This pricing supplement, which is not complete and may be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying product supplement, prospectus supplement and prospectus are not an offer to sell these Notes in any country or jurisdiction where such an offer would not be permitted.
Linked to the Least Performing of the Nasdaq-100® Technology
Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
• The Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF, due May 20, 2027 (the
“Notes”) are expected to price on May 17, 2024 and expected to issue on May 22, 2024.
• Approximate 3 year term if not called prior to maturity.
• Payments on the Notes will depend on the individual performance of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF (each an “Underlying”).
• Contingent coupon rate of 12.50% per annum (1.0417% per month) payable monthly if the Observation
Value of each Underlying on the applicable Observation Date is greater than or equal to 75.00% of its Starting Value, assuming
the Notes have not been called.
• Beginning on November 21, 2024, callable monthly at our option for an amount equal to the principal
amount plus the relevant Contingent Coupon Payment, if otherwise payable.
• Assuming the Notes are not called prior to maturity, if any Underlying declines by more than
40% from its Starting Value, at maturity your investment will be subject to 1:1 downside exposure to decreases in the value of the Least
Performing Underlying, with up to 100% of the principal at risk; otherwise, at maturity, you will receive the principal amount. At maturity
you will also receive a final Contingent Coupon Payment if the Observation Value of each Underlying on the final Observation Date
is greater than or equal to 75.00% of its Starting Value.
• All payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance”
or the “Issuer”), as issuer of the Notes, and Bank of America Corporation (“BAC” or the “Guarantor”),
as guarantor of the Notes.
• The Notes will not be listed on any securities exchange.
• CUSIP No. 09711BYB6.
The initial estimated value
of the Notes as of the pricing date is expected to be between $931.20 and $971.20 per $1,000.00 in principal amount of Notes, which is
less than the public offering price listed below. The actual value of your Notes at any time will reflect many factors and cannot
be predicted with accuracy. See “Risk Factors” beginning on page PS-11 of this pricing supplement and “Structuring the
Notes” on page PS-32 of this pricing supplement for additional information.
There are important differences
between the Notes and a conventional debt security. Potential purchasers of the Notes should consider the information in “Risk Factors”
beginning on page PS-11 of this pricing supplement, page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus
supplement, and page 7 of the accompanying prospectus.
None of the Securities and
Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved
of these securities or determined if this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
| |
Public offering price(1) |
Underwriting discount(1)(2)(3) |
Proceeds, before expenses, to BofA Finance(2) |
| Per Note |
$1,000.00 |
$2.50 |
$997.50 |
| Total |
|
|
|
|
(1) |
Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forgo some
or all of their selling concessions, fees or commissions. The public offering price for investors purchasing the Notes in these fee-based
advisory accounts may be as low as $997.50 per $1,000.00 in principal amount of Notes. |
|
(2) |
The underwriting discount per $1,000.00 in principal amount of Notes may be as high as $2.50, resulting
in proceeds, before expenses, to BofA Finance of as low as $997.50 per $1,000.00 in principal amount of Notes. |
|
(3) |
In addition to the underwriting discount above, if any, an affiliate of BofA Finance will pay a referral
fee of up to $3.50 per $1,000.00 in principal amount of the Notes in connection with the distribution of the Notes to other registered
broker-dealers. |
The Notes and the related guarantee:
| Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
 |
| Selling Agent |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Terms of the Notes
| Issuer: |
BofA Finance |
| Guarantor: |
BAC |
| Denominations: |
The Notes will be issued in minimum denominations of $1,000.00 and whole multiples of $1,000.00 in excess thereof. |
| Term: |
Approximately 3 years, unless previously called. |
| Underlyings: |
The Nasdaq-100® Technology Sector Index (Bloomberg symbol: “NDXT”), a price return index, the Russell 2000® Index (Bloomberg symbol: “RTY”), a price return index and the VanEck® Semiconductor ETF (NASDAQ/NMS (Global Market) symbol: “SMH”). |
| Pricing Date*: |
May 17, 2024 |
| Issue Date*: |
May 22, 2024 |
| Valuation Date*: |
May 17, 2027, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” in the accompanying product supplement. |
| Maturity Date*: |
May 20, 2027 |
| Starting Value: |
With respect to the NDXT, its closing level on the
pricing date.
With respect to the RTY, its closing level on the
pricing date.
With respect to the SMH, its Closing Market Price
on the pricing date.
|
| Observation Value: |
With respect to the NDXT, its closing level on the
applicable Observation Date.
With respect to the RTY, its closing level on the
applicable Observation Date.
With respect to the SMH, its Closing Market Price
on the applicable Observation Date, multiplied by its Price Multiplier.
|
| Ending Value: |
With respect to each Underlying, its Observation Value on the Valuation Date. |
| Price Multiplier: |
With respect to the SMH, 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-28 of the accompanying product supplement. |
| Coupon Barrier: |
With respect to each Underlying, 75.00% of its Starting Value. |
| Threshold Value: |
With respect to each Underlying, 60.00% of its Starting Value. |
| Contingent Coupon Payment: |
If, on any monthly Observation Date, the Observation Value of each Underlying is greater than or equal to its Coupon Barrier, we will pay a Contingent Coupon Payment of $10.417 per $1,000.00 in principal amount of Notes (equal to a rate of 1.0417% per month or 12.50% per annum) on the applicable Contingent Payment Date (including the Maturity Date). |
| Optional Early Redemption: |
On any monthly Call Payment Date, we have the right to redeem all (but not less than all) of the Notes at the Early Redemption Amount. No further amounts will be payable following an Optional Early Redemption. We will give notice to the trustee at least five business days but not more than 60 calendar days before the applicable Call Payment Date. |
| Early Redemption Amount: |
For each $1,000.00 in principal amount of Notes, $1,000.00, plus the applicable Contingent Coupon Payment if the Observation Value of each Underlying on the corresponding Observation Date is greater than or equal to its Coupon Barrier. |
 |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-2 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
| Redemption Amount: |
If the Notes have not been called prior to maturity,
the Redemption Amount per $1,000.00 in principal amount of Notes will be:
a) If the Ending Value of the Least Performing Underlying
is greater than or equal to its Threshold Value:
b) If the Ending Value of the Least Performing Underlying
is less than its Threshold Value:
In this case, the Redemption Amount (excluding
any final Contingent Coupon Payment) will be less than 60.00% of the principal amount and you could lose up to 100.00% of your investment
in the Notes.
The Redemption Amount will also include a final
Contingent Coupon Payment if the Ending Value of the Least Performing Underlying is greater than or equal to its Coupon Barrier. |
| Observation Dates*: |
As set forth beginning on page PS-4 |
| Contingent Payment Dates*: |
As set forth beginning on page PS-4 |
| Call Payment Dates*: |
As set forth beginning on page PS-6. Each Call Payment Date is also a Contingent Payment Date. |
| Calculation Agent: |
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance. |
| Selling Agent: |
BofAS |
| CUSIP: |
09711BYB6 |
| Underlying Return: |
With respect to each Underlying,
|
| Least Performing Underlying: |
The Underlying with the lowest Underlying Return. |
| Events of Default and Acceleration: |
If an Event of Default, as defined in the senior indenture relating to the Notes and in the section entitled “Description of Debt Securities of BofA Finance LLC—Events of Default and Rights of Acceleration; Covenant Breaches” on page 54 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption “Redemption Amount” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third Trading Day prior to the date of acceleration. We will also determine whether a final Contingent Coupon Payment is payable based upon the values of the Underlyings on the deemed Valuation 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. |
* Subject to change.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-3 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Observation Dates, Contingent Payment Dates and Call Payment Dates
| Observation Dates* |
Contingent Payment Dates |
| June 17, 2024 |
June 21, 2024 |
| July 17, 2024 |
July 22, 2024 |
| August 19, 2024 |
August 22, 2024 |
| September 17, 2024 |
September 20, 2024 |
| October 17, 2024 |
October 22, 2024 |
| November 18, 2024 |
November 21, 2024 |
| December 17, 2024 |
December 20, 2024 |
| January 17, 2025 |
January 23, 2025 |
| February 18, 2025 |
February 21, 2025 |
| March 17, 2025 |
March 20, 2025 |
| April 17, 2025 |
April 23, 2025 |
| May 19, 2025 |
May 22, 2025 |
| June 17, 2025 |
June 23, 2025 |
| July 17, 2025 |
July 22, 2025 |
| August 18, 2025 |
August 21, 2025 |
| September 17, 2025 |
September 22, 2025 |
| October 17, 2025 |
October 22, 2025 |
| November 17, 2025 |
November 20, 2025 |
| December 17, 2025 |
December 22, 2025 |
| January 20, 2026 |
January 23, 2026 |
| February 17, 2026 |
February 20, 2026 |
| March 17, 2026 |
March 20, 2026 |
| April 17, 2026 |
April 22, 2026 |
| May 18, 2026 |
May 21, 2026 |
| June 17, 2026 |
June 23, 2026 |
| July 17, 2026 |
July 22, 2026 |
| August 17, 2026 |
August 20, 2026 |
| September 17, 2026 |
September 22, 2026 |
| October 19, 2026 |
October 22, 2026 |
| November 17, 2026 |
November 20, 2026 |
| December 17, 2026 |
December 22, 2026 |
| January 19, 2027 |
January 22, 2027 |
| February 17, 2027 |
February 22, 2027 |
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-4 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
| Observation Dates* |
Contingent Payment Dates |
| March 17, 2027 |
March 22, 2027 |
| April 19, 2027 |
April 22, 2027 |
| May 17, 2027 (the “Valuation Date”) |
May 20, 2027 (the “Maturity Date”) |
* The Observation Dates are subject to postponement
as set forth in “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” beginning
on page PS-23 of the accompanying product supplement.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-5 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
| Call Payment Dates |
| November 21, 2024 |
| December 20, 2024 |
| January 23, 2025 |
| February 21, 2025 |
| March 20, 2025 |
| April 23, 2025 |
| May 22, 2025 |
| June 23, 2025 |
| July 22, 2025 |
| August 21, 2025 |
| September 22, 2025 |
| October 22, 2025 |
| November 20, 2025 |
| December 22, 2025 |
| January 23, 2026 |
| February 20, 2026 |
| March 20, 2026 |
| April 22, 2026 |
| May 21, 2026 |
| June 23, 2026 |
| July 22, 2026 |
| August 20, 2026 |
| September 22, 2026 |
| October 22, 2026 |
| November 20, 2026 |
| December 22, 2026 |
| January 22, 2027 |
| February 22, 2027 |
| March 22, 2027 |
| April 22, 2027 |
Any payments on the Notes depend on the credit risk
of BofA Finance, as Issuer, and BAC, as Guarantor, and on the performance of the Underlyings. The economic terms of the Notes are based
on BAC’s internal funding rate, which is the rate it would pay to borrow funds through the issuance of market-linked notes, and
the economic terms of certain related hedging arrangements BAC’s affiliates enter into. BAC’s internal funding rate is typically
lower than the rate it would pay when it issues conventional fixed or floating rate debt securities. This difference in funding rate,
as well as the underwriting discount, if any, the referral fee and the hedging related charges described below (see “Risk Factors”
beginning on page PS-11), will reduce the economic terms of the Notes to you and the initial estimated value of the Notes. Due to these
factors, the public offering price you pay to purchase the Notes will be greater than the initial estimated value of the Notes as of the
pricing date.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-6 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
The initial estimated value range of the Notes is
set forth on the cover page of this pricing supplement. The final pricing supplement will set forth the initial estimated value of the
Notes as of the pricing date. For more information about the initial estimated value and the structuring of the Notes, see “Risk
Factors” beginning on page PS-11 and “Structuring the Notes” on page PS-32.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-7 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Contingent Coupon Payment and Redemption Amount Determination
On
each Contingent Payment Date, if the Notes have not been previously called, you may receive a
Contingent
Coupon Payment per $1,000.00 in principal amount of Notes determined as follows:
Assuming
the Notes have not been called, on the Maturity Date, you will receive a cash payment per $1,000.00 in principal amount of Notes determined
as follows:
All payments described above are subject to the
credit risk of BofA Finance, as Issuer, and BAC, as Guarantor.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-8 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Total Contingent Coupon Payment Examples
The table below illustrates the hypothetical total
Contingent Coupon Payments per $1,000.00 in principal amount of Notes over the term of the Notes, based on the Contingent Coupon Payment
of $10.417, depending on how many Contingent Coupon Payments are payable prior to an Optional Early Redemption or maturity. Depending
on the performance of the Underlyings, you may not receive any Contingent Coupon Payments during the term of the Notes.
| Number of Contingent Coupon Payments |
Total Contingent Coupon Payments |
| 0 |
$0.000 |
| 2 |
$20.834 |
| 4 |
$41.668 |
| 6 |
$62.502 |
| 8 |
$83.336 |
| 10 |
$104.170 |
| 12 |
$125.004 |
| 14 |
$145.838 |
| 16 |
$166.672 |
| 18 |
$187.506 |
| 20 |
$208.340 |
| 22 |
$229.174 |
| 24 |
$250.008 |
| 26 |
$270.842 |
| 28 |
$291.676 |
| 30 |
$312.510 |
| 32 |
$333.344 |
| 34 |
$354.178 |
| 36 |
$375.012 |
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-9 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Hypothetical Payout Profile and Examples of Payments at Maturity
Contingent Income Issuer Callable Yield Notes
Table
The following table is for purposes of illustration
only. It assumes the Notes have not been called prior to maturity and is based on hypothetical values and shows hypothetical returns on the Notes. The table illustrates the calculation of the Redemption Amount and the return on the Notes based on a hypothetical
Starting Value of 100 for the Least Performing Underlying, a hypothetical Coupon Barrier of 75 for the Least Performing Underlying, a
hypothetical Threshold Value of 60 for the Least Performing Underlying, the Contingent Coupon Payment of $10.417 per $1,000.00 in principal
amount of Notes and a range of hypothetical Ending Values of the Least Performing Underlying. The actual amount you receive and the
resulting return will depend on the actual Starting Values, Coupon Barriers, Threshold Values, Observation Values and Ending Values of
the Underlyings, whether the Notes are called prior to maturity, and whether you hold the Notes to maturity. The following examples
do not take into account any tax consequences from investing in the Notes.
For recent actual values of the Underlyings, see
“The Underlyings” section below. The Ending Value of each Underlying will not include any income generated by dividends or
other distributions paid with respect to shares or units of that Underlying or on the securities included in that Underlying, as applicable.
In addition, all payments on the Notes are subject to Issuer and Guarantor credit risk.
| Ending Value of the Least Performing Underlying |
Underlying Return of the Least Performing Underlying |
Redemption Amount per Note (including any final Contingent Coupon Payment) |
Return on the Notes(1) |
| 160.00 |
60.00% |
$1,010.417 |
1.0417% |
| 150.00 |
50.00% |
$1,010.417 |
1.0417% |
| 140.00 |
40.00% |
$1,010.417 |
1.0417% |
| 130.00 |
30.00% |
$1,010.417 |
1.0417% |
| 120.00 |
20.00% |
$1,010.417 |
1.0417% |
| 110.00 |
10.00% |
$1,010.417 |
1.0417% |
| 105.00 |
5.00% |
$1,010.417 |
1.0417% |
| 102.00 |
2.00% |
$1,010.417 |
1.0417% |
| 100.00(2) |
0.00% |
$1,010.417 |
1.0417% |
| 90.00 |
-10.00% |
$1,010.417 |
1.0417% |
| 80.00 |
-20.00% |
$1,010.417 |
1.0417% |
| 75.00(3) |
-25.00% |
$1,010.417 |
1.0417% |
| 74.99 |
-25.01% |
$1,000.000 |
0.0000% |
| 70.00 |
-30.00% |
$1,000.000 |
0.0000% |
| 60.00(4) |
-40.00% |
$1,000.000 |
0.0000% |
| 59.99 |
-40.01% |
$599.900 |
-40.0100% |
| 50.00 |
-50.00% |
$500.000 |
-50.0000% |
| 0.00 |
-100.00% |
$0.000 |
-100.0000% |
| (1) |
The “Return on the Notes” is calculated based on the Redemption Amount and potential final Contingent Coupon Payment, not including any Contingent Coupon Payments paid prior to maturity. |
| (2) |
The hypothetical Starting Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent a likely Starting Value of any Underlying. |
| (3) |
This is the hypothetical Coupon Barrier of the Least Performing Underlying. |
| (4) |
This is the hypothetical Threshold Value of the Least Performing Underlying. |
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-10 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Risk Factors
Your investment in the Notes entails significant
risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after
carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors in light of your particular
circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the Notes
or financial matters in general. You should carefully review the more detailed explanation of risks relating to the Notes in the “Risk
Factors” sections beginning on page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus supplement
and page 7 of the accompanying prospectus, each as identified on page PS-37 below.
Structure-related Risks
• Your investment may result in a loss; there is no guaranteed return of principal. There is
no fixed principal repayment amount on the Notes at maturity. If the Notes are not called prior to maturity and the Ending Value of any Underlying is less than its Threshold Value, at maturity, your investment will be subject to 1:1 downside exposure to decreases in
the value of the Least Performing Underlying and you will lose 1% of the principal amount for each 1% that the Ending Value of the Least
Performing Underlying is less than its Starting Value. In that case, you will lose a significant portion or all of your investment in
the Notes.
• 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 Observation Value or Ending Value of any Underlying exceeds its Coupon Barrier or Starting
Value, as applicable. Similarly, the amount payable at maturity or upon an Optional Early Redemption will never exceed the sum of the
principal amount and the applicable Contingent Coupon Payment, regardless of the extent to which the Observation Value or Ending Value
of any Underlying exceeds its Starting 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 values. 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 Optional Early Redemption, which would limit your ability to receive the
Contingent Coupon Payments over the full term of the Notes. On each Call Payment Date, at our option, we may call your Notes in whole,
but not in part. If the Notes are called prior to the Maturity Date, you will be entitled to receive the Early Redemption Amount on the
applicable Call Payment 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 the Optional Early Redemption. If the Notes are called prior to the Maturity Date,
you may be unable to invest in other securities with a similar level of risk that could provide a return that is similar to the Notes.
Even if we do not exercise our option to call your Notes, our ability to do so may adversely affect the market value of your Notes. It
is our sole option whether to call your Notes prior to maturity on any such Call Payment Date and we may or may not exercise this option
for any reason. Because of this Optional Early Redemption potential, the term of your Notes could be anywhere between six and thirty-six
months.
• 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 Observation
Value of any 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 Observation Value of any 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 will not receive a positive
return on the Notes.
• Your return on the Notes may be less than the yield on a conventional debt security of comparable
maturity. Any return that you receive on the Notes may be less than the return you would earn if you purchased a conventional debt
security with the same Maturity Date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when
you consider factors, such as inflation, that affect the time value of money. 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.
• The Contingent Coupon Payment, Early Redemption Amount or Redemption Amount, as applicable, will
not reflect changes in the values of the Underlyings other than on the Observation Dates. The values 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 Early Redemption Amount or the Redemption Amount, as applicable, by comparing only the Starting Value, the Coupon Barrier or the Threshold
Value, as applicable, to the Observation Value or the Ending Value for each Underlying. No other values of the Underlyings will be taken
into account. As a result, if the Notes are not called prior to maturity and the Ending Value of the Least Performing Underlying is less
than its Threshold Value, you will receive less than the principal amount at maturity even if the value of each Underlying was always
above its Threshold Value prior to the Valuation Date.
• Because the Notes are linked to the least performing (and not the average performance) of the Underlyings,
you may not receive any return on the Notes and may lose a significant portion or all of your investment in the Notes even if the Observation
Value or Ending Value of one Underlying is greater than or equal to its Coupon Barrier or Threshold Value, as applicable. Your Notes
are linked to the least performing of the Underlyings, and a change in the value of one Underlying may not correlate with changes in the
values of the other Underlyings. The Notes are not linked to a basket composed of the Underlyings, where the depreciation in the
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-11 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
value of one Underlying could be offset
to some extent by the appreciation in the values of the other Underlyings. In the case of the Notes, the individual performance of each
Underlying would not be combined, and the depreciation in the value of one Underlying would not be offset by any appreciation in the values
of the other Underlyings. Even if the Observation Value of an Underlying is at or above its Coupon Barrier on an Observation Date, you
will not receive the Contingent Coupon Payment with respect to that Observation Date if the Observation Value of another Underlying is
below its Coupon Barrier on that day. In addition, even if the Ending Value of an Underlying is at or above its Threshold Value, you will
lose a significant portion or all of your investment in the Notes if the Ending Value of the Least Performing Underlying is below its
Threshold Value.
• Any payments on the Notes are subject to our credit risk and the credit risk of the Guarantor,
and any actual or perceived changes in our or the Guarantor’s creditworthiness are expected to affect the value of the Notes. The
Notes are our senior unsecured debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor.
The Notes are not guaranteed by any entity other than the Guarantor. As a result, your receipt of any 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 performance of the Underlyings. No assurance can be given as to what our financial condition or the financial condition
of the Guarantor will be at any time after the pricing date of the Notes. If we and the Guarantor become unable to meet our respective
financial obligations as they become due, you may not receive the amount(s) payable under the terms of the Notes.
In addition, our credit ratings and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities
to pay our obligations. Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our
or the Guarantor’s credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S.
Treasury securities (the “credit spread”) prior to the Maturity Date may adversely affect the market value of the Notes. However,
because your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective
obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce the
other investment risks related to the Notes.
• We are a finance subsidiary and, as such, 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 pricing date that will be provided in the final pricing supplement, are each estimates only, determined as of
a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions
and variables, including our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms
on hedging transactions, expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of
the Notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt
to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated
value. This is due to, among other things, changes in the values of the Underlyings, changes in the Guarantor’s internal funding
rate, and the inclusion in the public offering price of the underwriting discount, if any, the referral fee 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.
• We cannot assure you that a trading market for your Notes will ever develop or be maintained. We
will not list the Notes on any securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that
market will be liquid or illiquid.
Conflict-related Risks
• Trading and hedging activities by us, the Guarantor and any of our other affiliates, including
BofAS, may create conflicts of interest with you and may affect your return on the Notes and their market value. We, the Guarantor
or one or more of our other affiliates, including BofAS, may buy or sell shares or units of the Underlyings or the securities held by
or included in the Underlyings, as applicable, or futures or options contracts or exchange traded instruments on the Underlyings or those
securities, or other instruments whose value is derived from the Underlyings or those securities. While we, the Guarantor or one or more
of our other affiliates, including BofAS, may from time to time own shares or units of the Underlyings or securities represented by the
Underlyings, except to the extent that BAC’s common stock may be included in the Underlyings, we, the Guarantor and our other affiliates,
including BofAS, 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
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-12 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
more of our other affiliates, including
BofAS, may execute such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our
obligations under the Notes. These transactions may present a conflict of interest between your interest in the Notes and the interests
we, the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions,
including block trades, for our or their other customers, and in accounts under our or their management. These transactions may adversely
affect the values of the Underlyings in a manner that could be adverse to your investment in the Notes. On or before the pricing date,
any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or their behalf (including those
for the purpose of hedging some or all of our anticipated exposure in connection with the Notes), may affect the values of the Underlyings.
Consequently, the values of the Underlyings may change subsequent to the pricing date, which may adversely affect the market value of
the Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, also expect to engage in hedging activities that could affect
the values of the Underlyings on the pricing date. In addition, these hedging activities, including the unwinding of a hedge, may decrease
the market value of your Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or one or more
of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the Notes and may hold or resell
the Notes. For example, BofAS may enter into these transactions in connection with any market making activities in which it engages. We
cannot assure you that these activities will not adversely affect the values 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 risks associated with small-size capitalization companies. The stocks
comprising the RTY are issued by companies with small-sized market capitalization. The stock prices of small-size companies may be more
volatile than stock prices of large capitalization companies. Small-size capitalization companies may be less able to withstand adverse
economic, market, trade and competitive conditions relative to larger companies. Small-size capitalization companies may also be more
susceptible to adverse developments related to their products or services.
• The Notes are subject to risks associated with foreign securities markets. The NDXT includes
certain foreign equity securities. You should be aware that investments in securities linked to the value of foreign equity securities
involve particular risks. The foreign securities markets comprising the NDXT may have less liquidity and may be more volatile than U.S.
or other securities markets and market developments may affect foreign markets differently from U.S. or other securities markets. Direct
or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings in foreign companies,
may affect trading prices and volumes in these markets. Also, there is generally less publicly available information about foreign companies
than about those U.S. companies that are subject to the reporting requirements of the SEC, and foreign companies are subject to accounting,
auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
Prices of securities in foreign countries are subject to political, economic, financial and social factors that apply in those geographical
regions. These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in
a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other
laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in
the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of natural
disaster or adverse public health developments in the region. Moreover, foreign economies may differ favorably or unfavorably from the
U.S. economy in important respects such as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
• Adverse conditions in the technology sector may reduce your return on the Notes. All of the
stocks included in the NDXT are issued by companies in the technology sector. Market or economic factors impacting technology companies
and companies that rely heavily on technological advances could have a major effect on the value of the NDXT’s investments. The
prices of stocks of technology companies and companies that rely heavily on technology are particularly vulnerable to rapid changes in
technology product cycles, rapid product obsolescence, government regulation and competition, both domestically and internationally, including
competition from foreign competitors with lower production costs. Stocks of technology companies and companies that rely heavily on technology,
especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Technology companies are heavily
dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Additionally,
companies in the technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services
of qualified personnel. Any of these factors may have an adverse effect on the return on the Notes. 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 stocks included in the NDXT are concentrated in one sector. The NDXT hold securities issued
by companies in the technology sector. As a result, some of the stocks that will determine the performance of the Notes are concentrated
in one sector. Although an
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-13 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
investment in the Notes will not give
holders any ownership or other direct interests in the securities included in the NDXT, 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.
• Adverse conditions in the semiconductor production and equipment sector may reduce your return
on the Notes. All or substantially all of the stocks held by the SMH are issued by companies whose primary line of business is directly
associated with the semiconductor production and equipment sector. The SMH is subject to the risk that companies that are in the semiconductor
production and equipment sector may be similarly affected by particular economic or market events. As product cycles shorten and manufacturing
capacity increases, these companies may become increasingly subject to aggressive pricing, which hampers profitability. Semiconductor
companies are vulnerable to wide fluctuations in securities prices due to rapid product obsolescence. Many semiconductor companies may
not successfully introduce new products, develop and maintain a loyal customer base or achieve general market acceptance for their products,
and failure to do so could have a material adverse effect on their business, results of operations and financial condition. Reduced demand
for end-user products, underutilization of manufacturing capacity, and other factors could adversely impact the operating results of companies
in the semiconductor production and equipment sector. Semiconductor companies typically face high capital costs and such companies may
need additional financing, which may be difficult to obtain. They also may be subject to risks relating to research and development costs
and the availability and price of components. Moreover, they may be heavily dependent on intellectual property rights and may be adversely
affected by loss or impairment of those rights. Some of the companies involved in the semiconductor production and equipment sector are
also engaged in other lines of business unrelated to the semiconductor business, and they may experience problems with these lines of
business, which could adversely affect their operating results. The international operations of many semiconductor companies expose them
to risks associated with instability and changes in economic and political conditions, foreign currency fluctuations, changes in foreign
regulations, tariffs and trade disputes, competition from subsidized foreign competitors with lower production costs and other risks inherent
to international business. The semiconductor production and equipment sector is highly cyclical, which may cause the operating results
of many semiconductor companies to vary significantly. Companies in the semiconductor production and equipment sector also may be subject
to competition from new market entrants. The stock prices of companies in the semiconductor production and equipment sector have been
and will likely continue to be extremely volatile compared to the overall market. These factors could affect the semiconductor production
and equipment sector and could affect the value of the equity securities held by the SMH and the price of the SMH during the term of the
Notes, which may adversely affect the value of your Notes.
• The stocks held by the SMH are concentrated in one sector. The SMH holds securities issued
by companies in the semiconductor production and equipment sector. As a result, the stocks that will determine in part 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 SMH, the return on an investment in the Notes will be subject to certain risks associated with a direct
equity investment 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 SMH may not correlate with the performance of its underlying index as well
as the net asset value per share or unit of the SMH, especially during periods of market volatility. The performance of the SMH and
that of its 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 SMH 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 SMH 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 SMH,
differences in trading hours between the SMH (or the underlying assets held by the SMH) and its underlying index, or 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 the SMH are traded on a securities exchange and are subject to market supply and investor demand, the market
price of one share or unit of the SMH may differ from its net asset value per share or unit; shares or units of the SMH may trade at,
above, or below its net asset value per share or unit. During periods of market volatility, securities held by the SMH may be unavailable
in the secondary market, market participants may be unable to calculate accurately the net asset value per share or unit of the SMH and
the liquidity of the SMH may be adversely affected. Market volatility may also disrupt the ability of market participants to trade shares
or units of the SMH. 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 SMH. As a result, under these circumstances, the market value of shares or units of the
SMH may vary substantially from the net asset value per share or unit of the SMH.
• The anti-dilution adjustments will be limited. The calculation agent may adjust the Price Multiplier
of the SMH and other terms of the Notes to reflect certain actions by the SMH, 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 SMH and will have broad discretion to determine whether and to what extent an
adjustment is required.
• The publisher or the sponsor or investment advisor of an Underlying may adjust that Underlying
in a way that affects its values, and the publisher or the sponsor or investment advisor has no obligation to consider your interests. The publisher or 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 value. Any of these actions could adversely affect the value of
your Notes.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-14 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
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.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-15 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
The Underlyings
All disclosures contained in this pricing supplement
regarding the Underlyings, including, without limitation, their make-up, method of calculation, and changes in their components, have
been derived from publicly available sources. The information reflects the policies of, and is subject to change by, the sponsor of the
NDXT, the sponsor of the RTY and the investment advisor of the SMH (collectively, the “Underlying Sponsors”). The Underlying
Sponsors, which license the copyright and all other rights to the respective Underlyings, have no obligation to continue to publish, and
may discontinue publication of, the Underlyings. The consequences of any Underlying Sponsor discontinuing publication of the applicable
Underlying are discussed in “Description of the Notes — Discontinuance of an Index” and “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 BofAS accepts any responsibility for the calculation,
maintenance or publication of any Underlying or any successor underlying. None of us, the Guarantor, BofAS or any of our other affiliates
makes any representation to you as to the future performance of the Underlyings. You should make your own investigation into the Underlyings.
The Nasdaq-100® Technology
Sector Index
The NDXT is intended to measure the performance of the
technology companies in the Nasdaq-100® Index (“NDX”). The NDX is designed to measure the performance of the
100 largest domestic and international non-financial securities listed on The Nasdaq Stock Market ("NASDAQ") based on market
capitalization. Each issuer of a stock in the NDXT is classified as a Technology company according to the Industry Classification Benchmark
(“ICB”).
The NDXT began trading on February 22, 2006 at a base
value of 1,000.00. The NDXT is calculated and published by The Nasdaq OMX Group, Inc. (“Nasdaq OMX”). In administering the
NDXT, Nasdaq OMX will exercise reasonable discretion as it deems appropriate.
Security Eligibility Criteria and Selection
In order to be eligible for the NDXT, a security must
be included in the NDX. A company must be classified as a Technology company (any company classified under the Technology Industry) according
to the ICB.
All securities that meet the security eligibility criteria
are included in the NDXT.
Constituent Weighting
The NDXT is an equal-weighted
index. The NDXT is rebalanced quarterly such that all issuers within the NDXT have an equal index market value. The NDXT follows
the same reconstitution and rebalance schedule as the NDX. For issuers represented by multiple securities, the index market values are
equally apportioned across their respective index securities. Index shares are calculated by dividing each index security's resulting
index market value by its last sale price.
NDXT Index Calculation
The value of the NDXT equals the NDXT market value divided
by the NDXT divisor. The overall NDXT market value is the aggregate of each NDXT stock’s market value, adjusted by the NDXT stock’s
equal-weighting factor used to assign an equal weight at the previous rebalancing, as may be adjusted for any corporate actions. A NDXT
stock’s market value is determined by multiplying the last sale price by the number of shares of the index security included in
the NDX. In other words, the value of the NDXT is equal to (i) the sum of the products of (a) the index shares of each of the NDXT stocks
multiplied by (b) each such stock’s last sale price (adjusted for corporate actions, if any) multiplied by (c) such stock’s
equal weighting factor, divided by (ii) the divisor of the NDXT.
The price return NDXT divisor is calculated as the ratio
of (i) the start of day market value of the NDXT divided by (ii) the previous day NDXT value.
If an index security does not trade on the relevant
Nasdaq exchange on a given day or the relevant Nasdaq exchange has not opened for trading, the previous index calculation day’s
closing price for index security (adjusted for corporate actions occurring prior to market open on the current day, if any) is used. If
an index security is halted during the trading day, the most recent last sale price is used until trading resumes. For securities where
NASDAQ is the relevant Nasdaq exchange, the last sale price may be the Nasdaq Official Closing Price when it is closed.
NDXT Maintenance
Deletion Policy
If a component of the NDXT is removed from the NDX for
any reason, it is also removed from the NDXT at the same time.
Replacement Policy
When a component of the NDX that is classified as Technology
according to ICB is removed from the NDX, it is also removed from the NDXT. As such, if the replacement company being added to the NDX
is classified as Technology according to ICB, it is added to the NDXT and will assume the weight of the removed company on the index effective
date.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-16 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
When a component of the NDX that is not classified as
Technology according to ICB is removed and the replacement company being added to the NDX is classified as Technology according to ICB,
the replacement company is considered for addition to the NDXT at the next quarterly rebalance.
When a component of the NDX that is classified as Technology
according to ICB is removed from the NDX and the replacement company being added to the NDX is not classified as Technology according
to ICB, the company is removed from the NDXT and the divisor of the NDXT is adjusted to ensure index continuity.
Additions Policy
If a security is added to the NDX for any reason, it
may be added to the NDXT at the same time.
Corporate Actions
In the interim periods between scheduled index reconstitution
and rebalance events, individual Index securities may be the subject to a variety of corporate actions and events that require maintenance
and adjustments to the index.
In certain cases, corporate actions and events are handled
according to the weighting scheme or other index construction techniques employed. Wherever alternate methods are described, the index
will follow the “Non-Market Cap Corporate Action Method.”
Index Share Adjustments
Other than as a direct result of corporate actions,
the NDXT does not normally experience share adjustments between scheduled index rebalance and reconstitution events.
The Nasdaq-100® Index
The NDX is intended to measure the performance of the
100 largest domestic and international non-financial securities listed on NASDAQ based on market capitalization. The NDX reflects companies
across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It
does not contain securities of financial companies including investment companies.
The NDX began trading on January 31, 1985 at a base
value of 125.00. The NDX is calculated and published by Nasdaq, Inc. In administering the NDX, Nasdaq, Inc. will exercise reasonable discretion
as it deems appropriate.
Underlying Stock Eligibility Criteria
NDX eligibility is limited to specific security types
only. The security types eligible for the NDX include foreign or domestic common stocks, ordinary shares, ADRs and tracking stocks. Security
types not included in the NDX are closed-end funds, convertible debt securities, exchange traded funds, limited liability companies, limited
partnership interests, preferred stocks, rights, shares or units of beneficial interest, warrants, units, and other derivative securities.
The NDX does not contain securities of investment companies. For purposes of the NDX eligibility criteria, if the security is a depositary
receipt representing a security of a non-U.S. issuer, then references to the “issuer” are references to the issuer of the
underlying security.
Initial Eligibility Criteria
To be eligible for initial inclusion in the NDX, a security
must be listed on NASDAQ and meet the following criteria:
|
● |
the security’s U.S. listing must be exclusively
on the Nasdaq Global Select Market or the Nasdaq Global Market (unless the security was dually listed on another U.S. market prior to
January 1, 2004 and has continuously maintained such listing); |
|
● |
the security must be of a non-financial company; |
|
● |
the security may not be issued by an issuer currently
in bankruptcy proceedings; |
|
● |
the security must have a minimum three-month average
daily trading volume of at least 200,000 shares; |
|
● |
if the issuer of the security is organized under the
laws of a jurisdiction outside the U.S., then such security must have listed options on a recognized options market in the U.S. or be
eligible for listed-options trading on a recognized options market in the U.S.; |
|
● |
the issuer of the security may not have entered into
a definitive agreement or other arrangement which would likely result in the security no longer being eligible for inclusion in the NDX; |
|
● |
the issuer of the security may not have annual financial
statements with an audit opinion that is currently withdrawn; and |
|
● |
the issuer of the security must have “seasoned”
on NASDAQ, the New York Stock Exchange or NYSE Amex. Generally, a company is considered to be seasoned if it has been listed on a market
for at least three full months (excluding the first month of initial listing). |
Continued Eligibility Criteria
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-17 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
In
addition, to be eligible for continued inclusion in the NDX, the following criteria apply:
|
● |
the security’s U.S. listing must be exclusively
on the Nasdaq Global Select Market or the Nasdaq Global Market; |
|
● |
the security must be of a non-financial company; |
|
● |
the security may not be issued by an issuer currently
in bankruptcy proceedings; |
|
● |
the security must have a minimum three-month average
daily trading volume of at least 200,000 shares; |
|
● |
if the issuer of the security is organized under the
laws of a jurisdiction outside the U.S., then such security must have listed options on a recognized options market in the U.S. or be
eligible for listed-options trading on a recognized options market in the U.S. (measured annually during the ranking review process); |
|
● |
the security must have an adjusted market capitalization
equal to or exceeding 0.10% of the aggregate adjusted market capitalization of the NDX at each month-end. In the event a company does
not meet this criterion for two consecutive month-ends, it will be removed from the NDX effective after the close of trading on the third
Friday of the following month; and |
|
● |
the issuer of the security may not have annual financial
statements with an audit opinion that is currently withdrawn. |
Computation of the NDX
The
value of the NDX equals the aggregate value of the NDX share weights (the “NDX Shares”) of each of the NDX securities multiplied
by each such security’s last sale price (last sale price refers to the last sale price on NASDAQ), and divided by the divisor of
the NDX. If trading in an NDX security is halted while the market is open, the last traded price for that security is used for all NDX
computations until trading resumes. If trading is halted before the market is open, the previous day’s last sale price is used.
The formula for determining the NDX value is as follows:
The NDX is ordinarily calculated without regard to cash
dividends on NDX securities. The NDX is calculated during the trading day and is disseminated once per second from 09:30:01 to 17:16:00
ET. The closing level of the NDX may change up until 17:15:00 ET due to corrections to the last sale price of the NDX securities. The
official closing value of the NDX is ordinarily disseminated at 17:16:00 ET.
NDX Maintenance
Changes to NDX Constituents
Changes to the NDX constituents may be made during the
annual ranking review. In addition, if at any time during the year other than the annual review, it is determined that an NDX security
issuer no longer meets the criteria for continued inclusion in the NDX, or is otherwise determined to have become ineligible for continued
inclusion in the NDX, it is replaced with the largest market capitalization issuer not currently in the NDX that meets the applicable
eligibility criteria for initial inclusion in the NDX.
Ordinarily, a security will be removed from the NDX
at its last sale price. However, if at the time of its removal the NDX security is halted from trading on its primary listing market and
an official closing price cannot readily be determined, the NDX security may, in Nasdaq, Inc.’s discretion, be removed at a price
of $0.00000001 (“zero price”). This zero price will be applied to the NDX security after the close of the market but prior
to the time the official closing value of the NDX is disseminated.
Divisor Adjustments
The divisor is adjusted to ensure that changes in the
NDX constituents either by corporate actions (that adjust either the price or shares of an NDX security) or NDX participation outside
of trading hours do not affect the value of the NDX. All divisor changes occur after the close of the applicable index security markets.
Quarterly NDX Rebalancing
The NDX will be rebalanced on a quarterly basis if it
is determined that (1) the current weight of the single NDX security with the largest market capitalization is greater than 24.0% of the
NDX or (2) the collective weight of those securities whose individual current weights are in excess of 4.5% exceeds 48.0% of the NDX.
In addition, a “special rebalancing” of the NDX may be conducted at any time if Nasdaq, Inc. determines it necessary to maintain
the integrity and continuity of the NDX. If either one or both of the above weight distribution conditions are met upon quarterly review,
or Nasdaq, Inc. determines that a special rebalancing is necessary, a weight rebalancing will be performed.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-18 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
If the first weight distribution condition is met and
the current weight of the single NDX security with the largest market capitalization is greater than 24.0%, then the weights of all securities
with current weights greater than 1.0% (“large securities”) will be scaled down proportionately toward 1.0% until the adjusted
weight of the single largest NDX security reaches 20.0%.
If the second weight distribution condition is met and
the collective weight of those securities whose individual current weights are in excess of 4.5% (or adjusted weights in accordance with
the previous step, if applicable) exceeds 48.0% of the NDX, then the weights of all such large securities in that group will be scaled
down proportionately toward 1.0% until their collective weight, so adjusted, is equal to 40.0%.
The aggregate weight reduction among the large securities
resulting from either or both of the rebalancing steps above will then be redistributed to those securities with weightings of less than
1.0% (“small securities”) in the following manner. In the first iteration, the weight of the largest small security will be
scaled upwards by a factor which sets it equal to the average NDX weight of 1.0%. The weights of each of the smaller remaining small securities
will be scaled up by the same factor reduced in relation to each security’s relative ranking among the small securities such that
the smaller the NDX security in the ranking, the less its weight will be scaled upward. This is intended to reduce the market impact of
the weight rebalancing on the smallest component securities in the NDX.
In the second iteration of the small security rebalancing,
the weight of the second largest small security, already adjusted in the first iteration, will be scaled upwards by a factor which sets
it equal to the average NDX weight of 1.0%. The weights of each of the smaller remaining small securities will be scaled up by this same
factor reduced in relation to each security’s relative ranking among the small securities such that, once again, the smaller the
security in the ranking, the less its weight will be scaled upward. Additional iterations will be performed until the accumulated increase
in weight among the small securities equals the aggregate weight reduction among the large securities that resulted from the rebalancing
in accordance with the two weight distribution conditions discussed above.
Finally, to complete the rebalancing process, once the
final weighting percentages for each NDX security have been set, the NDX Shares will be determined anew based upon the last sale prices
and aggregate capitalization of the NDX at the close of trading on the last calendar day in February, May, August and November. Changes
to the NDX Shares will be made effective after the close of trading on the third Friday in March, June, September and December, and an
adjustment to the divisor is made to ensure continuity of the NDX. Ordinarily, new rebalanced NDX Shares will be determined by applying
the above procedures to the current NDX Shares. However, Nasdaq, Inc. may, from time to time, determine rebalanced weights, if necessary,
by applying the above procedure to the actual current market capitalization of the NDX components. In such instances, Nasdaq, Inc. would
announce the different basis for rebalancing prior to its implementation.
During the quarterly rebalancing, data is cutoff as
of the previous month end and no changes are made to the NDX from that cutoff until the quarterly index share change effective date, except
in the case of changes due to corporate actions with an ex-date.
Adjustments for Corporate Actions
Changes in the price and/or NDX Shares driven by corporate
events such as stock dividends, splits, and certain spin-offs and rights issuances will be adjusted on the ex-date. If the change in total
shares outstanding arising from other corporate actions is greater than or equal to 10.0%, the change will be made as soon as practicable.
Otherwise, if the change in total shares outstanding is less than 10.0%, then all such changes are accumulated and made effective at one
time on a quarterly basis after the close of trading on the third Friday in each of March, June, September, and December. The NDX Shares
are derived from the security’s total shares outstanding. The NDX Shares are adjusted by the same percentage amount by which the
total shares outstanding have changed.
Historical Performance of the NDXT
The following graph sets forth the daily historical
performance of the NDXT in the period from January 2, 2019 through May 7, 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. On May 7, 2024, the closing
level of the NDXT was 10,076.02.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-19 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
This historical data on the NDXT is not necessarily
indicative of the future performance of the NDXT or what the value of the Notes may be. Any historical upward or downward trend in the
closing level of the NDXT during any period set forth above is not an indication that the closing level of the NDXT is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the closing levels of the NDXT.
License Agreement
The Notes are not sponsored, endorsed, sold or promoted
by Nasdaq, Inc. or its affiliates (Nasdaq, Inc., with its affiliates, are referred to as the “Corporations”). The Corporations
have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Notes.
The Corporations make no representation or warranty, express or implied, to the owners of the Notes or any member of the public regarding
the advisability of investing in securities generally or in the Notes particularly, or the ability of the NDXT to track general stock
market performance. The Corporations’ only relationship to our affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“Licensee”) is in the licensing of the NASDAQ®, OMX®,
NASDAQ OMX®, and NDXT registered trademarks, and certain trade names of the Corporations
or their licensor and the use of the NDXT which is determined, composed and calculated by Nasdaq, Inc. without regard to Licensee or the
Notes. Nasdaq, Inc. has no obligation to take the needs of the Licensee or the owners of the Notes into consideration in determining,
composing or calculating the NDXT. The Corporations are not responsible for and have not participated in the determination of the timing
of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are to
be converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of the Notes.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR
UNINTERRUPTED CALCULATION OF THE NDXT OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY LICENSEE, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NDXT OR ANY DATA INCLUDED THEREIN.
THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE NDXT OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS
HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-20 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
The Russell 2000® Index
The RTY was developed by Russell Investments (“Russell”)
before FTSE International Limited and Russell combined in 2015 to create FTSE Russell, which is wholly owned by London Stock Exchange
Group. Additional information on the RTY is available at the following website: http://www.ftserussell.com. No information on that website
is deemed to be included or incorporated by reference in this pricing supplement.
Russell began dissemination of the RTY on January
1, 1984. FTSE Russell calculates and publishes the RTY. The RTY was set to 135 as of the close of business on December 31, 1986. The RTY
is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index, the RTY consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
The RTY is determined, comprised, and calculated by FTSE Russell without regard to the Notes.
Selection of Stocks Comprising the RTY
Each company eligible for inclusion in the RTY must
be classified as a U.S. company under FTSE Russell’s country-assignment methodology. If a company is incorporated, has a stated
headquarters location, and trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible),
then the company is assigned to its country of incorporation. If any of the three factors are not the same, FTSE Russell defines three
Home Country Indicators (“HCIs”): country of incorporation, country of headquarters, and country of the most liquid exchange
(as defined by a two-year average daily dollar trading volume) from all exchanges within a country. Using the HCIs, FTSE Russell compares
the primary location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs,
then the company is assigned to the primary location of its assets. If there is insufficient information to determine the country in which
the company’s assets are primarily located, FTSE Russell will use the country from which the company’s revenues are primarily
derived for the comparison with the three HCIs in a similar manner. FTSE Russell uses the average of two years of assets or revenues data
to reduce potential turnover. If conclusive country details cannot be derived from assets or revenues data, FTSE Russell will assign the
company to the country of its headquarters, which is defined as the address of the company’s principal executive offices, unless
that country is a Benefit Driven Incorporation (“BDI”) country, in which case the company will be assigned to the country
of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, Bonaire,
British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Guernsey, Isle of Man, Jersey,
Liberia, Marshall Islands, Panama, Saba, Sint Eustatius, Sint Maarten, and Turks and Caicos Islands. For any companies incorporated or
headquartered in a U.S. territory, including Puerto Rico, Guam, and U.S. Virgin Islands, a U.S. HCI is assigned.
All securities eligible for inclusion in the RTY
must trade on a major U.S. exchange. Stocks must have a closing price at or above $1.00 on their primary exchange on the last trading
day in May to be eligible for inclusion during annual reconstitution. However, in order to reduce unnecessary turnover, if an existing
member’s closing price is less than $1.00 on the last day of May, it will be considered eligible if the average of the daily closing
prices (from its primary exchange) during the month of May is equal to or greater than $1.00. Initial public offerings are added each
quarter and must have a closing price at or above $1.00 on the last day of their eligibility period in order to qualify for index inclusion.
If an existing stock does not trade on the “rank day” (typically the last trading day in May but a confirmed timetable is
announced each spring) but does have a closing price at or above $1.00 on another eligible U.S. exchange, that stock will be eligible
for inclusion.
An important criterion used to determine the list
of securities eligible for the RTY is total market capitalization, which is defined as the market price as of the last trading day in
May for those securities being considered at annual reconstitution times the total number of shares outstanding. Where applicable, common
stock, non-restricted exchangeable shares and partnership units/membership interests are used to determine market capitalization. Any
other form of shares such as preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants
and rights, installment receipts or trust receipts, are excluded from the calculation. If multiple share classes of common stock exist,
they are combined. In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each class is
considered for inclusion separately. If multiple share classes exist, the pricing vehicle will be designated as the share class with the
highest two-year trading volume as of the rank day in May.
Companies with a total market capitalization of
less than $30 million are not eligible for the RTY. Similarly, companies with only 5% or less of their shares available in the marketplace
are not eligible for the RTY. Royalty trusts, limited liability companies, closed-end investment companies (companies that are required
to report Acquired Fund Fees and Expenses, as defined by the SEC, including business development companies), blank check companies, special
purpose acquisition companies, and limited partnerships are also ineligible for inclusion. Bulletin board, pink sheets, and over-the-counter
traded securities are not eligible for inclusion. Exchange traded funds and mutual funds are also excluded.
Annual reconstitution is a process by which the
RTY is completely rebuilt. Based on closing levels of the company’s common stock on its primary exchange on the rank day of May
of each year, FTSE Russell reconstitutes the composition of the RTY using the then existing market capitalizations of eligible companies.
Reconstitution of the RTY occurs on the last Friday in June or, when the last Friday in June is the 29th or 30th, reconstitution occurs
on the prior Friday. In addition, FTSE Russell adds initial public offerings to the RTY on a quarterly basis based on total market capitalization
ranking within the market-adjusted capitalization breaks established during the most recent reconstitution. After membership is determined,
a security’s shares are adjusted to include only those shares available to the public. This is often referred to as “free
float.” The purpose of the adjustment is to exclude from market calculations the capitalization that is not available for purchase
and is not part of the investable opportunity set.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-21 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Historical Performance of the RTY
The following graph sets forth the daily historical
performance of the RTY in the period from January 2, 2019 through May 7, 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. On May 7, 2024, the closing
level of the RTY was 2,064.645.
This historical data on the RTY is not necessarily
indicative of the future performance of the RTY or what the value of the Notes may be. Any historical upward or downward trend in the
closing level of the RTY during any period set forth above is not an indication that the closing level of the RTY is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult
publicly available sources for the closing levels of the RTY.
License Agreement
“Russell 2000®” and “Russell
3000®” are trademarks of FTSE Russell and have been licensed for use by our affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated. The Notes are not sponsored, endorsed, sold, or promoted by FTSE Russell, and FTSE Russell makes no representation
regarding the advisability of investing in the Notes.
FTSE Russell and Merrill Lynch, Pierce, Fenner &
Smith Incorporated have entered into a non-exclusive license agreement providing for the license to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and its affiliates, including us, in exchange for a fee, of the right to use indices owned and published by FTSE Russell
in connection with some securities, including the Notes. The license agreement provides that the following language must be stated in
this pricing supplement:
The Notes are not sponsored, endorsed, sold, or
promoted by FTSE Russell. FTSE Russell makes no representation or warranty, express or implied, to the holders of the Notes or any member
of the public regarding the advisability of investing in securities generally or in the Notes particularly or the ability of the RTY to
track general stock market performance or a segment of the same. FTSE Russell’s publication of the RTY in no way suggests or implies
an opinion by FTSE Russell as to the advisability of investment in any or all of the securities upon which the RTY is based. FTSE Russell’s
only relationship to Merrill Lynch, Pierce, Fenner & Smith Incorporated and to us is the licensing of certain trademarks and trade
names of FTSE Russell and of the RTY, which is determined, composed, and calculated by FTSE Russell without regard to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, us, or the Notes. FTSE Russell is not responsible for and has not reviewed the Notes nor any associated
literature or publications and FTSE Russell makes no representation or warranty express or implied as to their accuracy or completeness,
or otherwise. FTSE Russell reserves the right, at any time and without notice, to alter, amend, terminate, or in any way change the RTY.
FTSE Russell has no obligation or liability in connection with the administration, marketing, or trading of the Notes.
FTSE RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE RTY OR ANY DATA INCLUDED THEREIN AND FTSE RUSSELL SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. FTSE RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, US, BAC, BOFAS, HOLDERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RTY OR ANY DATA INCLUDED THEREIN.
FTSE RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-22 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE RTY OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL FTSE RUSSELL HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-23 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
The VanEck® Semiconductor ETF
The SMH is an exchange-traded fund that trades on
the NYSE Arca, Inc. under the ticker symbol “SMH.” The SMH seeks to replicate as closely as possible, before fees and expenses,
the price and yield performance of the MVIS® US Listed Semiconductor 25 Index (“MVSMH”). For more information
about the MVSMH, please see “The MVIS® US Listed Semiconductor 25 Index” below.
The SMH, using a “passive” or indexing
investment approach, attempts to approximate the investment performance of the MVSMH by investing in a portfolio of securities that generally
replicates the MVSMH.
The SMH’s return may not match the return
of the MVSMH for a number of reasons. For example, the SMH incurs a number of operating expenses not applicable to the MVSMH and incurs
costs associated with buying and selling securities, especially when rebalancing the SMH’s securities holdings to reflect changes
in the composition of the MVSMH, which are not factored into the return of the MVSMH. Transaction costs, including brokerage costs, will
decrease the SMH’s net asset value to the extent not offset by the transaction fee payable by an authorized participant. Market
disruptions and regulatory restrictions could have an adverse effect on the SMH’s ability to adjust its exposure to the required
levels in order to track the MVSMH. Errors in the MVSMH data, the MVSMH computations and/or the construction of the MVSMH in accordance
with its methodology may occur from time to time and may not be identified and corrected by the MVSMH provider for a period of time or
at all, which may have an adverse impact on the SMH and its shareholders. In addition, the SMH may not invest in certain securities included
in the MVSMH, or invest in them in the exact proportions in which they are represented in the MVSMH. The SMH’s performance may also
deviate from the return of the MVSMH due to legal restrictions or limitations imposed by the governments of certain countries, certain
listing standards of the SMH’s listing exchange, a lack of liquidity on stock exchanges in which the securities trade, potential
adverse tax consequences or other regulatory reasons (such as diversification requirements). The SMH may value certain of its investments
and/or other assets based on fair value prices. To the extent the SMH calculates its net asset value based on fair value prices and the
value of the MVSMH is based on securities’ closing prices (i.e., the value of the MVSMH is not based on fair value prices), the
SMH’s ability to track the MVSMH may be adversely affected. In addition, any issues the SMH encounters with regard to currency convertibility
(including the cost of borrowing funds, if any) and repatriation may also increase tracking risk. In light of the factors discussed above,
the SMH’s return may deviate significantly from the return of the MVSMH. Changes to the composition of the MVSMH in connection with
a rebalancing or reconstitution of the MVSMH may cause the SMH to experience increased volatility, during which time the SMH’s index
tracking risk may be heightened.
The MVIS® US Listed Semiconductor 25 Index
All information contained in this pricing supplement
regarding the MVSMH, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available
information, without independent verification. This information reflects the policies of, and is subject to change by, MV Index Solutions
GmbH (“MVIS”). The MVSMH was developed by MVIS and is maintained and published by MVIS. The MVSMH is calculated by Solactive
AG. MVIS has no obligation to continue to publish, and may discontinue the publication of, the MVSMH.
The MVSMH is reported by Bloomberg L.P. under the
ticker symbol “MVSMH.”
The MVSMH is designed to track the performance of
the largest and most liquid U.S.-listed companies that derive at least 50% (25% for current components) of their revenues from semiconductors.
This includes companies engaged primarily in the production of semiconductors and semiconductor equipment. The MVSMH was launched on August
12, 2011 with a base index value of 1,000 as of September 29, 2000.
Index Composition and Maintenance
The Index Universe
The index universe includes only common stocks and
stocks with similar characteristics from financial markets that are freely investable for foreign investors and that provide real-time
and historical component and currency pricing. Limited partnerships are excluded. Companies from financial markets that are not freely
investable for foreign investors or that do not provide real-time and historical component and currency pricing may still be eligible
if they have a listing on an eligible exchange and if they meet all the size and liquidity requirements on that exchange.
Only stocks that have a full market capitalization
exceeding US$50 million are eligible for the index universe.
Investable Index Universe
Companies with a free-float (or shares available
to foreign investors) of less than 5% for existing index components or less than 10% for new components are ineligible for inclusion.
In addition to the above, stocks that are currently
not in the MVSMH must meet the following size and liquidity requirements:
|
• |
a full market capitalization exceeding US$150 million; |
|
• |
a three-month average-daily-trading volume of at least US$1 million at the current review and also at the previous two reviews; and |
|
• |
at least 250,000 shares traded per month over the last six months at the current review and also at the previous two reviews. |
For stocks already in the MVSMH the following applies:
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-24 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
|
• |
a full market capitalization exceeding US$75 million; and |
|
• |
a three-month average-daily-trading volume of at least US$0.2 million in at least two of the latest three quarters (current review
and also at previous two reviews) |
|
• |
In addition, a three-month average-daily-trading volume of at least US$0.6 million at current review or at one of the previous two
reviews; or |
|
• |
at least 200,000 shares traded per month over the last six months at the current review or at one of the previous two reviews. |
In case the number of investable stocks drops below
the minimum component number for the respective index, current components remain investable.
Only one share line of each company is eligible.
In case more than one share line fulfills the above size and liquidity rules, only the largest share line by free-float market capitalization
is eligible. MVIS can, in exceptional cases (e.g., significantly higher liquidity), decide for a different share line.
In case the free-float market capitalization of
a non-component share line:
|
• |
exceeds the free-float market capitalization of a share line of the same company which is an index component by at least 25%; and |
|
• |
fulfills all size and liquidity eligibility criteria for non-components, |
|
• |
the current component share line will be replaced by the larger one. MVIS can, in exceptional cases (e.g., significantly higher liquidity),
decide to keep the current share line instead. |
Index Constituent Selection
The MVSMH is reviewed on a semi-annual basis in
March and September.
The target coverage of the MVSMH is 25 companies
from the investable universe. MVSMH constituents are selected using the following procedure:
|
(1) |
The largest 50 stocks (by full market capitalization) from the investable universe qualify. |
|
(2) |
The 50 stocks are ranked in two different ways — by free-float market capitalization in descending order (the largest company
receives rank “1”) and then by three-month average-daily-trading volume in descending order (the most liquid company receives
rank “1”). These two ranks are added up. |
|
(3) |
The 50 stocks are then ranked by the sum of their two ranks in Step 2 in ascending order. If two companies have the same sum of ranks,
the larger company is placed on top. |
|
a. |
Initially, the highest ranked 25 companies made up the MVSMH. |
|
b. |
On-going, a 10-40 buffer is applied: the highest ranked 10 companies qualify. The remaining 15 companies are selected from the highest
ranked remaining current MVSMH components ranked between 11 and 40. If the number of selected companies is still below 25, then the highest
ranked remaining stocks are selected until 25 companies have been selected. |
Review Schedule
The reviews for the MVSMH are based on the closing
data on the last business day in February and August. If a company does not trade on the last business day in February or August, the
last available price for this company will be used.
The underlying index data (e.g., new number of shares,
new free-float factors and new weighting cap factors) is announced on the second Friday in March or September. The weighting cap factors
are based on closing data of the Wednesday prior to the second Friday in March or September. Changes to the MVSMH are implemented and
based on the closing prices of the third Friday in March or September. If the third Friday is not a business day, then the review will
take place on the last business day before the third Friday. If a constituent of the MVSMH does not trade on the third Friday in March
or September, then the last available price for that index constituent will be used. Changes become effective on the next business day.
The component changes to the MVSMH are announced on the second Friday in March or September.
Ongoing Maintenance
In addition to the periodic reviews, the MVSMH is
continually reviewed for corporate events (e.g., mergers, takeovers, spin-offs, delistings and bankruptcies) that affect the MVSMH components.
Deletions. For all corporate events that
result in a stock deletion from the MVSMH, the deleted stock will be replaced with the highest ranked non-component on the most recent
selection list immediately only if the number of components in the MVSMH would drop below 20. The replacement stock will be added at the
same weight as the deleted stock. Only in case the number of components drop below its minimum due to a merger of two or more index components,
the replacement stock will be added with its free-float market capitalization, weighted with the capping factor of the uncapped components
in the small-weight group of the weighting scheme. In all other cases (i.e., there is not replacement), the additional weight resulting
from the deletion will be redistributed proportionally across all other components of the MVSMH.
Changes to Free-Float Factor and Number of Shares. Changes to the number of shares or the free-float factors due to corporate actions like stock dividends, splits, rights issues, etc. are
implemented immediately and will be effective the next trading day (i.e., the ex-date). Simple share/float changes are implemented after
a 3-day notice period.
Initial Public Offerings (IPOs) and Spin-Offs. An IPO stock is eligible for fast-track addition to the index universe for the MVSMH once; either at the next
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-25 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
semi-annual review if it has been trading since
at least the last trading day of the month prior to the review snapshot dates (i.e., the last trading day in February or August) or else
at the then-following semi-annual review. In order to be added to the MVSMH the IPO stock has to meet the size and liquidity requirements:
|
• |
the IPO must have a full market capitalization exceeding US$150 million; |
|
• |
the IPO must have a free-float factor of at least 10%; |
|
• |
the IPO must have an average-daily-trading volume of at least US$1 million; and |
|
• |
the IPO must have traded at least 250,000 shares per month (or per 22 days). |
This rule is applicable for newly spun-off companies
as well.
Changes due to Mergers & Takeovers. A
merger or takeover is deemed successful if it has been declared wholly unconditional and has received approval of all regulatory agencies
with jurisdiction over the transaction. The result of a merger or takeover is typically one surviving stock and one or more non-surviving
stocks that may not necessarily be de-listed from the respective trading system(s).
If a MVSMH component merges with or takes over another
MVSMH component: The surviving stock remains in the MVSMH and the other stock is deleted immediately from the MVSMH. Its shares and float
are adjusted according to the terms of the merger/takeover. The index market capitalization of the merged company corresponds to the market
capitalization of the two separate companies.
If a MVSMH component merges with or takes over a
non-MVSMH component: If the surviving stock meets the MVSMH requirements, then it remains in the MVSMH and its shares (if the share change
is greater than 10%) and float are adjusted according to the terms of the merger/takeover. If the surviving stock does not meet the MVSMH
requirements, then it is deleted immediately from the MVSMH.
If a non-MVSMH component merges with or takes over
a MVSMH component: If the surviving stock meets the MVSMH requirements, then it will be added to the MVSMH (shares (if the share change
is greater than 10%) and float adjusted according to the terms of the merger/takeover) and will replace the current MVSMH component. If
the surviving stock does not meet the MVSMH requirements, then it will not be added to the MVSMH and the current MVSMH component is deleted
immediately from the MVSMH.
Changes due to Spin-Offs. Each spin-off stock
is immediately added to the MVSMH for at least two trading days. If a spin-off company does not qualify for the MVSMH, it will be deleted
based on its closing price. Shares and floats of the surviving companies are adjusted according to the terms of the spin-off. In case
the number of MVSMH components drops below the minimum component number and no non-component stock is eligible as a replacement, the determination
of the addition is subject to MVIS’s decision.
Index Calculation
The value of the MVSMH is calculated using the Laspeyres’
formula, rounded to two decimal places, with stock prices converted to U.S. dollars:
where (for all stocks (i) in the MVSMH):
· pi = stock price (rounded to four decimal places);
· qi = number of shares;
· ffi = free-float factor (rounded to two decimal places);
· fxi = exchange rate (local currency to U.S. Dollar) (rounded to 12 decimal places);
· cfi = sector-weighting cap factor (if applicable, otherwise set to 1) (rounded to 16 decimal places);
· M
= free-float market capitalization of the MVSMH; and
· D
= divisor (rounded to six decimal places).
Free-Float
The MVSMH is free-float adjusted — that is,
the number of shares outstanding is reduced to exclude closely held shares (amount larger than 5% of the company’s full market capitalization)
from the index calculation. At times, other adjustments are made to the share count to reflect foreign ownership limits. These are combined
with the block-ownership adjustments into a single factor. To avoid unwanted double counting, either the block-ownership adjustment or
the restricted stocks adjustment is applied, whichever produces the higher result. Free-float factors are reviewed quarterly.
Company-Weighting Cap Factors
Companies in the MVSMH are weighted according to
their free-float market capitalization, as modified by the company-weighting cap factors. The MVSMH used the company-weighting cap factors
to ensure diversification to avoid overweighting. The company-weighting cap factors are reviewed quarterly and applied, if necessary.
The following weighting scheme applies to the MVSMH:
|
(1) |
All MVSMH components are weighted by their free-float market capitalization. |
|
(2) |
All companies exceeding 4.5% but at least the largest five and at the maximum the largest 10 companies are grouped together (so called |
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-26 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
“Large-Weights”). All other companies
are grouped together as well (so called “Small-Weights“).
|
(3) |
The aggregated weighting of the Large-Weights is capped at 50%: |
|
a. |
Large-Weights: If the aggregated weighting of all companies in Large-Weight exceeds 50%, then a capping factor is calculated to bring
the weighting down to 50%; at the same time, a second capping factor for the Small-Weights is calculated to increase the aggregated weight
to 50%. These two factors are then applied to all companies in the Large-Weights or the Small-Weights respectively. |
|
b. |
Large-Weights: The maximum weight for any single stock is 20% and the minimum weighting is 5%. If a stock is above the maximum or
below the minimum weight, then the weight will be reduced to the maximum weight or increased to the minimum weight and the excess weight
will be re-distributed proportionally across all other remaining MVSMH constituents in the Large-Weights. |
|
c. |
Small-Weights: The maximum weight for any single stock is 4.5%. If a stock is above the maximum weight, then the weight will be reduced
to the maximum weight and the excess weight will be re-distributed proportionally across all other remaining MVSMH constituents in the
Small-Weights. |
Divisor Adjustments
Index maintenance (reflecting changes in, e.g.,
shares outstanding, capital actions, addition or deletion of stocks to the MVSMH) should not change the level of the MVSMH. This is accomplished
with an adjustment to the divisor. Any change to the stocks in the MVSMH that alters the total market value of the MVSMH while holding
stock prices constant will require a divisor adjustment.
where ∆MC is the difference between closing
market capitalization and adjusted closing market capitalization of the MVSMH.
Data Correction
Incorrect or missing input data will be corrected
immediately.
Corporate Action Related Adjustments
Corporate actions range widely from routine share
issuances or buy backs to unusual events like spin-offs or mergers. These are listed on the table below with notes about the necessary
changes and whether the divisor will be adjusted. Implementation takes place on the ex-date.
Special cash dividend
pi, adjusted = pi – (Dividend x (1 –
Withholding Tax)) |
Divisor change: Yes |
Split
Shareholders receive “B” new shares
for every “A” share held.
|
Divisor change: No |
Rights offering
Shareholders receive “B” new shares
for every “A” share held.
If the subscription-price is either not available
or not smaller than the closing price, then no adjustment will be done.
|
Divisor change: No |
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-27 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Stock dividend
Shareholders receive “B” new shares
for every “A” share held.
|
Divisor change: No |
Stock dividend from treasury
Stock dividends from treasury are adjusted as
ordinary cash dividends. Shareholders receive ‘B’ new shares for every ‘A’ share held.
|
Divisor change: Yes |
Stock dividend of a different company security
Shareholders receive “B” shares
of a different company for every “A” share held.
|
Divisor change: Yes |
Spin-offs
Shareholders receive “B” shares
of a different company for every “A” share held.
|
Divisor change: Yes |
Addition/deletion of a company
Net change in market value
determines the divisor adjustment. |
Divisor change: Yes |
Changes in shares outstanding/free-float
Any secondary issuance,
share repurchase, buy back, tender offer, Dutch auction, exchange offer, bought deal equity offering or prospectus offering will be updated
at the semi-annual review if the change is smaller than 10%. Changes larger than 10% will be pre-announced (3 trading days’ notice)
and implemented on a best efforts basis. If necessary and information is available, resulting float changes are taken into consideration.
Share changes will not be implemented in the week between review announcement and implementation. |
Divisor change: Yes |
Changes due to a merger/takeover/spin-off
Net change in free-float
market value determines the divisor adjustment. In case of no change, the divisor change is 0. |
Divisor change: Yes |
With corporate actions where cash dividends or other
corporate assets are distributed to shareholders, the price of the stock will drop on the ex-dividend day (the first day when a new shareholder
is eligible to receive the distribution). The effect of the divisor adjustment is to prevent this price drop from causing a corresponding
drop in the MVSMH.
Corporate actions are announced at least four days
prior to implementation.
Historical Performance of the SMH
The following graph sets forth the daily historical
performance of the SMH in the period from December 11, 2019 through May 7, 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. On May 7, 2024, the Closing
Market Price of the SMH was $220.73.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-28 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
This historical data on the SMH is not necessarily
indicative of the future performance of the SMH or what the value of the Notes may be. Any historical upward or downward trend in the
Closing Market Price of the SMH during any period set forth above is not an indication that the Closing Market Price of the SMH is more
or less likely to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult
publicly available sources for the Closing Market Prices and trading pattern of the SMH.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-29 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Supplement to the Plan of Distribution; Role of BofAS and Conflicts
of Interest
BofAS, a broker-dealer affiliate of ours, is a member
of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling agent in the distribution of
the Notes. Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121. BofAS may not make sales in this
offering to any of its discretionary accounts without the prior written approval of the account holder.
We expect to deliver the Notes against payment therefor
in New York, New York on a date that is greater than two business days following the pricing date. Under Rule 15c6-1 of the Securities
Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to any
such trade expressly agree otherwise. Accordingly, if the initial settlement of the Notes occurs more than two business days from the
pricing date, purchasers who wish to trade the Notes more than two business days prior to the original issue date will be required to
specify alternative settlement arrangements to prevent a failed settlement.
Under our distribution agreement with BofAS, BofAS
will purchase the Notes from us as principal at the public offering price indicated on the cover of this pricing supplement, less the
indicated underwriting discount, if any. BofAS will sell the Notes to other broker-dealers that will participate in the offering and that
are not affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may sell the Notes to one or more
additional broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer and that not all dealers will purchase
or repurchase the Notes at the same discount. Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may
forgo some or all of their selling concessions, fees or commissions. The public offering price for investors purchasing the Notes in these
fee-based advisory accounts may be as low as $997.50 per $1,000.00 in principal amount of Notes. In addition to the underwriting discount,
if any, an affiliate of BofA Finance will pay a referral fee of up to $3.50 per $1,000.00 in principal amount of Notes in connection with
the distribution of the Notes to other registered broker-dealers.
BofAS and any of our other broker-dealer affiliates
may use this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for offers and sales in
secondary market transactions and market-making transactions in the Notes. However, they are not obligated to engage in such secondary
market transactions and/or market-making transactions. These broker-dealer affiliates may act as principal or agent in these transactions,
and any such sales will be made at prices related to prevailing market conditions at the time of the sale.
At BofAS’s discretion, for a short, undetermined
initial period after the issuance of the Notes, BofAS may offer to buy the Notes in the secondary market at a price that may exceed the
initial estimated value of the Notes. Any price offered by BofAS for the Notes will be based on then-prevailing market conditions and
other considerations, including the performance of the Underlyings and the remaining term of the Notes. However, none of us, the Guarantor,
BofAS or any of our other affiliates is obligated to purchase your Notes at any price or at any time, and we cannot assure you that any
party will purchase your Notes at a price that equals or exceeds the initial estimated value of the Notes.
Any price that BofAS may pay to repurchase the Notes
will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction costs. At certain times,
this price may be higher than or lower than the initial estimated value of the Notes.
European Economic Area 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.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-30 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
United Kingdom
The communication of this pricing supplement, the
accompanying product supplement, the accompanying prospectus supplement, the accompanying prospectus and any other document or materials
relating to the issue of the Notes offered hereby is not being made, and such documents and/or materials have not been approved, by an
authorized person for the purposes of Section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the
“FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general
public in the United Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those
persons in the United Kingdom who have professional experience in matters relating to investments and who fall within the definition of
investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,
as amended (the “Financial Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order,
or who are any other persons to whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together
being referred to as “Relevant Persons”). In the United Kingdom, the Notes offered hereby are only available to, and any investment
or investment activity to which this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement and
the accompanying prospectus relates will be engaged in only with, Relevant Persons. Any person in the United Kingdom that is not a relevant
person should not act or rely on this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement
or the accompanying prospectus or any of their contents.
Any invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only be communicated or
caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to BofA Finance, as Issuer, or BAC, as Guarantor.
All applicable provisions of the FSMA must be complied
with in respect to anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-31 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Structuring the Notes
The Notes are our debt securities, the return on
which is linked to the performance of the Underlyings. The related guarantee is BAC’s obligation. As is the case for all of our
and BAC’s respective debt securities, including our market-linked notes, the economic terms of the Notes reflect our and BAC’s
actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased operational,
funding and liability management costs to us and BAC, BAC typically borrows the funds under these types of notes at a rate, which we refer
to in this pricing supplement as BAC’s internal funding rate, that is more favorable to BAC than the rate that it might pay for
a conventional fixed or floating rate debt security. This generally relatively lower internal funding rate, which is reflected in the
economic terms of the Notes, along with the fees and charges associated with market-linked notes, typically results in the initial estimated
value of the Notes on the pricing date being less than their public offering price.
In order to meet our payment obligations on the
Notes, at the time we issue the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options
or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a number of factors, including our and BAC’s creditworthiness, interest
rate movements, the volatility of the 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-5 and “Supplemental Use of Proceeds” on page PS-20 of the accompanying product supplement.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-32 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
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 an Underlying or the issuer of any component stock included in an Underlying that is an index 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 an Underlying or the issuer of one or more stocks
included in an Underlying that is an index 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 issuer of an Underlying or the issuers of the component
stocks included in each Underlying that is an index and consult your tax advisor regarding the possible consequences to you, if any, if
the issuer of an Underlying or the issuer of any component stock included in an Underlying that is an index 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
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-33 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
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 one 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.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-34 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Because some Underlyings are indices that periodically
rebalance, it is possible that the Notes could be treated as a series of contingent income-bearing single financial contracts, each of
which matures on the next rebalancing date. If the Notes were properly characterized in such a manner, a U.S. Holder would be treated
as disposing of the Notes on each rebalancing date in return for new Notes that mature on the next rebalancing date, and a U.S. Holder
would accordingly likely recognize capital gain or loss on each rebalancing date equal to the difference between the holder’s tax
basis in the Notes (which would be adjusted to take into account any prior recognition of gain or loss) and the fair market value of the
Notes on such date.
Non-U.S. Holders
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, 2025. Based on our
determination that the Notes are not delta-one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the Underlyings or the Notes, and following such occurrence the Notes could
be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions
in respect of the Underlyings or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
As discussed above, alternative characterizations
of the Notes for U.S. federal income tax purposes are possible. Should an alternative characterization, by reason of change or clarification
of the law, by regulation or otherwise, cause payments as to the Notes to become subject to withholding tax 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.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-35 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
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.
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-36 |
Contingent Income Issuer Callable Yield Notes Linked to the Least Performing of the Nasdaq-100® Technology Sector Index, the Russell 2000® Index and the VanEck® Semiconductor ETF
Where You Can Find More Information
The terms and risks of the Notes are contained in
this pricing supplement and in the following related product supplement, prospectus supplement and prospectus, which can be accessed at
the following links:
• Product Supplement EQUITY-1 dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315473/d429684d424b2.htm
• Series A MTN prospectus supplement dated December 30, 2022 and prospectus dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315195/d409418d424b3.htm
This pricing supplement and the accompanying product
supplement, prospectus supplement and prospectus have been filed as part of a registration statement with the SEC, which may, without
cost, be accessed on the SEC website at www.sec.gov or obtained from BofAS by calling 1-800-294-1322. Before you invest, you should read
this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus for information about us, BAC and
this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by this
pricing supplement and the accompanying product supplement, prospectus supplement and prospectus. Certain terms used but not defined in
this pricing supplement have the meanings set forth in the accompanying product supplement or prospectus supplement. Unless otherwise
indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,”
or similar references are to BofA Finance, and not to BAC.
The Notes are our senior debt securities. Any payments
on the Notes are fully and unconditionally guaranteed by BAC. The Notes and the related guarantee are not insured by the Federal Deposit
Insurance Corporation or secured by collateral. The Notes will rank equally in right of payment with all of our other unsecured and unsubordinated
obligations, except obligations that are subject to any priorities or preferences by law. The related guarantee will rank equally in right
of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations that are subject to any priorities
or preferences by law, and senior to its subordinated obligations. Any payments due on the Notes, including any repayment of the principal
amount, will be subject to the credit risk of BofA Finance, as Issuer, and BAC, as Guarantor
| |
CONTINGENT INCOME ISSUER CALLABLE YIELD NOTES | PS-37 |
Bank of America (PK) (USOTC:BACRP)
過去 株価チャート
から 4 2024 まで 5 2024
Bank of America (PK) (USOTC:BACRP)
過去 株価チャート
から 5 2023 まで 5 2024
