This pricing supplement, which is not complete
and may be changed, relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus are not an offer to sell these notes in any country or jurisdiction where such
an offer would not be permitted.
SUBJECT TO COMPLETION, DATED July 19, 2024
Preliminary Pricing Supplement - Subject to Completion
(To Prospectus dated December 30, 2022,
Prospectus Supplement dated December 30, 2022 and
Product Supplement EQUITY-1 dated December 30, 2022)
Dated July , 2024
|
Filed Pursuant to
Rule 424(b)(2)
Series A Registration Statement
Nos. 333-268718 and 333-268718-01 |
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_001.jpg)
BofA Finance LLC $---- Capped GEARS
Linked to an Unequally Weighted Basket of Five Indices Due September 30,
2025
Fully and Unconditionally Guaranteed by Bank of America Corporation
The Capped GEARS (the “Notes”) linked to an unequally weighted
basket of five indices due September 30, 2025 are senior unsecured obligations issued by BofA Finance LLC (“BofA Finance”),
a consolidated finance subsidiary of Bank of America Corporation (“BAC” or the “Guarantor”), which are fully and
unconditionally guaranteed by the Guarantor. The return on the Notes is linked to the performance of an unequally weighted basket of five
indices (the “Basket”) comprised of the EURO STOXX 50® Index, the Nikkei 225® Index, the FTSE®
100 Index, the Swiss Market Index® and the S&P®/ASX 200 Index (each, a “Basket Component”).
If the Basket Return is positive, BofA Finance will repay the Stated Principal Amount of the Notes at maturity plus a return equal to
the Basket Return multiplied by the Upside Gearing of 3.0, but no more than the Maximum Gain of between [18.85% and 20.85%] (to be set
on the Trade Date). If the Basket Return is zero, BofA Finance will repay the Stated Principal Amount of the Notes at maturity. However,
if the Basket Return is negative, you will be fully exposed to the negative Basket Return and you will receive less than the Stated Principal
Amount at maturity, resulting in a loss that is proportionate to the decline in the value of the Basket. In this case, you will have full
downside exposure to the Basket from the Initial Basket Value to the Final Basket Value, and you could lose all of your initial investment.
Investing in the Notes involves significant risks. You will
not receive coupon payments during the 14 month term of the Notes. You may lose a substantial portion or all of your initial investment.
You will not receive dividends or other distributions paid on any stocks included in the Basket Components. Any payment on the Notes,
including any repayment of the Stated Principal Amount, is subject to the creditworthiness of BofA Finance and the Guarantor and is not,
either directly or indirectly, an obligation of any third party.
| q | Enhanced Growth Potential, subject to Maximum Gain—
If the Basket Return is positive, BofA Finance will repay the Stated Principal Amount of the Notes at maturity plus a return equal to
the Basket Return multiplied by the Upside Gearing, but no more than the Maximum Gain. The Upside Gearing feature will provide leveraged
exposure to a limited range of positive performance of the Basket. |
| q | Downside Exposure— If the Basket Return is zero,
you will receive the Stated Principal Amount of the Notes at maturity. However, if the Basket Return is negative, you will receive less
than the Stated Principal Amount of your Notes at maturity, resulting in a loss that is proportionate to the decline in the value of
the Basket from the Trade Date to the Valuation Date, up to a 100% loss of your investment. |
Any payment on the Notes is subject to the creditworthiness of BofA Finance
and the Guarantor.
Key Dates1 |
Trade Date2
Issue Date2
Valuation Date3
Maturity Date3 |
July 29, 2024
July 31, 2024
September 26, 2025
September 30, 2025 |
| 1 | Subject to change and will be set forth in the final pricing
supplement relating to the Notes. |
| 2 | See “Supplement
to the Plan of Distribution; Role of BofAS and Conflicts of Interest”
in this pricing supplement for additional information. |
| 3 | See page PS-4 for additional details. |
NOTICE TO INVESTORS: The Notes
are significantly riskier than conventional debt INSTRUMENTS. BofA Finance IS NOT NECESSARILY OBLIGATED TO REPAY THE STATED PRINCIPAL
AMOUNT AT MATURITY, AND the Notes CAN have downside MARKET risk SIMILAR TO the Basket. This MARKET risk is in addition to the CREDIT risk
INHERENT IN PURCHASING A DEBT OBLIGATION OF BOFA FINANCE THAT IS GUARANTEED BY BAC. You should not PURCHASE the Notes if you do
not understand or are not comfortable with the significant risks INVOLVED in INVESTING IN the Notes.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “RISK
FACTORS’’ BEGINNING ON PAGE PS-6 OF THIS PRICING SUPPLEMENT, PAGE PS-5 OF THE ACCOMPANYING PRODUCT SUPPLEMENT, PAGE S-6 OF
THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND PAGE 7 OF THE ACCOMPANYING PROSPECTUS BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF
THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY AFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE
SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES. THE NOTES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE AND MAY HAVE LIMITED OR NO
LIQUIDITY.
We are offering Capped GEARS linked to an unequally weighted basket of five
indices due September 30, 2025. The Basket Components are listed below and described in more detail beginning on page PS-12 of this pricing
supplement. Any payment on the Notes will be based on the performance of the Basket. The Maximum Gain and the Initial Index Value of each
Basket Component will be determined on the Trade Date. The Notes are our senior unsecured obligations, guaranteed by BAC, and are offered
for a minimum investment of 100 Notes (each Note corresponding to $10.00 in Stated Principal Amount) at the Public Offering Price described
below.
Basket Components |
Basket Weighting |
Initial Index Value |
Initial Basket Value |
Upside Gearing |
Maximum Gain |
CUSIP / ISIN |
EURO STOXX 50® Index (Bloomberg ticker: SX5E) |
40.00% |
|
100.00 |
3.0 |
[18.85% to 20.85%] |
09710R821 / US09710R8218 |
Nikkei 225® Index (Bloomberg ticker: NKY) |
25.00% |
|
FTSE® 100 Index (Bloomberg ticker: UKX) |
17.50% |
|
Swiss Market Index® (Bloomberg ticker: SMI) |
10.00% |
|
S&P®/ASX 200 Index (Bloomberg ticker: AS51) |
7.50% |
|
See “Summary” in this pricing supplement. The Notes will have
the terms specified in the accompanying product supplement, prospectus supplement and prospectus, as supplemented by this pricing supplement.
None of the Securities and Exchange Commission (the “SEC”), any
state securities commission, or any other regulatory body has approved or disapproved of these Notes or the guarantee, or passed upon
the adequacy or accuracy of this pricing supplement, or the accompanying product supplement, prospectus supplement or prospectus. Any
representation to the contrary is a criminal offense. The Notes and the related guarantee of the Notes by the Guarantor are unsecured
and are not savings accounts, deposits, or other obligations of a bank. The Notes are not guaranteed by Bank of America, N.A. or any other
bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency and involve investment risks.
|
Public Offering Price |
Underwriting Discount(1) |
Proceeds (before expenses) to BofA Finance |
Per Note |
$10.00 |
$0.20 |
$9.80 |
Total |
$ |
$ |
$ |
(1) The underwriting discount is $0.20 per Note.
BofA Securities, Inc. (“BofAS”), acting as principal, expects to purchase from BofA Finance, and BofA Finance expects to sell
to BofAS, the aggregate principal amount of the Notes set forth above for $9.80 per Note. UBS Financial Services Inc. (“UBS”),
acting as a selling agent for sales of the Notes, expects to purchase from BofAS, and BofAS expects to sell to UBS, all of the Notes for
$9.80 per Note. UBS will receive an underwriting discount of $0.20 per Note for each Note it sells in this offering. UBS proposes to offer
the Notes to the public at a price of $10.00 per Note. For additional information on the distribution of the Notes, see “Supplement
to the Plan of Distribution; Role of BofAS and Conflicts of Interest” in this pricing supplement.
The initial estimated value of the Notes will be less
than the public offering price. The initial estimated value of the Notes as of the Trade Date is expected to be between $9.20 and
$9.70 per $10 in Stated Principal Amount. See “Summary” on page PS-4 of this pricing supplement, “Risk Factors”
beginning on page PS-6 of this pricing supplement and “Structuring the Notes” on page PS-26 of this pricing supplement for
additional information. The actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy.
UBS Financial Services Inc. |
BofA Securities |
Additional
Information about BofA Finance LLC, Bank of America Corporation and the Notes |
You should read carefully this entire pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus to understand fully the terms of the Notes, as well as the tax and other considerations
important to you in making a decision about whether to invest in the Notes. In particular, you should review carefully the section in
this pricing supplement entitled “Risk Factors,” which highlights a number of risks of an investment in the Notes, to determine
whether an investment in the Notes is appropriate for you. If information in this pricing supplement is inconsistent with the product
supplement, prospectus supplement or prospectus, this pricing supplement will supersede those documents. You are urged to consult with
your own attorneys and business and tax advisors before making a decision to purchase any of the Notes.
The information in the “Summary” section is qualified
in its entirety by the more detailed explanation set forth elsewhere in this pricing supplement and the accompanying product supplement,
prospectus supplement and prospectus. You should rely only on the information contained in this pricing supplement and the accompanying
product supplement, prospectus supplement and prospectus. We have not authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should not rely on it. None of us, the Guarantor, BofAS or UBS
is making an offer to sell these Notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information
in this pricing supplement and the accompanying product supplement, prospectus supplement, and prospectus is accurate only as of the date
on their respective front covers.
Certain terms used but not defined in this pricing supplement have
the meanings set forth in the accompanying product supplement, prospectus supplement and prospectus. Unless otherwise indicated or unless
the context requires otherwise, all references in this pricing supplement to “we,” “us,” “our,” or
similar references are to BofA Finance, and not to BAC (or any other affiliate of BofA Finance).
The above-referenced accompanying documents may be accessed at the
following links:
|
| ¨ | Product supplement EQUITY-1 dated December 30, 2022: |
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315473/d429684d424b2.htm
|
| ¨ | Series A MTN prospectus supplement dated December 30, 2022 and prospectus dated December 30, 2022: |
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315195/d409418d424b3.htm
The Notes are our senior debt securities. Any payments
on the Notes are fully and unconditionally guaranteed by BAC. The Notes and the related guarantee are not insured by the Federal Deposit
Insurance Corporation or secured by collateral. The Notes will rank equally in right of payment with all of our other unsecured and unsubordinated
obligations, except obligations that are subject to any priorities or preferences by law. The related guarantee will rank equally in right
of payment with all of BAC’s other unsecured and unsubordinated obligations, except obligations that are subject to any priorities
or preferences by law, and senior to its subordinated obligations. Any payments due on the Notes, including any repayment of the principal
amount, will be subject to the credit risk of BofA Finance, as issuer, and BAC, as Guarantor.
The Notes may be suitable for you if, among other considerations:
¨
You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire investment.
¨
You do not seek current income from your investment and are willing to forgo dividends or any other distributions paid on the stocks
included in the Basket Components.
¨
You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that will have
the full downside market risk of an investment in the Basket.
¨
You understand and accept the risks associated with the Basket Components.
¨
You believe that the value of the Basket will increase over the term of the Notes and that the Final Basket Value is likely to
close above the Initial Basket Value, and you are willing to give up any appreciation in excess of the Maximum Gain (the actual Maximum
Gain will be determined on the Trade Date).
¨
You understand and accept that your potential return is limited by the Maximum Gain and you would be willing to invest in the Notes
if the Maximum Gain was set equal to the lower end of the range indicated on the cover page of this pricing supplement (the actual Maximum
Gain will be determined on the Trade Date).
¨
You can tolerate fluctuations in the value of the Notes prior to maturity that may be similar to or exceed the downside fluctuations
in the value of the Basket.
¨
You are willing and able to hold the Notes to maturity, and accept that there may be little or no secondary market for the Notes.
¨
You are willing to assume the credit risk of BofA Finance and BAC for all payments under the Notes, and understand that if BofA
Finance and BAC default on their obligations, you might not receive any amounts due to you, including any repayment of the Stated Principal
Amount. |
The Notes may not be suitable for you if, among
other considerations:
¨
You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire investment.
¨
You seek current income from this investment or prefer to receive the dividends and any other distributions paid on the stocks
included in the Basket Components.
¨
You cannot tolerate the loss of all or a substantial portion of your initial investment, or you are not willing to make an investment
that will have the full downside market risk of an investment in the Basket.
¨
You require an investment designed to guarantee a full return of the Stated Principal Amount at maturity.
¨
You do not understand or are not willing to accept the risks associated with the Basket Components.
¨
You believe that the value of the Basket will decline during the term of the Notes and the Final Basket Value is likely to close
below the Initial Basket Value on the Valuation Date, exposing you to full downside performance of the Basket, or you believe the Basket
will appreciate over the term of the Notes by more than the Maximum Gain (the actual Maximum Gain will be determined on the Trade Date).
¨
You seek an investment that participates in the full appreciation in the value of the Basket or that has unlimited return potential,
or you would be unwilling to invest in the Notes if the Maximum Gain was set equal to the lower end of the range indicated on the cover
page of this pricing supplement (the actual Maximum Gain will be determined on the Trade Date).
¨
You cannot tolerate fluctuations in the value of the Notes prior to maturity that may be similar to or exceed the downside fluctuations
in the value of the Basket.
¨
You seek an investment for which there will be an active secondary market.
¨
You prefer the lower risk of conventional fixed income investments with comparable maturities and credit ratings.
¨
You are not willing to assume the credit risk of BofA Finance and BAC for all payments under the Notes, including any repayment
of the Stated Principal Amount. |
The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should review “The Basket and the Basket Components” herein for more information on the Basket Components. You should also review carefully the “Risk Factors” section herein for risks related to an investment in the Notes. |
Summary |
Issuer |
BofA Finance |
Guarantor |
BAC |
Public Offering Price |
100% of the Stated Principal Amount |
Stated Principal Amount |
$10.00 per Note |
Minimum Investment |
$1,000 (100 Notes) |
Term |
Approximately fourteen months |
Trade Date1,2 |
July 29, 2024 |
Issue Date1,2 |
July 31, 2024 |
Valuation Date1 |
September 26, 2025, subject to postponement as set forth in “Description of the Notes—Certain Terms of the Notes—Events Relating to Calculation Days” beginning on page PS-22 of the accompanying product supplement. |
Maturity Date1 |
September 30, 2025 |
Basket |
The Notes are linked to an unequally weighted basket consisting
of the following indices and their respective weightings: |
|
EURO STOXX 50® Index (Bloomberg ticker: SX5E) |
40.00% |
|
Nikkei 225® Index (Bloomberg ticker: NKY) |
25.00% |
|
FTSE® 100 Index (Bloomberg ticker: UKX) |
17.50% |
|
Swiss Market Index® (Bloomberg ticker: SMI) |
10.00% |
|
S&P®/ASX 200 Index (Bloomberg ticker: AS51) |
7.50% |
Payment At Maturity (per $10.00 Stated Principal Amount) |
If the Basket Return is positive, we will repay the Stated Principal
Amount of the Notes at maturity plus a return equal to the Basket Return multiplied by the Upside Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00 × (1 + the lesser of (i)
Basket Return x Upside Gearing and (ii) Maximum Gain)
If the Basket Return is zero, we will repay the Stated Principal
Amount of the Notes at maturity.
If the Basket Return is negative, we will repay less than the Stated
Principal Amount of your Notes at maturity, resulting in a loss that is proportionate to the decline in the value of the Basket from the
Trade Date to the Valuation Date, calculated as follows:
$10.00 × (1 + Basket Return)
Accordingly, you may lose all or a substantial portion of
your Stated Principal Amount at maturity, depending on how significantly the Basket declines. |
Basket Return |
Final Basket Value – Initial Basket Value
Initial Basket Value |
Upside Gearing |
3.0 |
Maximum Gain |
[18.85% to 20.85%], which corresponds to a maximum Payment at Maturity of between [$11.885 to $12.085]. The actual Maximum Gain will be determined on the Trade Date. |
Initial Basket Value |
100.00 |
1 Subject to change and will be
set forth in the final pricing supplement relating to the Notes.
Final Basket Value |
100.00 × (1 + the sum of the Weighted Basket Component Returns) |
Weighted Basket Component Return |
For each Basket Component, its weighting multiplied by its Basket Component Return |
Basket Component Return |
For each Basket Component,
Final Index Value – Initial Index
Value
Initial Index Value |
Initial Index Value |
For each Basket Component, the closing level of that Basket Component on the Trade Date, as specified on the cover page of this pricing supplement. |
Final Index Value |
For each Basket Component, the closing level of that Basket Component on the Valuation Date. |
Calculation Agent |
BofAS, an affiliate of BofA Finance. |
Selling Agents |
BofAS and UBS. |
Events of Default and Acceleration |
If an Event of Default, as defined in the senior indenture relating to the Notes and in the section entitled “Description of Debt Securities of BofA Finance LLC—Events of Default and Rights of Acceleration; Covenant Breaches” on page 54 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption “—Payment at Maturity” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third trading day prior to the date of acceleration. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate. |
2 See
“Supplement to the Plan of Distribution; Role of BofAS and Conflicts
of Interest” in this pricing supplement for additional information.
Investment
Timeline |
|
|
|
|
|
Trade Date |
|
The closing level of each Basket Component (its Initial Index Value) is observed and the Maximum Gain is set. |
|
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_009.jpg) |
|
|
|
Maturity Date |
|
The Final Basket Value is determined on the Valuation Date and the Basket
Return is calculated.
If the Basket Return is positive, we will repay the Stated Principal
Amount of the Notes at maturity plus a return equal to the Basket Return multiplied by the Upside Gearing but no more than the Maximum
Gain, calculated as follows:
$10.00 × (1 + the lesser of (i)
Basket Return x Upside Gearing and (ii) Maximum Gain)
If the Basket Return is zero, we will repay the Stated Principal Amount
of the Notes at maturity.
If the Basket Return is negative, we will repay less than the Stated
Principal Amount of your Notes at maturity, resulting in a loss that is proportionate to the decline in the value of the Basket from the
Trade Date to the Valuation Date, calculated as follows:
$10.00 × (1 + Basket Return)
Accordingly, you may lose all or a substantial portion of
your Stated Principal Amount at maturity, depending on how significantly the Basket declines. |
INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE A
SUBSTANTIAL PORTION OR ALL OF YOUR INITIAL INVESTMENT. YOU WILL BE EXPOSED TO THE MARKET RISK OF THE BASKET COMPONENTS. ANY PAYMENT
ON THE NOTES IS SUBJECT TO THE CREDITWORTHINESS OF BOFA FINANCE AND THE GUARANTOR.
Your investment in the Notes entails significant
risks, many of which differ from those of a conventional debt security. Your decision to purchase the Notes should be made only after
carefully considering the risks of an investment in the Notes, including those discussed below, with your advisors in light of your particular
circumstances. The Notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the Notes
or financial matters in general. You should carefully review the more detailed explanation of risks relating to the Notes in the “Risk
Factors” sections beginning on page PS-5 of the accompanying product supplement, page S-6 of the accompanying prospectus supplement
and page 7 of the accompanying prospectus identified on page PS-2 above.
Structure-related Risks
| ¨ | Your investment may result in a loss; there is no guaranteed return of principal. There is no
fixed principal repayment amount on the Notes at maturity. If the Final Basket Value is less than the Initial Basket Value, at maturity,
you will lose 1% of the Stated Principal Amount for each 1% that the Final Basket Value is less than the Initial Basket Value. In that
case, you will lose a significant portion or all of your investment in the Notes. |
| ¨ | The return on the Notes will be limited to the Maximum Gain. The return on the Notes
will not exceed the Maximum Gain, regardless of the performance of the Basket. Your return on the Notes may be less than the return that
you could have realized if you invested directly in the securities held by or included in the Basket Components, and you will not receive
the full benefit of any appreciation in the value of the Basket beyond that Maximum Gain. |
| ¨ | The Notes do not bear interest. Unlike a conventional debt security, no interest payments will
be paid over the term of the Notes, regardless of the extent to which the Final Basket Value exceeds the Initial Basket Value. |
| ¨ | The Upside Gearing applies only at maturity. You should be willing to hold your Notes to maturity.
If you are able to sell your Notes in the secondary market prior to maturity, the price you receive will likely not reflect the full economic
value of the Upside Gearing, and the return you realize may be less than the then-current basket return multiplied by the Upside Gearing,
even if such return is positive. You can receive the full benefit of the Upside Gearing only if you hold your Notes to maturity. Any payment
on the Notes is subject to the credit risk of BofA Finance, as issuer, and BAC, as guarantor. |
| ¨ | Your return on the Notes may be less than the yield on a conventional debt security of comparable
maturity. Any return that you receive on the Notes may be less than the return you would earn if you purchased a conventional debt
security with the same Maturity Date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when
you consider factors, such as inflation, that affect the time value of money. |
| ¨ | Any payment on the Notes is subject to our credit risk and the credit risk of the Guarantor, and actual
or perceived changes in our or the Guarantor’s creditworthiness are expected to affect the value of the Notes. The Notes are
our senior unsecured debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes
are not guaranteed by any entity other than the Guarantor. As a result, your receipt of any payment 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 Maturity Date, regardless of the
Final Basket Value as compared to the Initial Basket Value. No assurance can be given as to what our financial condition or the financial
condition of the Guarantor will be on the Maturity Date. If we and the Guarantor become unable to meet our respective financial obligations
as they become due, you may not receive the amount payable under the terms of the Notes and you could lose all of your initial investment. |
In addition, our credit ratings and the credit
ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations. Consequently, our or
the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s credit ratings or
increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities (the “credit spread”)
prior to the Maturity Date of your Notes may adversely affect the market value of the Notes. However, because your return on the Notes
depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective obligations, such as the values
of the Basket Components, 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 payment on the Notes may be limited. |
| ¨ | The Payment at Maturity will not reflect the value of the Basket other than on the Valuation Date.
The value of the Basket during the term of the Notes other than on the Valuation Date will not affect payment on the Notes. Notwithstanding
the foregoing, investors should generally be aware of the performance of the Basket and the Basket Components while holding the Notes,
as the performance of the Basket and the Basket Components may influence the market value of the Notes. The calculation agent will calculate
the Payment at Maturity by comparing only the Initial Basket Value to the Final Basket Value for the Basket. No other value of the Basket
will be taken into account. As a result, if the Final Basket Value of the Basket is less than the Initial Basket Value, you will receive
less than the Stated Principal Amount at maturity, even if the value of the Basket was always above the Initial Basket Value prior to
the Valuation Date. |
| ¨ | Changes in the level of one of the Basket Components may be offset by changes in the level of the
other Basket Components. The Notes are linked to a Basket. Changes in the levels of one or more of the Basket Components may not correlate
with changes in the levels of one or more of the other Basket Components. The levels of one or more Basket Components may increase, while
the levels of one or |
more of the other Basket Components may decrease or not increase
as much. Therefore, in calculating the value of the Basket, increases in the level of one Basket Component may be moderated or wholly
offset by decreases or lesser increases in the level of one or more of the other Basket Components. Due to the different weightings of
the Basket Components, adverse changes in the level of the Basket Components which are more heavily weighted will have a greater impact
upon the value of your Notes at any time or the Payment at Maturity than changes in the level of lower weighted Basket Components.
Valuation and Market-related Risks
| ¨ | The public offering price you pay for the Notes will exceed their initial estimated value. The
range of initial estimated values of the Notes that is provided on the cover page of this preliminary pricing supplement, and the initial
estimated value as of the Trade Date that will be provided in the final pricing supplement, are each estimates only, determined as of
a particular point in time by reference to our and our affiliates' pricing models. These pricing models consider certain assumptions and
variables, including our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging
transactions, expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes.
These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the
Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated value.
This is due to, among other things, changes in the levels of the Basket Components, changes in the Guarantor’s internal funding
rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charges, all as further described
in "Structuring the Notes" below. These factors, together with various credit, market and economic factors over the term of
the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value
of the Notes in complex and unpredictable ways. |
| ¨ | The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS
or any of our other affiliates would be willing to purchase your Notes in any secondary market (if any exists) at any time.
The value of your Notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including
the performance of the Basket Components, our and BAC’s creditworthiness and changes in market conditions. |
| ¨ | The price of the Notes that may be paid by BofAS in any secondary market (if BofAS makes a market,
which it is not required to do), as well as the price which may be reflected on customer account statements, will be higher than the then-current
estimated value of the Notes for a limited time period after the Trade Date. As agreed by BofAS and UBS, for approximately a seven-month
period after the Trade Date, to the extent BofAS offers to buy the Notes in the secondary market, it will do so at a price that will exceed
the estimated value of the Notes at that time. The amount of this excess, which represents a portion of the hedging-related charges
expected to be realized by BofAS and UBS over the term of the Notes, will decline to zero on a straight line basis over that seven-month
period. Accordingly, the estimated value of your Notes during this initial seven-month period may be lower than the value shown
on your customer account statements. Thereafter, if BofAS buys or sells your Notes, it will do so at prices that reflect the estimated
value determined by reference to its pricing models at that time. Any price at any time after the Trade Date will be based on then-prevailing
market conditions and other considerations, including the performance of the Basket Components and the remaining term of the Notes.
However, none of us, the Guarantor, BofAS or any other party is obligated to purchase your Notes at any price or at any time, and we cannot
assure you that any party will purchase your Notes at a price that equals or exceeds the initial estimated value of the Notes. |
| ¨ | We cannot assure you that a trading market for your Notes will ever develop or be maintained. We
will not list the Notes on any securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that
market will be liquid or illiquid. |
The development of a trading market for the
Notes will depend on the Guarantor’s financial performance and other factors, including changes in the levels of the Basket Components.
The number of potential buyers of your Notes in any secondary market may be limited. We anticipate that BofAS will act as a market-maker
for the Notes, but none of us, the Guarantor or BofAS is required to do so. There is no assurance that any party will be willing to purchase
your Notes at any price in any secondary market. BofAS may discontinue its market-making activities as to the Notes at any time. To the
extent that BofAS engages in any market-making activities, it may bid for or offer the Notes. Any price at which BofAS may bid for, offer,
purchase, or sell any Notes may differ from the values determined by pricing models that it may use, whether as a result of dealer discounts,
mark-ups, or other transaction costs. These bids, offers, or completed transactions may affect the prices, if any, at which the Notes
might otherwise trade in the market. In addition, if at any time BofAS were to cease acting as a market-maker as to the Notes, it is likely
that there would be significantly less liquidity in the secondary market. In such a case, the price at which the Notes could be sold likely
would be lower than if an active market existed.
| ¨ | Economic and market factors have affected the terms of the Notes and may affect the market value of
the Notes prior to maturity. Because market-linked notes, including the Notes, can be thought of as having a debt component and a
derivative component, factors that influence the values of debt instruments and options and other derivatives will also affect the terms
and features of the Notes at issuance and the market price of the Notes prior to maturity. These factors include the levels of the Basket
Components and the values of the securities included in the Basket Components; the volatility of the Basket Components and the securities
included in the Basket Components; the dividend rate paid on the securities included in the Basket Components, if applicable; the time
remaining to the maturity of the Notes; interest rates in the markets; geopolitical conditions and economic, financial, political, force
majeure and regulatory or judicial events; whether the value of the Basket is currently or has been less than the Initial Basket Value;
the availability of comparable instruments; the creditworthiness of BofA Finance, as issuer, and BAC, as guarantor; and the then current
bid-ask spread for the Notes and the factors discussed under “— Trading and hedging activities by us, the Guarantor and any
of our other affiliates, including BofAS, and UBS and its affiliates, may create conflicts of interest with you and may affect your return
on the Notes and their market value” below. These factors are unpredictable and interrelated and may offset or magnify each other. |
| ¨ | Greater expected volatility generally indicates an increased risk of loss at maturity. Volatility
is a measure of the degree of variation in the level of the Basket Components over a period of time. The greater the expected volatility
of the Basket Components at the time the terms of the Notes are set, the greater the expectation is
at that time that you may lose a significant portion or all of the Stated Principal Amount at maturity. However,
the Basket Components' volatility can change significantly over the term of the Notes. You should be willing to accept the downside market
risk of each Basket Component and the potential to lose a significant portion or all of your initial investment. |
Conflict-related Risks
| ¨ | Trading and hedging activities by us, the Guarantor and any of our other affiliates, including BofAS,
and UBS and its affiliates, may create conflicts of interest with you and may affect your return on the Notes and their market value.
We, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates, may buy or sell the securities
held by or included in the Basket Components, or futures or options contracts on the Basket Components or those securities, or other listed
or over-the-counter derivative instruments linked to the Basket Components or those securities. We, the Guarantor or one or more of our
other affiliates, including BofAS, and UBS and its affiliates also may issue or underwrite other financial instruments with returns based
upon the Basket Components and the securities held by or included in the Basket Components. We expect to enter into arrangements or adjust
or close out existing transactions to hedge our obligations under the Notes. We, the Guarantor or our other affiliates, including BofAS,
and UBS and its affiliates also may enter into hedging transactions relating to other notes or instruments, some of which may have returns
calculated in a manner related to that of the Notes offered hereby. We or UBS may enter into such hedging arrangements with one of our
or their affiliates. Our affiliates or their affiliates may enter into additional hedging transactions with other parties relating to
the Notes and the Basket Components. This hedging activity is expected to result in a profit to those engaging in the hedging activity,
which could be more or less than initially expected, or the hedging activity could also result in a loss. We and our affiliates and UBS
and its affiliates will price these hedging transactions with the intent to realize a profit, regardless of whether the value of the Notes
increases or decreases. Any profit in connection with such hedging activities will be in addition to any other compensation that we, the
Guarantor and our other affiliates, including BofAS, and UBS and its affiliates receive for the sale of the Notes, which creates an additional
incentive to sell the Notes to you. While we, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates
may from time to time own securities represented by the Basket Components, except to the extent that BAC’s or UBS Group AG’s
(the parent company of UBS) common stock may be included in the Basket Components, as applicable, we, the Guarantor and our other affiliates,
including BofAS, and UBS and its affiliates do not control any company included in the Basket Components, and have not verified any disclosure
made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates may execute
such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations under the
Notes. The transactions described above may present a conflict of interest between your interest in the Notes and the interests we, the
Guarantor and our other affiliates, including BofAS, and UBS and its affiliates may have in our or their proprietary accounts, in facilitating
transactions, including block trades, for our or their other customers, and in accounts under our or their management. |
The transactions described above may affect
the value of the Basket Components in a manner that could be adverse to your investment in the Notes. On or before the Trade Date, any
purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on its behalf, and UBS and its affiliates (including
for the purpose of hedging some or all of our anticipated exposure in connection with the Notes) may affect the value of the Basket Components.
Consequently, the value of the Basket Components may change subsequent to the Trade Date, which may adversely affect the market value
of the Notes. In addition, these activities may decrease the market value of your Notes prior to maturity, and may affect the amounts
to be paid on the Notes. We, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates may purchase
or otherwise acquire a long or short position in the Notes and may hold or resell the Notes. For example, BofAS may enter into these transactions
in connection with any market making activities in which it engages. We cannot assure you that these activities will not adversely affect
the value of the Basket Components, the market value of your Notes prior to maturity or the amounts payable on the Notes.
| t | There may be potential conflicts of interest involving the calculation agent, which is an affiliate
of ours. We have the right to appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the
Notes and, as such, will make a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes.
Under some circumstances, these duties could result in a conflict of interest between its status as our affiliate and its responsibilities
as calculation agent. |
Basket-related Risks
| ¨ | The Notes are subject to the market risk of the Basket Components. The return on the Notes, which
may be negative, is directly linked to the performance of the Basket Components and indirectly linked to the value of the securities included
in the Basket Components. The levels of the Basket Components can rise or fall sharply due to factors specific to the Basket Components
and the securities included in the Basket Components and the issuers of such securities, such as stock price volatility, earnings and
financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general
market factors, such as general stock market or commodity market volatility and levels, interest rates and economic and political conditions. |
| ¨ | Your return on the Notes and the value of the Notes may be affected by exchange rate movements and
factors affecting the international securities markets, specifically changes in the countries represented by the Basket Components.
The Basket Components include 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 Basket Components may have less liquidity
and may be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S.
or other securities markets. Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings
in foreign companies, may affect trading prices and volumes in these markets. Also, there is generally less publicly available |
information about foreign companies than about those
U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange Commission, and foreign companies
are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S.
reporting companies. Prices of securities in foreign countries are subject to political, economic, financial and social factors that
apply in those geographical regions. These factors, which could negatively affect those securities markets, include the possibility
of recent or future changes in a foreign government’s economic and fiscal policies, the possible imposition of, or changes in,
currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities and
the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political
instability and the possibility of natural disaster or adverse public health developments in the region. Moreover, foreign economies
may differ favorably or unfavorably from the U.S. economy in important respects such as growth of gross national product, rate of
inflation, capital reinvestment, resources and self-sufficiency. In addition, you will not obtain the benefit of any increase in the
value of the currencies in which the securities included in the Basket Components trade against the U.S. dollar, which you would
have received if you had owned the securities represented by the Basket Components during the term of your Notes, although the level
of the Basket Components may be adversely affected by general exchange rate movements in the market.
| ¨ | The publisher of each Basket Component may adjust the applicable Basket Component in a way that affects
its level, and the publisher has no obligation to consider your interests. The publisher of each Basket Component can add, delete,
or substitute the components included in the applicable Basket Component or make other methodological changes that could change its level.
Any of these actions could adversely affect the value of your Notes. |
| ¨ | Governmental regulatory actions could result in material changes to the composition of the Basket
Components and could negatively affect your return on the Notes. Governmental regulatory actions, including but not limited to sanctions-related
actions by the U.S. or foreign governments, could make it necessary or advisable for there to be material changes to the composition of
the Basket Components, depending on the nature of such governmental regulatory actions and the Basket Component constituent stocks that
are affected. For instance, pursuant to recent executive orders, U.S. persons are prohibited from engaging in transactions in publicly
traded securities of certain companies that are determined to be linked to the People’s Republic of China (the “PRC”)
military, intelligence and security apparatus, or securities that are derivative of, or are designed to provide investment exposure to
such securities. If any governmental regulatory action results in the removal of Basket Component constituent stocks that have (or historically
have had) significant weights within the applicable Basket Component, such removal, or even any uncertainty relating to a possible removal,
could have a material and negative effect on the level of the applicable Basket Component and, therefore, your return on the Notes. |
Tax-related Risks
| t | The U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be adverse
to a holder of the Notes. No statutory, judicial, or administrative authority directly addresses the characterization of the Notes
or securities similar to the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax
consequences of an investment in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes
as single financial contracts, as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue
Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the timing and character of
gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance
can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.” You
are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the Notes. |
Hypothetical terms only. Actual terms may vary.
See the cover page for actual offering terms.
The examples below illustrate the hypothetical Payment at Maturity
for a $10.00 Stated Principal Amount Note for a range of hypothetical Basket Returns for the Basket with the following assumptions* (the
actual terms of the Notes will be determined on the Trade Date; amounts may have been rounded for ease of reference and do not take into
account any tax consequences from investing in the Notes):
| t | Stated Principal Amount: $10 |
| t | Term: Approximately 14 months |
| t | Initial Basket Value: 100.00 |
| t | Hypothetical Maximum Gain: 18.85% (the lower end of the range for the Maximum Gain) |
| t | Hypothetical Maximum Payment at Maturity: $11.885 (corresponding to the lower end of the range for the
Maximum Gain) |
*The hypothetical Maximum
Gain and Maximum Payment at Maturity may not represent the actual Maximum Gain and Maximum Payment at Maturity. The actual Maximum Gain
and Maximum Payment at Maturity will be determined on the Trade Date. Any payment on the Notes is subject to issuer and Guarantor credit
risk.
Final Basket Value |
Basket Return |
Payment at Maturity |
Return on the Notes |
160.00 |
60.00% |
$11.885 |
18.85% |
150.00 |
50.00% |
$11.885 |
18.85% |
140.00 |
40.00% |
$11.885 |
18.85% |
130.00 |
30.00% |
$11.885 |
18.85% |
120.00 |
20.00% |
$11.885 |
18.85% |
110.00 |
10.00% |
$11.885 |
18.85% |
106.29 |
6.29% |
$11.885 |
18.85%(1) |
102.00 |
2.00% |
$10.60 |
6.00% |
100.00(2) |
0.00% |
$10.00 |
0.00% |
90.00 |
-10.00% |
$9.00 |
-10.00% |
80.00 |
-20.00% |
$8.00 |
-20.00% |
75.00 |
-25.00% |
$7.50 |
-25.00% |
60.00 |
-40.00% |
$6.00 |
-40.00% |
50.00 |
-50.00% |
$5.00 |
-50.00% |
0.00 |
-100.00% |
$0.00 |
-100.00% |
(1) The “Return on the Notes” cannot exceed the hypothetical Maximum Gain and is calculated based on the Public Offering Price of $10 per Note. |
|
(2) This is the Initial Basket Value. |
|
Example 1 — The Final Basket Value of 150.00 is greater than
the Initial Basket Value of 100.00, resulting in a Basket Return of 50.00%.
Since the Basket Return is positive, we will repay the Stated Principal
Amount of the Notes at maturity plus a return equal to the Basket Return multiplied by the Upside Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00 × (1 + the lesser of (i) 50.00%
x 3.0 and (ii) 18.85%) = $11.885.
In this example, an investment in the Notes would
underperform a direct investment in the securities held by or included in the Basket Components.
Example 2 — The Final Basket Value of 102.00 is greater than
the Initial Basket Value of 100.00, resulting in a Basket Return of 2.00%.
Since the Basket Return is positive, we will repay the Stated Principal
Amount of the Notes at maturity plus a return equal to the Basket Return multiplied by the Upside Gearing, but no more than the Maximum
Gain, calculated as follows:
$10.00 × (1 + the lesser of (i) 2.00%
x 3.0 and (ii) 18.85%) = $10.60.
Example 3 — The Final Basket Value of 50.00 is less than the
Initial Basket Value of 100.00 (resulting in a Basket Return of -50.00%).
Since the Basket Return is negative, we will repay less than the Stated
Principal Amount of your Notes at maturity, resulting in a loss that is proportionate to the decline in the value of the Basket from the
Trade Date to the Valuation Date, calculated as follows:
$10.00 × (1 + -50.00%) = $5.00
The
Basket and the Basket Components
Because the Basket exists solely for purposes of these Notes, historical
information on the performance of the Basket does not exist for dates prior to the Trade Date for these Notes. The graph below sets forth
the hypothetical historical daily levels of the Basket for the period from January 2, 2019 to July 17, 2024, assuming that the Basket
was created on January 2, 2019 with the same Basket Components and corresponding weights in the Basket and with an Initial Basket Value
of 100 on that date. The hypothetical performance of the Basket is based on the actual closing levels of the Basket Components on the
applicable dates. We obtained these closing levels from Bloomberg L.P., without independent verification. Any historical trend in the
level of the Basket during the period shown below is not an indication of the performance of the Basket during the term of the Notes.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_002.jpg)
All disclosures contained in this pricing supplement regarding the
Basket Components, 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, each of STOXX Limited (“STOXX”)
with respect to the EURO STOXX 50® Index (the “SX5E”), Nikkei Inc. (“Nikkei”) with respect to Nikkei
225® Index (the “NKY”), FTSE International Limited (“FTSE”) with respect to the FTSE®
100 Index (the “UKX”), the Geneva, Zurich, SIX Group Ltd., certain of its subsidiaries, and the Management Committee of the
SIX Swiss Exchange (collectively, the “SIX Exchange”), with respect to the Swiss Market Index (the “SMI”) , and
S&P Dow Jones Indices LLC (“S&P”) with respect to the S&P®/ASX 200 Index (the “AS51”)
(STOXX, Nikkei, FTSE, S&P, and Six Exchange together, the “Underlying Sponsors”) The Underlying Sponsors, which license
the copyright and all other rights to the respective Basket Components, have no obligation to continue to publish, and may discontinue
publication of, any Basket Component. The consequences of an Underlying Sponsor discontinuing publication of the applicable Basket Component
are discussed in “Description of the Notes—Discontinuance of an Index” in the accompanying product supplement. None
of us, the Guarantor, the calculation agent, or either Selling Agent accepts any responsibility for the calculation, maintenance or publication
of any Basket Component or any successor index.
None of us, the Guarantor, the Selling Agents or any of our or their
respective affiliates makes any representation to you as to the future performance of any Basket Component.
You should make your own investigation into the Basket Components.
The EURO STOXX 50® Index
The SX5E is composed of 50 stocks from 11 Eurozone countries (Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) of the STOXX Europe 600 Supersector
indices. The STOXX 600 Supersector indices contain the 600 largest stocks traded on the major exchanges of 18 European countries and are
organized into the following 20 Supersectors: Technology; Telecommunications; Health Care; Banks; Financial Services; Insurance; Real
Estate; Automobiles and Parts; Consumer Products and Services; Media; Retail; Travel and Leisure; Food, Beverage and Tobacco; Personal
Care, Drug and Grocery Stores; Construction and Materials; Industrial Goods and Services; Basic Resources; Chemicals; Energy; and Utilities.
The SX5E was created by STOXX, which is part of the Deutsche Börse
Group. Publication of the SX5E began in February 1998, based on an initial SX5E level of 1,000 at December 31, 1991. On March 1, 2010,
STOXX announced the removal of the “Dow Jones” prefix from all of its indices, including the SX5E.
SX5E Composition and Maintenance
For each of the 20 EURO STOXX regional supersector indices, the stocks
are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until the coverage is close
to, but still less than, 60% of the free-float market capitalization of the corresponding supersector index. If the next highest-ranked
stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current stocks in the SX5E
are then added to the selection list. All of the stocks on the selection list are then ranked in terms of free-float market capitalization
to produce the final index selection list. The largest 40 stocks on the selection list are selected; the
remaining 10 stocks are selected from the largest remaining current
stocks ranked between 41 and 60; if the number of stocks selected is still below 50, then the largest remaining stocks are selected until
there are 50 stocks. In exceptional cases, STOXX’s management board can add stocks to and remove them from the selection list.
The SX5E components are subject to a capped maximum index weight of
10%, which is applied on a quarterly basis.
The composition of the SX5E is reviewed annually, based on the closing
stock data on the last trading day in August. Changes in the composition of the SX5E are made to ensure that the SX5E includes the 50
market sector leaders from within the SX5E.
The free float factors for each component stock used to calculate the
SX5E, as described below, are reviewed, calculated, and implemented on a quarterly basis and are fixed until the next quarterly review.
The SX5E is subject to a “fast exit rule.” The SX5E components
are monitored for any changes based on the monthly selection list ranking. A stock is deleted from the SX5E if: (a) it ranks 75 or below
on the monthly selection list and (b) it has been ranked 75 or below for a consecutive period of two months in the monthly selection list.
The highest-ranked stock that is not an index component will replace it. Changes will be implemented on the close of the fifth trading
day of the month, and are effective the next trading day.
The SX5E is also subject to a “fast entry rule.” All stocks
on the latest selection lists and initial public offering (IPO) stocks are reviewed for a fast-track addition on a quarterly basis. A
stock is added, if (a) it qualifies for the latest STOXX blue-chip selection list generated end of February, May, August or November and
(b) it ranks within the “lower buffer” on this selection list.
The SX5E is also reviewed on an ongoing monthly basis. Corporate actions
(including initial public offerings, mergers and takeovers, spin-offs, delistings, and bankruptcy) that affect the SX5E composition are
announced immediately, implemented two trading days later and become effective on the next trading day after implementation.
SX5E Calculation
The SX5E is calculated with the “Laspeyres formula,”
which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating the
SX5E value can be expressed as follows:
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_003.jpg)
The “free float market capitalization of the SX5E” is
equal to the sum of the product of the price, the number of shares and the free float factor and the weighting cap factor for each component
stock as of the time the SX5E is being calculated.
The SX5E is also subject to a divisor, which is adjusted to maintain
the continuity of the SX5E values across changes due to corporate actions, such as the deletion and addition of stocks, the substitution
of stocks, stock dividends, and stock splits.
Neither we nor any of our affiliates, including the selling agent,
accepts any responsibility for the calculation, maintenance, or publication of, or for any error, omission, or disruption in, the SX5E
or any successor to the SX5E. STOXX does not guarantee the accuracy or the completeness of the SX5E or any data included in the SX5E.
STOXX assumes no liability for any errors, omissions, or disruption in the calculation and dissemination of the SX5E. STOXX disclaims
all responsibility for any errors or omissions in the calculation and dissemination of the SX5E or the manner in which the SX5E is applied
in determining the amount payable on the notes at maturity.
Historical Performance of the SX5E
The following graph sets forth the daily historical performance of
the SX5E in the period from January 2, 2019 through July 17, 2024. We obtained this historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 17, 2024 the closing level of the SX5E was
4,891.46.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_004.jpg)
This historical data on the SX5E is not necessarily indicative of
the future performance of the SX5E or what the value of the Notes may be. Any historical upward or downward trend in the level of the
SX5E during any period set forth above is not an indication that the level of the SX5E is more or less likely to increase or decrease
at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly available
sources for the levels of the SX5E.
License Agreement
One of our affiliates has entered into a non-exclusive license agreement
with STOXX providing for the license to it and certain of its affiliated companies, including us, in exchange for a fee, of the right
to use indices owned and published by STOXX (including the SX5E) in connection with certain securities, including the notes offered hereby.
The license agreement requires that the following language be stated
in this document:
STOXX and its licensors (the “Licensors”) have no relationship
to us, other than the licensing of the SX5E and the related trademarks for use in connection with the notes. STOXX and its Licensors do
not:
| § | sponsor, endorse, sell, or promote the notes; |
| § | recommend that any person invest in the notes offered hereby or any other securities; |
| § | have any responsibility or liability for or make any decisions about the timing, amount, or pricing of
the notes; |
| § | have any responsibility or liability for the administration, management, or marketing of the notes; or |
| § | consider the needs of the notes or the holders of the notes in determining, composing, or calculating
the SX5E, or have any obligation to do so. |
STOXX and its Licensors will not have any liability in connection
with the notes. Specifically:
| § | STOXX and its Licensors do not make any warranty, express or implied, and disclaims any and all warranty
concerning: |
| § | the results to be obtained by the notes, the holders of the notes or any other person in connection
with the use of the SX5E and the data included in the SX5E; |
| § | the accuracy or completeness of the SX5E and its data; |
| § | the merchantability and the fitness for a particular purpose or use of the SX5E and its data; |
| § | STOXX and its Licensors will have no liability for any errors, omissions, or interruptions in the
SX5E or its data; and |
| § | Under no circumstances will STOXX be liable for any lost profits or indirect, punitive, special, or
consequential damages or losses, even if STOXX or its Licensors know that they might occur. |
The licensing agreement discussed above is solely for our benefit and
that of STOXX, and not for the benefit of the holders of the notes or any other third parties.
The Nikkei 225 Index
The NKY, also known as the Nikkei Stock Average Index, is an equity
index calculated, published, and disseminated by Nikkei Inc. The NKY measures the composite price performance of selected Japanese stocks.
The NKY is currently based on 225 stocks (each, an “Index Stock”) trading on the Tokyo Stock Exchange (“TSE”)
and represents a broad cross-section of Japanese industry. All 225 of the Index Stocks are listed in the First Section of the TSE. Index
Stocks listed in the First Section are among the most actively traded stocks on the TSE. The NKY started on September 7, 1950. However,
it was retroactively calculated back to May 16, 1949, when the TSE reopened for the first time after World War II.
Calculation of the NKY
The NKY is a modified, price-weighted index. Each Index Stock’s
weight is based on its price per share rather than the total market capitalization of the issuer. Nikkei Inc. calculates the NKY by multiplying
the per share price of each Index Stock by the corresponding weighting factor for that Index Stock (a “Weight Factor”), calculating
the sum of all these products and dividing that sum by a divisor. The divisor is subject to periodic adjustments as set forth below. Each
Weight Factor is computed by dividing ¥50 by the presumed par value of the relevant Index Stock, so that the share price of each Index
Stock when multiplied by its Weight Factor corresponds to a share price based on a uniform par value of ¥50. Each Weight Factor represents
the number of shares of the related Index Stock which are included in one trading unit of the NKY. The stock prices used in the calculation
of the NKY are those reported by a primary market for the Index Stocks, currently the TSE. The level of the NKY is currently calculated
once per 15 seconds during TSE trading hours.
In order to maintain continuity in the level of the NKY in the event
of certain changes due to non-market factors affecting the Index Stocks, such as the addition or deletion of stocks, stock splits, or
increase in paid-in capital, the divisor used in calculating the NKY is adjusted in a manner designed to prevent any instantaneous change
or discontinuity in the level of the NKY. The divisor remains at the new value until a further adjustment is necessary as the result of
another change. In the event of a change affecting any Index Stock, the divisor is adjusted in such a way that the sum of all share prices
immediately after the change multiplied by the applicable Weight Factor and divided by the new divisor, i.e., the level of the NKY immediately
after the change, will equal the level of the NKY immediately prior to the change.
Index Maintenance
The NKY is reviewed annually at the beginning of October. The purpose
of the review is to maintain the representative nature of the Index Stocks. Stocks with high market liquidity are added and those with
low liquidity are deleted. At the same time, to take changes in industry structure into account, the balance of the sectors, in terms
of the number of constituents, is considered. Liquidity of a stock is assessed by the two measures: “trading value” and “magnitude
of price fluctuation by volume,” which is calculated as (high price/low price) / volume. Among stocks on the TSE First Section,
the top 450 stocks in terms of liquidity are selected to form the “high liquidity group”. Those constituents that are not
in the high liquidity group are deleted. Those non-constituent stocks which are in the top 75 of the high liquidity group are added.
After the liquidity deletions and additions, constituents are deleted
and added to balance the number of constituents among sectors, and to make the total number of the constituents equal 225. Among the 450
“high liquidity” stocks, half of those that belong to a sector are designated as the “appropriate number of stocks”
for that sector. The actual number of constituents in a sector is then compared with its “appropriate number,” and if the
actual number is larger or smaller than the “appropriate number,” then components are deleted or added, as necessary. Stocks
to be deleted are selected from stocks with lower liquidity and stocks to be added are selected from stocks with higher liquidity. Stocks
selected according to the foregoing procedures are candidates for addition or deletion, as applicable, and the final determinations will
be made by Nikkei Inc.
The NKY is also reviewed on an ongoing basis in response to extraordinary
developments, such as bankruptcies or mergers. Any stock becoming ineligible for listing in the TSE First Section due to any of the following
reasons will be removed from the NKY: (i) bankruptcy and liquidation events; (ii) corporate restructurings, such as mergers, share exchanges
or share transfers; (iii) excess debt or other reasons; or (iv) transfer to the TSE Second Section. In addition, a component stock designated
as “security under supervision” becomes a deletion candidate. However, the decision to delete such a candidate will be made
by examining the sustainability and the probability of delisting for each individual case. Upon deletion of a stock from the NKY, Nikkei
Inc. will generally select as a replacement the most liquid stock that is both in the “high liquidity group” and in the same
sector as the deleted stock. When deletions are known in advance, replacements may be selected as part of the periodic review process
or by using similar procedures.
The Tokyo Stock Exchange
The TSE is one of the world’s largest securities exchanges
in terms of market capitalization. Trading hours for most products listed on the TSE are currently from 9:00 A.M. to 11:00 A.M. and from
12:30 P.M. to 3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day, the TSE
will close prior to the opening of business in New York City on the same calendar day. Therefore, the closing level of the NKY on a trading
day will generally be available in the U.S. by the opening of business on the same calendar day.
The TSE has adopted certain measures, including daily price floors
and ceilings on individual stocks, intended to prevent any extreme short-term price fluctuations resulting from order imbalances. In general,
any stock listed on the TSE cannot be traded at a price lower than the applicable price floor or higher than the applicable price ceiling.
These price floors and ceilings are expressed in absolute Japanese yen, rather than percentage limits based on the closing price of the
stock on the previous trading day. In addition, when there is a major order imbalance in a listed stock, the TSE posts a “special
bid quote” or a “special asked quote” for that stock at a specified higher or lower price level than the stock’s
last sale price in order to solicit counter-orders and balance supply and demand for the stock. The TSE may also suspend the trading of
individual stocks in certain limited and extraordinary circumstances, including, for example, unusual trading activity in that stock.
As a result, changes in the NKY may be limited by price limitations or special quotes, or by suspension of trading, on individual stocks
that make up the NKY, and these limitations, in turn, may adversely affect the market value of the notes.
Historical Performance of the NKY
The following graph sets forth the daily historical performance of
the NKY in the period from January 2, 2019 through July 17, 2024. We obtained this historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 17, 2024 the closing level of the NKY was
41,097.69.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_005.jpg)
This historical data on the NKY is not necessarily indicative of
the future performance of the NKY or what the value of the Notes may be. Any historical upward or downward trend in the level of the NKY
during any period set forth above is not an indication that the level of the NKY is more or less likely to increase or decrease at any
time over the term of the Notes.
Before investing in the Notes, you should consult publicly available
sources for the levels of the NKY.
License Agreement
One of our affiliates has entered into an agreement with Nikkei Inc.
providing us with a non-exclusive license with the right to use the NKY in exchange for a fee. The NKY is the intellectual property of
Nikkei Inc. (the “index sponsor”), formerly known as Nihon Keizai Shimbum, Inc. “Nikkei”, “Nikkei Stock
Average”, and “Nikkei 225” are the service marks of Nikkei Inc. Nikkei Inc. reserves all the rights, including copyright,
to the NKY.
The Notes are not in any way sponsored, endorsed or promoted by the
index sponsor. The index sponsor does not make any warranty or representation whatsoever, express or implied, either as to the results
to be obtained as to the use of the NKY or the figure at which the NKY stands at any particular day or otherwise. The NKY is compiled
and calculated solely by the index sponsor. However, the index sponsor shall not be liable to any person for any error in the NKY and
the index sponsor shall not be under any obligation to advise any person, including a purchaser or seller of the Notes, of any error therein.
In addition, the index sponsor gives no assurance regarding any modification
or change in any methodology used in calculating the NKY and is under no obligation to continue the calculation, publication and dissemination
of the NKY.
The FTSE® 100 Index
The UKX is a market capitalization-weighted index of the 100 most highly
capitalized U.K.-listed blue chip companies traded on the London Stock Exchange. The UKX was developed with a base level of 1,000 as of
December 30, 1983. It is calculated, published and disseminated by FTSE, a company owned by The London Stock Exchange Plc.
Additional information on the UKX is available from the following website:
ftse.com/uk. We are not incorporating by reference that website or any material it includes in this document.
Index Composition and Selection Criteria
The UKX consists of the 100 largest U.K.-listed blue chip companies,
based on full market capitalization, that pass screening tests for price and liquidity. The UKX is reviewed on a quarterly basis in March,
June, September and December based on data from the close of business on the Tuesday before the first Friday of the review month. The
FTSE Europe, Middle East & Africa Regional Advisory Committee (the “Committee”), meets quarterly to approve the constituents
of the UKX. These meetings are held on the Wednesday before the first Friday in March, June, September and December. Any constituent changes
are implemented after the close of business on the third Friday of the review month (i.e., effective Monday), following the expiration
of the London International Financial Futures and Options Exchange futures and options contracts.
Eligibility Standards
Only “premium listed” equity shares, as defined by the
Financial Conduct Authority in its Listing Rules Sourcebook, are eligible for inclusion in the UKX. Eligible stocks must pass price and
liquidity screens before being included in the UKX. Additionally, a stock must have a free float (as described below) of greater than
5%.
Price Screen — With regard to the price screen, the
Committee must be satisfied that an accurate and reliable price exists for purposes of determining the market value of a company. To be
eligible for inclusion in the UKX, a stock must have a full listing on the London Stock Exchange with a Sterling-denominated price on
SETS (the London Stock Exchange’s trading service for UK blue chip securities).
Minimum Voting Rights Screen — Companies are required
to have greater than 5% of the company’s voting rights (aggregated across all of its equity securities, including, where identifiable,
those that are not listed or trading) in the hands of unrestricted shareholders in order to be eligible for index inclusion. Current constituents
who do not meet this requirement will have until the September 2022 review to meet the requirement or they will be removed from the index.
Liquidity Screen — With regard to liquidity, each eligible
stock is tested for liquidity annually in June by calculating its median daily trading per month. When calculating the median of daily
trades per month of any security, a minimum of five trading days in each month must exist, otherwise the month is excluded from the test.
Liquidity is tested from the first business day in May of the previous year to the last business day of April. The median trade is calculated
by ranking each daily trade total and selecting the middle-ranking day. Any period of suspension is not included in the test. The liquidity
test is applied on a pro-rata basis where the testing period is less than 12 months. A stock not presently included in the UKX that does
not turnover at least 0.025% of its shares in issue (after application of any investability weightings) based on its median daily trade
per month in at least ten of the 12 months prior to the annual index review in June will not be eligible for inclusion until
the next annual review. An existing constituent failing to trade at least 0.015% of its shares in issue (after the application of any
investability weightings) based on its median daily trade per month for at least eight of the 12 months prior to the annual index
review will be removed from the UKX and will not be eligible for inclusion until the next annual review. New issues will become eligible
for inclusion in the UKX at the quarterly review following their issuance provided that they have a minimum trading record of at least
20 trading days prior to the review date and that they have turned over at least 0.025% of their shares in issue (after the application
of any investability weightings) based on their median daily trade per month since listing.
Market Capitalization Ranking — Eligible stocks that
pass the price and liquidity screens are ranked by the Committee according to their market capitalization before the application of any
adjustments based on the extent to which the shares are publicly traded. Only the quoted equity capital of a constituent company will
be included in the calculation of its market capitalization. Where a company has two or more classes of equity, secondary lines will be
included in the calculation of the market capitalization of the company only if those lines are significant and liquid. The Committee
will add a stock to the UKX at the quarterly review if it has risen to 90th place or above on the full market capitalization rankings
and will delete a stock at the quarterly review if it has fallen to 111th place or below on these rankings. Market capitalization
rankings are calculated using data as of the close of business on the day before the review.
100 Constituent Limitation — The UKX always contains
100 constituents. If a greater number of companies qualify to be inserted in the UKX than qualify to be removed, the lowest ranking constituents
of the UKX will be removed so that the total number of stocks remains at 100 following inclusion of those that qualify to be inserted.
Likewise, if a greater number of companies qualify to be removed than to be inserted at
the quarterly review, securities of the highest ranking companies
that are then not included in the UKX will be inserted to match the number of companies being removed, in order to maintain the total
at 100.
Index Calculation
The UKX is a market capitalization weighted index. This means that
the price movement of a larger company (that is, one representing larger percentage of the UKX) will have a greater effect on the level
of the UKX than will the price movement of a smaller company (that is, one representing a smaller percentage of the UKX).
The value of the UKX is represented by a fraction, (a) the numerator
of which is the sum of the product of (i) the price of each component stock, (ii) the number of shares issued
for each such component and (iii) a free float factor for each such component (described more fully below), and (b) the denominator
of which is a divisor. The divisor represents the total issued share capital of the UKX on the base date; the divisor may be adjusted
as necessary to allow for changes in issued share capital of individual securities without distorting the UKX.
As noted above, a free float factor is applied to each index component.
By employing this approach, FTSE uses the investable market capitalization, not the total market capitalization, of each constituent to
determine the value of the UKX. Investable market capitalization depends on free float. The following are excluded from free float: shares
directly owned by state, regional, municipal and local governments (excluding shares held by independently managed pension schemes for
governments); shares held by sovereign wealth funds where each holding is 10% or greater of the total number of shares in issue (if the
holding subsequently decreases below 10%, the shares will be excluded from free float until the holding falls below 7%); shares held by
directors, senior executives and managers of the company, and by their family and direct relations, and by companies with which they are
affiliated; shares held within employee share plans; shares held by public companies or by non-listed subsidiaries of public companies;
shares held by founders, promoters, former directors, founding venture capital and private equity firms, private companies and individuals
(including employees) where the holding is 10% or greater of the total number of shares in issue (if the holding subsequently decreases
below 10%, the shares will be excluded from free float until the holding falls below 7%); all shares where the holder is subject to a
lock-in clause (for the duration of that clause, after which free float changes resulting from the expiration of a lock-in clause will
be implemented at the next quarterly review subsequent to there being a minimum of 20 business days between the expiration date of such
lock-in clause and the index review date); shares held for publicly announced strategic reasons, including shares held by several holders
acting in concert; and shares that are subject to ongoing contractual agreements (such as swaps) where they would ordinarily be treated
as restricted.
The UKX is recalculated whenever errors or distortions occur that are
deemed to be significant. Users of the UKX are notified through appropriate media.
Index Maintenance
The UKX is reviewed quarterly for changes in free float. A stock’s
free float is also reviewed and adjusted if necessary following certain corporate events. Following a takeover or merger involving one
or more index constituents, the free float restrictions will be based on restricted holdings in the successor company and will be implemented
when the offer has completed (or lapsed) unless it directly reflects a corporate action independent of and not conditional on the takeover
or merger completing or lapsing. If the corporate event includes another corporate action that affects the UKX, a change in free float
is implemented at the same time as the corporate action. If there is no corporate action, the change in free float will be applied at
the next quarterly review. Following the application of an initial free float restriction, a stock’s free float will only be
changed if its rounded free float moves more than three percentage points above or below the existing rounded free float. Companies with
a free float of above 99% and of 15% or below will not be subject to the three percentage points threshold.
At each quarterly review, the Committee publishes a Reserve List
containing the six highest ranking non-constituents of the UKX. The Reserve List will be used in the event that one or more constituents
are deleted from the UKX during the period up to the next quarterly review. If a merger or takeover results in one index constituent being
absorbed by another constituent, the resulting company will remain a constituent and a vacancy will be created. This vacancy will be filled
by selecting the highest ranking security in the Reserve List as at the close of the index calculation two days prior to the deletion
and related index adjustment. If an index constituent is taken over by a non-constituent company, the original constituent will be removed
and replaced by the highest ranking non-constituent on the Reserve List. Any eligible company resulting from the takeover will be eligible
to become the replacement company if it is ranked higher than any other company on the Reserve List. If a constituent company is split
to form two or more companies, then the resulting companies will be eligible for inclusion as index constituents, based on their respective
full market capitalizations (before the application of any investability weightings), provided that they qualify in all other respects.
Any eligible company resulting from a split that has no available market price after 20 business days will be removed. If a split results
in the inclusion of an ineligible non-equity security, such security will remain in the UKX for two trading days and then be removed.
If a constituent is delisted or ceases to have a firm quotation, it will be removed from the list of constituents and be replaced by the
highest ranking eligible company from the Reserve List as at the close of the index calculation two days prior to the deletion.
Capitalization Adjustments
A premium listed secondary line of a company will be considered for
index inclusion if its total market capitalization before the application of any adjustments based on the extent to which the shares are
publicly traded, is greater than 25% of the total market capitalization of the company’s principal line and the secondary line is
eligible, in its own right. Should the total market capitalization of a secondary line fall below 20% of the total market capitalization
of the company’s principal line at an annual review, the secondary line will be deleted from the UKX unless its total market capitalization
remains above the qualification level for continued inclusion as a constituent of the UKX at that review. Where a company has partly paid
shares, these shares, together with the outstanding call(s), are both included in the UKX. Warrants to purchase ordinary shares and convertible
securities are not included in the UKX until they are exercised or converted.
Share Weighting Changes — For the purposes of computing
the UKX, the number of shares in issue for each constituent security is expressed to the nearest share and, to prevent a large number
of insignificant weighting changes, the number of shares in issue for each constituent security is amended only when the total shares
in issue held within the index system changes by more than 1% on a cumulative basis. Changes will be made quarterly after the close of
business on the third Friday of March, June, September and December. The data for these changes will be taken from the close of business
on the third Wednesday of the month prior to the review month.
If a corporate action is applied to a constituent, which involves
a change in the number of shares in issue, the change in shares will be applied simultaneously with the corporate action. If accumulated
changes in the number of shares in issue add up to 10% or more or when an accumulated share change represents $2 billion of a company’s
total market capitalization, they are implemented between quarters. If an adjustment is made, it will be applied for the first time at
the next review in March of the following year. All adjustments are made before the start of the index calculation on the day concerned,
unless market conditions prevent this.
Shares in Issue Increase — When a company increases
the number of shares it has in issue, the market capitalization of that company increases and the total market capitalization will rise
accordingly. The index divisor is adjusted to maintain a constant index value.
Weighting Amendments — The market capitalization of
a company is adjusted to take account of various corporate actions, in accordance with the rules of the UKX. To prevent the value of the
UKX from changing due to such an event, all corporate actions which affect the market capitalization of the UKX require an offsetting
divisor adjustment. By adjusting the divisor, the value of the UKX remains constant before and after the event. Below is a summary of
the more frequent corporate actions and their resulting adjustment.
Market Disruption
If there is a system problem or situation in the market that is judged
by FTSE to affect the quality of the constituent prices at any time when the UKX is being calculated, the UKX will be declared indicative
(e.g., normally where a “fast market” exists in the equity market). The message “IND” will be displayed against
the index value calculated by FTSE. The Committee must be satisfied that an accurate and reliable price for the purposes of determining
the market value of a company exists. The Committee may exclude a security from the UKX should it consider that an “accurate and
reliable” price is not available.
If any event leads to an error in the value of the UKX that is greater
than three basis points at the local country index level, then the UKX will generally be recalculated, subject to discovery, within one
month of the event. Where an alternative approach is available, FTSE may, at its sole discretion, choose not to recalculate.
Historical Performance of the UKX
The following graph sets forth the daily historical performance of
the UKX in the period from January 2, 2019 through July 17, 2024. We obtained this historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 17, 2024 the closing level of the UKX was
8,187.46.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_006.jpg)
This historical data on the UKX is not necessarily indicative of
the future performance of the UKX or what the value of the Notes may be. Any historical upward or downward trend in the level of the UKX
during any period set forth above is not an indication that the level of the UKX is more or less likely to increase or decrease at any
time over the term of the Notes.
Before investing in the Notes, you should consult publicly available
sources for the levels of the UKX.
License Agreement
These notes are not in any way sponsored, endorsed, sold or promoted
by FTSE or by The London Stock Exchange Plc (the “Exchange”) or by The Financial Times Limited (“FT”) and neither
FTSE or Exchange or FT makes any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained
from the use of the FTSE® 100 Index and/or the figure at which the said index stands at any particular time on any particular
day or otherwise. The index is compiled and calculated solely by FTSE. However, neither FTSE or Exchange or FT shall be liable (whether
in negligence or otherwise) to any person for any error in the index and neither FTSE or Exchange or FT shall be under any obligation
to advise any person of any error therein.
“FTSETM” and “FootsieTM”
are trademarks of The London Stock Exchange Plc and The Financial Times Limited and are used by FTSE under license.
The Swiss Market Index
The SMI:
| · | was first launched with a base level of 1,500 as of June 30, 1988; and |
| · | is sponsored, calculated, published and disseminated by SIX Group Ltd., certain of its subsidiaries,
and the Management Committee of the SIX Swiss Exchange. |
The SMI is a price return float-adjusted market capitalization-weighted
index of the 20 largest stocks traded on the SIX Swiss Exchange. The Management Committee of SIX Swiss Exchange is supported by an Index
Commission (advisory board) in all index-related matters, notably in connection with changes to the index rules and adjustments, additions
and exclusions outside of the established review and acceptance period. The Index Commission meets at least twice annually.
Information regarding the SMI may be found on the SIX Swiss Exchange’s
website. Please note that information included in that website is not included or incorporated by reference in this document.
Index Composition and Selection Criteria
The SMI is comprised of the 20 highest ranked stocks traded on the
SIX Swiss Exchange that have a free float of 20% or more and that are not investment companies. The equity universe is largely Swiss domestic
companies; however, in some cases, foreign issuers with a primary listing on the SIX Swiss Exchange or investment companies that do not
hold any shares of any other eligible company and that have a primary listing on the SIX Swiss Exchange may be included.
The ranking of each security is determined by a combination of the
following criteria:
| · | average free-float market capitalization (compared to the capitalization of the entire SIX Swiss Exchange
index family), and |
| · | cumulative on order book turnover (compared to the total turnover of the SIX Swiss Exchange index family). |
Each of these two factors is assigned a 50% weighting in ranking the
stocks eligible for the SMI.
The SMI is reconstituted annually after prior notice of at least two
months on the third Friday in September after the close of trading.
The reconstitution is based on data from the previous July 1 through
June 30. Provisional interim selection (ranking) lists are also published following the end of the third, fourth and first financial quarters.
In order to reduce turnover, an index constituent will not be replaced
unless it is ranked below 23 or, if it is ranked 21 or 22, if another share ranks 18 or higher. If a company has primary listings on several
exchanges and less than 50% of that company’s total turnover is generated on the SIX Swiss Exchange, it will not be included in
the SMI unless it ranks at least 18 or better on the selection list on the basis of its turnover alone (i.e., without considering its
free float).
Maintenance of the Index
Constituent Changes. In the case of major market changes
as a result of capital events such as mergers or new listings, the Management Committee of the SIX Swiss Exchange can decide at the request
of the Index Commission that a security should be admitted to the SMI outside the annual review period as long as it clearly fulfills
the criteria for inclusion. For the same reasons, a security can also be excluded if the requirements for admission to the SMI are no
longer fulfilled. As a general rule, extraordinary acceptances into the SMI take place after a three-month period on a quarterly basis
after the close of trading on the third Friday of March, June, September and December (for example, a security listed on or before the
fifth trading day prior to the end of November cannot be included until the following March). An announced insolvency is deemed to be
an extraordinary event and the security will be removed from the SMI with five trading days’ prior notice if the circumstances permit
such notice.
Capped Weightings and Intra-Quarter Breaches. The weight
of any index constituent that exceeds a weight of 18% within the index is reduced to that value at each quarterly index review by applying
a capping factor to the calculation of such constituent’s free float market capitalization. A constituent’s number of shares
and free float market capitalization are used to determine its capping factor. The excess weight (the difference of the original weight
minus the capped weight) is distributed proportionally across the other index constituents. The constituents are also capped to 18% as
soon as two index constituents exceed a weight of 20% (an “intra-quarter breach”). If an intra-quarter breach is observed
after the close of the markets, a new calculation of the capping factors is executed immediately and communicated to the market in order
to ensure that the maximum weight per constituent is capped at 18% for the opening on the next day. In order to achieve a capped weighting
of the index without causing market distortion, a stepwise reduction is conducted based on the quarterly index reviews to ensure that
no change in the weight (as a result of capping) from one review to the next exceeds 3%. The transition period is in effect until no component
has a weight larger than 18%. In the case of an intra-quarter breach, the weights are limited to the last defined weights as of the prior
review.
Number of Shares and Free Float. The securities included
in the SMI are weighted according to their free float. This means that shares deemed to be in firm hands are subtracted from the total
market capitalization of that company. The free float is calculated on the basis of outstanding shares. Issued and outstanding equity
capital is, as a rule, the total amount of equity capital that has been fully subscribed and wholly or partially paid in and documented
in the Commercial Register. Not counting as issued and outstanding equity capital are the approved capital and the conditional capital
of a company. The free float is calculated on the basis of listed shares only. If a company offers several different categories of listed
participation rights, each is treated separately for purposes of index calculation.
Shares held deemed to be in firm hands are shareholdings that have
been acquired by one person or a group of persons in companies domiciled in Switzerland and which, upon exceeding 5%, have been reported
to the SIX Swiss Exchange. Shares of persons and groups of persons who are subject to a shareholder agreement which is binding for more
than 5% of the listed shares or who, according to publicly known facts, have a long-term interest in a company, are also deemed to be
in firm hands.
For the calculation of the number of shares in firm hands, the SIX
Swiss Exchange may also use other sources than the reports submitted to it. In particular, the SIX Swiss Exchange may use data gained
from issuer surveys that it conducts itself.
In general, shares held by custodian nominees, trustee companies,
investment funds, pension funds and investment companies are deemed free-floating regardless whether a report has been made to the SIX
Swiss Exchange. The SIX Swiss Exchange classifies at its own discretion persons and groups of persons who, because of their area of activity
or the absence of important information, cannot be clearly assigned.
The free-float rule applies only to bearer shares and registered
shares. Capital issued in the form of participation certificates and bonus certificates is taken into full account in calculating the
SMI because it does not confer voting rights.
The number of securities in the SMI and the free-float factors are
adjusted after the close of trading on four adjustment dates per year, the third Friday of March, June, September and December. Such changes
are pre-announced at least one month before the adjustment date, although the SIX Exchange reserves the right to take account of recent
changes before the adjustment date in the actual adjustment, so the definite new securities are announced five trading days before the
adjustment date.
In order to avoid frequent slight changes to the weighting and to
maintain the stability of the SMI, any extraordinary change of the total number of outstanding securities or the free float will only
result in an extraordinary adjustment if it exceeds 10% and 5% respectively and is in conjunction with a corporate action.
After a takeover, the SIX Swiss Exchange may, in exceptional cases,
adjust the free float of a company upon publication of the end results after a five-day notification period or may exclude the security
from the relevant index family. When an insolvency has been announced, an extraordinary adjustment will be made and the affected security
will be removed from the SMI after five trading days’ notice.
The SIX Exchange reserves the right to make an extraordinary adjustment,
in exceptional cases, without observing the notification period.
Calculation of the Index
The SIX Exchange calculates the SMI using the “Laspeyres formula,”
with a weighted arithmetic mean of a defined number of securities issues. The formula for calculating the index value can be expressed
as follows:
Index = |
Free Float Market Capitalization of the index
Divisor |
The “free float market capitalization of the index” is
equal to the sum of the product of the last-paid price, the number of shares, the free-float factor, the capping factor and, if a foreign
stock is included, the current CHF exchange rate as of the time the index value is being calculated. The index value is calculated in
real time and is updated whenever a trade is made in a component stock. Where any index component stock price is unavailable on any trading
day, the SIX Swiss Exchange will use the last reported price for such component stock. Only prices from the SIX Swiss Exchange’s
electronic order book are used in calculating the SMI.
Divisor Value and Adjustments
The divisor is a technical number used to calculate the SMI and is
adjusted to reflect changes in market capitalization due to corporate events, and is adjusted by SIX Swiss Exchange to reflect corporate
events, as described in the index rules.
Historical Performance of the SMI
The following graph sets forth the daily historical performance of
the SMI in the period from January 2, 2019 through July 17, 2024. We obtained this historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 17, 2024 the closing level of the SMI was
12,333.93.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_007.jpg)
This historical data on the SMI is not necessarily indicative of
the future performance of the SMI or what the value of the Notes may be. Any historical upward or downward trend in the level of the SMI
during any period set forth above is not an indication that the level of the SMI is more or less likely to increase or decrease at any
time over the term of the Notes.
Before investing in the Notes, you should consult publicly available
sources for the levels of the SMI.
License Agreement
The Notes are not in any way sponsored, endorsed, sold or promoted
by the SIX Swiss Exchange and the SIX Swiss Exchange makes no warranty or representation whatsoever, express or implied, either as to
the results to be obtained from the use of the SMI and/or the level at which the SMI stands at any particular time on any particular day.
However, the SIX Swiss Exchange shall not be liable (whether through negligence or otherwise) to any person for any error in the index
and the SIX Swiss Exchange shall not be under any obligation to disclose such errors.
SIX®, SIX Swiss Exchange®, SPI®,
Swiss Performance Index (SPI)®, SPI EXTRA®, SMI®, Swiss Market Index® (SMI)®,
SMIM®, SMI MID (SMIM)®, SMI Expanded®, SXI®, SXI LIFE SCIENCES®,
SXI Bio+Medtech®, SBI®, SBI Swiss Bond Index®, VSMI®, SIX Immobilienfonds
Index® and SIX Quotematch® are trademarks that have been registered in Switzerland and/or abroad by the
SIX Swiss Exchange. Their use is subject to a license.
The S&P®/ASX 200 Index
The AS51:
| · | was first launched in 1979 by the Australian Securities Exchange and was acquired and re-launched by
S&P on April 3, 2000; and |
| · | is sponsored, calculated, published and disseminated by S&P Dow Jones Indices LLC, a part of McGraw
Hill Financial. |
The AS51 includes 200 companies and covers approximately 80% of the
Australian equity market by market capitalization. As discussed below, the AS51 is not limited solely to companies having their primary
operations or headquarters in Australia or to companies having their primary listing on the Australian Securities Exchange (the “ASX”).
All ordinary and preferred shares (if such preferred shares are not of a fixed income nature) listed on the ASX, including secondary listings,
are eligible for the AS51. Hybrid stocks, bonds, warrants, preferred stock that provides a guaranteed fixed return and listed investment
companies are not eligible for inclusion.
The AS51 is intended to provide exposure to the largest 200 eligible
securities that are listed on the ASX by float-adjusted market capitalization. Constituent companies for the AS51 are chosen based on
market capitalization, public float and liquidity. All index-eligible securities that have their primary or secondary listing on the ASX
are included in the initial selection of stocks from which the 200 index stocks may be selected.
The float-adjusted market capitalization of companies is determined
based on the daily average market capitalization over the last six months. The security’s price history over the last six months,
the latest available shares on issue and the investable weight factor (the “IWF”), are the factors relevant to the calculation
of daily average market capitalization. The IWF is a variable that is primarily used to determine the available float of a security for
ASX listed securities.
Information regarding the S&P®/ASX 200 Index may
be found on S&P’s website. That information is updated from time to time on that website. Please note that information included
in that website is not included or incorporated by reference in this document.
Number of Shares
When considering the index eligibility of securities for inclusion
or promotion into S&P/ASX indices, the number of index securities under consideration is based upon the latest available ASX quoted
securities. For domestic securities (companies incorporated in Australia and traded on the ASX, companies incorporated overseas but exclusively
listed on the ASX and companies incorporated overseas and traded on other markets but most of its trading activity is on the ASX), this
figure is purely based upon the latest available data from the ASX.
Foreign-domiciled securities may quote the total number of securities
on the ASX that is representative of their global equity capital; whereas other foreign-domiciled securities may quote securities on the
ASX on a partial basis that represents their Australian equity capital. In order to overcome this inconsistency, S&P will quote the
number of index securities that are represented by CHESS Depositary Interests (“CDIs”) for a foreign entity. When CDIs are
not issued, S&P will use the total securities held on the Australian register (CHESS and, where supplied, the issuer sponsored register).
This quoted number for a foreign entity is representative of the Australian equity capital, thereby allowing the AS51 to be increasingly
reflective of the Australian market.
The number of CDIs or shares of a foreign entity quoted on the ASX
can experience more volatility than is typically the case for ordinary shares on issue. Therefore, an average number on issue will be
applied over a six-month period.
Where CDI information is not supplied to the ASX by the company or
the company’s share register, estimates for Australian equity capital will be drawn from CHESS data and, ultimately, registry-sourced
data.
IWF
The IWF represents the float-adjusted portion of a stock’s
equity capital. Therefore any strategic holdings that are classified as either corporate, private or government holdings reduce the IWF
which, in turn, results in a reduction in the float-adjusted market capital.
The IWF ranges between 0 and 1, is calculated as 1 – Sum of
the % held by strategic shareholders who possess 5% or more of issued shares, and is an adjustment factor that accounts for the publicly
available shares of a company. A company must have a minimum IWF of 0.3 to be eligible for index inclusion.
S&P identifies the following shareholders whose holdings are
considered to be control blocks and are subject to float adjustment:
| 1. | Government and government agencies; |
| 2. | Controlling and strategic shareholders/partners; |
| 3. | Any other entities or individuals which hold more than 5%, excluding insurance companies, securities companies and investment funds;
and |
Other restricted portions such as treasury stocks.
Liquidity Test
Only stocks that are regularly traded are eligible for inclusion. Eligible
stocks are considered for index inclusion based on their stock median liquidity (median daily value traded divided by its average float-adjusted
market capitalization for the last six months relative to the market capitalization weighted average of the stock median liquidities of
the 500 constituents of the All Ordinaries index, another member of the S&P/ASX index family).
Index Maintenance
S&P rebalances constituents quarterly to ensure adequate market
capitalization and liquidity using the previous six months’ data to determine index eligibility. Quarterly review changes take effect
the third Friday of March, June, September and December. Eligible stocks are considered for index inclusion based on their float-adjusted
market capitalization rank relative to the stated quota of 200 securities. For example, a stock that is currently in the S&P/ASX 300
and is ranked at 175, based on float-adjusted market capitalization, within the universe of eligible securities may be considered for
inclusion into the AS51, provided that liquidity hurdles are met.
In order to limit the level of index turnover, eligible securities
will only be considered for index inclusion once another stock is excluded due to a sufficiently low rank and/or liquidity, based on the
float-adjusted market capitalization. Potential index inclusions and exclusions need to satisfy buffer requirements in terms of the rank
of the stock relative to a given index. The buffers are established to limit the level of index turnover that may take place at each quarterly
rebalancing.
Between rebalancing dates, an index addition is generally made only
if a vacancy is created by an index deletion. Index additions are made according to float-adjusted market capitalization and liquidity.
An initial public offering is added to the AS51 only when an appropriate vacancy occurs and is subject to proven liquidity for at least
two months. An exception may be made for extraordinary large offerings where sizeable trading volumes justify index inclusion.
Deletions can occur between index rebalancing dates due to acquisitions,
mergers and spin-offs or due to suspension or bankruptcies. The decision to remove a stock from the AS51 will be made once there is sufficient
evidence that the transaction will be completed. Stocks that are removed due to mergers and acquisitions are removed from the AS51 at
the cash offer price for cash-only offers. Otherwise, the best available price in the market is used.
Share numbers for all index constituents are updated quarterly and
are rounded to the nearest thousand. The update to the number of issued shares will be considered if the change is at least 5% of the
float adjusted shares or $100 million in value.
Share updates for foreign-domiciled securities will take place annually
at the March rebalancing. The update to the number of index shares will only take place when the six-month average of CDIs or the Total
Securities held in the Australian branch of issuer sponsored register (where supplied) and in CHESS, as of the March rebalancing, differs
from the current index shares by either 5% or a market-cap dollar amount greater than A$100 million. Where CDI information is not supplied
to the ASX by the company or the company’s share register, estimates for Australian equity capital will be drawn from CHESS data
and, ultimately, registry-sourced data.
Intra-quarter share changes are implemented at the effective date
or as soon as reliable information is available; however, they will only take place in the following circumstances:
| · | changes in a company’s float-adjusted shares of 5% or more due to market-wide shares issuance; |
| · | rights issues, bonus issues and other major corporate actions; and |
| · | share issues resulting from index companies merging and major off-market buy-backs. |
Share changes due to mergers or acquisitions are implemented when
the transaction occurs, even if both of the companies are not in the same index and regardless of the size of the change.
IWFs are reviewed annually as part of the September quarterly review.
However, any event that alters the float of a security in excess of 5% will be implemented as soon as practicable by an adjustment to
the IWF.
The function of the IWF is also to manage the index weight of foreign-domiciled
securities that quote shares on the basis of CDIs. Due to the volatility that is displayed by CDIs, unusually large changes in the number
of CDIs on issue could result. Where this is the case, the IWF may be used to limit the effect of unusually large changes in the average
number of CDIs (and, thereby, limit the potential to manipulate this figure). Where the Australian Index Committee sees fit to apply the
IWF in this manner, the rationale for the decision will be announced to the market. This will be reviewed annually at the March-quarter
index rebalancing date.
Calculation of the AS51
The AS51 is calculated using a base-weighted aggregate methodology.
The value of the AS51 on any day for which an index value is published is determined by a fraction, the numerator of which is the aggregate
of the price of each stock in the AS51 times the number of shares of such stock included in the AS51 times that stock’s IWF, and
the denominator of which is the divisor, which is described more fully below.
In order to prevent the value of the AS51 from changing due to corporate
actions, all corporate actions may require S&P to make an index or divisor adjustment, as described in S&P’s rules. This
helps maintain the value of the AS51 and ensures that the movement of the AS51 does not reflect the corporate actions of the individual
companies that comprise the AS51.
In situations where an exchange is forced to close early due to unforeseen
events, such as computer or electric power failures, weather conditions or other events, S&P will calculate the closing price of the
indices based on (1) the closing prices published by the exchange or (2) if no closing price is available, the last regular trade reported
for each security before the exchange closed. If the exchange fails to open due to unforeseen circumstances, S&P treats this closure
as a standard market holiday. The AS51 will use the prior day’s closing prices and shifts any
corporate actions to the following business day. If all exchanges
fail to open or in other extreme circumstances, S&P may determine not to publish the AS51 for that day.
S&P reserves the right to recalculate the AS51 under certain
limited circumstances.
Historical Performance of the AS51
The following graph sets forth the daily historical performance of
the AS51 in the period from January 2, 2019 through July 17, 2024. We obtained this historical data from Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 17, 2024 the closing level of the AS51 was
8,057.892.
![](https://www.sec.gov/Archives/edgar/data/1682472/000101376224000304/image_008.jpg)
This historical data on the AS51 is not necessarily indicative of
the future performance of the AS51 or what the value of the Notes may be. Any historical upward or downward trend in the level of the
AS51 during any period set forth above is not an indication that the level of the AS51 is more or less likely to increase or decrease
at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly available
sources for the levels of the AS51.
License Agreement
S&P® is a registered trademark of Standard &
Poor’s Financial Services LLC (“S&P”). These trademarks have been licensed for use by S&P Dow Jones Indices
LLC. “Standard & Poor’s®,” “S&P®/ASX 200®” and “S&P®”
are trademarks of S&P. These trademarks have been sublicensed for certain purposes by our subsidiary, Merrill Lynch, Pierce, Fenner
& Smith Incorporated (“MLPF&S”). The S&P®/ASX 200 Index is a product of S&P Dow Jones Indices
LLC and/or its affiliates and has been licensed for use by MLPF&S.
The Notes are not sponsored, endorsed, sold or promoted by Standard
& Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”). Neither S&P nor the Australia Stock Exchange
make any 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 S&P®/ASX 200 Index to track
general stock market performance. S&P’s and the Australia Stock Exchange’s only relationship to MLPF&S is the licensing
of certain trademarks and trade names of S&P and the Australia Stock Exchange and of the S&P®/ASX 200 Index, which
index is determined, composed and calculated by S&P without regard to us, MLPF&S or the Notes. S&P and the Australia Stock
Exchange have no obligation to take our needs or the needs of MLPF&S or the owners of the Notes into consideration in determining,
composing or calculating the S&P®/ASX 200 Index. S&P and the Australia Stock Exchange 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. S&P and the Australia Stock Exchange have no obligation
or liability in connection with the administration, marketing or trading of the Notes.
S&P AND THE AUSTRALIA STOCK EXCHANGE DO NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE S&P®/ASX 200 INDEX OR ANY DATA INCLUDED THEREIN AND S&P AND THE AUSTRALIA STOCK
EXCHANGE SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P AND THE AUSTRALIA STOCK EXCHANGE MAKE NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY US, MLPF&S, OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE S&P®/ASX 200 INDEX OR ANY DATA INCLUDED THEREIN. S&P AND THE AUSTRALIA STOCK EXCHANGE 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 S&P®/ASX 200 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
OR THE AUSTRALIA STOCK EXCHANGE HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
Supplement
to the Plan of Distribution; Role of BofAS and Conflicts of Interest |
BofAS, an affiliate of BofA Finance and the lead selling agent for the
sale of the Notes, will receive an underwriting discount of $0.20 for any Note sold in this offering. UBS, as selling agent for sales
of the Notes, expects to purchase from BofAS, and BofAS expects to sell to UBS, all of the Notes sold in this offering for $9.80 per Note.
UBS proposes to offer the Notes to the public at a price of $10.00 per Note. UBS will receive an underwriting discount of $0.20 for each
Note it sells to the public. The underwriting discount will be received by UBS and its financial advisors collectively. If all of the
Notes are not sold at the initial offering price, BofAS may change the public offering price and other selling terms.
BofAS, a broker-dealer affiliate of ours, is a member of the Financial
Industry Regulatory Authority, Inc. (“FINRA”) and will participate as lead selling agent in the distribution of the Notes.
Accordingly, the offering of the Notes will conform to the requirements of FINRA Rule 5121. BofAS may not make sales in this offering
to any of its discretionary accounts without the prior written approval of the account holder.
We will deliver the Notes against payment therefor in New York, New
York on a date that is greater than one business day following the Trade Date. Under Rule 15c6-1 of the Securities Exchange Act of 1934,
trades in the secondary market generally are required to settle in one business day, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade the Notes more than one business day prior to the Issue Date will be required to
specify alternative settlement arrangements to prevent a failed settlement.
BofAS and any of our other broker-dealer affiliates may use this pricing
supplement, and the accompanying product supplement, prospectus supplement and prospectus, for offers and sales in secondary market transactions
and market-making transactions in the Notes. However, they are not obligated to engage in such secondary market transactions and/or market-making
transactions. These broker-dealer affiliates may act as principal or agent in these transactions, and any such sales will be made at prices
related to prevailing market conditions at the time of the sale.
As agreed by BofAS and UBS, for approximately a seven-month period
after the Trade Date, to the extent BofAS offers to buy the Notes in the secondary market, it will do so at a price that will exceed the
estimated value of the Notes at that time. The amount of this excess will decline on a straight line basis over that period. Thereafter,
if BofAS buys or sells your Notes, it will do so at prices that reflect the estimated value determined by reference to its pricing models
at that time. Any price at any time after the Trade Date will be based on then-prevailing market conditions and other considerations,
including the performance of the Basket Components and the remaining term of the Notes. However, none of us, the Guarantor, BofAS, UBS
or any other party is obligated to purchase your Notes at any price or at any time, and we cannot assure you that any party will purchase
your Notes at a price that equals or exceeds the initial estimated value of the Notes.
Any price that BofAS may pay to repurchase the Notes will depend upon
then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction costs. At certain times, this price may
be higher than or lower than the initial estimated value of the Notes.
Sales Outside of the United States
The Notes have not been approved for public sale in any jurisdiction
outside of the United States. There has been no registration or filing as to the Notes with any regulatory, securities, banking, or local
authority outside of the United States and no action has been taken by BofA Finance, BAC, BofAS or any other affiliate of BAC, or by UBS
or any of its affiliates, to offer the Notes in any jurisdiction other than the United States. As such, these Notes are made available
to investors outside of the United States only in jurisdictions where it is lawful to make such offer or sale and only under circumstances
that will result in compliance with applicable laws and regulations, including private placement requirements.
Further, no offer or sale of the securities is permitted with regards
to the following jurisdictions:
You are urged to carefully review the selling restrictions that
may be applicable to your jurisdiction beginning on page S-56 of the accompanying prospectus supplement.
European Economic Area and United Kingdom
None of this pricing supplement, the accompanying product
supplement, the accompanying prospectus or the accompanying prospectus supplement is a prospectus for the purposes of the Prospectus Regulation
(as defined below). This pricing supplement, the accompanying product supplement, the accompanying prospectus and the accompanying prospectus
supplement have been prepared on the basis that any offer of Notes in any Member State of the European Economic Area (the “EEA”)
or in the United Kingdom (each, a “Relevant State”) will only be made to a legal entity which is a qualified investor under
the Prospectus Regulation (“Qualified Investors”). Accordingly any person making or intending to make an offer in that Relevant
State of Notes which are the subject of the offering contemplated in this pricing supplement, the accompanying product supplement, the
accompanying prospectus and the accompanying prospectus supplement may only do so with respect to Qualified Investors. Neither BofA Finance
nor BAC has authorized, nor does it authorize, the making of any offer of Notes other than to Qualified Investors. The expression “Prospectus
Regulation” means Regulation (EU) 2017/1129.
PROHIBITION OF SALES TO EEA AND UNITED KINGDOM RETAIL
INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the EEA or in the United Kingdom. For these purposes: (a) a retail investor means a
person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID
II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (the Insurance Distribution Directive), where that customer
would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as
defined in the Prospectus Regulation; and (b) the expression “offer” includes the communication in any form and by any means
of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe
for the Notes. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”)
for offering or selling the Notes or otherwise making them available to retail investors in the EEA or in the United Kingdom has been
prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA or in the United
Kingdom may be unlawful under the PRIIPs Regulation.
United Kingdom
The communication of this pricing supplement, the accompanying
product supplement, the accompanying prospectus supplement, the accompanying prospectus and any other document or materials relating to
the issue of the Notes offered hereby is not being made, and such documents and/or materials have not been approved, by an authorized
person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the “FSMA”).
Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United
Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those persons in the United
Kingdom who have professional experience in matters relating to investments and who fall within the definition of investment professionals
(as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial
Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order, or who are any other persons to
whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together being referred to as “relevant
persons”). In the United Kingdom, the Notes offered hereby are only available to, and any investment or investment activity to which
this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement and the accompanying prospectus relates
will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely
on this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus
or any of their contents.
Any invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only be communicated or caused to
be communicated in circumstances in which Section 21(1) of the FSMA does not apply to the issuer or the Guarantor.
All applicable provisions of the FSMA must be complied with in respect to
anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom.
Structuring
the Notes
The Notes are our debt securities, the return on which is linked to
the performance of the Basket. The related guarantees are BAC’s obligations. Any payments on the Notes depend on the credit risk
of BofA Finance and BAC and on the performance of the Basket. The economic terms of the Notes reflect our and BAC’s actual or perceived
creditworthiness at the time of pricing and are based on BAC’s internal funding rate, which is the rate it would pay to borrow funds
through the issuance of market-linked notes, and the economic terms of certain related hedging arrangements it enters into. BAC’s
internal funding rate is typically lower than the rate it would pay when it issues conventional fixed or floating rate debt securities.
This difference in funding rate, as well as the underwriting discount and the hedging related charges described elsewhere in this pricing
supplement, will reduce the economic terms of the Notes to you and the initial estimated value of the Notes. Due to these factors, the
public offering price you pay to purchase the Notes will be greater than the initial estimated value of the Notes as of the Trade Date.
On the cover page of this preliminary pricing supplement, we have provided the initial estimated value range for the Notes. The final
pricing supplement will set forth the initial estimated value of the Notes as of the Trade Date.
In order to meet our payment obligations on the Notes, at the time
we issue the Notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives)
with BofAS or one of our other affiliates. The terms of these hedging arrangements are determined based upon terms provided by BofAS and
its affiliates, and take into account a number of factors, including our and BAC’s creditworthiness, interest rate movements, the
volatility of the Basket Components, 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-6 above and “Supplemental Use of Proceeds” on page PS-20 of the accompanying product supplement.
U.S. Federal Income Tax Summary |
The following summary of the material U.S. federal income and estate tax
considerations of the acquisition, ownership, and disposition of the Notes supplements, and to the extent inconsistent supersedes, the
discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and is not exhaustive of all possible
tax considerations. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated
under the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations), rulings, current
administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect and all of which
are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would
not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. This summary does not
include any description of the tax laws of any state or local governments, or of any foreign government, that may be applicable to a particular
holder.
Although the Notes are issued by us, they will be treated as if they were
issued by BAC for U.S. federal income tax purposes. Accordingly throughout this tax discussion, references to “we,” “our”
or “us” are generally to BAC unless the context requires otherwise.
This summary is directed solely to U.S. Holders and Non-U.S. Holders that,
except as otherwise specifically noted, will purchase the Notes upon original issuance and will hold the Notes as capital assets within
the meaning of Section 1221 of the Code, which generally means property held for investment, and that are not excluded from the discussion
under “U.S. Federal Income Tax Considerations” in the accompanying prospectus.
You should consult your own tax advisor concerning the U.S. federal income
tax consequences to you of acquiring, owning, and disposing of the Notes, as well as any tax consequences arising under the laws of any
state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws.
General
Although there is no statutory, judicial, or administrative authority directly
addressing the characterization of the Notes, in the opinion of our counsel, Sidley Austin LLP, and based on certain factual representations
received from us, the Notes should be treated as single financial contracts with respect to the Basket Components and under the terms
of the Notes, we and every investor in the Notes agree, in the absence of an administrative determination or judicial ruling to the contrary,
to treat the Notes in accordance with such characterization. This discussion assumes that the Notes constitute single financial contracts
with respect to the Basket Components for U.S. federal income tax purposes. If the Notes did not constitute single financial contracts,
the tax consequences described below would be materially different.
This characterization of the Notes is not binding on the IRS or the courts.
No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or any similar instruments for
U.S. federal income tax purposes, and no ruling is being requested from the IRS with respect to their proper characterization and treatment.
Due to the absence of authorities on point, significant aspects of the U.S. federal income tax consequences of an investment in the Notes
are not certain, and no assurance can be given that the IRS or any court will agree with the characterization and tax treatment described
in this pricing supplement. Accordingly, you are urged to consult your tax advisor regarding all aspects of the U.S. federal income tax
consequences of an investment in the Notes, including possible alternative characterizations.
Unless otherwise stated, the following discussion is based on the characterization
described above. The discussion in this section assumes that there is a significant possibility of a significant loss of principal on
an investment in the Notes.
We will not attempt to ascertain whether the issuer of any component stocks
included in a Basket Component would be treated as a “passive foreign investment company” (“PFIC”), within the
meaning of Section 1297 of the Code, or a United States real property holding corporation, within the meaning of Section 897(c) of the
Code. If the issuer of one or more stocks included in a Basket Component were so treated, certain adverse U.S. federal income tax consequences
could possibly apply to a holder of the Notes. You should refer to information filed with the SEC by the issuers of the component stocks
included in each Basket Component and consult your tax advisor regarding the possible consequences to you, if any, if any issuer of a
component stock included in a Basket Component is or becomes a PFIC or is or becomes a United States real property holding corporation.
U.S. Holders
Upon receipt of a cash payment at maturity or upon a sale or exchange of
the Notes prior to maturity, a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized
and the U.S. Holder’s tax basis in the Notes. A U.S. Holder’s tax basis in the Notes will equal the amount paid by that holder
to acquire them. This capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder held the Notes for more
than one year. The deductibility of capital losses is subject to limitations.
Alternative Tax Treatments. Due to the absence of authorities that
directly address the proper tax treatment of the Notes, prospective investors are urged to consult their tax advisors regarding all possible
alternative tax treatments of an investment in the Notes. In particular, the IRS could seek to subject the Notes to the Treasury regulations
governing contingent payment debt instruments. If the IRS were successful in that regard, the timing and character of income on the Notes
would be affected significantly. Among other things, a U.S. Holder would be required to accrue original issue discount every year at a
“comparable yield” determined at the time of issuance. In addition, any gain realized by a U.S. Holder at maturity or upon
a sale or exchange of the Notes generally would be treated as ordinary income, and any loss realized at maturity or
upon a sale or exchange of the Notes generally would be treated as ordinary
loss to the extent of the U.S. Holder’s prior accruals of original issue discount, and as capital loss thereafter.
The IRS released Notice 2008-2 (the “Notice”), which sought comments
from the public on the taxation of financial instruments currently taxed as “prepaid forward contracts.” This Notice addresses
instruments such as the Notes. According to the Notice, the IRS and Treasury are considering whether a holder of an instrument such as
the Notes should be required to accrue ordinary income on a current basis, regardless of whether any payments are made prior to maturity.
It is not possible to determine what guidance the IRS and Treasury will ultimately issue, if any. Any such future guidance may affect
the amount, timing and character of income, gain, or loss in respect of the Notes, possibly with retroactive effect.
The IRS and Treasury are also considering additional issues, including whether
additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders of such instruments should
be subject to withholding tax on any deemed income accruals, whether Section 1260 of the Code, concerning certain “constructive
ownership transactions,” generally applies or should generally apply to such instruments, and whether any of these determinations
depend on the nature of the underlying asset.
In addition, proposed Treasury regulations require the accrual of income
on a current basis for contingent payments made under certain notional principal contracts. The preamble to the regulations states that
the “wait and see” method of accounting does not properly reflect the economic accrual of income on those contracts, and requires
current accrual of income for some contracts already in existence. While the proposed regulations do not apply to prepaid forward contracts,
the preamble to the proposed regulations expresses the view that similar timing issues exist in the case of prepaid forward contracts.
If the IRS or Treasury publishes future guidance requiring current economic accrual for contingent payments on prepaid forward contracts,
it is possible that you could be required to accrue income over the term of the Notes.
Because of the absence of authority regarding the appropriate tax characterization
of the Notes, it is also possible that the IRS could seek to characterize the Notes in a manner that results in tax consequences that
are different from those described above. For example, the IRS could possibly assert that any gain or loss that a holder may recognize
at maturity or upon the sale or exchange of the Notes should be treated as ordinary gain or loss.
Because each Basket Component is an index that periodically rebalances, it
is possible that the Notes could be treated as a series of single financial contracts, each of which matures on the next rebalancing date.
If the Notes were properly characterized in such a manner, a U.S. Holder would be treated as disposing of the Notes on each rebalancing
date in return for new Notes that mature on the next rebalancing date, and a U.S. Holder would accordingly likely recognize capital gain
or loss on each rebalancing date equal to the difference between the holder’s tax basis in the Notes (which would be adjusted to
take into account any prior recognition of gain or loss) and the fair market value of the Notes on such date.
Non-U.S. Holders
Except as discussed below, a Non-U.S. Holder generally will not be subject
to U.S. federal income or withholding tax for amounts paid in respect of the Notes provided that the Non-U.S. Holder complies with applicable
certification requirements and that the payment is not effectively connected with the conduct by the Non-U.S. Holder of a U.S. trade or
business. Notwithstanding the foregoing, gain from the sale or exchange of the Notes or their settlement at maturity may be subject to
U.S. federal income tax if that Non-U.S. Holder is a non-resident alien individual and is present in the U.S. for 183 days or more during
the taxable year of the sale, exchange, or settlement and certain other conditions are satisfied.
If a Non-U.S. Holder of the Notes is engaged in the conduct of a trade or
business within the U.S. and if gain realized on the settlement at maturity, or upon sale or exchange of the Notes, is effectively connected
with the conduct of such trade or business (and, if certain tax treaties apply, is attributable to a permanent establishment maintained
by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although exempt from U.S. federal withholding tax, generally will be subject
to U.S. federal income tax on such gain on a net income basis in the same manner as if it were a U.S. Holder. Such Non-U.S. Holders should
read the material under the heading “—U.S. Holders,” for a description of the U.S. federal income tax consequences of
acquiring, owning, and disposing of the Notes. In addition, if such Non-U.S. Holder is a foreign corporation, it may also be subject to
a branch profits tax equal to 30% (or such lower rate provided by any applicable tax treaty) of a portion of its earnings and profits
for the taxable year that are effectively connected with its conduct of a trade or business in the U.S., subject to certain adjustments.
A “dividend equivalent” payment is treated as a dividend from
sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid to a Non-U.S. Holder.
Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”) that are
“specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent
payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2027. Based on our
determination that the Notes are not delta-one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent
payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the Basket Components 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 Basket Components or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the Notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or
the applicable paying agent) would be entitled to withhold taxes without
being required to pay any additional amounts with respect to amounts so withheld.
As discussed above, alternative characterizations of the Notes for U.S. federal
income tax purposes are possible. Should an alternative characterization, by reason of change or clarification of the law, by regulation
or otherwise, cause payments as to the Notes to become subject to withholding tax, tax will be withheld at the applicable statutory rate.
As discussed above, the IRS has indicated in the Notice that it is considering whether income in respect of instruments such as the Notes
should be subject to withholding tax. Prospective Non-U.S. Holders should consult their own tax advisors regarding the tax consequences
of such alternative characterizations.
U.S. Federal Estate Tax. Under current law, while the matter is not
entirely clear, individual Non-U.S. Holders, and entities whose property is potentially includible in those individuals’ gross estates
for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained
certain interests or powers), should note that, absent an applicable treaty benefit, a Note is likely to be treated as U.S. situs property,
subject to U.S. federal estate tax. These individuals and entities should consult their own tax advisors regarding the U.S. federal estate
tax consequences of investing in a Note.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal Income Tax Considerations
— General — Backup Withholding and Information Reporting” in the accompanying prospectus for a description of the applicability
of the backup withholding and information reporting rules to payments made on the Notes.
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