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.
SUBJECT TO COMPLETION, DATED July 18, 2024
Preliminary Pricing Supplement - Subject to Completion
(To Prospectus dated December
30, 2022,
Prospectus Supplement dated December 30, 2022 and
Product Supplement EQUITY-1 dated December 30, 2022)
Dated July , 2024
BofA Finance LLC $---- Trigger Callable Yield Notes |
Filed Pursuant to Rule 424(b)(2)
Series A Registration Statement Nos. 333-268718
and 333-268718-01
![](https://www.sec.gov/Archives/edgar/data/1682472/000121390024062600/image_001.jpg)
|
Linked to the Nasdaq-100® Index Due October 23, 2025
Fully and Unconditionally Guaranteed by Bank of America Corporation
Investment Description |
The Trigger Callable Yield Notes linked to the Nasdaq-100® Index (the “Underlying”) due October 23, 2025 (the “Notes”) are senior unsecured obligations issued by BofA Finance LLC (“BofA Finance” or the “issuer”), a consolidated finance subsidiary of Bank of America Corporation (“BAC” or the “Guarantor”), which are fully and unconditionally guaranteed by the Guarantor. The Notes will pay a Coupon Payment, regardless of the performance of the Underlying, on each monthly Coupon Payment Date. Beginning in October 2024, on any Call Date, the issuer may, in its sole discretion, call the Notes in whole, but not in part, and pay you the Stated Principal Amount plus the Coupon Payment otherwise due on such Call Date, and no further amounts will be owed to you. If the Notes have not previously been called, at maturity, the amount you receive will depend on the Final Value of the Underlying on the Final Observation Date. If the Final Value of the Underlying on the Final Observation Date is greater than or equal to its Downside Threshold, you will receive the Stated Principal Amount at maturity (plus the final Coupon Payment). However, if the Notes have not been called prior to maturity and the Final Value of the Underlying on the Final Observation Date is less than its Downside Threshold, although you will receive the final Coupon Payment, you will receive less than the Stated Principal Amount at maturity, resulting in a loss that is proportionate to the decline in the closing level of the Underlying from the Trade Date to the Final Observation Date, up to a 100% loss of your investment. Investing in the Notes involves significant risks. You may lose a substantial portion or all of your initial investment. The payment at maturity on the Notes will be based on the performance of the Underlying. You will not receive dividends or other distributions paid on any stocks included in the Underlying or participate in any appreciation of the Underlying. The contingent repayment of the Stated Principal Amount applies only if you hold the Notes to maturity or earlier call by the issuer. Any payment on the Notes, including any repayment of the Stated Principal Amount, is subject to the creditworthiness of BofA Finance and the Guarantor and is not, either directly or indirectly, an obligation of any third party. |
| q | Coupon Payment — Regardless of the performance of the Underlying, we will pay you a Coupon Payment on each monthly Coupon
Payment Date. |
| q | Issuer Callable — Beginning in October 2024, on any Call Date, the issuer may, in its sole discretion, call the Notes
in whole, but not in part, and pay you the Stated Principal Amount plus the Coupon Payment otherwise due on such Call Date. If the Notes
are not called, investors may have full downside market exposure to the Underlying at maturity. |
| q | Downside Exposure with Contingent Repayment of Principal at Maturity — If the Notes are not called prior to maturity
and the Final Value on the Final Observation Date is greater than or equal to its Downside Threshold, you will receive the Stated Principal
Amount at maturity (plus the final Coupon Payment). However, if the Final Value on the Final Observation Date is less than its Downside
Threshold, although you will receive the final Coupon Payment, you will receive less than the Stated Principal Amount of your Notes at
maturity, resulting in a loss that is proportionate to the decline in the closing level of the Underlying from the Trade Date to the Final
Observation Date, up to a 100% loss of your investment. |
Any payment on the Notes is subject to the creditworthiness
of BofA Finance and the Guarantor.
Trade Date2 |
July 18, 2024 |
Issue Date2 |
July 23, 2024 |
Coupon Payment Dates3 |
Monthly, beginning on August 21, 2024 |
Call Dates3 |
Monthly, prior to the Maturity Date, beginning on October 22, 2024 |
Final Observation Date4 |
October 20, 2025 |
Maturity Date |
October 23, 2025 |
| 1 | Subject to change and will be set forth in the final pricing supplement relating to the Notes. |
| 2 | See “Supplement to the Plan of Distribution; Role of BofAS and Conflicts of Interest”
in this pricing supplement for additional information. |
| 3 | See page PS-6 for additional details. |
| 4 | See page PS-4 for additional details. |
NOTICE TO INVESTORS: The Notes are
significantly riskier than conventional debt INSTRUMENTS. BofA Finance IS NOT NECESSARILY OBLIGATED TO REPAY THE STATED PRINCIPAL AMOUNT
AT MATURITY, AND the Notes CAN have downside MARKET risk SIMILAR TO the UNDERLYING. This MARKET risk is in addition to the CREDIT risk
INHERENT IN PURCHASING A DEBT OBLIGATION OF BOFA FINANCE THAT IS GUARANTEED BY BAC. You should not PURCHASE the Notes if you do
not understand or are not comfortable with the significant risks INVOLVED in INVESTING IN the Notes.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “RISK FACTORS’’
BEGINNING ON PAGE PS-7 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 BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS
AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL
INVESTMENT IN THE NOTES. THE NOTES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE AND MAY HAVE LIMITED OR NO LIQUIDITY. |
Notes Offering |
We are offering Trigger Callable Yield Notes linked to the Nasdaq-100® Index due October 23, 2025. The payment at maturity on the Notes will be based on the performance of the Underlying. The Coupon Rate, Initial Value and Downside Threshold will be determined on the Trade Date. The Notes are our senior unsecured obligations, guaranteed by BAC, and are offered for a minimum investment of 100 Notes (each Note corresponding to $10.00 in Stated Principal Amount) at the Public Offering Price described below. |
Underlying |
Coupon Rate |
Initial Value |
Downside Threshold |
CUSIP / ISIN |
|
Nasdaq-100® Index (Ticker: NDX) |
Between [7.00% and 7.15%] per annum |
|
, which is 70% of the Initial Value |
09710R854 / US09710R8549 |
See “Summary” in this pricing supplement. The Notes will have the terms
specified in the accompanying product supplement, prospectus supplement and prospectus, as supplemented by this pricing supplement.
None of the Securities and Exchange Commission (the “SEC”), any state securities
commission, or any other regulatory body has approved or disapproved of these Notes or the guarantee, or passed upon the adequacy or accuracy
of this pricing supplement, or the accompanying product supplement, prospectus supplement or prospectus. Any representation to the contrary
is a criminal offense. The Notes and the related guarantee of the Notes by the Guarantor are unsecured and are not savings accounts, deposits,
or other obligations of a bank. The Notes are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and involve investment risks.
|
Public Offering Price |
Underwriting Discount(1) |
Proceeds (before expenses) to BofA Finance |
|
Per Note |
$10.00 |
$0.10 |
$9.90 |
|
|
Total |
$ |
$ |
$ |
|
(1) The underwriting discount is $0.10 per Note. BofA Securities, Inc. (“BofAS”),
acting as principal, expects to purchase from BofA Finance, and BofA Finance expects to sell to BofAS, the aggregate principal amount
of the Notes set forth above for $9.90 per Note. UBS Financial Services Inc. (“UBS”), acting as a selling agent for sales
of the Notes, expects to purchase from BofAS, and BofAS expects to sell to UBS, all of the Notes for $9.90 per Note. UBS will receive
an underwriting discount of $0.10 per Note for each Note it sells in this offering. UBS proposes to offer the Notes to the public at a
price of $10.00 per Note. For additional information on the distribution of the Notes, see “Supplement to the Plan of Distribution;
Role of BofAS and Conflicts of Interest” in this pricing supplement.
The initial estimated value of the Notes will be less than the
public offering price. The initial estimated value of the Notes as of the Trade Date is expected to be between $9.30 and $9.80 per
$10 in Stated Principal Amount. See “Summary” on page PS-4 of this pricing supplement, “Risk Factors” beginning
on page PS-7 of this pricing supplement and “Structuring the Notes” on page PS-18 of this pricing supplement for additional
information. The actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy.
UBS Financial Services Inc. |
BofA Securities |
Additional
Information about BofA Finance LLC, Bank of America Corporation and the Notes |
You should read carefully this entire pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus to understand fully the terms of the Notes, as well as the tax and other considerations
important to you in making a decision about whether to invest in the Notes. In particular, you should review carefully the section in
this pricing supplement entitled “Risk Factors,” which highlights a number of risks of an investment in the Notes, to determine
whether an investment in the Notes is appropriate for you. If information in this pricing supplement is inconsistent with the product
supplement, prospectus supplement or prospectus, this pricing supplement will supersede those documents. You are urged to consult with
your own attorneys and business and tax advisors before making a decision to purchase any of the Notes.
The information in the “Summary” section is qualified in its entirety
by the more detailed explanation set forth elsewhere in this pricing supplement and the accompanying product supplement, prospectus supplement
and prospectus. You should rely only on the information contained in this pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus. We have not authorized any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. None of us, the Guarantor, BofAS or UBS is making an offer
to sell these Notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this pricing
supplement and the accompanying product supplement, prospectus supplement, and prospectus is accurate only as of the date on their respective
front covers.
Certain terms used but not defined in this pricing supplement have the meanings
set forth in the accompanying product supplement, prospectus supplement and prospectus. Unless otherwise indicated or unless the context
requires otherwise, all references in this pricing supplement to “we,” “us,” “our,” or similar references
are to BofA Finance, and not to BAC (or any other affiliate of BofA Finance).
The above-referenced accompanying documents may be accessed at the following
links:
¨ Product
supplement EQUITY-1 dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315473/d429684d424b2.htm
¨ Series
A MTN prospectus supplement dated December 30, 2022 and prospectus dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315195/d409418d424b3.htm
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.
|
The Notes may be suitable for you if, among other considerations:
¨ You
fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire investment.
¨ You
can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that will have the full downside
market risk of an investment in the Underlying.
¨ You
understand and accept the risks associated with the Underlying.
¨ You
believe the Final Value will be greater than or equal to the Downside Threshold on the Final Observation Date, and, if the Final Value
is below the Downside Threshold on the Final Observation Date, you can tolerate a loss of all or a substantial portion of your investment.
¨ You
can tolerate fluctuations in the value of the Notes prior to maturity that may be similar to or exceed the downside fluctuations in the
level of the Underlying.
¨ You
understand that your return will be based on the performance of the Underlying.
¨ You
are willing to hold Notes that may be called early by the issuer in its sole discretion, regardless of the closing level of the Underlying,
on any Call Date on or after the October 2024 Call Date, and you are otherwise willing to hold such Notes to maturity.
¨ You
are willing to make an investment whose positive return is limited to the Coupon Payments, regardless of the potential appreciation of
the Underlying, which could be significant.
¨ You
are willing and able to hold the Notes to maturity, and accept that there may be little or no secondary market for the Notes.
¨ You
are willing to forgo dividends or any other distributions paid on the stocks included in the Underlying.
¨ You
are willing to assume the credit risk of BofA Finance and BAC for all payments under the Notes, and understand that if BofA Finance and
BAC default on their obligations, you might not receive any amounts due to you, including any repayment of the Stated Principal Amount. |
The Notes may not be suitable for you if, among other considerations:
¨ You
do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire investment.
¨ You
cannot tolerate the loss of all or a substantial portion of your initial investment, or you are not willing to make an investment that
will have the full downside market risk of an investment in the Underlying.
¨ You
require an investment designed to guarantee a full return of the Stated Principal Amount at maturity.
¨ You
do not understand or are not willing to accept the risks associated with the Underlying.
¨ You
believe the Final Value will be less than the Downside Threshold on the Final Observation Date, exposing you to the full downside performance
of the Underlying.
¨ You
cannot tolerate fluctuations in the value of the Notes prior to maturity that may be similar to or exceed the downside fluctuations in
the level of the Underlying.
¨ You
are unwilling to accept that your return will be based on the performance of the Underlying.
¨ You
are unwilling to hold Notes that may be called early by the issuer in its sole discretion, regardless of the closing level of the Underlying,
on any Call Date on or after the October 2024 Call Date, or you are otherwise unable or unwilling to hold such Notes to maturity.
¨ You
seek an investment that participates in the full appreciation of the Underlying and whose positive return is not limited to the Coupon
Payments.
¨ You
seek an investment for which there will be an active secondary market.
¨ You
prefer to receive the dividends and any other distributions paid on the stocks included in the Underlying.
¨ You
prefer the lower risk of conventional fixed income investments with comparable maturities and credit ratings.
¨ You
are not willing to assume the credit risk of BofA Finance and BAC for all payments under the Notes, including any repayment of the Stated
Principal Amount. |
The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should review “The Underlying” herein for more information on the Underlying. You should also review carefully the “Risk Factors” section herein for risks related to an investment in the Notes. |
Issuer |
BofA Finance |
Guarantor |
BAC |
Public Offering Price |
100% of the Stated Principal Amount |
Stated Principal Amount |
$10.00 per Note |
Minimum Investment |
$1,000 (100 Notes) |
Term |
Approximately 15 months, unless earlier called |
Trade Date1,2 |
July 18, 2024 |
Issue Date1,2 |
July 23, 2024 |
Final Observation Date1 |
October 20, 2025, 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 Date1 |
October 23, 2025 |
Underlying |
Nasdaq-100® Index (Ticker: NDX) |
Issuer Call Feature |
Beginning in October 2024, the issuer may, in its sole discretion, call
the Notes in whole, but not in part, on any Call Date upon not less than five (5) business days’ but not more than 60 calendar days’
notice prior to such Call Date.
If the Notes are called, on the applicable Call Date we will pay you
a cash payment per $10.00 Stated Principal Amount equal to the Stated Principal Amount plus the Coupon Payment otherwise due on such Call
Date.
If the Notes are called, no further payments will be made on the Notes. |
Coupon Payment Dates1 |
See “Coupon Payment Dates” on page PS-6. |
Coupon Payment/Coupon Rate |
We will pay a Coupon Payment on each monthly Coupon Payment Date.
Each Coupon Payment will be in the amount of between [$0.05834 to $0.05959]
for each $10.00 Stated Principal Amount (based on the per annum Coupon Rate of between [7.00% to 7.15%]) and will be payable on the related
Coupon Payment Date. The actual Coupon Payment and Coupon Rate will be determined on the Trade Date. |
Call Dates1 |
The monthly Coupon Payment Dates beginning on October 22, 2024 and ending on September 22, 2025, as indicated on page PS-6. |
Payment At Maturity (per $10.00 Stated Principal Amount) |
If the Notes are not called prior to maturity and the Final Value of the
Underlying on the Final Observation Date is greater than or equal to its Downside Threshold, on the Maturity Date we will pay you
the Stated Principal Amount.
If the Notes are not called prior to maturity and the Final Value of the Underlying
on the Final Observation Date is less than its Downside Threshold, we will pay you a cash payment on the Maturity Date that is less
than your Stated Principal Amount and may be zero, resulting in a loss that is proportionate to the negative Underlying Return, equal
to:
$10.00
× (1 + Underlying Return)
Accordingly, you may lose all or a substantial portion of your Stated
Principal Amount at maturity, depending on how significantly the Underlying declines.
In each case described above you will also receive the final Coupon Payment. |
Underlying Return |
Final Value – Initial Value
Initial Value |
Downside Threshold |
70% of its Initial Value, as specified on the cover page of this pricing supplement. |
Initial Value |
The closing level of the Underlying on the Trade Date, as specified on the cover page of this pricing supplement. |
Final Value |
The closing level of the Underlying on the Final Observation Date. |
Calculation Agent |
BofAS, an affiliate of BofA Finance. |
Selling Agents |
BofAS and UBS. |
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
“—Payment at Maturity” above, calculated as though the date of acceleration were the Maturity Date of the Notes and
as though the Final Observation Date were the third trading day prior to the date of acceleration. The final Coupon Payment will be prorated
by the calculation agent to reflect the length of the final coupon payment period. 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.
|
1 Subject
to change and will be set forth in the final pricing supplement relating to the Notes.
2 See
“Supplement to the Plan of Distribution; Role of BofAS and Conflicts of Interest” in this pricing supplement for additional
information.
|
Trade Date |
|
The closing level of the Underlying (its Initial Value) is observed, the Coupon Rate/Coupon Payment is set and the Downside Threshold for the Underlying is determined. |
|
![](https://www.sec.gov/Archives/edgar/data/1682472/000121390024062600/image_002.jpg) |
|
|
|
Monthly (callable by the issuer in its sole discretion beginning in October 2024) |
|
We will pay a Coupon Payment on each Coupon Payment Date.
Beginning in October 2024, the issuer may, in its sole discretion, call
the Notes in whole, but not in part, on any Call Date upon not less than five (5) business days’ but not more than 60 calendar days’
notice prior to such Call Date.
If the Notes are called, on the applicable Call Date we will pay you
a cash payment per $10.00 Stated Principal Amount equal to the Stated Principal Amount plus the Coupon Payment otherwise due on such Call
Date.
If the Notes are called, no further payments will be made on the Notes. |
|
![](https://www.sec.gov/Archives/edgar/data/1682472/000121390024062600/image_002.jpg) |
|
|
|
Maturity Date (if not previously called) |
|
If the Notes are not called prior to maturity, the Final Value of the
Underlying will be observed on the Final Observation Date.
If the Final Value of the Underlying on the Final Observation Date is
greater than or equal to its Downside Threshold, on the Maturity Date we will pay you the Stated Principal Amount.
If the Final Value of the Underlying on the Final Observation Date is
less than its Downside Threshold, on the Maturity Date we will pay you a cash payment that is less than your Stated Principal Amount
and may be zero, resulting in a loss that is proportionate to the negative Underlying Return, equal to:
$10.00
× (1 + Underlying Return)
In each case described above you will also receive the final Coupon Payment.
|
INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE A SUBSTANTIAL
PORTION OR ALL OF YOUR INITIAL INVESTMENT. YOU WILL BE EXPOSED TO THE MARKET RISK OF THE UNDERLYING AND ANY DECLINE IN THE LEVEL
OF THE UNDERLYING MAY NEGATIVELY AFFECT YOUR RETURN. THE CONTINGENT REPAYMENT OF THE STATED PRINCIPAL AMOUNT APPLIES ONLY IF YOU HOLD
THE NOTES TO MATURITY OR EARLIER CALL BY THE ISSUER. ANY PAYMENT ON THE NOTES IS SUBJECT TO THE CREDITWORTHINESS OF BOFA FINANCE AND THE
GUARANTOR.
Coupon
Payment Dates1
August 21, 2024 |
September 20, 2024 |
October 22, 2024 * |
November 20, 2024 * |
December 20, 2024 * |
January 23, 2025 * |
February 20, 2025 * |
March 20, 2025 * |
April 23, 2025 * |
May 21, 2025 * |
June 23, 2025 * |
July 22, 2025 * |
August 20, 2025 * |
September 22, 2025 * |
October 23, 2025 |
*These are the Call Dates. |
1 Subject to change and will be set forth in the final pricing supplement
relating to the Notes.
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 identified on page PS-2 above.
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 Notes are not called prior to maturity and the Final Value is less than its Downside Threshold, at maturity,
you will lose 1% of the Stated Principal Amount for each 1% that the Final Value is less than its Initial Value. In that case, you will
lose a significant portion or all of your investment in the Notes. |
| ¨ | The limited downside protection provided by the Downside Threshold applies only at maturity. You should be willing to hold
your Notes to maturity. If you are able to sell your Notes in the secondary market prior to a call or maturity, you may have to sell them
at a loss relative to your initial investment even if the level of the Underlying at that time is equal to or greater than its Downside
Threshold. All payments on the Notes are subject to the credit risk of BofA Finance, as issuer, and BAC, as guarantor. |
| ¨ | Your return on the Notes is limited to the return represented by the Coupon Payments over the term of the Notes. Your return
on the Notes is limited to the Coupon Payments paid over the term of the Notes, regardless of the extent to which the closing level of
the Underlying at any time exceeds its Initial Value. Similarly, the amount payable at maturity or upon a call will never exceed the sum
of the Stated Principal Amount and the applicable Coupon Payment, regardless of the extent to which the closing level or Final Value of
the Underlying, as applicable, exceeds its Initial Value. In contrast, a direct investment in the securities included in the Underlying
would allow you to receive the benefit of any appreciation in their values. Thus, any return on the Notes will not reflect the return
you would realize if you actually owned those securities and received the dividends paid or distributions made on them. |
| ¨ | The Notes are subject to a potential early call, which would limit your ability to receive the Coupon Payments over the full term
of the Notes. Beginning in October 2024, on each Call Date, at our option, we may redeem your Notes in whole, but not in part. If
the Notes are called prior to the Maturity Date, you will be entitled to receive the Stated Principal Amount plus the Coupon Payment otherwise
due on such Call Date. In this case, you will lose the opportunity to continue to receive Coupon Payments after the date of the early
call. If the Notes are called prior to the Maturity Date, you may be unable to invest in other securities with a similar level of risk
that could provide a return that is similar to the Notes. Even if we do not exercise our option to redeem your Notes, our ability to do
so may adversely affect the market value of your Notes. It is our sole option whether to redeem your Notes prior to maturity on any Call
Date and we may or may not exercise this option for any reason. Because of this, the term of your Notes could be anywhere between three
and fifteen months. |
It is more likely that we will call the Notes in our sole
discretion prior to maturity to the extent that the expected Coupon Payments payable on the Notes are greater than the coupon that would
be payable on other instruments issued by us of comparable maturity, terms and credit rating trading in the market. The greater likelihood
of us calling the Notes in that environment increases the risk that you will not be able to reinvest the proceeds from the called Notes
in another investment that provides a similar yield with a similar level of risk. We are less likely to call the Notes prior to maturity
when the expected Coupon Payments payable on the Notes are less than the coupon that would be payable on other comparable instruments
issued by us. Therefore, the Notes are more likely to remain outstanding when the expected Coupon Payments payable on the Notes are less
than what would be payable on other comparable instruments and when your risk of not receiving a coupon is relatively higher.
| ¨ | Your return on the Notes may be less than the yield on a conventional debt security of comparable maturity. Any return that
you receive on the Notes may be less than the return you would earn if you purchased a conventional debt security with the same Maturity
Date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when you consider factors, such as inflation,
that affect the time value of money. In addition, if interest rates increase during the term of the Notes, the Coupon Payment (if any)
may be less than the yield on a conventional debt security of comparable maturity. |
| ¨ | Any payment on the Notes is subject to our credit risk and the credit risk of the Guarantor, and 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 all payments on the Notes will be dependent upon our ability and the ability
of the Guarantor to repay our respective obligations under the Notes on the applicable payment date, regardless of the closing level or
Final Value of the Underlying as compared to its Downside Threshold or Initial Value, as applicable. No assurance can be given as to what
our financial condition or the financial condition of the Guarantor will be on the Maturity Date. If we and the Guarantor become unable
to meet our respective financial obligations as they become due, you may not receive the amounts payable under the terms of the Notes
and you could lose all of your initial investment. |
In addition, our credit ratings and the credit ratings
of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations. Consequently, our or the Guarantor’s
perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s credit ratings or increases in the spread
between the yield on our respective securities and the yield on U.S. Treasury
securities (the “credit spread”) prior to the
Maturity Date of your Notes may adversely affect the market value of the Notes. However, because your return on the Notes depends upon
factors in addition to our ability and the ability of the Guarantor to pay our respective obligations, such as the value of the Underlying,
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. |
| ¨ | Greater expected volatility generally indicates an increased risk of loss. A higher Coupon Rate and/or a lower Downside Threshold
may reflect greater expected volatility of the Underlying, which is generally associated with a greater risk of loss. Volatility is a
measure of the degree of variation in the level of the Underlying over a period of time. The greater the expected volatility of the Underlying
at the time the terms of the Notes are set, the greater the expectation is at that time that you may lose a significant portion or all
of the Stated Principal Amount at maturity. In addition, the economic terms of the Notes, including the Coupon Rate and the Downside Threshold,
are based, in part, on the expected volatility of the Underlying at the time the terms of the Notes are set, where higher expected volatility
will generally be reflected in a higher Coupon Rate than the fixed rate we would pay on conventional debt securities of the same maturity
and/or on otherwise comparable securities and/or a lower Downside Threshold as compared to otherwise comparable securities. Accordingly,
a higher Coupon Rate will generally be indicative of a greater risk of loss while a lower Downside Threshold does not necessarily indicate
that the Notes have a greater likelihood of returning the Stated Principal Amount at maturity. You should be willing to accept the downside
market risk of the Underlying and the potential loss of a significant portion or all of the Stated Principal Amount at maturity. |
Valuation and Market-related Risks
| ¨ | 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 Trade
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, changes in the Guarantor’s internal funding rate, and the inclusion in the public offering
price of the underwriting discount and the hedging related charges, all as further described in “Structuring the Notes” below.
These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price
at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable
ways. |
| ¨ | The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates
would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any time after
issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlying,
our and BAC’s creditworthiness and changes in market conditions. |
| ¨ | The price of the Notes that may be paid by BofAS in any secondary market (if BofAS makes a market, which it is not required to
do), as well as the price which may be reflected on customer account statements, will be higher than the then-current estimated value
of the Notes for a limited time period after the Trade Date. As agreed by BofAS and UBS, for approximately a three-month period after
the Trade Date, to the extent BofAS offers to buy the Notes in the secondary market, it will do so at a price that will exceed the estimated
value of the Notes at that time. The amount of this excess, which represents a portion of the hedging-related charges expected to
be realized by BofAS and UBS over the term of the Notes, will decline to zero on a straight line basis over that three-month period.
Accordingly, the estimated value of your Notes during this initial three-month period may be lower than the value shown on your customer
account statements. Thereafter, if BofAS buys or sells your Notes, it will do so at prices that reflect the estimated value determined
by reference to its pricing models at that time. Any price at any time after the Trade Date 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 other party 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. |
| ¨ | 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. |
The development of a trading market for the Notes will
depend on the Guarantor’s financial performance and other factors, including changes in the level of the Underlying. The number
of potential buyers of your Notes in any secondary market may be limited. We anticipate that BofAS will act as a market-maker for the
Notes, but none of us, the Guarantor or BofAS is required to do so. There is no assurance that any party will be willing to purchase your
Notes at any price in any secondary market. BofAS may discontinue its market-making activities as to the Notes at any time. To the extent
that BofAS engages in any market-making activities, it may bid for or offer the Notes. Any price at which BofAS may bid for, offer, purchase,
or sell any Notes may differ from the values determined by pricing models that it may use, whether as a result of dealer discounts, mark-ups,
or other transaction costs. These bids, offers, or completed transactions may affect the prices, if any, at which the Notes might otherwise
trade in the market. In addition, if at any time BofAS were to cease acting
as a market-maker as to the Notes, it is likely that there
would be significantly less liquidity in the secondary market. In such a case, the price at which the Notes could be sold likely would
be lower than if an active market existed.
| ¨ | Economic and market factors have affected the terms of the Notes and may affect the market value of the Notes prior to maturity
or a call. Because market-linked notes, including the Notes, can be thought of as having a debt component and a derivative component,
factors that influence the values of debt instruments and options and other derivatives will also affect the terms and features of the
Notes at issuance and the market price of the Notes prior to maturity or a call. These factors include the level of the Underlying and
the securities included in the Underlying; the volatility of the Underlying and the securities included in the Underlying; the dividend
rate paid on the securities included in the Underlying, if applicable; the time remaining to the maturity of the Notes; interest rates
in the markets; geopolitical conditions and economic, financial, political, force majeure and regulatory or judicial events; the availability
of comparable instruments; the creditworthiness of BofA Finance, as issuer, and BAC, as guarantor; and the then current bid-ask spread
for the Notes and the factors discussed under “— Trading and hedging activities by us, the Guarantor and any of our other
affiliates, including BofAS, and UBS and its affiliates, may create conflicts of interest with you and may affect your return on the Notes
and their market value” below. These factors are unpredictable and interrelated and may offset or magnify each other. |
Conflict-related Risks
| ¨ | Trading and hedging activities by us, the Guarantor and any of our other affiliates, including
BofAS, and UBS and its 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, and UBS and its affiliates, 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. We, the Guarantor or one or more of our
other affiliates, including BofAS, and UBS and its affiliates also may issue or underwrite other financial instruments with returns based
upon the Underlying. We expect to enter into arrangements or adjust or close out existing transactions to hedge our obligations under
the Notes. We, the Guarantor or our other affiliates, including BofAS, and UBS and its affiliates also may enter into hedging transactions
relating to other notes or instruments, some of which may have returns calculated in a manner related to that of the Notes offered hereby.
We or UBS may enter into such hedging arrangements with one of our or their affiliates. Our affiliates or their affiliates may enter into
additional hedging transactions with other parties relating to the Notes and the Underlying. This hedging activity is expected to result
in a profit to those engaging in the hedging activity, which could be more or less than initially expected, or the hedging activity could
also result in a loss. We and our affiliates and UBS and its affiliates will price these hedging transactions with the intent to realize
a profit, regardless of whether the value of the Notes increases or decreases. Any profit in connection with such hedging activities will
be in addition to any other compensation that we, the Guarantor and our other affiliates, including BofAS, and UBS and its affiliates
receive for the sale of the Notes, which creates an additional incentive to sell the Notes to you. While we, the Guarantor or one or more
of our other affiliates, including BofAS, and UBS and its affiliates may from time to time own securities represented by the Underlying,
except to the extent that BAC’s or UBS Group AG’s (the parent company of UBS) common stock may be included in the Underlying,
as applicable, we, the Guarantor and our other affiliates, including BofAS, and UBS and its affiliates 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, and UBS and its affiliates 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. The transactions described above may present a conflict of interest between
your interest in the Notes and the interests we, the Guarantor and our other affiliates, including BofAS, and UBS and its affiliates 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. |
The transactions described above may affect the value of
the Underlying in a manner that could be adverse to your investment in the Notes. On or before the Trade Date, any purchases or sales
by us, the Guarantor or our other affiliates, including BofAS or others on its behalf, and UBS and its affiliates (including for the purpose
of hedging some or all of our anticipated exposure in connection with the Notes) may affect the value of the Underlying. Consequently,
the value of the Underlying may change subsequent to the Trade Date, which may adversely affect the market value of the Notes. 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, and UBS and its affiliates 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.
| t | 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
| t | The Notes are subject to the market risk of the Underlying. The return on the Notes, which may be negative, is directly linked
to the performance of the Underlying and indirectly linked to the value of the securities included in the Underlying. The level of the
Underlying can rise or fall sharply due to factors specific to the Underlying and the securities included in the Underlying and the issuers
of such securities, such as stock price volatility, earnings and financial conditions, corporate, industry and regulatory developments,
management changes and decisions and other events, as well as general market factors, such as general stock market or commodity market
volatility and levels, interest rates and economic and political conditions. |
| t | 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. 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.
| t | Governmental regulatory actions could result in material changes to the composition of the NDX and could negatively affect your
return on the Notes. Governmental regulatory actions, including but not limited to sanctions-related actions by the U.S. or foreign
governments, could make it necessary or advisable for there to be material changes to the composition of the NDX, depending on the nature
of such governmental regulatory actions and the constituent stocks that are affected. For instance, pursuant to recent executive orders,
U.S. persons are prohibited from engaging in transactions in publicly traded securities of certain companies that are determined to be
linked to the People’s Republic of China (the “PRC”) military, intelligence and security apparatus, or securities that
are derivative of, or are designed to provide investment exposure to such securities. If any governmental regulatory action results in
the removal of constituent stocks that have (or historically have had) significant weights within the NDX, such removal, or even any uncertainty
relating to a possible removal, could have a material and negative effect on the price of the NDX and, therefore, your return on the Notes. |
| ¨ | The publisher of the Underlying may adjust the Underlying in a way that affects its level, 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. |
Tax-related Risks
| t | 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 substantially 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 consisting of a put option and a deposit, as more fully 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 income, 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. |
Hypothetical terms only. Actual terms may vary. See the cover
page for actual offering terms.
The examples below illustrate the hypothetical payment upon a call or at maturity
for a $10.00 Stated Principal Amount Note with the following assumptions* (the actual terms of the Notes will be determined on the Trade
Date; amounts may have been rounded for ease of reference and do not take into account any tax consequences from investing in the Notes):
| t | Stated Principal Amount: $10 |
| t | Term: Approximately 15 months, unless earlier called |
| t | Hypothetical Initial Value: |
| o | Nasdaq-100® Index: 100.00 |
| t | Hypothetical Coupon Rate: 7.00% per annum (or 0.5834% per month) (the lower end of the range for the
Coupon Rate) |
| t | Hypothetical Monthly Coupon Payment: $0.05834 per month per Note (the lower end of the range for the
Coupon Payment) |
| t | Issuer Call: Beginning in October 2024, monthly, on any Call Date, as indicated on page PS-6 |
| t | Hypothetical Downside Threshold: |
| o | Nasdaq-100® Index: 70.00, which is 70% of its hypothetical Initial Value |
*The hypothetical Coupon Rate and Coupon
Payment may not represent the actual Coupon Rate and Coupon Payment, and the hypothetical Initial Value and Downside Threshold do not
represent the actual Initial Value and Downside Threshold, respectively, applicable to the Underlying. The actual Coupon Rate, Coupon
Payment, Initial Value and Downside Threshold will be determined on the Trade Date. All payments on the Notes are subject to issuer and
Guarantor credit risk.
Example 1 — Notes are called by us in our sole discretion on the third
Coupon Payment Date (which is also the first Call Date).
Date |
Payment (per Note) |
First Coupon Payment Date |
$0.05834 (Coupon Payment — Not callable) |
Second Coupon Payment Date |
$0.05834 (Coupon Payment — Not callable) |
Third Coupon Payment Date (First Call Date) |
$10.05834 (Stated Principal Amount plus Coupon Payment — Notes are called) |
Total Payment: |
$10.17502 (1.7502% total return) |
A Coupon Payment is paid on each of the first and second Coupon Payment Dates.
Since the Notes are called by us in our sole discretion on the third Coupon Payment Date, which is also the first Call Date, we will pay
you a total of $10.05834 per Note (equal to the Stated Principal Amount plus the Coupon Payment) on that Call Date. When added to the
$0.11668 in Coupon Payments received in respect of the first two Coupon Payment Dates, you would have been paid a total of $10.17502 per
Note, representing a 1.7502% total return on the Notes over the approximately three months the Notes were outstanding before they were
called by us in our sole discretion. You will not receive any further payments on the Notes.
Example 2 — Notes are NOT called prior to the Maturity Date and the Final
Value of the Underlying on the Final Observation Date is at or above its Downside Threshold.
Date |
Final Value on the Final Observation Date |
Payment (per Note) |
|
Nasdaq-100® Index |
|
First Coupon Payment Date |
N/A |
$0.05834 (Coupon Payment — Not callable) |
Second Coupon Payment Date |
N/A |
$0.05834 (Coupon Payment — Not callable) |
Third to Fourteenth Coupon Payment Dates |
N/A |
$0.05834 (Coupon Payment on each Coupon Payment Date—Notes are not called) |
Final Observation Date |
99.00 (at or above Downside Threshold) |
$10.05834 (Stated Principal Amount plus the final Coupon Payment)
|
|
|
Total Payment: |
$10.87510 (8.7510% total return) |
A Coupon Payment is paid on each of the first fourteen Coupon Payment Dates, but
the Notes are not called prior to maturity. On the final Observation Date, the Final Value of the Underlying is above its Downside Threshold.
At maturity, we will pay you $10.05834 per Note (equal to the Stated Principal Amount plus the final Coupon Payment). When added to the
Coupon Payments of $0.81676 received in respect of the first fourteen Coupon Payment Dates, you would have been paid a total of $10.87510
per Note, representing an 8.7510% total return on the Notes over 15 months.
Example 3 — Notes are NOT called prior to the Maturity Date and the Final
Value of the Underlying on the Final Observation Date is below its Downside Threshold.
Date |
Final Value on the Final Observation Date |
Payment (per Note) |
|
Nasdaq-100® Index |
|
First Coupon Payment Date |
N/A |
$0.05834 (Coupon Payment — Not callable) |
Second Coupon Payment Date |
N/A |
$0.05834 (Coupon Payment — Not callable) |
Third to Fourteenth Coupon Payment Dates |
N/A |
$0.05834 (Coupon Payment on each Coupon Payment Date — Notes are not called) |
Final Observation Date |
45.00 (below Downside Threshold) |
$10.000 × [1 + Underlying Return of the Underlying] =
$10.00 × [1 + -55.00%] =
$10.00 × 0.45 =
$4.50
$4.50000+$0.05834 = $4.55834 (Payment at Maturity) |
|
|
|
|
|
Total Payment: |
$5.37510 (-46.2490% total return) |
A Coupon Payment is paid on each of the first fourteen Coupon Payment Dates, but
the Notes are not called. On the Final Observation Date, the Underlying closes below its Downside Threshold. At maturity, investors are
exposed to the proportionate downside performance of the Underlying and you will receive $4.50000 per Note, which reflects the percentage
decrease of the closing level of the Underlying from the Trade Date to the Final Observation Date, plus the final Coupon Payment of $0.05834,
for a Payment at Maturity of $4.55834. When added to the $0.81676 in Coupon Payments received in respect of the first fourteen Coupon
Payment Dates, you would have been paid a total of $5.37510 per Note, representing a -46.2490% total return over 15 months.
The
Underlying
All disclosures contained in this pricing supplement regarding the Underlying, 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 NDX (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 consequence 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 either Selling Agent accepts any responsibility for the calculation,
maintenance or publication of the Underlying or any successor index.
None of us, the Guarantor, the Selling Agents or any of our or their respective 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 |
| ● | 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:
![](https://www.sec.gov/Archives/edgar/data/1682472/000121390024062600/image_003.jpg)
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 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, 2019 through July 17, 2024. 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 hypothetical
Downside Threshold of 13,859.40 (rounded to two decimal places), which is 70% of the NDX’s hypothetical Initial Value of 19,799.14,
which was its closing level on July 17, 2024. The actual Initial Value and Downside Threshold will be determined on the Trade Date.
![](https://www.sec.gov/Archives/edgar/data/1682472/000121390024062600/image_004.jpg)
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, 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.
Supplement to the Plan
of Distribution; Role of BofAS and Conflicts of Interest |
BofAS, an affiliate of BofA Finance and the lead selling agent for the sale of the Notes,
will receive an underwriting discount of $0.10 for any Note sold in this offering. UBS, as selling agent for sales of the Notes, expects
to purchase from BofAS, and BofAS expects to sell to UBS, all of the Notes sold in this offering for $9.90 per Note. UBS proposes to offer
the Notes to the public at a price of $10.00 per Note. UBS will receive an underwriting discount of $0.10 for each Note it sells to the
public. The underwriting discount will be received by UBS and its financial advisors collectively. If all of the Notes are not sold at
the initial offering price, BofAS may change the public offering price and other selling terms.
BofAS, a broker-dealer affiliate of ours, is a member of the Financial Industry
Regulatory Authority, Inc. (“FINRA”) and will participate as lead 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 one business days following the Trade Date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary
market generally are required to settle in one business days, unless the parties to any such trade expressly agree otherwise. Accordingly,
purchasers who wish to trade the Notes more than one business days prior to the Issue Date will be required to specify alternative settlement
arrangements to prevent a failed settlement.
BofAS and any of our other broker-dealer affiliates may use this pricing supplement,
and the accompanying product supplement, prospectus supplement and prospectus, for offers and sales in secondary market transactions and
market-making transactions in the Notes. However, they are not obligated to engage in such secondary market transactions and/or market-making
transactions. 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.
As agreed by BofAS and UBS, for approximately a three-month period after the
Trade Date, to the extent BofAS offers to buy the Notes in the secondary market, it will do so at a price that will exceed the estimated
value of the Notes at that time. The amount of this excess will decline on a straight line basis over that period. Thereafter, if BofAS
buys or sells your Notes, it will do so at prices that reflect the estimated value determined by reference to its pricing models at that
time. Any price at any time after the Trade Date 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, UBS or any other party
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, or by UBS or any
of its affiliates, 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 securities is permitted with regards to the
following jurisdictions:
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.
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 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.
Structuring
the Notes
The Notes are our debt securities, the return on which is linked to the performance
of the Underlying. The related guarantees are BAC’s obligations. Any payments on the Notes, including any Coupon Payments, depend
on the credit risk of BofA Finance and BAC and on the performance of the Underlying. The economic terms of the Notes reflect our and BAC’s
actual or perceived creditworthiness at the time of pricing and 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 it enters
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 elsewhere
in this pricing supplement, 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
Trade Date. On the cover page of this preliminary pricing supplement, we have provided the initial estimated value range for the Notes.
The final pricing supplement will set forth the initial estimated value of the Notes as of the Trade Date.
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-20 of the accompanying product supplement.
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
There is no statutory, judicial, or administrative authority directly addressing the
characterization of the Notes or instruments substantially similar to the Notes. We intend to treat the Notes for all tax purposes as
a unit (a “Unit”) consisting of the following:
| (i) | a put option (the “Put Option”) written by you to us that, if exercised, requires you to pay us an amount equal to the
Deposit (as defined below) in exchange for a cash amount based upon the performance of the Underlying; and |
| (ii) | a deposit with us of a fixed amount of cash, equal to the issue price of the Note, to secure your obligation under the Put Option
(the “Deposit”) that pays you interest based on our cost of borrowing at the time of issuance (the “Deposit Interest”). |
Based on the treatment of each Note as a Unit consisting of the Put Option and the Deposit,
it would be reasonable to allocate each Coupon Payment between the Deposit and the Put Option and treat % of each Coupon Payment as Deposit
Interest and % of each Coupon Payment as Put Option premium. Under this approach, it would be reasonable to allocate 100% of the issue
price of a Note to the Deposit and none to the Put Option.
No statutory, judicial or administrative authority directly addresses the proper treatment
of the Notes or instruments substantially similar to the Notes for U.S. federal income tax purposes, and no ruling is being requested
from the IRS with respect to the Notes. Significant aspects of the U.S. federal income tax consequences of an investment in the Notes
are uncertain, and no assurance can be given that the IRS or a court will agree with the tax treatment described herein. In the opinion
of our counsel, Sidley Austin LLP, the treatment of the Notes described above is reasonable under current law; however, our counsel has
advised us that it is unable to conclude affirmatively that this treatment is more likely than not to be upheld, and that alternative
treatments are possible. Accordingly, you should consult your tax advisor regarding the U.S. federal income tax consequences of an investment
in the Notes (including alternative treatments of the notes). Unless otherwise expressly stated, the remainder of this discussion is based
upon, and assumes, the treatment of each Note as a Unit consisting of the Put Option and the Deposit, as well as the allocation of the
Coupon Payments and issue price of the Note described above.
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 any component stocks 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
The Deposit Interest payments will be included in the income of a U.S. Holder as interest
at the time that such interest is accrued or received in accordance with such U.S. Holder’s regular method of tax accounting. The
Put Option premium will not be included in the income of a U.S. Holder until the sale, exchange, redemption or maturity of the Notes.
Accordingly, all of the Put Option premium payments on the Notes (except for the last Put Option premium payment) generally will not be
included in the income of a U.S. Holder when they are received.
If at maturity the U.S. Holder receives cash equal to the full principal amount plus
the last Deposit Interest payment and the last Put Option premium payment, then such U.S. Holder (i) would include the last Deposit Interest
payment in income as interest in the manner described above and (ii) would recognize short-term capital gain equal to the entire amount
of Put Option premium, which amount is equal to the sum of all of the Put Option premium payments received.
If at maturity the U.S. Holder receives an amount of cash that is less than the full
principal amount and receives the last Deposit Interest payment and the last Put Option premium payment, then such U.S. Holder (i) will
include the last Deposit Interest payment in income as interest in the manner described above and (ii) will recognize long-term capital
gain or loss with respect to the remaining cash received at maturity (other than the last Put Option premium payment) in an amount equal
to the difference between (1) the sum of all of the Put Option premiums received (including the last Put Option premium payment) and (2)
the excess of the principal amount of the Note over the amount of such cash received.
Upon a redemption of the Notes prior to maturity, a U.S. Holder (i) would include the
last Deposit Interest payment in income as interest in the manner described above and (ii) would recognize short-term capital gain equal
to the sum of all the Put Option premium payments received.
Upon a sale or exchange of a Note prior to maturity (except upon redemption of the Notes
prior to maturity, which is described above), a U.S. Holder will generally recognize short-term or long-term capital gain or loss with
respect to the Deposit (depending upon the U.S. Holder’s holding period for the Notes). The U.S. Holder will also generally recognize
short-term capital gain or loss with respect to the Put Option. For purposes of determining the amount of such gain or loss, a U.S. Holder
should apportion the amount realized on the sale or exchange (other than amounts attributable to accrued but unpaid Deposit Interest payments,
which would be taxed as described above) between the Deposit and the Put Option based upon their respective fair market values on the
date of such sale or exchange. In general, the amount of capital gain or loss on the Deposit will equal the amount realized that is attributable
to the Deposit, less the U.S. Holder’s adjusted tax basis in the Deposit. The amount realized that is attributable to the Put Option
plus the total Put Option premiums previously received by the U.S. Holder should be treated as short-term capital gain. Notwithstanding
the foregoing, if the fair market value of the Deposit on the date of such sale or exchange exceeds the total amount realized on the sale
or exchange (other than amounts attributable to accrued but unpaid Deposit Interest payments), the U.S. Holder should be treated as having
(i) sold or exchanged the Deposit for an amount equal to its fair market value on such date and (ii) made a payment (the “Put Option
Assumption Payment”) equal to the amount of such excess in exchange for the purchaser’s assumption of the U.S. Holder’s
rights and obligations under the Put Option. In such event, the U.S. Holder should recognize short-term capital gain or loss in respect
of the Put Option in an amount equal to the difference between the total Put Option premiums previously received by the U.S. Holder and
the Put Option Assumption Payment.
Alternative Tax Treatments. Due to the absence of authorities that directly address
the proper tax treatment of the Notes, prospective investors are urged to consult their tax advisors regarding all possible alternative
tax treatments of an investment in the Notes. In particular, the IRS could seek to subject the Notes to the Treasury regulations governing
contingent payment debt instruments. If the IRS were successful in that regard, the timing and character of income on the Notes would
be affected significantly. Among other things, a U.S. Holder would be required to accrue original issue discount every year at a “comparable
yield” determined at the time of issuance. In addition, any gain realized by a U.S. Holder at maturity or upon a sale, exchange,
or redemption of the Notes generally would be treated as ordinary income, and any loss realized at maturity or upon a sale, exchange,
or redemption of the Notes generally would be treated as ordinary loss to the extent of the U.S. Holder’s prior accruals of original
issue discount, and as capital loss thereafter. Alternatively, under an alternative characterization of the Notes as income-bearing single
financial contracts, the entire Coupon Payments could be required to be included in income as ordinary income by a U.S. holder at the
time received accrued. Other alternative characterizations are possible and prospective investors should consult with their tax advisors
regarding all aspects of the U.S. federal income tax consequences of an investment in the Notes.
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, exchange, or redemption 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 income-bearing 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
Assuming the treatment of the Notes as set forth above is respected and subject to the
discussions below regarding the potential application of Section 871(m) of the Code and the discussions in the accompanying prospectus
regarding FATCA, Coupon Payments with respect to a Note, and gain realized on the sale, exchange or redemption of such Note, should not
be subject to U.S. federal income or withholding tax under current law, provided that:
| · | the Non-U.S. Holder does not own, directly or by attribution, ten percent or more of the total combined voting power of all classes
of our stock entitled to vote; |
| · | the Non-U.S. Holder is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership; |
| · | the Non-U.S. Holder is not a bank receiving interest under Section 881(c)(3)(A) of the Code; |
| · | the certification requirement described below has been fulfilled with respect to the beneficial owner; and |
| · | and the payment is not effectively connected with the conduct by the Non-U.S. Holder of U.S. trade or business. |
Certification Requirement. The certification requirement referred to in the preceding
paragraph will be fulfilled if the beneficial owner of a Note (or a financial institution holding a Note on behalf of the beneficial owner)
furnishes to the applicable withholding agent an IRS Form W-8BEN (or other appropriate form), on which the beneficial owner certifies
under penalties of perjury that it is not a U.S. person.
Alternative Tax Treatments. As described above under “— U.S. Holders
— Alternative Tax Treatments,” the IRS may seek to apply a different characterization and tax treatment from the treatment
described herein. While the U.S. federal income and withholding tax consequences to a Non-U.S. Holder of ownership and disposition of
a Note under current law should generally be the same as those described immediately above, it is possible that a Non-U.S. Holder could
be subject to withholding tax under certain recharacterizations of the Notes.
Moreover, among the issues addressed in the Notice described in “— U.S.
Holders — Alternative Tax Treatments” is the degree, if any, to which income realized by Non-U.S. Holders should be subject
to withholding tax. It is possible that any Treasury regulations or other guidance issued after consideration of this issue could materially
and adversely affect the withholding tax consequences of ownership and disposition of the Notes, possibly with retroactive effect. Accordingly,
prospective investors should consult their tax advisors regarding all aspects of the U.S. federal income tax consequences of an investment
in the Notes, including the possible implications of the Notice discussed above. Prospective investors should note that we currently do
not intend to withhold on any of the payments made with respect to the Notes to Non-U.S. Holders (subject to compliance by such holders
with the certification requirement described above and to the discussion regarding FATCA in the accompanying prospectus). However, in
the event of a change of law or any formal or informal guidance by the IRS, the Treasury or Congress, we (or the applicable paying agent)
may decide to withhold on payments made with respect to the Notes to Non-U.S. Holders and we will not be required to pay any additional
amounts with respect to amounts withheld.
Notwithstanding the foregoing, gain from the sale, exchange, or redemption of the Notes
or their settlement at maturity may be subject to U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and
is present in the U.S. for 183 days or more during the taxable year of the sale, exchange, redemption, or settlement and certain other
conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in the conduct of a trade or business within
the U.S. and if any Coupon Payment and gain realized on the settlement at maturity, or upon sale, exchange or redemption of the Notes,
is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is attributable to a permanent
establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S. federal withholding tax,
generally will be subject to U.S. federal income tax on such Coupon Payment and gain on a net income basis in the same manner as if it
were a U.S. Holder. Such Non-U.S. Holders should read the material under the heading “—U.S. Holders,” for a description
of the U.S. federal income tax consequences of acquiring, owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is
a foreign corporation, it may also be subject to a branch profits tax equal to 30% (or such lower rate provided by any applicable tax
treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business
in the U.S., subject to certain adjustments.
A “dividend equivalent” payment is treated
as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid
to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”)
that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend
equivalent payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2027. 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.
As discussed above, alternative characterizations of the Notes for U.S. federal income
tax purposes are possible. Should an alternative characterization, by reason of change or clarification of the law, by regulation or otherwise,
cause payments as to the Notes to become subject to withholding tax in addition to the withholding tax described above, tax will be withheld
at the applicable statutory rate. Prospective Non-U.S. Holders should consult their own tax advisors regarding the tax consequences of
such alternative characterizations.
U.S. Federal Estate Tax. Under current law, while the matter is not entirely
clear, individual Non-U.S. Holders, and entities whose property is potentially includible in those individuals’ gross estates for
U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained
certain interests or powers), should note that, absent an applicable treaty benefit, a Note is likely to be treated as U.S. situs property,
subject to U.S. federal estate tax. These individuals and entities should consult their own tax advisors regarding the U.S. federal estate
tax consequences of investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal Income Tax Considerations —
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.
Bank of America (NYSE:BML-L)
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