notes other than on the Valuation Date will not be reflected in the calculation of the Redemption Amount.
No other levels of the Underlying will be taken into account.
|
|
•
|
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 U.S. Securities and Exchange Commission, and foreign
companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable
to U.S. reporting companies. Prices of securities in foreign countries are subject to political, economic, financial and social
factors that apply in those geographical regions. These factors, which could negatively affect those securities markets, include
the possibility of recent or future changes in a foreign government’s economic and fiscal policies, the possible imposition
of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign
equity securities and the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks
of hostility and political instability and the possibility of natural disaster or adverse public health developments in the region.
Moreover, foreign economies may differ favorably or unfavorably from the U.S. economy in important respects such as growth of gross
national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
|
|
•
|
The publisher of
the Underlying may adjust the Underlying in a way that affects its levels, and the publisher has no obligation to consider your
interests. The publisher of the Underlying can add, delete, or substitute the components included in the Underlying or
make other methodological changes that could change its level. Any of these actions could adversely affect the value of your Notes.
|
|
•
|
Trading and hedging activities by us, the
Guarantor and any of our other affiliates may create conflicts of interest with you and may affect your return on the Notes
and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell the
securities held by or included in the Underlying, or futures or options contracts on the Underlying or those securities, or
other listed or over-the-counter derivative instruments linked to the Underlying or those securities. While we, the Guarantor
or one or more of our other affiliates, including BofAS, may from time to time own securities represented by the Underlying,
except to the extent that BAC’s common stock may be included in the Underlying, we, the Guarantor and our other
affiliates, including BofAS, do not control any company included in the Underlying, and have not verified any disclosure made
by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, may execute such
purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations
under the Notes. These transactions may present a conflict of interest between your interest in the Notes and the interests
we, the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating
transactions, including block trades, for our or their other customers, and in accounts under our or their management. These
transactions may affect the value of the Underlying in a manner that could be adverse to your investment in the Notes. On or
before the pricing date, any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on
its behalf (including for the purpose of hedging anticipated exposures), may affect the value of the Underlying.
Consequently, the value of the Underlying may change subsequent to the pricing date, adversely affecting the market value of
the Notes.
|
We, the Guarantor or one or more
of our other affiliates, including BofAS, may also engage in hedging activities that could affect the value of the Underlying on
the pricing date. In addition, these activities may decrease the market value of your Notes prior to maturity, and may affect the
amounts to be paid on the Notes. We, the Guarantor or one or more of our other affiliates, including BofAS, may purchase or otherwise
acquire a long or short position in the Notes and may hold or resell the Notes. For example, BofAS may enter into these transactions
in connection with any market making activities in which it engages. We cannot assure you that these activities will not adversely
affect the value of the Underlying, the market value of your Notes prior to maturity or the amounts payable on the Notes.
|
•
|
There may be potential conflicts of interest involving
the calculation agent, which is an affiliate of ours. We have the right to appoint and remove the calculation agent. One of
our affiliates will be the calculation agent for the Notes and, as such, will make a variety of determinations relating to the
Notes, including the amounts that will be paid on the Notes. Under some circumstances, these duties could result in a conflict
of interest between its status as our affiliate and its responsibilities as calculation agent.
|
|
•
|
The U.S. federal
income tax consequences of an investment in the Notes are uncertain, and may be adverse to a holder of the Notes. No statutory,
judicial, or administrative authority directly addresses the characterization of the Notes or securities similar to the Notes for
U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment
in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes as single financial
contracts, as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue Service
(the “IRS”) were successful in asserting an alternative characterization for the Notes, the timing and character of
gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance
can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.”
You are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing
in the Notes.
|
|
ENHANCED RETURN NOTES® | PS-8
|
ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
The Underlying
All
disclosures contained in this pricing supplement regarding the Underlying, including, without limitation, its make-up, method of
calculation, and changes in its components, have been derived from publicly available sources. The information reflects the policies
of, and is subject to change by Nasdaq, Inc., the sponsor of the Underlying. We refer to SPDJI as the “Underlying Sponsor”.
The Underlying Sponsor, which licenses the copyright and all other rights to the Underlying, has no obligation to continue to publish,
and may discontinue publication of, the Underlying. The consequences of the Underlying Sponsor discontinuing publication of the
Underlying are discussed in “Description of the Notes—Discontinuance of an Index” in the accompanying product
supplement. None of us, the Guarantor, the calculation agent, or BofAS accepts any responsibility for the calculation, maintenance
or publication of the Underlying or any successor index. None of us, the Guarantor, BofAS or any of our other affiliates makes
any representation to you as to the future performance of the Underlying. You should make your own investigation into the Underlying.
The Nasdaq-100® Index
The NDX is intended to measure
the performance of the 100 largest domestic and international non-financial securities listed on 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, NYSE 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;
|
|
·
|
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
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·
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the issuer of the security may not have annual financial
statements with an audit opinion that is currently withdrawn.
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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:
Aggregated Adjusted Market Value
|
Divisor
|
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 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
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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 1, 2008 through August [*], 2019. We obtained
this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained
from Bloomberg L.P. The horizontal line in the graph represents the Threshold Value of 6,829.106 (rounded to three decimal places),
which is 90% of the Starting Value of 7,587.896, which was the closing level on August 28, 2019. The actual Starting Value and
Threshold Value will be determined on the pricing 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 level of the NDX during any period set forth above is not an indication that the 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 levels of the NDX.
License
Agreement
The Notes
are not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, 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 Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “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 without regard to Licensee or the Notes.
Nasdaq 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
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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.
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, MLPF&S, 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 MLPF&S, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
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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. 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 $985.00 per Note.
BofAS and any of our other broker-dealer
affiliates may use this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for offers
and sales in secondary market transactions and market-making transactions in the Notes. However, they are not obligated to engage
in such secondary market transactions and/or market-making transactions. The selling agent may act as principal or agent in these
transactions, and any such sales will be made at prices related to prevailing market conditions at the time of the sale.
At BofAS’s discretion, for a
short, undetermined initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary market at
a price that may exceed the initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based on then-prevailing
market conditions and other considerations, including the performance of the Underlying and the remaining term of the Notes. However,
none of us, the Guarantor, BofAS or any of our other affiliates is obligated to purchase your Notes at any price or at any time,
and we cannot assure you that any party will purchase your Notes at a price that equals or exceeds the initial estimated value
of the Notes.
Any price that BofAS may pay to repurchase
the Notes will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction costs.
At certain times, this price may be higher than or lower than the initial estimated value of the Notes.
None of this pricing supplement,
the accompanying product supplement, the accompanying prospectus supplement nor the accompanying prospectus is a prospectus for
the purposes of the Prospectus Regulation (as defined below). This pricing supplement, the accompanying product supplement, the
accompanying prospectus supplement and the accompanying prospectus have been prepared on the basis that any offer of Notes in any
Member State of the European Economic Area (the “EEA”) will be made pursuant to an exemption under the Prospectus Regulation
from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer in
that Member State of Notes which are the subject of the offering contemplated in this pricing supplement, the accompanying product
supplement, the accompanying prospectus supplement and the accompanying prospectus may only do so in circumstances in which no
obligation arises for the Issuer or any of the dealers to publish a prospectus pursuant to Article 3 of the Prospectus Regulation
or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, in each case, in relation to such offer. Neither
the Issuer nor the dealers have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an
obligation arises for the Issuer or the dealers to publish or supplement a prospectus for such offer. The expression “Prospectus
Regulation” means Regulation (EU) (2017/1129), as amended.
European Economic Area
In relation to each Member State of
the EEA, no offer of Notes which are the subject of the offering contemplated by this pricing supplement, the accompanying product
supplement, the accompanying prospectus supplement and the accompanying prospectus to the public may be made in that Member State
other than:
(a) to
any legal entity which is a qualified investor as defined in the Prospectus Regulation;
(b) to
fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining
the prior consent of the relevant dealers nominated by the Issuer for any such offer; or
(c) in
any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of Notes
shall require the Issuer or any dealer to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement
a prospectus pursuant to Article 23 of the Prospectus Regulation.
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For the purposes of this provision,
the expression an "offer of Notes to the public" in relation to any Notes in any Member State means 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.
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 the Issuer or the Guarantor.
All applicable provisions
of the FSMA must be complied with in respect to anything done by any person in relation to the Notes in, from or otherwise involving
the United Kingdom.
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Structuring the Notes
The Notes are our
debt securities, the return on which is linked to the performance of the Underlying. The related guarantee is BAC’s obligation.
As is the case for all of our and BAC’s respective debt securities, including our market-linked notes, the economic terms
of the Notes reflect our and BAC’s actual or perceived creditworthiness at the time of pricing. In addition, because market-linked
notes result in increased operational, funding and liability management costs to us and BAC, BAC typically borrows the funds under
these types of notes at a rate, which we refer to in this pricing supplement as BAC’s internal funding rate, that is more
favorable to BAC than the rate that it might pay for a conventional fixed or floating rate debt security. This generally relatively
lower internal funding rate, which is reflected in the economic terms of the Notes, along with the fees and charges associated
with market-linked notes, typically results in the initial estimated value of the Notes on the pricing date being less than their
public offering price.
In order to meet our payment obligations
on the Notes, at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which may include call
options, put options or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging arrangements are
determined based upon terms provided by BofAS and its affiliates, and take into account a number of factors, including our and
BAC’s creditworthiness, interest rate movements, the volatility of the Underlying, the tenor of the Notes and the hedging
arrangements. The economic terms of the Notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised
us that the hedging arrangements will include hedging related charges, reflecting the costs associated with, and our affiliates’
profit earned from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces,
actual profits or losses from these hedging transactions may be more or less than any expected amounts.
For further information,
see “Risk Factors” beginning on page PS-7 above and “Supplemental Use of Proceeds” on page PS-16 of the
accompanying product supplement.
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U.S. Federal Income Tax Summary
The following summary of the material
U.S. federal income tax considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent
inconsistent supersedes, the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus
and under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive
of all possible tax considerations. In addition, any reference to “Morrison & Foerster LLP” in the aforementioned
tax discussions in the accompanying prospectus and prospectus supplement should be read as a reference to “Sidley Austin
LLP.” This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated
under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations), rulings,
current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect
and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given
that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described
below. This summary does not include any description of the tax laws of any state or local governments, or of any foreign government,
that may be applicable to a particular holder.
Although the Notes are issued by us,
they will be treated as if they were issued by Bank of America Corporation for U.S. federal income tax purposes. Accordingly throughout
this tax discussion, references to “we,” “our” or “us” are generally to Bank of America Corporation
unless the context requires otherwise.
This summary is directed solely to U.S. Holders and Non-U.S. Holders that, except as otherwise specifically noted, will purchase
the Notes upon original issuance and will hold the Notes as capital assets within the meaning of Section 1221 of the Code, which
generally means property held for investment, and that are not excluded from the discussion under “U.S. Federal Income Tax
Considerations” in the accompanying prospectus.
You should consult your own tax advisor
concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax
consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes
in U.S. federal or other tax laws.
General
Although there is no statutory, judicial, or administrative authority directly addressing the characterization of the Notes, 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 Underlying 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 Underlying for U.S. federal income tax purposes. If the Notes did not constitute single financial contracts, the tax consequences
described below would be materially different.
This characterization of the Notes is not binding on the IRS or the courts. No statutory, judicial, or administrative authority
directly addresses the characterization of the Notes or any similar instruments for U.S. federal income tax purposes, and no ruling
is being requested from the IRS with respect to their proper characterization and treatment. Due to the absence of authorities
on point, significant aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain, and no
assurance can be given that the IRS or any court will agree with the characterization and tax treatment described in this pricing
supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of the U.S. federal income tax consequences
of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following
discussion is based on the characterization described above. The discussion in this section assumes that there is a significant
possibility of a significant loss of principal on an investment in the Notes.
We will not attempt to ascertain whether
any issuer of a component stock included in the 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 the 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 Underlying and consult your tax advisor regarding the possible
consequences to you, if any, if any issuer of a component stock included in the Underlying is or becomes a PFIC or is or becomes
a United States real property holding corporation.
U.S. Holders
Upon receipt of a cash payment at maturity
or upon a sale or exchange of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to
the difference between the amount realized and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis
in the Notes will equal the amount paid by that holder to acquire them. This capital gain or loss generally will be long-term capital
gain or loss if the U.S. Holder held the Notes for more than one year. The deductibility of capital losses is subject to limitations.
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
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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 the Underlying is an index that
periodically rebalances, it is possible that the Notes could be treated as a series of single financial contracts, each of which
matures on the next rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated
as disposing of the Notes on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S.
Holder would accordingly likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s
tax basis in the Notes (which would be adjusted to take into account any prior recognition of gain or loss) and the fair market
value of the Notes on such date.
Non-U.S. Holders
Except as discussed below, a Non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax for amounts paid in respect of the Notes provided
that the Non-U.S. Holder complies with applicable certification requirements and that the payment is not effectively connected
with the conduct by the Non-U.S. Holder of a U.S. trade or business. Notwithstanding the foregoing, gain from the sale or exchange
of the Notes or their settlement at maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident
alien individual and is present in the U.S. for 183 days or more during the taxable year of the sale, exchange, or settlement and
certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is
engaged in the conduct of a trade or business within the U.S. and if gain realized on the settlement at maturity, or upon sale
or exchange of the Notes, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply,
is attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt
from U.S. federal withholding tax, generally will be subject to U.S. federal income tax on such gain on a net income basis in the
same manner as if it were a U.S. Holder. Such Non-U.S. Holders should read the material under the heading “—U.S. Holders,”
for a description of the U.S. federal income tax consequences of acquiring, owning, and disposing of the Notes. In addition, if
such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30% (or such lower rate
provided by any applicable tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected
with its conduct of a trade or business in the U.S., subject to certain adjustments.
A “dividend equivalent” payment
is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding
tax if paid to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked
instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified
ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation
for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However,
IRS guidance provides that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one
instruments and that are issued before January 1, 2021. Based on our determination that the Notes are not delta-one instruments,
Non-U.S. Holders should not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is
possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain
events affecting the Underlying or the Notes, and following such occurrence the Notes could be treated as subject to withholding
on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions in respect of the Underlying
or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context
of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the
applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
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ENHANCED RETURN NOTES® | PS-17
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ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
As discussed above, alternative
characterizations of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by
reason of change or clarification of the law, by regulation or otherwise, cause payments as to the Notes to become subject to
withholding tax, tax will be withheld at the applicable statutory rate. As discussed above, the IRS has indicated in the
Notice that it is considering whether income in respect of instruments such as the Notes should be subject to withholding
tax. Prospective Non-U.S. Holders should consult their own tax advisors regarding the tax consequences of such alternative
characterizations.
U.S. Federal Estate Tax. Under
current law, while the matter is not entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible
in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual
and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty
benefit, a note is likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities
should consult their own tax advisors regarding the U.S. federal estate tax consequences of investing in a note.
Backup Withholding and Information
Reporting
Please see the discussion under “U.S.
Federal Income Tax Considerations — Taxation of Debt Securities — Backup Withholding and Information Reporting”
in the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules
to payments made on the Notes.
Foreign Account Tax Compliance Act
(“FATCA”)
The discussion in the accompanying
prospectus under “U.S. Federal Income Tax Considerations – Foreign Account Tax Compliance Act” is hereby modified
to reflect regulations proposed by Treasury indicating its intent to eliminate the requirements under FATCA of withholding on gross
proceeds from the sale, exchange, settlement at maturity or other disposition of relevant financial instruments. Treasury has indicated
that taxpayers may rely on these proposed regulations pending their finalization.
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ENHANCED RETURN NOTES® | PS-18
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ENHANCED RETURN NOTES Linked to the NASDAQ-100® Index
Where You Can Find More Information
The terms and risks of the Notes are
contained in this pricing supplement and in the following related product supplement, prospectus supplement and prospectus, which
can be accessed at the following links:
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•
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Product
Supplement EQUITY-1 dated January 24, 2017:
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https://www.sec.gov/Archives/edgar/data/70858/000119312517016445/d331325d424b5.htm
These documents (together, the
“Note Prospectus”) have been filed as part of a registration statement with the SEC, which may, without cost, be accessed
on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should read the Note
Prospectus, including this pricing supplement, for information about us, BAC and this offering. Any prior or contemporaneous oral
statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used
but not defined in this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus supplement.
Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,”
“our,” or similar references are to BofA Finance, and not to BAC.
As a result of the completion
of the reorganization of Bank of America’s U.S. broker-dealer business, references to MLPF&S in the accompanying product
supplement, prospectus supplement and prospectus, as such references relate to MLPF&S’s institutional services, should
now be read as references to BofAS.
The Notes are our senior
debt securities. Any payments on the Notes are fully and unconditionally guaranteed by BAC. The Notes and the related
guarantee are not insured by the Federal Deposit Insurance Corporation or secured by collateral. The Notes will rank
equally in right of payment with all of our other unsecured and unsubordinated obligations, and the related guarantee will rank
equally in right of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations that are
subject to any priorities or preferences by law. Any payments due on the Notes, including any repayment of the principal amount,
will be subject to the credit risk of BofA Finance, as Issuer, and BAC, as Guarantor.
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ENHANCED RETURN NOTES® | PS-19
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