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 24, 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)
July , 2024 |
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/1682472/000101376224000764/image_001.jpg) |
BofA Finance LLC $-- Trigger Autocallable Contingent Yield Notes
Linked to the Least Performing of the Invesco S&P 500 Equal Weight
ETF and the iShares® Russell 2000 ETF Due July 29, 2027
Fully and Unconditionally Guaranteed by Bank of America Corporation
The Trigger Autocallable Contingent Yield Notes linked to the least performing
of the Invesco S&P 500 Equal Weight ETF and the iShares® Russell 2000 ETF (each, an “Underlying”) due July
29, 2027 (the “Notes”) are senior unsecured obligations issued by BofA Finance LLC (“BofA Finance”), 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 Contingent Coupon Payment on each quarterly Coupon Payment Date if, and only if, the
Current Underlying Price of the Least Performing Underlying on the related quarterly Observation Date is greater than or equal to its
Coupon Barrier. If the Current Underlying Price of the Least Performing Underlying on the applicable quarterly Observation Date is less
than its Coupon Barrier, no Contingent Coupon Payment will accrue or be paid on the related Coupon Payment Date. Beginning approximately
six months after issuance, if the Current Underlying Price of the Least Performing Underlying on the applicable quarterly Observation
Date (other than the Final Observation Date) is greater than or equal to its Initial Value, we will automatically call the Notes and pay
you the Stated Principal Amount plus the Contingent Coupon Payment for that Observation Date, and no further amounts will be owed to you.
If the Notes have not previously been automatically called, at maturity, the amount you receive will depend on the Final Value of the
Least Performing Underlying on the Final Observation Date. If the Final Value of the Least Performing 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 any final Contingent
Coupon Payment otherwise due on the Maturity Date). However, if the Notes have not been automatically called prior to maturity and the
Final Value of the Least Performing Underlying on the Final Observation Date is less than its Downside Threshold, you will receive less
than the Stated Principal Amount at maturity, resulting in a loss that is proportionate to the decline in the Current Underlying Price
of the Least Performing Underlying from the Trade Date to the Final Observation Date, up to a 100% loss of your investment. On each Observation
Date, the "Least Performing Underlying" is the Underlying with the lowest Underlying Return from the Trade Date to that Observation
Date. Investing in the Notes involves significant risks. You may lose a substantial portion or all of your initial investment. All
payments on the Notes will be based solely on the performance of the Least Performing Underlying. You will not benefit in any way
from the performance of the other Underlying. You will therefore be adversely affected if either Underlying performs poorly, regardless
of the performance of the other Underlying. You will not receive dividends or other distributions paid on any shares or units of the Underlyings
or on the stocks included in the Underlyings, as applicable, or participate in any appreciation of either Underlying. The contingent repayment
of the Stated Principal Amount applies only if you hold the Notes to maturity or earlier automatic call. 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.
| ❑ | Contingent Coupon Payment — We will pay you a Contingent
Coupon Payment on each quarterly Coupon Payment Date if, and only if, the Current Underlying Price of the Least Performing Underlying
on the related quarterly Observation Date is greater than or equal to its Coupon Barrier. Otherwise, no Contingent Coupon Payment will
be paid for that quarter. |
| ❑ | Automatic Call — Beginning approximately six months
after issuance, if the Current Underlying Price of the Least Performing Underlying on the applicable quarterly Observation Date (other
than the Final Observation Date) is greater than or equal to its Initial Value, we will automatically call the Notes and pay you the
Stated Principal Amount plus the Contingent Coupon Payment for that Observation Date, and no further amounts will be owed to you. If
the Notes are not automatically called, investors will have full downside market exposure to the Least Performing Underlying at maturity. |
| ❑ | Downside Exposure with Contingent Repayment of Principal
at Maturity — If the Notes are not automatically called prior to maturity and the Final Value of the Least Performing 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 any final Contingent Coupon Payment otherwise due on the Maturity Date). However, if the Final Value of the Least Performing Underlying
on the Final Observation Date is less than its Downside Threshold, 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 Current Underlying Price of the Least Performing Underlying
from the Trade Date to the Final Observation Date, up to a 100% loss of your investment. |
Trade Date2 |
July 24, 2024 |
Issue Date2 |
July 29, 2024 |
Observation Dates3 |
Quarterly, subject to automatic call beginning on January 24, 2025 |
Final Observation Date3 |
July 26, 2027 |
Maturity Date |
July 29, 2027 |
| 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-7 for additional details. |
Any payment on the Notes is subject to
the creditworthiness of BofA Finance and the Guarantor.
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 LEAST PERFORMING 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-8 OF THIS PRICING SUPPLEMENT, PAGE PS-5 OF THE ACCOMPANYING PRODUCT SUPPLEMENT, PAGE S-6 OF THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AND PAGE 7 OF THE ACCOMPANYING PROSPECTUS 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.
We are offering Trigger Autocallable Contingent Yield Notes linked
to the least performing of the Invesco S&P 500 Equal Weight ETF and the iShares® Russell 2000 ETF due July 29, 2027.
Any payment on the Notes will be based solely on the performance of the Least Performing Underlying. The Contingent Coupon Rate, Initial
Values, Coupon Barriers and Downside Thresholds 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.
Underlyings |
Contingent Coupon Rate |
Initial Values |
Coupon Barriers |
Downside Thresholds |
CUSIP / ISIN |
Invesco S&P 500 Equal Weight ETF (Ticker: RSP) |
At least 7.00% per annum |
|
$ , which is 70% of the Initial Value |
$ , which is 70% of the Initial Value |
09710R714 /
US09710R7145 |
iShares® Russell 2000 ETF (Ticker: IWM) |
|
$ , which is 70% of the Initial Value |
$ , which is 70% of the Initial Value |
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 |
$0.20 |
$9.80 |
Total |
$ |
$ |
$ |
(1) The underwriting discount is $0.20 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 $9.80 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 $9.80 per
Note. UBS will receive an underwriting discount of $0.20 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 $9.20 and $9.70 per $10.00
in Stated Principal Amount. See “Summary” beginning on page PS-4 of this pricing supplement, “Risk Factors” beginning
on page PS-8 of this pricing supplement and “Structuring the Notes” on page PS-22 of this pricing supplement for additional
information. The actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy.
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:
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 Least Performing
Underlying. |
| ♦ | You understand and accept the risks associated with the Underlyings. |
| ♦ | You are willing to accept the individual market risk of each
Underlying and understand that any decline in the price of one Underlying will not be offset or mitigated by a lesser decline or any
potential increase in the price of the other Underlying. |
| ♦ | You believe the Current Underlying Price of each Underlying
is likely to be greater than or equal to its Coupon Barrier on the Observation Dates, and, if the Current Underlying Price of either
Underlying is not, you can tolerate receiving few or no Contingent Coupon Payments over the term of the Notes. |
| ♦ | You believe the Current Underlying Price of each Underlying
will be greater than or equal to its Downside Threshold on the Final Observation Date, and, if the Current Underlying Price of either
Underlying is below its 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 price of the Least Performing Underlying. |
| ♦ | You understand that your return on the Notes will be based on
the performance of the Least Performing Underlying and you will not benefit from the performance of the other Underlying. |
| ♦ | You are willing to hold Notes that will be called on the earliest
Observation Date (beginning six months after issuance, other than the Final Observation Date) on which the Current Underlying Price of
the Least Performing Underlying is greater than or equal to its Initial Value. |
| ♦ | You are willing to make an investment whose positive return
is limited to the Contingent Coupon Payments, regardless of the potential appreciation of the Underlyings, 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 do not seek guaranteed current income from your investment
and are willing to forgo dividends or any other distributions paid on the Underlyings or on the stocks included in the Underlyings, as
applicable. |
| ♦ | 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 Least Performing Underlying. |
| ♦ | You do not understand or are not willing to accept the risks
associated with each of the Underlyings. |
| ♦ | You are unwilling to accept the individual market risk of each Underlying or do not understand that any decline in the price of one
Underlying will not be offset or mitigated by a lesser decline or any potential increase in the price of the other Underlying. |
| ♦ | You require an investment designed to guarantee a full return
of the Stated Principal Amount at maturity. |
| ♦ | You do not believe the Current Underlying Price of each Underlying
is likely to be greater than or equal to its Coupon Barrier on the Observation Dates, or you cannot tolerate receiving few or no Contingent
Coupon Payments over the term of the Notes. |
| ♦ | You believe the Current Underlying Price of either Underlying
will be less than its Downside Threshold on the Final Observation Date, exposing you to the full downside performance of the Least Performing
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 price of the Least Performing Underlying. |
| ♦ | You are unwilling to accept that your return on the Notes will
be based on the performance of the Least Performing Underlying, or you seek an investment based on the performance of a basket composed
of the Underlyings. |
| ♦ | You are unwilling to hold Notes that will be called on the earliest
Observation Date (beginning six months after issuance, other than the Final Observation Date) on which the Current Underlying Price of
the Least Performing Underlying is greater than or equal to its Initial Value. |
| ♦ | You seek an investment that participates in the full appreciation
of the Underlyings and whose positive return is not limited to the Contingent Coupon Payments. |
| ♦ | You seek an investment for which there will be an active secondary
market. |
| ♦ | You seek guaranteed current income from this investment or prefer
to receive the dividends and any other distributions paid on the Underlyings or on the stocks included in the Underlyings, as applicable. |
| ♦ | 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 Underlyings” section herein for
more information on the Underlyings. 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 three years, unless earlier automatically called
|
Trade Date1, 2
|
July 24, 2024
|
Issue Date1, 2
|
July 29, 2024
|
Final Observation Date1
|
July 26, 2027
|
Maturity Date1
|
July 29, 2027
|
Underlyings |
Invesco S&P 500 Equal Weight ETF (Ticker: RSP) |
|
iShares® Russell 2000 ETF (Ticker: IWM) |
Automatic Call Feature
|
The Notes will be automatically called if the Current Underlying Price
of the Least Performing Underlying on any Observation Date occurring on or after January 24, 2025 (other than the Final Observation Date)
is greater than or equal to its Initial Value.
If the Notes are automatically called, on the applicable Coupon Payment
Date we will pay you a cash payment per $10.00 Stated Principal Amount equal to the Stated Principal Amount plus any Contingent Coupon
Payment otherwise due on such Coupon Payment Date.
If the Notes are automatically called, no further payments will be made
on the Notes.
|
Observation Dates1
|
See “Observation Dates and Coupon Payment Dates” on page PS-7.
|
Coupon Payment Dates1
|
See “Observation Dates and Coupon Payment Dates” on page PS-7.
|
Contingent Coupon Payment / Contingent Coupon Rate
|
If the Current Underlying Price of the Least Performing Underlying on the
applicable quarterly Observation Date is greater than or equal to its Coupon Barrier, we will make a Contingent Coupon Payment with respect
to that Observation Date on the related Coupon Payment Date.
However, if the Current Underlying Price of the Least Performing Underlying on the applicable quarterly Observation Date is below its
Coupon Barrier, no Contingent Coupon Payment will accrue or be payable on the related Coupon Payment Date.
Each Contingent Coupon Payment will be in the amount of at least $0.175
for each $10.00 Stated Principal Amount (based on the per annum Contingent Coupon Rate of at least 7.00%) and will be payable, if applicable,
on the related Coupon Payment Date. The actual Contingent Coupon Payment and Contingent Coupon Rate will be determined on the Trade Date.
Contingent Coupon Payments on the Notes are not guaranteed. We will
not pay you the Contingent Coupon Payment for any Observation Date on which the Current Underlying Price of the Least Performing Underlying
on that Observation Date is less than its Coupon Barrier, even if the Current Underlying Price of the other Underlying is above its Coupon
Barrier.
|
| 1 | Subject
to change and will be set forth in the final pricing supplement relating to the Notes. |
Payment At Maturity (per $10.00 Stated Principal Amount)
|
If the Notes are not automatically called prior to maturity and the
Final Value of the Least Performing 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 plus any Contingent Coupon Payment otherwise due on the Maturity Date.
If the Notes are not automatically called prior to maturity and the
Final Value of the Least Performing 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 of the Least Performing Underlying on the Final Observation Date, equal to:
$10.00 × (1 + Underlying Return of the Least
Performing Underlying on the Final Observation Date)
Accordingly, you may lose all or a substantial portion of your Stated
Principal Amount at maturity, depending on how significantly the Least Performing Underlying declines, even if the Final Value of the
other Underlying is above its Downside Threshold.
|
Least Performing Underlying
|
On each Observation Date, including the Final Observation Date, the Underlying
with the lowest Underlying Return as of that Observation Date.
|
Underlying Return
|
For any Underlying on any Observation Date, calculated as follows:
Current Underlying Price - Initial Value
Initial Value
|
Downside Threshold
|
For any Underlying, 70% of its Initial Value, as specified on the cover
page of this pricing supplement.
|
Coupon Barrier
|
For any Underlying, 70% of its Initial Value, as specified on the cover
page of this pricing supplement.
|
Initial Value
|
For any Underlying, its Closing Market Price on the Trade Date, as specified
on the cover page of this pricing supplement.
|
Price Multiplier
|
With respect to each of the RSP and the IWM, 1, subject to adjustment for
certain events as described in “Description of the Notes – Anti-Dilution and Discontinuance Adjustments Relating to ETFs”
beginning on page PS-27 of the accompanying product supplement.
|
Current Underlying Price
|
For any Underlying and any Observation Date, the Closing Market Price of
that Underlying on that Observation Date, multiplied by its Price Multiplier, as determined by the calculation agent.
|
Final Value
|
For any Underlying, its Current Underlying Price on the Final Observation
Date.
|
Trading Day
|
As defined on page PS-21 of the accompanying product supplement.
|
Calculation Agent
|
BofAS, an affiliate of BofA Finance.
|
Selling Agents
|
BofAS and UBS.
|
| 2 | See
“Supplement to the Plan of Distribution; Role of BofAS and Conflicts of Interest” in this pricing supplement for additional
information. |
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. We will also determine whether the
final Contingent Coupon Payment is payable based upon the prices of the Underlyings on the deemed Final Observation Date; any such final
Contingent Coupon Payment will be prorated by the calculation agent to reflect the length of the final contingent 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.
|
|
|
|
|
|
Trade Date
|
|
The Initial Value of each Underlying is observed, the Contingent Coupon Payment/Contingent Coupon Rate is set, and the Coupon Barrier and Downside Threshold for each Underlying are determined. |
|
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000764/image_002.jpg) |
|
|
|
|
|
|
|
Quarterly (autocallable after six months)
|
|
If the Current Underlying Price of the Least Performing Underlying on the
applicable quarterly Observation Date is greater than or equal to its Coupon Barrier, we will make a Contingent Coupon Payment with respect
to that Observation Date on the related Coupon Payment Date.
However, if the Current Underlying Price of the Least Performing Underlying on the applicable quarterly Observation Date is below its
Coupon Barrier, no Contingent Coupon Payment will accrue or be payable on the related Coupon Payment Date.
The Notes will be automatically called if the Current Underlying Price of
the Least Performing Underlying on any Observation Date occurring on or after January 24, 2025 (other than the Final Observation Date)
is greater than or equal to its Initial Value.
If the Notes are automatically called on any Observation Date, on the related
Coupon Payment Date we will pay you a cash payment per $10.00 Stated Principal Amount equal to the Stated Principal Amount plus the applicable
Contingent Coupon Payment.
If the Notes are automatically called, no further payments will be made on
the Notes.
|
|
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000764/image_002.jpg) |
|
|
|
|
|
|
|
Maturity Date (if not previously automatically called)
|
|
If the Notes are not automatically called prior to maturity, the Final Value
of each Underlying will be observed on the Final Observation Date.
If the Final Value of the Least Performing 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 plus any
Contingent Coupon Payment otherwise due on the Maturity Date.
If the Final Value of the Least Performing 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 of the Least Performing Underlying
on the Final Observation Date, equal to:
$10.00 × (1 + Underlying Return of the Least Performing Underlying
on the Final Observation Date)
|
|
|
|
|
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 EACH UNDERLYING AND ANY DECLINE IN THE PRICE OF ONE
UNDERLYING MAY NEGATIVELY AFFECT YOUR RETURN AND WILL NOT BE OFFSET OR MITIGATED BY A LESSER DECLINE OR ANY POTENTIAL INCREASE IN THE
PRICE OF THE OTHER UNDERLYING. THE CONTINGENT REPAYMENT OF THE STATED PRINCIPAL AMOUNT APPLIES ONLY IF YOU HOLD THE NOTES TO MATURITY
OR EARLIER AUTOMATIC CALL. ANY PAYMENT ON THE NOTES IS SUBJECT TO THE CREDITWORTHINESS OF BOFA FINANCE AND THE GUARANTOR.
Observation Dates and Coupon Payment Dates |
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Observation Dates1, 2 |
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Coupon Payment Dates1 |
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October 24, 2024 * |
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October 28, 2024 |
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January 24, 2025 |
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January 28, 2025 |
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April 24, 2025 |
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April 28, 2025 |
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July 24, 2025 |
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July 28, 2025 |
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October 24, 2025 |
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October 28, 2025 |
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January 26, 2026 |
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January 28, 2026 |
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April 24, 2026 |
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April 28, 2026 |
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July 24, 2026 |
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July 28, 2026 |
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October 26, 2026 |
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October 28, 2026 |
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January 25, 2027 |
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January 27, 2027 |
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April 26, 2027 |
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April 28, 2027 |
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July 26, 2027 * |
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July 29, 2027 |
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* The Notes are NOT automatically callable until the second Observation Date,
which is January 24, 2025, and will NOT be automatically callable on the Final Observation Date (July 26, 2027).
1 Subject to change and will be set forth in the final pricing
supplement relating to the Notes.
2 The Observation Dates are subject to postponement as set forth
in “Additional Terms Relating to Observation Dates” below.
Additional Terms Relating to Observation Dates
Events Relating to Observation Dates – The following replaces
in its entirety the section entitled “Description of the Notes—Certain Terms of the Notes – Events Relating to Observation
Dates” in the accompanying product supplement:
If, with respect to any Underlying, (i) a Market Disruption Event occurs
on a scheduled Observation Date or (ii) the calculation agent determines that by reason of an extraordinary event, occurrence, declaration
or otherwise, any scheduled Observation Date is not a Trading Day for any Underlying (any such day in either (i) or (ii) being a “Non-Observation
Date”), the calculation agent will determine the Closing Market Price of the applicable Underlyings for that day as follows:
| ● | The Closing Market Price of an Underlying that is not so affected
will be its Closing Market Price on that Non-Observation Date. |
| ● | The Closing Market Price of an Underlying that is affected by
that Non-Observation Date will be deemed to be its Closing Market Price on the first scheduled Trading Day following that Non-Observation
Date. However, if (i) a Market Disruption Event occurs on the first scheduled Trading Day following that Non-Observation Date or (ii)
the first scheduled Trading Day following that Non-Observation Date is determined by the calculation agent not to be a Trading Day by
reason of an extraordinary event, occurrence, declaration or otherwise, the Closing Market Price of the Underlying for the relevant Observation
Date will be determined (or, if not determinable, estimated) by the calculation agent in a manner which the calculation agent considers
commercially reasonable under the circumstances on such first scheduled Trading Day following that Non-Observation Date, regardless of
the occurrence of a Market Disruption Event or non-Trading Day on that day. |
The applicable Observation Date will be deemed to occur after the calculation
agent has determined the Closing Market Prices of the Underlyings as provided above.
Your investment in the Notes entails significant risks, many of which
differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after carefully considering
the risks of an investment in the Notes, including those discussed below, with your advisors in light of your particular circumstances.
The Notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the Notes or financial
matters in general. You should carefully review the more detailed explanation of risks relating to the Notes in the “Risk Factors”
sections beginning on page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus supplement and page 7
of the accompanying prospectus, each as identified on page PS-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 automatically called prior to maturity and the Final Value of either Underlying
is less than its Downside Threshold, at maturity, you will lose 1% of the Stated Principal Amount for each 1% that the Final Value of
the Least Performing Underlying is less than its Initial Value. In that case, you will lose a significant portion or all of your investment
in the Notes. Generally, the longer the Notes remain outstanding, the less likely the Notes will be subject to an automatic call because
of the shorter time remaining for the price of an Underlying that has experienced a decline to recover. The periods in which it is less
likely the Notes will be subject to an automatic call generally coincide with a period of greater risk of loss of the Stated Principal
Amount on your 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 an automatic call or maturity, you may have
to sell them at a loss relative to your initial investment even if the price of each 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 Contingent Coupon Payments, if any, over the term of the Notes.
Your return on the Notes is limited to the Contingent Coupon Payments paid over the term of the Notes, regardless of the extent to which
the Current Underlying Price or the Final Value of either Underlying exceeds its Coupon Barrier or Initial Value, as applicable. Similarly,
the amount payable at maturity or upon an automatic call will never exceed the sum of the Stated Principal Amount and the applicable Contingent
Coupon Payment, regardless of the extent to which the Final Value or the Current Underlying Price of either Underlying exceeds its Initial
Value. In contrast, a direct investment in an Underlying or in the securities included in one or more of the Underlyings would allow you
to receive the benefit of any appreciation in their prices. 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 automatic early call, which would limit your ability to receive the Contingent Coupon Payments
over the full term of the Notes. The Notes are subject to a potential automatic early call. Beginning in January 2025, the Notes will
be automatically called if, on any Observation Date (other than the Final Observation Date), the Current Underlying Price of the Least
Performing Underlying is greater than or equal to its Initial Value. If the Notes are automatically called prior to the Maturity Date,
you will be entitled to receive the Stated Principal Amount and the Contingent Coupon Payment with respect to the applicable Observation
Date, and no further amounts will be payable on the Notes. In this case, you will lose the opportunity to continue to receive Contingent
Coupon Payments after the date of automatic call. If the Notes are called prior to the Maturity Date, you may be unable to invest in other
securities with a similar level of risk that could provide a return that is similar to the Notes. |
| ♦ | You may not receive any Contingent Coupon Payments. The Notes do not provide for any regular fixed coupon payments. Investors
in the Notes will not necessarily receive any Contingent Coupon Payments on the Notes. If the Current Underlying Price of the Least Performing
Underlying is less than its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment applicable to that
Observation Date. If the Current Underlying Price of the Least Performing Underlying is less than its Coupon Barrier on all the Observation
Dates during the term of the Notes, you will not receive any Contingent Coupon Payments during the term of the Notes, and you will not
receive a positive return on the Notes. |
| ♦ | The Contingent Coupon Payments, Payment at Maturity, or payment upon an automatic call, as applicable, will not reflect the prices
of the Underlyings other than on the Observation Dates. The prices of the Underlyings during the term of the Notes other than on the
Observation Dates will not affect payments on the Notes. Notwithstanding the foregoing, investors should generally be aware of the performance
of the Underlyings while holding the Notes, as the performance of the Underlyings may influence the market value of the Notes. The calculation
agent will determine whether each Contingent Coupon Payment is payable and will calculate the payment upon an automatic call or the Payment
at Maturity, as applicable, by comparing only the Initial Value, the Coupon Barrier or the Downside Threshold, as applicable, to the Current
Underlying Price or the Final Value for each Underlying. No other prices of the Underlyings will be taken into account. As a result, if
the Notes are not automatically called prior to maturity and the Final Value of the Least Performing Underlying is less than its Downside
Threshold, you will receive less than the Stated Principal Amount at maturity even if the price of each Underlying was always above its
Downside Threshold prior to the Final Observation Date. |
| ♦ | Because the Notes are linked to the performance of the least performing between the RSP and the IWM, you are exposed to greater
risk of receiving no Contingent Coupon Payments or sustaining a significant loss on your investment than if the Notes were linked to just
the RSP or just the IWM. The risk that you will not receive any Contingent Coupon Payments and/or lose a significant portion or all
of your investment in the Notes is greater if you invest in the Notes as opposed to substantially similar securities that are linked to
the performance of just the RSP or just the IWM. With two Underlyings, it is more likely that an Underlying will close below its Coupon
Barrier on an Observation Date or below its Downside Threshold on the Final Observation Date than if the Notes were linked to only one
of the Underlyings, and therefore it is more likely that you will not receive any Contingent Coupon Payments or will receive a Payment
at Maturity that is significantly less than the Stated Principal Amount on the Maturity Date. |
| ♦ | Your return on the Notes may be less than the yield on a conventional debt security of comparable maturity. Any return that
you receive on the Notes may be less than the return you would earn if you purchased a conventional debt security with the same maturity
date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when you consider factors, such as inflation,
that affect the time value of money. In addition, if interest rates increase during the term of the Notes, the Contingent Coupon Payment
(if any) may be less than the yield on a conventional debt security of comparable maturity. |
| ♦ | 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 Current Underlying
Price or Final Value, as applicable, of either Underlying as compared to its Coupon Barrier, 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 any payment date,
including 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 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 prices of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce the
other investment risks related to the Notes. |
| ♦ | We are a finance subsidiary and, as such, have no independent assets, operations or revenues. We are a finance subsidiary of
the Guarantor, have no operations other than those related to the issuance, administration and repayment of our debt securities that are
guaranteed by the Guarantor, and are dependent upon the Guarantor and/or its other subsidiaries to meet our obligations under the Notes
in the ordinary course. Therefore, our ability to make payments on the Notes may be limited. |
Valuation- and Market-related Risks
| ♦ | The public offering price you 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 prices of the Underlyings, 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 Underlyings, 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 seven-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 seven-month period. Accordingly,
the estimated value of your Notes during this initial seven-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 Underlyings 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 prices of the Underlyings. 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 an automatic 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 an automatic call. These factors include the prices of
the Underlyings and the securities included in the Underlyings, as applicable; the volatility of the Underlyings and the securities included
in the Underlyings; the correlation among the Underlyings; the dividend rate paid on the Underlyings or on the securities included in
the Underlyings, 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; whether the price of either of the Underlyings is
currently or has been less than its Coupon Barrier; 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. |
| ♦ | Greater expected volatility generally indicates an increased risk of loss. Volatility is a measure of the degree of variation
in the price of an Underlying over a period of time. The greater the expected volatilities of the Underlyings at the time the terms of
the Notes are set, the greater the expectation is at that time that you may not receive one or more, or all, Contingent Coupon Payments
and 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 Contingent Coupon Rate, the Coupon Barrier and the Downside Threshold, are based, in part, on the expected volatilities
of the Underlyings at the time the terms of the Notes are set, where higher expected volatility will generally be reflected in a higher
Contingent Coupon Rate than the fixed rate we would pay on conventional debt securities of the same maturity and/or on other comparable
securities and a lower Coupon Barrier and/or lower Downside |
Threshold as compared to other comparable securities. However,
an Underlying’s volatility can change significantly over the term of the Notes. A relatively higher Contingent Coupon Rate generally
will be indicative of a greater risk of loss while a lower Coupon Barrier and/or a lower Downside Threshold does not necessarily indicate
that the Notes have a greater likelihood of paying Contingent Coupon Payments or a return of principal at maturity. You should be willing
to accept the downside market risk of each Underlying and the potential to lose a significant portion or all of your initial investment.
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 shares or units of the Underlyings or the
securities held by or included in the Underlyings, as applicable, or futures or options contracts on the Underlyings or those securities,
or other listed or over-the-counter derivative instruments linked to the Underlyings or those securities. 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 Underlyings. 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 Underlyings. 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 shares or units of the Underlyings or
the securities included in the Underlyings, except to the extent that BAC’s or UBS Group AG’s (the parent company of UBS)
common stock may be included in the Underlyings, as applicable, we, the Guarantor and our other affiliates, including BofAS, and UBS and
its affiliates, do not control any company included in the Underlyings, and have not verified any disclosure made by any other company.
We, the Guarantor or one or more of our other affiliates, including BofAS, 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 prices of the Underlyings 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 prices of the Underlyings. Consequently, the prices of the Underlyings 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 prices of the Underlyings, the market value of your Notes prior to maturity or
the amounts payable on the Notes. |
| ♦ | There may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right
to appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will make
a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances, these
duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent. |
Underlying-related Risks
| ♦ | The Notes are subject to the market risk of the Underlyings. The return on the Notes, which may be negative, is directly linked
to the performance of the Underlyings and indirectly linked to the value of the securities included in the Underlyings. The prices of
the Underlyings can rise or fall sharply due to factors specific to the Underlyings and the securities included in the Underlyings 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. |
| ♦ | You are exposed to the market risk of each Underlying. Your return on the Notes is not linked to a basket consisting of the
Underlyings. Rather, it will be contingent upon the independent performance of each of the RSP and the IWM. Unlike an instrument with
a return linked to a basket of underlying assets, in which risk is mitigated and diversified among all of the components of the basket,
you will be exposed to the risks related to each of the RSP and the IWM. Poor performance by either of the Underlyings over the term of
the Notes may negatively affect your return and will not be offset or mitigated by positive performance by the other Underlying. For the
Notes to be automatically called or to receive any Contingent Coupon Payment or the contingent repayment of principal at maturity, each
Underlying must close at or above its respective Initial Value, Coupon Barrier or Downside Threshold, respectively, on the applicable
Observation Date or Final Observation Date, as applicable. Therefore, if the Notes are not called prior to maturity, you may incur a loss
proportionate to the negative return of the Least Performing Underlying even if the other Underlying appreciates during the term of the
Notes. Accordingly, your investment is subject to the market risk of each Underlying. Additionally, movements in the prices of the Underlyings
may be correlated or uncorrelated at different times during the term of the Notes, and such correlation (or lack thereof) could have an
adverse effect on your return on the Notes. For example, the likelihood that one of the Underlyings will close below its Coupon Barrier
on an Observation Date or below its Downside Threshold on the Final Observation Date will increase when the movements in the prices of
the Underlyings are uncorrelated. Thus, if the performance of the Underlyings is not correlated or is negatively correlated, the risk
of not receiving a Contingent Coupon Payment and of incurring a significant loss of principal at maturity is greater. In addition, correlation
generally decreases for each additional Underlying to which the Notes are linked, resulting in a greater potential of not receiving a
Contingent Coupon Payment and for a significant loss of principal at maturity. Although the correlation of the Underlyings’ performance
may change over the term of the Notes, the economic terms of the Notes, including the Contingent Coupon Rate, Coupon Barrier and Downside
Threshold, are determined, in part, based on the correlation of the Underlyings’ performance calculated using our and our affiliates'
pricing models at the time when the terms of the Notes are finalized. All other things being equal, a higher Contingent Coupon Rate and
lower Coupon Barrier and Downside Threshold is generally associated with lower correlation of the Underlyings, which may indicate a greater |
potential for missed Contingent Coupon Payments and/or a significant
loss on your investment at maturity. See “Correlation of the Underlyings” below.
| ♦ | The Notes are subject to risks associated with small-size capitalization companies. The stocks comprising the Russell 2000®
Index, which is the IWM’s underlying index, are issued by companies with small-sized market capitalization. The stock prices of
small-size companies may be more volatile than stock prices of large capitalization companies. Small-size capitalization companies may
be less able to withstand adverse economic, market, trade and competitive conditions relative to larger companies. Small-size capitalization
companies may also be more susceptible to adverse developments related to their products or services. |
| ♦ | The stocks held by the IWM are concentrated in one sector. The IWM holds securities issued by companies in the consumer staples
sector. As a result, some of the stocks that will determine the performance of the Notes are concentrated in one sector. Although an investment
in the Notes will not give holders any ownership or other direct interests in the securities held by the IWM, the return on an investment
in the Notes will be subject to certain risks associated with a direct equity investment in companies in this sector. Accordingly, by
investing in the Notes, you will not benefit from the diversification which could result from an investment linked to companies that operate
in multiple sectors. |
| ♦ | The performance of the RSP or the IWM may not correlate with the performance of its respective underlying index (each, an “underlying
index”) as well as its respective net asset value per share or unit, especially during periods of market volatility. The performance
of the RSP or the IWM and that of its respective underlying index generally will vary due to, for example, transaction costs, management
fees, certain corporate actions, and timing variances. Moreover, it is also possible that the performance of the RSP or the IWM may not
fully replicate or may, in certain circumstances, diverge significantly from the performance of its underlying index . This could be due
to, for example, the RSP or the IWM not holding all or substantially all of the underlying assets included in its underlying index and/or
holding assets that are not included in its underlying index, the temporary unavailability of certain securities in the secondary market,
the performance of any derivative instruments held by the RSP or the IWM, differences in trading hours between the RSP or the IWM (or
its underlying assets) and the underlying index, or due to other circumstances. This variation in performance is called the “tracking
error,” and, at times, the tracking error may be significant. In addition, because the shares or units of each of the RSP and the
IWM are traded on a securities exchange and are subject to market supply and investor demand, the market price of one share or unit may
differ from its respective net asset value per share or unit; shares or units of the RSP or the IWM may trade at, above, or below its
respective net asset value per share or unit. During periods of market volatility, securities held by the RSP or the IWM may be unavailable
in the secondary market, market participants may be unable to calculate accurately the respective net asset value per share or unit and
the liquidity of the RSP or the IWM may be adversely affected. Market volatility may also disrupt the ability of market participants to
trade shares or units of the RSP or the IWM. Further, market volatility may adversely affect, sometimes materially, the prices at which
market participants are willing to buy and sell shares or units of the RSP or the IWM. As a result, under these circumstances, the market
value of shares or units of the RSP or the IWM may vary substantially from its respective net asset value per share or unit.
For the foregoing reasons, the performance of the RSP or the IWM may not match the performance of its respective underlying index or its
respective net asset value per share or unit over the same period. Because of this variance, the return on the Notes to the extent dependent
on the performance of the RSP or the IWM may not be the same as an investment directly in the securities included in the underlying index
or the same as a debt security with a return linked to the performance of that underlying index. |
| ♦ | The sponsor or investment advisor of an Underlying may adjust that Underlying in a way that affects its price, and the sponsor
or investment advisor has no obligation to consider your interests. The sponsor or investment advisor of an Underlying can add, delete,
or substitute the components included in that Underlying or make other methodological changes that could change its price. Any of these
actions could adversely affect the value of your Notes. |
| ♦ | The anti-dilution adjustments will be limited. The calculation agent may adjust the Price Multiplier of the RSP or the IWM
and other terms of the Notes to reflect certain actions by that Underlying, as described in the section “Description of the Notes—Anti-Dilution
and Discontinuance Adjustments Relating to ETFs” in the accompanying product supplement. The calculation agent will not be required
to make an adjustment for every event that may affect the RSP or the IWM and will have broad discretion to determine whether and to what
extent an adjustment is required. |
Tax-related Risks
| ♦ | The U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be adverse to a holder of the Notes.
No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or securities similar to
the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment
in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes as contingent income-bearing
single financial contracts, as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the timing and character of
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 an automatic
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):
| ♦ | Stated Principal Amount: $10.00 |
| ♦ | Term: Approximately 3 years, unless earlier automatically called |
| ♦ | Hypothetical Initial Values: |
| ❍ | Invesco S&P 500 Equal Weight ETF: 100.00 |
| ❍ | iShares® Russell 2000 ETF: 100.00 |
| ♦ | Hypothetical Contingent Coupon Rate: 7.00% per annum (or 1.75% per quarter) |
| ♦ | Hypothetical Quarterly Contingent Coupon Payment: $0.175 per quarter per Note |
| ♦ | Observation Dates: Quarterly, automatically callable (other than on the Final Observation Date) after approximately six months, as
set forth on page PS-7 of this pricing supplement |
| ♦ | Hypothetical Coupon Barriers: |
| ❍ | Invesco S&P 500 Equal Weight ETF: 70.00, which is 70% of its hypothetical Initial Value |
| ❍ | iShares® Russell 2000 ETF: 70.00, which is 70% of its hypothetical Initial Value |
| ♦ | Hypothetical Downside Thresholds: |
| ❍ | Invesco S&P 500 Equal Weight ETF: 70.00, which is 70% of its hypothetical Initial Value |
| ❍ | iShares® Russell 2000 ETF: 70.00, which is 70% of its hypothetical Initial Value |
*The hypothetical Contingent Coupon Rate/Contingent
Coupon Payment may not represent the actual Contingent Coupon Rate/Contingent Coupon Payment and the hypothetical Initial Values, Coupon
Barriers and Downside Thresholds do not represent the actual Initial Values, Coupon Barriers and Downside Thresholds, respectively, applicable
to the Underlyings. The actual Contingent Coupon Rate/Contingent Coupon Payment, Initial Values, Coupon Barriers and Downside Thresholds
will be determined on the Trade Date. All payments on the Notes are subject to issuer and guarantor credit risk.
Example 1 - Notes are automatically called on the second Observation Date. |
Date |
Current Underlying Price of the Underlying |
Payment (per Note) |
Invesco S&P 500 Equal Weight ETF |
iShares® Russell 2000 ETF |
First Observation Date |
85.00 (at or above Coupon Barrier) |
49.00 (below Coupon Barrier)* |
$0.000 (not callable) |
Second Observation Date |
102.00 (at or above Coupon Barrier and Initial Value)* |
108.00 (at or above Coupon Barrier and Initial Value) |
$10.175 (Payment upon automatic call) |
* Denotes Least Performing Underlying for the applicable Observation Date
|
Total Payment: |
$10.175 (1.75% total return) |
The Least Performing Underlying on the first Observation Date closes below
its Coupon Barrier, and as a result no Contingent Coupon Payment is paid on the first Coupon Payment Date. On the second Observation Date
(which is approximately six months after the Trade Date and is the first Observation Date on which the Notes are subject to potential
automatic call), the Least Performing Underlying closes above its Initial Value, and the Notes are automatically called on the related
Coupon Payment Date. You will receive on the related Coupon Payment Date a total of $10.175 per Note, reflecting the $10.000 Stated Principal
Amount plus the applicable Contingent Coupon Payment. You would have been paid a total of $10.175 per Note for a 1.75% total return
on the Notes over six months. No further amounts would be owed to you under the Notes, and you would not participate in the appreciation
of the Underlyings.
Example 2 - Notes are NOT automatically called and the Final Value of the Least Performing Underlying on the Final Observation Date is at or above its Downside Threshold and Coupon Barrier. |
Date |
Current Underlying Price of the Underlying / Final Value on the Final Observation Date |
Payment (per Note) |
Invesco S&P 500 Equal Weight ETF |
iShares® Russell 2000 ETF |
First Observation Date |
97.00 (at or above Coupon Barrier) |
88.00 (at or above Coupon Barrier)* |
$0.175 (Contingent Coupon Payment - not callable) |
Second to Eleventh Observation Dates |
Various (all at or above Coupon Barrier; all below Initial Value) |
Various (all below Coupon Barrier and Initial Value)* |
$0.000 (Notes are not called) |
Final Observation Date |
79.00 (at or above Coupon Barrier and Downside Threshold) |
76.00 (at or above Coupon Barrier and Downside Threshold)* |
$10.175 (Stated Principal Amount plus the final Contingent Coupon Payment - Payment at Maturity) |
* Denotes Least Performing Underlying for the applicable Observation Date
|
Total Payment: |
$10.350 (3.50% total return) |
The Least Performing Underlying on the first Observation Date closes
above its Coupon Barrier and therefore a Contingent Coupon Payment is paid on the related Coupon Payment Date. On each of the second to
eleventh Observation Dates, the Least Performing Underlying closes below its Coupon Barrier. Therefore, no Contingent Coupon Payment is
paid on any related Coupon Payment Date. In addition, on each of the second to eleventh Observation Dates (which are the Observation Dates
on which the Notes are subject to potential automatic call), the Least Performing Underlying closes below its Initial Value, and as a
result the Notes are not automatically called. On the Final Observation Date, the Least Performing Underlying
closes at or above its Downside Threshold and its Coupon Barrier.
Therefore, at maturity, you would receive a total of $10.175 per Note, reflecting the $10.000 Stated Principal Amount plus the
applicable Contingent Coupon Payment. When added to the total Contingent Coupon Payments of $0.175 received in respect of the prior Observation
Dates, you would have been paid a total of $10.350 per Note for a 3.50% total return on the Notes over 3 years.
Example 3 - Notes are NOT automatically called and the Final Value of the Least Performing Underlying on the Final Observation Date is below its Downside Threshold and Coupon Barrier. |
Date |
Current Underlying Price of the Underlying / Final Value on the Final Observation Date |
Payment (per Note) |
Invesco S&P 500 Equal Weight ETF |
iShares® Russell 2000 ETF |
First Observation Date |
85.00 (at or above Coupon Barrier) |
49.00 (below Coupon Barrier)* |
$0.00 (not callable) |
Second to Eleventh Observation Dates |
Various (all below Coupon Barrier and Initial Value) |
Various (all below Coupon Barrier and Initial Value)* |
$0.00 (Notes are not called) |
Final Observation Date |
35.00 (below Coupon Barrier and Downside Threshold)* |
70.00 (at or above Coupon Barrier and Downside Threshold) |
$10.00 x [1 + Underlying Return of the Least Performing Underlying on the Final Observation Date] =
$10.00 x [1 + -65.00%] =
$10.00 x 0.35 =
$3.50 (Payment at Maturity) |
* Denotes Least Performing Underlying for the applicable Observation Date
|
Total Payment: |
$3.50 (-65.00% total return) |
The Least Performing Underlying on each Observation Date, including the Final
Observation Date, closes below its Coupon Barrier, and as a result no Contingent Coupon Payment is paid on any Coupon Payment Date during
the term of the Notes, including the Maturity Date. In addition, on each of the second to eleventh Observation Dates (which are the Observation
Dates on which the Notes are subject to potential automatic call), the Least Performing Underlying closes below its Initial Value, and
as a result the Notes are not automatically called. On the Final Observation Date, the Least Performing Underlying closes below its Downside
Threshold and its Coupon Barrier. Therefore, at maturity, investors are exposed to the proportionate downside performance of the Least
Performing Underlying and you will receive $3.50 per Note for a -65.00% total return on the Notes over 3 years, which reflects the percentage
decrease of the Least Performing Underlying from the Trade Date to the Final Observation Date.
All disclosures contained in this pricing supplement regarding the Underlyings,
including, without limitation, their make-up, method of calculation, and changes in their components, have been derived from publicly
available sources. The information reflects the policies of, and is subject to change by, the investment advisor of the RSP and the investment
advisor of the IWM (collectively, the “Investment Advisors”). The Investment Advisors, which license the copyright and all
other rights to the respective Underlyings, have no obligation to continue to publish, and may discontinue publication of, the applicable
Underlyings. The consequences of either Investment Advisor discontinuing publication of the applicable Underlying are discussed in “Description
of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs — Discontinuance of or Material Change to an
ETF” 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 either Underlying or any successor underlying.
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 Underlyings.
You should make your own investigation into the Underlyings.
The Invesco S&P 500® Equal Weight
ETF
The shares of the RSP are issued by Invesco Exchange-Traded Fund Trust (the
“Invesco Trust”), a registered investment company. Invesco Capital Management LLC is currently the investment adviser to the
RSP. The RSP seeks investment results that correspond generally to the performance, before fees and expenses, of the of the S&P 500®
Equal Weight Index (“SPW”). The SPW is an equal-weighted version of the S&P 500® Index (“SPX”).
The RSP is the successor to the investment performance of the Guggenheim S&P 500® Equal Weight ETF (the “Predecessor
Fund”) as a result of the reorganization of the Predecessor Fund into the RSP, which was consummated after the close of business
on April 6, 2018. The Invesco S&P 500® Equal Weight ETF trades on the NYSE Arca under the ticker symbol “RSP.”
The shares of the RSP are registered under the Exchange Act. Accordingly,
information filed with the SEC relating to the RSP, including its periodic financial reports, may be found on the SEC website.
Investment Approach
The RSP uses an “indexing” investment approach to seek to track
the investment results, before fees and expenses, of the SPW. The RSP employs a “full replication” methodology in seeking
to track the SPW, meaning that it generally invests in all of the securities comprising the SPW in proportion to their weightings in the
SPW. The RSP will generally invest at least 90% of its total assets in the securities that comprise the SPW. However, under various circumstances,
it may not be possible or practicable to purchase all of those securities in those same weightings. In those circumstances, the RSP may
purchase a sample of securities in the SPW. A “sampling” methodology means that Invesco uses quantitative analysis to select
securities from the SPW universe to obtain a representative sample of securities that have, in the aggregate, investment characteristics
similar to the SPW in terms of key risk factors, performance attributes and other characteristics. These include industry weightings,
market capitalization, return variability, earnings valuation, yield and other financial characteristics of securities. When employing
a sampling methodology, Invesco bases the quantity of holdings in the RSP on a number of factors, including asset size of the RSP, and
generally expects the RSP to hold less than the total number of securities in the SPW.
The RSP’s return may not match the return of the SPW for a number of
reasons. For example, the RSP incurs operating expenses not applicable to the SPW and incurs costs in buying and selling securities, especially
when rebalancing the RSP’s securities holdings to reflect changes in the composition of the SPW. In addition, the performance of
the RSP and the SPW may vary due to asset valuation differences and differences between the RSP’s portfolio and the SPW resulting
from legal restrictions, cost or liquidity constraints.
The S&P 500® Equal Weight Index
The SPW is the equal weight version of the SPX.
The composition of the SPW is the same as the SPX. Constituent changes are
incorporated in the SPW as and when they are made in the SPX. When a company is added to the SPW in the middle of the quarter, it takes
the weight of the company that it replaced. The one exception is when a company is removed from the SPW at a price of $0.00. In that case,
the company’s replacement is added to the SPW at the weight using the previous day’s closing value, or the most immediate
prior business day that the deleted company was not valued at $0.00.
The SPW is calculated and maintained in the same manner as the SPX, except
that the constituents of the SPW are equally weighted rather than weighted by float-adjusted market capitalization. To calculate an equal-weighted
index, the market capitalization for each stock used in the calculation of the index is redefined so that each index constituent has an
equal weight in the index at each rebalancing date. In addition to being the product of the stock price, the stock’s shares outstanding,
and the stock’s investible weight factor (“IWF”), an additional weight factor (“AWF”) is also introduced
in the market capitalization calculation to establish equal weighting. The AWF of a stock is the adjustment factor of that stock assigned
at each index rebalancing date that makes all index constituents’ modified market capitalization equal (and, therefore, equal weight),
while maintaining the total market value of the overall index.
The S&P 500® Index
The SPX includes a representative sample of 500 companies in leading
industries of the U.S. economy. The SPX is intended to provide an indication of the pattern of common stock price movement. The calculation
of the level of the SPX is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular
time compared to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years
1941 through 1943.
The SPX includes companies from eleven main groups: Communication Services;
Consumer Discretionary; Consumer Staples; Energy; Financials; Health Care; Industrials; Information Technology; Real Estate; Materials;
and Utilities. S&P 500 Dow Jones Indices LLC ("SPDJI"), the sponsor of the SPX, may from time to time, in its sole discretion,
add companies to, or delete companies from, the SPX to achieve the objectives stated above.
Company additions to the SPX must have an unadjusted company market
capitalization of $18.0 billion or more (an increase from the previous requirement of an unadjusted company market capitalization of $15.8
billion or more).
SPDJI calculates the SPX by reference to the prices of the constituent
stocks of the SPX without taking account of the value of dividends paid on those stocks. As a result, the return on the Notes will not
reflect the return you would realize if you actually owned the SPX constituent stocks and received the dividends paid on those stocks.
Computation of the SPX
While SPDJI currently employs the following methodology to calculate
the SPX, no assurance can be given that SPDJI will not modify or change this methodology in a manner that may affect the payments on the
Notes.
Historically, the market value of any component stock of the SPX
was calculated as the product of the market price per share and the number of then outstanding shares of such component stock. In March
2005, SPDJI began shifting the SPX halfway from a market capitalization weighted formula to a float-adjusted formula, before moving the
SPX to full float adjustment on September 16, 2005. SPDJI’s criteria for selecting stocks for the SPX did not change with the shift
to float adjustment. However, the adjustment affects each company’s weight in the SPX.
Under float adjustment, the share counts used in calculating the
SPX reflect only those shares that are available to investors, not all of a company’s outstanding shares. Float adjustment excludes
shares that are closely held by control groups, other publicly traded companies or government agencies.
In September 2012, all shareholdings representing more than 5% of
a stock’s outstanding shares, other than holdings by “block owners,” were removed from the float for purposes of calculating
the SPX. Generally, these “control holders” will include officers and directors, private equity, venture capital and special
equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted shares, ESOPs, employee
and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities at all levels
(other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company as reported
in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds and ETF providers, 401(k)
plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers and investment funds,
independent foundations and savings and investment plans, will ordinarily be considered part of the float.
Treasury stock, stock options, restricted shares, equity participation
units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow investors in
countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are normally part of the float unless
those shares form a control block. If a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class are
treated as a control block.
For each stock, an investable weight factor (“IWF”) is
calculated by dividing the available float shares by the total shares outstanding. Available float shares are defined as the total shares
outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control blocks. For example,
if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds 5% of the company’s
shares, SPDJI would assign that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s officers
and directors hold 3% of the company’s shares and another control group holds 20% of the company’s shares, SPDJI would assign
an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control. As of July
31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the SPX. Constituents of the SPX prior to
July 31, 2017 with multiple share class lines will be grandfathered in and continue to be included in the SPX. If a constituent company
of the SPX reorganizes into a multiple share class line structure, that company will remain in the SPX at the discretion of the S&P
Index Committee in order to minimize turnover.
The SPX is calculated using a base-weighted aggregate methodology.
The level of the SPX reflects the total market value of all component stocks relative to the base period of the years 1941 through 1943.
An indexed number is used to represent the results of this calculation in order to make the level easier to work with and track over time.
The actual total market value of the component stocks during the base period of the years 1941 through 1943 has been set to an indexed
level of 10. This is often indicated by the notation 1941- 43 = 10. In practice, the daily calculation of the SPX is computed by dividing
the total market value of the component stocks by the “index divisor.” By itself, the index divisor is an arbitrary number.
However, in the context of the calculation of the SPX, it serves as a link to the original base period level of the SPX. The index divisor
keeps the SPX comparable over time and is the manipulation point for all adjustments to the SPX, which is index maintenance.
Index Maintenance
Index maintenance includes monitoring and completing the adjustments
for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to company restructuring
or spinoffs. Some corporate actions, such as stock splits and stock dividends, require changes in the common shares outstanding and the
stock prices of the companies in the SPX, and do not require index divisor adjustments.
To prevent the level of the SPX from changing due to corporate actions,
corporate actions which affect the total market value of the SPX require an index divisor adjustment. By adjusting the index divisor for
the change in market value, the level of the SPX remains constant and does not reflect the corporate actions of individual companies in
the SPX. Index divisor adjustments are made after the close of trading and after the calculation of the SPX closing level.
Changes in a company’s shares outstanding of 5.00% or more
due to mergers, acquisitions, public offerings, tender offers, Dutch auctions, or exchange offers are made as soon as reasonably possible.
Share changes due to mergers or acquisitions of publicly held companies that trade on a major exchange are implemented when the transaction
occurs, even if both of the companies are not in the same headline index, and regardless of the size of the change. All other changes
of 5.00% or more (due to, for example, company stock repurchases, private placements, redemptions, exercise of options, warrants, conversion
of preferred stock, notes, debt, equity participation units, at-the-market offerings, or other recapitalizations) are made weekly and
are announced on Fridays for implementation after the close of trading on the following Friday. Changes of less than 5.00% are accumulated
and made quarterly on the third Friday of March, June, September, and December, and are usually announced two to five days prior. If a
change in a company’s shares outstanding of 5.00% or more causes a company’s IWF to change by five percentage points or more,
the IWF is updated at the same time as the share change. IWF changes resulting from partial tender offers are considered on a case by
case basis.
Historical Performance of the RSP
The following graph sets forth the daily historical performance of the RSP
in the period from January 2, 2019 through July 22, 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
RSP’s hypothetical Coupon Barrier and hypothetical Downside Threshold of $118.81 (rounded to two decimal places), which is 70% of
the RSP’s hypothetical Initial Value of $169.73, which was its Closing Market Price on July 22, 2024. The actual Initial Value,
Coupon Barrier and Downside Threshold will be determined on the Trade Date.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000764/image_003.jpg)
This historical data on the RSP is not necessarily indicative of the future
performance of the RSP or what the value of the Notes may be. Any historical upward or downward trend in the price of the RSP during any
period set forth above is not an indication that the price of the RSP is more or less likely to increase or decrease at any time over
the term of the Notes.
Before investing in the Notes, you should consult publicly available sources
for the prices and trading pattern of the RSP.
The iShares® Russell 2000 ETF
The IWM seeks investment results that correspond generally to the price
and yield performance, before fees and expenses, of the Russell 2000® Index, its underlying index. The IWM uses
a “passive” or indexing approach to try to achieve its investment objective. The IWM uses a representative sampling indexing
strategy, which involves investing in a representative sample of securities that collectively has an investment profile similar to that
of its underlying index. The IWM generally will invest at least 80% of its assets in the component securities of its underlying index
or investments that have economic characteristics that are substantially identical to the component securities of its underlying index.
The IWM typically earns income dividends from securities included in
the Russell 2000® Index. These amounts, net of expenses and taxes (if applicable), are passed along to the IWM’s
shareholders as “ordinary income.” In addition, the IWM realizes capital gains or losses whenever it sells securities. Net
long-term capital gains are distributed to shareholders as “capital gain distributions.” However, because the Notes are linked
only to the share price of the IWM, you will not be entitled to receive income, dividend, or capital gain distributions from the IWM or
any equivalent payments. The shares of the iShares® Russell 2000 Index ETF trade on the NYSE Arca under the symbol “IWM”.
The shares of the IWM are registered under the Exchange Act. Accordingly,
information filed with the SEC relating to the IWM, including its periodic financial reports, may be found on the SEC website.
The Russell 2000® Index
The Russell 2000® Index was developed by Russell Investments
(“Russell”) before FTSE International Limited and Russell combined in 2015 to create FTSE Russell, which is wholly owned by
London Stock Exchange Group. Additional information on the Russell 2000® Index is available at the following website: http://www.ftserussell.com.
No information on that website is deemed to be included or incorporated by reference in this pricing supplement.
Russell began dissemination of the Russell 2000® Index
(Bloomberg L.P. index symbol “RTY”) on January 1, 1984. FTSE Russell calculates and publishes the Russell 2000®
Index. The Russell 2000® Index was set to 135 as of the close of business on December 31, 1986. The Russell 2000®
Index is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000®
Index, the Russell 2000® Index consists of the smallest 2,000 companies included in the Russell 3000® Index.
The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of
the investable U.S. equity market. The Russell 2000® Index is determined, comprised, and calculated by FTSE Russell without
regard to the Notes.
Selection of Stocks Comprising the Russell 2000®
Index
All companies eligible for inclusion in the Russell 2000®
Index must be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated, has
a stated headquarters location, and trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible),
then the company is assigned to its country of incorporation. If any of the three factors are not the same, FTSE Russell defines three
Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country of the most liquid exchange
(as defined by a two-year average daily dollar trading volume) from all exchanges within a country. Using the HCIs, FTSE Russell compares
the primary location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs,
then the company is assigned to the primary location of its assets. If there is insufficient information to determine the country in which
the company’s assets are primarily located, FTSE Russell will use the country from which the company’s revenues are primarily
derived for the comparison with the three HCIs in a similar manner. FTSE Russell uses the average of two years of assets or revenues data
to reduce potential turnover. If conclusive country details cannot be derived from assets or revenues data, FTSE Russell will assign the
company to the country of its headquarters, which is defined as the address of the company’s principal executive offices, unless
that country is a Benefit Driven Incorporation (“BDI”) country, in which case the company will be assigned to the country
of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, Bonaire,
British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey,
Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies incorporated or
headquartered in a U.S. territory, including Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion in the Russell 2000®
Index must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the last trading
day in May to be eligible for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an existing
member’s closing price is less than $1.00 on the last day of May, it will be considered eligible if the average of the daily closing
prices (from its primary exchange) during the month of May is equal to or greater than $1.00. Initial public offerings are added each
quarter and must have a closing price at or above $1.00 on the last day of their eligibility period in order to qualify for index inclusion.
If an existing stock does not trade on the “rank day” (typically the last trading day in May but a confirmed timetable is
announced each spring) but does have a closing price at or above $1.00 on another eligible U.S. exchange, that stock will be eligible
for inclusion.
An important criterion used to determine the list of securities eligible
for the Russell 2000® Index is total market capitalization, which is defined as the market price as of the last trading
day in May for those securities being considered at annual reconstitution times the total number of shares outstanding. Where applicable,
common stock, non-restricted exchangeable shares and partnership units/membership interests are used to determine market capitalization.
Any other form of shares such as preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants
and rights, installment receipts or trust receipts, are excluded from the calculation. If multiple share classes of common stock exist,
they are combined. In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each class is
considered for inclusion separately. If multiple share classes exist, the pricing vehicle will be designated as the share class with the
highest two-year trading volume as of the rank day in May.
Companies with a total market capitalization of less than $30 million
are not eligible for the Russell 2000® Index. Similarly, companies with only 5% or less of their shares available in the
marketplace are not eligible for the Russell 2000® Index. Royalty trusts, limited liability companies, closed-end investment
companies (companies that are required to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development
companies), blank check companies, special purpose acquisition companies, and limited partnerships are also ineligible for inclusion.
Bulletin board, pink sheets, and over-the-counter traded securities are not eligible for inclusion. Exchange traded funds and mutual funds
are also excluded.
Annual reconstitution is a process by which the Russell 2000®
Index is completely rebuilt. Based on closing prices of the company’s common stock on its primary exchange on the rank day of May
of each year, FTSE Russell reconstitutes the composition of the Russell 2000® Index using the then existing market capitalizations
of eligible companies. Reconstitution of the Russell 2000® Index occurs on the last Friday in June or, when the last Friday
in June is the 29th or 30th, reconstitution occurs on the prior Friday. In addition, FTSE Russell adds initial public offerings to the
Russell 2000® Index on a quarterly basis based on total market capitalization ranking within the market-adjusted capitalization
breaks established during the most recent reconstitution. After membership is determined, a security’s shares are adjusted to include
only those shares available to the public. This is often referred to as “free float.” The purpose of the adjustment is to
exclude from market calculations the capitalization that is not available for purchase and is not part of the investable opportunity set.
Historical Performance of the IWM
The following graph sets forth the daily historical performance of the IWM
in the period from January 2, 2019 through July 22, 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
IWM’s hypothetical Coupon Barrier and hypothetical Downside Threshold of $154.20 (rounded to two decimal places), which is 70% of
the IWM’s hypothetical Initial Value of $220.29, which was its Closing Market Price on July 22, 2024. The actual Initial Value,
Coupon Barrier and Downside Threshold will be determined on the Trade Date.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000764/image_004.jpg)
This historical data on the IWM is not necessarily indicative of the future
performance of the IWM or what the value of the Notes may be. Any historical upward or downward trend in the price of the IWM during any
period set forth above is not an indication that the price of the IWM is more or less likely to increase or decrease at any time over
the term of the Notes.
Before investing in the Notes, you should consult publicly available sources
for the prices and trading pattern of the IWM.
Correlation of the Underlyings
The graph below illustrates the daily performance of the RSP and the IWM
from January 2, 2019 through July 22, 2024. For comparison purposes, each Underlying has been “normalized” to have a Closing
Market Price of 100 on January 2, 2019 by dividing the Closing Market Price of that Underlying on each trading day by the Closing Market
Price of that Underlying on January 2, 2019 and multiplying by 100. We obtained the Closing Market Prices used to determine the normalized
Closing Market Prices set forth below from Bloomberg L.P., without independent verification.
The correlation of a pair of Underlyings represents a statistical measurement
of the degree to which the returns of those Underlyings were similar to each other over a given period in terms of timing and direction.
The correlation between a pair of Underlyings is scaled from 1.0 to -1.0, with 1.0 indicating perfect positive correlation (i.e., the
value of both Underlyings are increasing together or decreasing together and the ratio of their returns has been constant), 0 indicating
no correlation (i.e., there is no statistical relationship between the returns of that pair of Underlyings) and -1.0 indicating perfect
negative correlation (i.e., as the value of one Underlying increases, the value of the other Underlying decreases and the ratio of their
returns has been constant).
The graph below illustrates the historical performance of each Underlying
relative to each other over the time period shown and provides an indication of how close the relative performance of each Underlying
has historically been to the other Underlying. A closer relationship between the daily returns of two or more underlying assets over a
given period indicates that such underlying assets have been more positively correlated. Lower (or more-negative) correlation among two
or more underlying assets over a given period may indicate that it is less likely that those underlying assets will subsequently move
in the same direction. Therefore, lower correlation among the Underlyings may indicate a greater potential for one of the Underlyings
to close below its respective Coupon Barrier on an Observation Date or below its respective Downside Threshold on the Final Observation
Date, as applicable, because there may be a greater likelihood that at least one of the Underlyings will decrease in value significantly.
However, even if the Underlyings have a higher positive correlation, one or both of the Underlyings may close below the respective Coupon
Barrier(s) on an Observation Date or below the respective Downside Threshold(s) on the Final Observation Date, as applicable, as the Underlyings
may each decrease in value. Moreover, the actual correlation among the Underlyings may differ, perhaps significantly, from their historical
correlation. Although the correlation of the Underlyings’ performance may change over the term of the Notes, the economic terms
of the Notes, including the Contingent Coupon Rate, Downside Threshold and Coupon Barrier, are determined, in part, based on the correlation
of the Underlyings’ performance calculated using our and our affiliates' pricing models at the time when the terms of the Notes
are finalized. All other things being equal, a higher Contingent Coupon Rate and lower Downside Threshold and Coupon Barrier is generally
associated with lower correlation among the Underlyings, which may indicate a greater potential for missed Contingent Coupon Payments
and/or a significant loss on your investment at maturity. See “Risk Factors — You are exposed to the market risk of each Underlying”,
and “—Because the Notes are linked to the performance of the least performing between the RSP and the IWM, you are exposed
to greater risk of receiving no Contingent Coupon Payments or sustaining a significant loss on your investment than if the Notes were
linked to just the RSP or just the IWM” herein.
Past performance and correlation of the Underlyings are not indicative of
the future performance or correlation of the Underlyings.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000764/image_005.jpg)
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 $0.20 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 $9.80 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 $0.20 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 day 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 day, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the Notes more than one business day 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 seven-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 Underlyings 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.
The Notes are our debt securities, the return on which is linked to the performance
of the Underlyings. The related guarantees are BAC’s obligations. Any payments on the Notes, including any Contingent Coupon Payments,
depend on the credit risk of BofA Finance and BAC and on the performance of each of the Underlyings. 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 Underlyings, the tenor of the Notes and the hedging arrangements. The economic terms of the Notes and their initial
estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements will include hedging-related
charges, reflecting the costs associated with, and our affiliates’ profit earned from, these hedging arrangements. Since hedging
entails risk and may be influenced by unpredictable market forces, actual profits or losses from these hedging transactions may be more
or less than any expected amounts.
For further information, see “Risk Factors” beginning on page
PS-8 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
Although there is no statutory, judicial, or administrative authority directly
addressing the characterization of the Notes, we intend to treat the Notes for all tax purposes as contingent income-bearing single financial
contracts with respect to the Underlyings and under the terms of the Notes, we and every investor in the Notes agree, in the absence of
an administrative determination or judicial ruling to the contrary, to treat the Notes in accordance with such characterization. In the
opinion of our counsel, Sidley Austin LLP, it is reasonable to treat the Notes as contingent income-bearing single financial contracts
with respect to the Underlyings. However, Sidley Austin LLP has advised us that it is unable to conclude that it is more likely than not
that this treatment will be upheld. This discussion assumes that the Notes constitute contingent income-bearing single financial contracts
with respect to the Underlyings for U.S. federal income tax purposes. If the Notes did not constitute contingent income-bearing single
financial contracts, the tax consequences described below would be materially different.
This characterization of the Notes is not binding on the IRS or the courts.
No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or any similar instruments for
U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper characterization and treatment.
Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences of an investment in the Notes
are not certain, and no assurance can be given that the IRS or any court will agree with the characterization and tax treatment described
in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of the U.S. federal income tax
consequences of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following discussion is based on the characterization
described above. The discussion in this section assumes that there is a significant possibility of a significant loss of principal on
an investment in the Notes.
We will not attempt to ascertain whether the issuer of any 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 any Underlying
were so treated, certain adverse U.S. federal income tax consequences could possibly apply to a holder of the Notes. You should refer
to information filed with the SEC by the issuers of the Underlyings and consult your tax advisor regarding the possible consequences to
you, if any, if the issuer of any Underlying is or becomes a PFIC or is or becomes a United States real property holding corporation.
U.S. Holders
Although the U.S. federal income tax treatment of any Contingent Coupon Payment
on the Notes is uncertain, we intend to take the position, and the following discussion assumes, that any Contingent Coupon Payment constitutes
taxable ordinary income to a U.S. Holder at the time received or accrued in accordance with the U.S. Holder’s regular method of
accounting. By purchasing the Notes you agree, in the absence of an administrative determination or judicial ruling to the contrary, to
treat any Contingent Coupon Payment as described in the preceding sentence.
Upon receipt of a cash payment at maturity or upon a sale, exchange, or redemption
of the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount
realized (other than amounts representing any Contingent Coupon Payment, which would be taxed as described above) and the U.S. Holder’s
tax basis in the Notes. A U.S. Holder’s tax basis in the Notes will equal the amount paid by that holder to acquire them. Subject
to the discussion below concerning the possible application of the “constructive ownership” rules of Section 1260 of the Code,
this capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder held the Notes for more than one year. The
deductibility of capital losses is subject to limitations.
Possible Application of Section 1260 of the Code. Since each Underlying is
the type of financial asset described under Section 1260 of the Code (including, among others, any equity interest in pass-through entities
such as exchange traded funds, regulated investment companies, real estate investment trusts, partnerships, and passive foreign investment
companies, each a “Section 1260 Financial Asset”), while the matter is not entirely clear, there may exist a risk that an
investment in the Notes will be treated, in whole or in part, as a “constructive ownership transaction” to which
Section 1260 of the Code applies. If Section 1260 of the Code applies, all
or a portion of any long-term capital gain recognized by a U.S. Holder in respect of the Notes will be recharacterized as ordinary income
(the “Excess Gain”). In addition, an interest charge will also apply to any deemed underpayment of tax in respect of any Excess
Gain to the extent such gain would have resulted in gross income inclusion for the U.S. Holder in taxable years prior to the taxable year
of the sale, exchange, redemption, or settlement (assuming such income accrued at a constant rate equal to the applicable federal rate
as of the date of sale, exchange, redemption, or settlement).
If an investment in the Notes is treated as a constructive ownership transaction,
it is not clear to what extent any long-term capital gain of a U.S. Holder in respect of the Notes will be recharacterized as ordinary
income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary income in respect
of the Notes will equal the excess of (i) any long-term capital gain recognized by the U.S. Holder in respect of the Notes and attributable
to Section 1260 Financial Assets, over (ii) the “net underlying long-term capital gain” (as defined in Section 1260 of the
Code) such U.S. Holder would have had if such U.S. Holder had acquired an amount of the corresponding Section 1260 Financial Assets at
fair market value on the original issue date for an amount equal to the portion of the issue price of the Notes attributable to the corresponding
Section 1260 Financial Assets and sold such amount of Section 1260 Financial Assets at maturity or upon sale, exchange or redemption of
the Notes at fair market value. Unless otherwise established by clear and convincing evidence, the net underlying long-term capital gain
is treated as zero and therefore it is possible that all long-term capital gain recognized by a U.S. Holder in respect of the Notes will
be recharacterized as ordinary income if Section 1260 of the Code applies to an investment in the Notes. U.S. Holders should consult their
tax advisors regarding the potential application of Section 1260 of the Code to an investment in the Notes.
As described below, the IRS, as indicated in Notice 2008-2 (the “Notice”),
is considering whether Section 1260 of the Code generally applies or should apply to the Notes, including in situations where the Underlyings
are not the type of financial asset described under Section 1260 of the Code.
Alternative Tax Treatments. Due to the absence of authorities that
directly address the proper tax treatment of the Notes, prospective investors are urged to consult their tax advisors regarding all possible
alternative tax treatments of an investment in the Notes. In particular, the IRS could seek to subject the Notes to the Treasury regulations
governing contingent payment debt instruments. If the IRS were successful in that regard, the timing and character of income on the Notes
would be affected significantly. Among other things, a U.S. Holder would be required to accrue original issue discount every year at a
“comparable yield” determined at the time of issuance. In addition, any gain realized by a U.S. Holder at maturity or upon
a sale, exchange, or redemption of the Notes generally would be treated as ordinary income, and any loss realized at maturity or upon
a sale, exchange, or redemption of the Notes generally would be treated as ordinary loss to the extent of the U.S. Holder’s prior
accruals of original issue discount, and as capital loss thereafter.
In addition, it is possible that the Notes could be treated as a unit consisting
of a deposit and a put option written by the Note holder, in which case the timing and character of income on the Notes would be affected
significantly.
The Notice sought comments from the public on the taxation of financial instruments
currently taxed as “prepaid forward contracts.” This Notice addresses instruments such as the Notes. According to the Notice,
the IRS and Treasury are considering whether a holder of an instrument such as the Notes should be required to accrue ordinary income
on a current basis, regardless of whether any payments are made prior to maturity. It is not possible to determine what guidance the IRS
and Treasury will ultimately issue, if any. Any such future guidance may affect the amount, timing and character of income, gain, or loss
in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering additional issues, including whether
additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders of such instruments should
be subject to withholding tax on any deemed income accruals, whether Section 1260 of the Code, concerning certain “constructive
ownership transactions,” generally applies or should generally apply to such instruments, and whether any of these determinations
depend on the nature of the underlying asset.
In addition, proposed Treasury regulations require the accrual of income
on a current basis for contingent payments made under certain notional principal contracts. The preamble to the regulations states that
the “wait and see” method of accounting does not properly reflect the economic accrual of income on those contracts, and requires
current accrual of income for some contracts already in existence. While the proposed regulations do not apply to prepaid forward contracts,
the preamble to the proposed regulations expresses the view that similar timing issues exist in the case of prepaid forward contracts.
If the IRS or Treasury publishes future guidance requiring current economic accrual for contingent payments on prepaid forward contracts,
it is possible that you could be required to accrue income over the term of the Notes.
Because of the absence of authority regarding the appropriate tax characterization
of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner that results in tax consequences that
are different from those described above. For example, the IRS could possibly assert that any gain or loss that a holder may recognize
at maturity or upon the sale, exchange, or redemption of the Notes should be treated as ordinary gain or loss.
Non-U.S. Holders
Because the U.S. federal income tax treatment of the Notes (including any
Contingent Coupon Payment) is uncertain, we (or the applicable paying agent) will withhold U.S. federal income tax at a 30% rate (or at
a lower rate under an applicable income tax treaty) on the entire amount of any Contingent Coupon Payment made unless such payments are
effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (in which case, to avoid withholding,
the Non-U.S. Holder will be required to provide a Form W-8ECI). We (or the applicable paying agent) will not pay any additional amounts
in respect of such withholding. To claim benefits under an income tax treaty, a Non-U.S. Holder must obtain a taxpayer identification
number and certify as to its eligibility under the appropriate treaty’s limitations on benefits article, if applicable. In addition,
special rules may apply to claims for treaty benefits made by Non-U.S. Holders that are entities rather than individuals. The availability
of a lower rate of withholding under an applicable income tax treaty will depend on whether such rate applies to the characterization
of the payments under U.S.
federal income tax laws. A Non-U.S. Holder that is eligible for a reduced
rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS.
Except as discussed below, a Non-U.S. Holder generally will not be subject
to U.S. federal income or withholding tax for amounts paid in respect of the Notes (not including, for the avoidance of doubt, amounts
representing any Contingent Coupon Payment which would be subject to the rules discussed in the previous paragraph) upon the sale, exchange,
or redemption of the Notes or their settlement at maturity, provided that the Non-U.S. Holder complies with applicable certification requirements
and that the payment is not effectively connected with the conduct by the Non-U.S. Holder of a U.S. trade or business. Notwithstanding
the foregoing, gain from the sale, exchange, or redemption of the Notes or their settlement at maturity may be subject to U.S. federal
income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S. for 183 days or more during the taxable
year of the sale, exchange, redemption, or settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in the conduct of a trade or
business within the U.S. and if any Contingent Coupon Payment and gain realized on the settlement at maturity, or upon sale, exchange,
or redemption of the Notes, is effectively connected with the conduct of such trade or business (and, if certain tax treaties apply, is
attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S.
federal withholding tax, generally will be subject to U.S. federal income tax on such Contingent Coupon Payment and gain on a net income
basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders should read the material under the heading “—U.S.
Holders,” for a description of the U.S. federal income tax consequences of acquiring, owning, and disposing of the Notes. In addition,
if such Non-U.S. Holder is a foreign corporation, it may also be subject to a branch profits tax equal to 30% (or such lower rate provided
by any applicable tax treaty) of a portion of its earnings and profits for the taxable year that are effectively connected with its conduct
of a trade or business in the U.S., subject to certain adjustments.
A “dividend equivalent” payment is treated as a dividend from
sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid to a Non-U.S. Holder.
Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”) that are
“specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent
payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 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 Underlyings or the Notes, and following such occurrence the Notes could
be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions
in respect of the Underlyings or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
As discussed above, alternative characterizations of the Notes for U.S. federal
income tax purposes are possible. Should an alternative characterization, by reason of change or clarification of the law, by regulation
or otherwise, cause payments as to the Notes to become subject to withholding tax 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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Bank of America (NYSE:BML-L)
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から 7 2023 まで 7 2024