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 August , 2024
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Filed Pursuant to Rule 424(b)(2)
Series A Registration Statement Nos. 333-268718 and 333-268718-01
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![]() BofA Finance LLC $---- Capped Airbag GEARS
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Linked to the MSCI EAFE® Index Due August 20, 2026
Fully and Unconditionally Guaranteed by Bank of America Corporation
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Investment Description
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The Capped Airbag GEARS (the “Notes”) linked to the MSCI EAFE® Index (the “Underlying”) due August 20, 2026 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 the Underlying from its Initial Value to its Final Value. If the Underlying Return is positive, BofA Finance will repay the Stated Principal Amount of the Notes at maturity plus a return equal to the Underlying Return multiplied by the Upside Gearing of 2.00, but no more than the Maximum Gain of at least 29.35%. If the Underlying Return is zero or negative and the Final Value is greater than or equal to the Downside Threshold of 90% of the Initial Value, BofA Finance will repay the Stated Principal Amount of the Notes at maturity. However, if the Underlying Return is negative and the Final Value is less than the Downside Threshold, you will receive less than the Stated Principal Amount, and possibly nothing, at maturity. In this case, you will be exposed to the downside performance of the Underlying beyond the Downside Threshold at a rate greater than 1-for-1. Specifically, you will be exposed to a decrease of approximately 1.11% in your initial investment for each 1% decline in the Underlying in excess of the Threshold Percentage from the Trade Date to the Valuation Date, with up to a 100% loss of your initial investment.
Investing in the Notes involves significant risks. You will not receive coupon payments during the approximate 24 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 Underlying. Downside exposure to the Underlying is buffered only if you hold the Notes to maturity. 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.
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Features
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Key Dates1
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❑ Enhanced Growth Potential, subject to the Maximum Gain— If the Underlying Return is positive, BofA Finance will repay the Stated Principal Amount of the Notes at maturity plus a return equal to the Underlying 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 Underlying.
❑ Downside Exposure with Contingent Repayment of Principal at Maturity— If the Underlying Return is zero or negative and the Final Value of the Underlying is greater than or equal to the Downside Threshold, you will receive the Stated Principal Amount of the Notes at maturity. However, if the Underlying Return is negative and the Final Value of the Underlying is less than the Downside Threshold, you will receive less than the Stated Principal Amount of the Notes, and possibly nothing, at maturity. In this case, you will be exposed to the downside performance of the Underlying beyond the Downside Threshold at a rate greater than 1-for-1. Specifically, you will be exposed to a decrease of approximately 1.11% in your initial investment for each 1% decline in the Underlying in excess of the Threshold Percentage from the Trade Date to the Valuation Date, up to a 100% loss of your investment.
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Any payment on the Notes is subject to the creditworthiness of BofA Finance and the Guarantor.
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Trade Date2
Issue Date2
Valuation Date3
Maturity Date
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August 16, 2024
August 21, 2024
August 17, 2026
August 20, 2026
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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.
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NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. BOFA FINANCE IS NOT NECESSARILY OBLIGATED TO REPAY THE FULL AMOUNT OF THE STATED PRINCIPAL AMOUNT AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING, SUBJECT TO THE BUFFER. 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 A SIGNIFICANT PORTION OF YOUR INITIAL INVESTMENT IN THE NOTES. THE NOTES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE AND MAY HAVE LIMITED OR NO LIQUIDITY.
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Notes Offering
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We are offering Capped Airbag GEARS linked to the MSCI EAFE® Index due August 20, 2026. Any payment on the Notes will be based on the performance of the Underlying. The Maximum Gain, Initial Value and Downside Threshold will be determined on the Trade Date. The Notes are our senior unsecured obligations, guaranteed by BAC, and are offered for a minimum investment of 100 Notes (each Note corresponding to $10.00 in Stated Principal Amount) at the Public Offering Price described below.
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Underlying
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Upside Gearing
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Downside Gearing
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Maximum Gain
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Initial Value
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Downside Threshold
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Threshold Percentage
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CUSIP / ISIN
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MSCI EAFE® Index (Ticker: MXEA)
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2.00
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Approximately 1.11
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at least 29.35%
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- , which is 90% of the Initial Value
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10.00%
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09710T538 / US09710T5386
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Public Offering Price
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Underwriting Discount(1)
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Proceeds (before expenses) to BofA Finance
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Per Note
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$10.00
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$0.00
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$10.00
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Total
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$
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$
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$
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UBS Financial Services Inc. |
BofA Securities |
Additional Information about BofA Finance LLC, Bank of America Corporation and the Notes
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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:
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Product supplement EQUITY-1 dated December 30, 2022:
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Series A MTN prospectus supplement dated December 30, 2022 and prospectus dated December 30, 2022:
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.
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Investor Suitability
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The Notes may be suitable for you if, among other considerations:
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You fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire investment.
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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 Underlying.
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You can tolerate a loss of all or a substantial portion of your investment and are willing to make an investment that is subject to leveraged downside market exposure to any decline in the Underlying in excess of the Threshold Percentage.
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You understand and accept the risks associated with the Underlying.
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You believe that the level of the Underlying will increase over the term of the Notes and the Final Value is likely to close above the Initial 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).
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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 is no higher than the percentage indicated on the cover page of this pricing supplement (the actual Maximum Gain will be determined on the Trade Date).
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You can tolerate fluctuations in the value of the Notes prior to maturity that may be similar to or exceed the downside fluctuations in the level of the Underlying.
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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.
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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.
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The Notes may not be suitable for you if, among other considerations:
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You do not fully understand the risks inherent in an investment in the Notes, including the risk of loss of your entire investment.
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You seek current income from this investment or prefer to receive the dividends and any other distributions paid on the stocks included in the Underlying.
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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 is subject to the leveraged downside market exposure to any decline in the Underlying in excess of the Threshold Percentage.
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You require an investment designed to guarantee a full return of the Stated Principal Amount at maturity.
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You do not understand or are not willing to accept the risks associated with the Underlying.
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You believe that the level of the Underlying will decline during the term of the Notes and the Final Value is likely to close below the Downside Threshold on the Valuation Date, exposing you to downside performance of the Underlying, or you believe the Underlying 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).
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You seek an investment that participates in the full appreciation in the level of the Underlying or that has unlimited potential, or you would be unwilling to invest in the Notes if the Maximum Gain is no higher than the percentage indicated on the cover page of this pricing supplement (the actual Maximum Gain will be determined on the Trade Date).
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You cannot tolerate fluctuations in the value of the Notes prior to maturity that may be similar to or exceed the downside fluctuations in the level of the Underlying.
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You seek an investment for which there will be an active secondary market.
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You prefer the lower risk of conventional fixed income investments with comparable maturities and credit ratings.
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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.
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The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should review “The Underlying” herein for more information on the Underlying. You should also review carefully the “Risk Factors” section herein for risks related to an investment in the Notes.
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Summary
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Issuer
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BofA Finance
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Guarantor
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BAC
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Public Offering Price
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100% of the Stated Principal Amount
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Stated Principal Amount
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$10.00 per Note
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Minimum Investment
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$1,000 (100 Notes)
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Term
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Approximately twenty-four months
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Trade Date1,2
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August 16, 2024
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Issue Date1, 2
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August 21, 2024
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Valuation Date1
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August 17, 2026, 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.
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Maturity Date1
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August 20, 2026
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Underlying
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MSCI EAFE® Index (Ticker: MXEA)
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Payment At Maturity (per $10.00 Stated Principal Amount)
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If the Underlying Return is positive, we will repay the Stated Principal Amount of the Notes at maturity plus a return equal to the Underlying Return multiplied by the Upside Gearing, but no more than the Maximum Gain, calculated as follows:
$10.00 × (1 + the lesser of (i) Underlying Return x Upside Gearing and (ii) Maximum Gain)
If the Underlying Return is zero or negative and the Final Value is greater than or equal to the Downside Threshold, we will repay the Stated Principal Amount of the Notes at maturity.
If the Underlying Return is negative and the Final Value is less than the Downside Threshold, we will repay less than the Stated Principal Amount of your Notes at maturity, resulting in a loss of approximately 1.11% for each 1% decline in the Underlying in excess of the Threshold Percentage from the Trade Date to the Final Valuation Date, calculated as follows:
$10.00 + [$10.00 × Downside Gearing × (Underlying Return + Threshold Percentage)]
Accordingly, you may lose approximately 1.11% of your Stated Principal Amount of the Notes for each 1% decline in the Underlying in excess of the Threshold Percentage from the Trade Date to the Valuation Date. You may lose all or a substantial portion of your Stated Principal Amount at maturity, depending on how significantly the Underlying declines.
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Underlying Return
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Final Value – Initial Value
Initial Value |
Maximum Gain
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At least 29.35%, which corresponds to a maximum Payment at Maturity of at least $12.935 per Note. The actual Maximum Gain will be determined on the Trade Date.
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Downside Threshold
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90% of the Initial Value, as specified on the cover page of this pricing supplement.
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Upside Gearing
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2.00
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Downside Gearing
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The quotient of the Initial Value divided by the Downside Threshold, which is approximately 1.11. |
Threshold Percentage
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10.00%.
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Initial Value
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The closing level of the Underlying on the Trade Date, as specified on the cover page of this pricing supplement.
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Final Value
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The closing level of the Underlying on the Valuation Date.
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Calculation Agent
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BofAS, an affiliate of BofA Finance.
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Selling Agents
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BofAS and UBS.
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Events of Default and Acceleration
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If an Event of Default, as defined in the senior indenture 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.
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1
Subject to change and will be set forth in the final pricing supplement relating to the Notes.
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2
See “Supplement to the Plan of Distribution; Role of BofAS and Conflicts of Interest” in this pricing supplement for additional information.
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Investment Timeline
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Trade Date
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The closing level of the Underlying (its Initial Value) is observed, the Maximum Gain is set and the Downside Threshold for the Underlying is determined.
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Maturity Date
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If the Underlying Return is positive, we will repay the Stated Principal Amount of the Notes at maturity plus a return equal to the Underlying Return multiplied by the Upside Gearing but no more than the Maximum Gain, calculated as follows:
$10.00 × (1 + the lesser of (i) Underlying Return x Upside Gearing and (ii) Maximum Gain)
If the Underlying Return is zero or negative and the Final Value is greater than or equal to the Downside Threshold, we will repay the Stated Principal Amount of the Notes at maturity.
If the Underlying Return is negative and the Final Value is less than the Downside Threshold, we will repay less than the Stated Principal Amount of your Notes at maturity, resulting in a loss of approximately 1.11% for each 1% decline in the Underlying in excess of the Threshold Percentage from the Trade Date to the Valuation Date, calculated as follows:
$10.00 + [$10.00 × Downside Gearing × (Underlying Return + Threshold Percentage)]
Accordingly, you may lose approximately 1.11% of your Stated Principal Amount for each 1% decline in the Underlying in excess of the Threshold Percentage from the Trade Date to the Valuation Date. You may lose all or a substantial portion of your Stated Principal Amount at maturity, depending on how significantly the Underlying declines.
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Risk Factors
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♦
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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 Value is less than the Downside Threshold, at maturity, you will be exposed on a leveraged basis to declines in the Underlying beyond its Downside Threshold. In that case, you will lose a significant portion or all of your investment in the Notes.
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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 Value exceeds the Initial Value.
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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 Underlying. 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 the Underlying, and you will not receive the full benefit of any appreciation in the Underlying beyond that Maximum Gain.
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Downside exposure to the Underlying is buffered only if you hold the Notes to 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, you may have to sell them at a loss relative to your initial investment even if the level of the Underlying at that time is equal to or greater than the Downside Threshold. Any payment on the Notes is subject to the credit risk of BofA Finance, as issuer, and BAC, as guarantor.
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♦
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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 underlying 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.
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♦
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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.
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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 Value as compared to the Downside Threshold or Initial Value, as applicable. No assurance can be given as to what our financial condition or the financial condition of the Guarantor will be on the Maturity Date. If we and the Guarantor become unable to meet our respective financial obligations as they become due, you may not receive the amount payable under the terms of the Notes and you could lose all of your initial investment.
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We are a finance subsidiary and, as such, have no independent assets, operations or revenues. We are a finance subsidiary of BAC, have no operations other than those related to the issuance, administration and repayment of our debt securities that are guaranteed by the Guarantor, and are dependent upon the Guarantor and/or its other subsidiaries to meet our obligations under the Notes in the ordinary course. Therefore, our ability to make payments on the Notes may be limited.
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♦
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The Payment at Maturity will not reflect the level of the Underlying other than on the Valuation Date. The level of the Underlying 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 Underlying while holding the Notes, as the performance of the Underlying may influence the market value of the Notes. The calculation agent will calculate the Payment at Maturity by comparing only the Initial Value or the Downside Threshold, as applicable, to the Final Value for the Underlying. No other level of the Underlying will be taken into account. As a result, if the Final Value of the Underlying is less than the Downside Threshold, you will receive less than the Stated Principal Amount at maturity, even if the level of the Underlying was always above the Downside Threshold prior to the Valuation Date.
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♦
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The public offering price you pay for the Notes will exceed their initial estimated value. The range of initial estimated values of the Notes that is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the Trade Date that will be provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference to our and our affiliates' pricing models. These pricing models consider certain assumptions and variables, including our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions, expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated value. This is due to, among other things, changes in the level of the Underlying, changes in the Guarantor’s internal funding rate, and the inclusion in the public offering price of the underwriting discount, if any, 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.
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♦
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The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlying, our and BAC’s creditworthiness and changes in market conditions.
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♦
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The price of the Notes that may be paid by BofAS in any secondary market (if BofAS makes a market, which it is not required to do), as well as the price which may be reflected on customer account statements, will be higher than the then-current estimated value of the Notes for a limited time period after the Trade Date. As agreed by BofAS and UBS, for approximately a three-month period after the Trade Date, to the extent BofAS offers to buy the Notes in the secondary market, it will do so at a price that will exceed the estimated value of the Notes at that time. The amount of this excess, which represents a portion of the hedging-related charges expected to be realized by BofAS and UBS over the term of the Notes, will decline to zero on a straight line basis over that three-month period. Accordingly, the estimated value of your Notes during this initial three-month period may be lower than the value shown on your customer account statements. Thereafter, if BofAS buys or sells your Notes, it will do so at prices that reflect the estimated value determined by reference to its pricing models at that time. Any price at any time after the Trade Date will be based on the then-prevailing market conditions and other considerations, including the performance of the Underlying and the remaining term of the Notes. However, none of us, the Guarantor, BofAS or any other party is obligated to purchase your Notes at any price or at any time, and we cannot assure you that any party will purchase your Notes at a price that equals or exceeds the initial estimated value of the Notes.
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♦
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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.
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♦
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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 level of the Underlying and the securities held by the Underlying; the volatility of the Underlying and the securities held by the Underlying; the dividend rate paid on the securities held by the Underlying, if applicable; the time remaining to the maturity of the Notes; interest rates in the markets; geopolitical conditions and economic, financial, political, force majeure and regulatory or judicial events; whether the level of the Underlying is currently or has been less than the Downside Threshold; 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.
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♦
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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 Underlying over a period of time. The greater the expected volatility of the Underlying at the time the terms of the Notes are set, the greater the expectation is at that time that you may lose a significant portion or all of the Stated Principal Amount at maturity. However, the Underlying's volatility can change significantly over the term of the Notes, and a relatively lower Downside Threshold may not necessarily indicate that the Notes have a greater likelihood of a return of principal at maturity. You should be willing to accept the downside market risk of the Underlying and the potential to lose a significant portion or all of your initial investment.
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Trading and hedging activities by us, the Guarantor and any of our other affiliates, including BofAS, and UBS and its affiliates, may create conflicts of interest with you and may affect your return on the Notes and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates, may buy or sell the securities held by or included in the Underlying, or futures or options contracts on the Underlying or those securities, or other listed or over-the-counter derivative instruments linked to the Underlying or those securities. We, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates also may issue or underwrite other financial instruments with returns based upon the Underlying. We expect to enter into arrangements or adjust or close out existing transactions to hedge our obligations under the Notes. We, the Guarantor or our other affiliates, including BofAS, and UBS and its affiliates also may enter into hedging transactions relating to other notes or instruments, some of which may have returns calculated in a manner related to that of the Notes offered hereby. We or UBS may enter into such hedging arrangements with one of our or their affiliates. Our affiliates or their affiliates may enter into additional hedging transactions with other parties relating to the Notes and the Underlying. This hedging activity is expected to result in a profit to those engaging in the hedging activity, which could be more or less than initially expected, or the hedging activity could also result in a loss. We and our affiliates and UBS and its affiliates will price these hedging transactions with the intent to realize a profit, regardless of whether the value of the Notes increases or decreases. Any profit in connection with such hedging activities will be in addition to any other compensation that we, the Guarantor and our other affiliates, including BofAS, and UBS and its affiliates receive for the sale of the Notes, which creates an additional incentive to sell the Notes to you. While we, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates may from time to time own securities represented by the Underlying, except to the extent that BAC’s or UBS Group AG’s (the parent company of UBS) common stock may be included in the Underlying, as applicable, we, the Guarantor and our other affiliates, including BofAS, and UBS and its affiliates do not control any company included in the Underlying, and have not verified any disclosure made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, and UBS and its affiliates may execute such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations under the Notes. The transactions described above may present a conflict of interest between your interest in the Notes and the interests we, the Guarantor and our other affiliates, including BofAS, and UBS and its affiliates may have in our or their proprietary accounts, in facilitating transactions, including block trades, for our or their other customers, and in accounts under our or their management.
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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.
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The publisher of the Underlying may adjust the Underlying in a way that affects its level, and the publisher has no obligation to consider your interests. The publisher of the Underlying can add, delete, or substitute the components included in the Underlying or make other methodological changes that could change its level. Any of these actions could adversely affect the value of your Notes.
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The Notes are subject to the market risk of the Underlying. The return on the Notes, which may be negative, is directly linked to the performance of the Underlying and indirectly linked to the value of the securities held by the Underlying. The level of the Underlying can rise or fall sharply due to factors specific to the Underlying and the securities held by the Underlying and the issuers of such securities, such as stock price volatility, earnings and financial conditions, corporate, industry and regulatory developments, management changes and decisions and other events, as well as general market factors, such as general stock market or commodity market volatility and levels, interest rates and economic and political conditions.
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The Notes are subject to risks associated with foreign securities markets. The MXEA includes certain foreign equity securities. You should be aware that investments in securities linked to the value of foreign equity securities involve particular risks. The foreign securities markets comprising the MXEA may have less liquidity and may be more volatile than U.S. or other securities markets and market developments may affect foreign markets differently from U.S. or other securities markets. Direct or indirect government intervention to stabilize these foreign securities markets, as well as cross-shareholdings in foreign companies, may affect trading prices and volumes in these markets. Also, there is generally less publicly available information about foreign companies than about those U.S. companies that are subject to the reporting requirements of the SEC, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies. Prices of securities in foreign countries are subject to political, economic, financial and social factors that apply in those geographical regions. These factors, which could negatively affect those securities markets, include the possibility of recent or future changes in a foreign government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities and the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political instability and the possibility of
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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.
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Governmental regulatory actions could result in material changes to the composition of the MXEA 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 MXEA, depending on the nature of such governmental regulatory actions and the constituent stocks that are affected. For instance, pursuant to recent executive orders, U.S. persons are prohibited from engaging in transactions in publicly traded securities of certain companies that are determined to be linked to the People’s Republic of China (the “PRC”) military, intelligence and security apparatus, or securities that are derivative of, or are designed to provide investment exposure to such securities. If any governmental regulatory action results in the removal of constituent stocks that have (or historically have had) significant weights within the MXEA, such removal, or even any uncertainty relating to a possible removal, could have a material and negative effect on the price of the MXEA and, therefore, your return on the Notes.
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The Notes are subject to a foreign currency exchange risk. The MXEA includes securities traded outside of the United States. The level of the MXEA will depend upon the values of these securities, which will in turn depend in part upon changes in the value of the currencies in which the securities included in the MXEA are traded. Accordingly, investors in the Notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the securities included in the MXEA are traded. An investor’s net exposure will depend on the extent to which these currencies strengthen or weaken against the U.S. dollar. If the dollar strengthens against these currencies, the level of the MXEA will be adversely affected and the value of the MXEA may decrease.
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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.
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Hypothetical Examples
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Stated Principal Amount: $10
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Term: Approximately 24 months
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Hypothetical Initial Value: 100.00
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Upside Gearing: 2.00
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Hypothetical Downside Gearing: 1.11
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Hypothetical Maximum Gain: 29.35%
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Hypothetical Maximum Payment at Maturity: $12.935
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Hypothetical Downside Threshold: 90.00
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Threshold Percentage: 10.00%
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Final Value
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Underlying Return
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Payment at Maturity
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Return on the Notes
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160.00
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60.00%
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$12.93500
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29.3500%
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150.00
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50.00%
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$12.93500
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29.3500%
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140.00
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40.00%
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$12.93500
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29.3500%
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130.00
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30.00%
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$12.93500
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29.3500%
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120.00
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20.00%
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$12.93500
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29.3500%
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114.68
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14.68%
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$12.93500
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29.3500%(1)
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105.00
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5.00%
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$11.00000
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10.0000%
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102.00
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2.00%
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$10.40000
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4.0000%
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100.00(2)
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0.00%
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$10.00000
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0.0000%
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90.00(3)
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-10.00%
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$10.00000
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0.0000%
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89.99
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-10.01%
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$9.99889
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-0.0111%
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80.00
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-20.00%
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$8.89000
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-11.1000%
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70.00
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-30.00%
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$7.78000
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-22.2000%
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60.00
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-40.00%
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$6.67000
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-33.3000%
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50.00
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-50.00%
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$5.56000
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-44.4000%
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0.00
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-100.00%
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$0.00000
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0.0000%
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(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) The hypothetical Initial Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent a likely Initial Value for the Underlying.
(3) This is the hypothetical Downside Threshold of the Underlying.
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◆
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semi-annual reviews, which will occur each May and November and will involve a comprehensive reevaluation of the market, the universe of eligible securities and other factors involved in composing the indices;
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◆
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quarterly reviews, which will occur each February, May, August and November and will focus on significant changes in the market since the last semi-annual review and on including significant new eligible securities (such as IPOs, which were not eligible for earlier inclusion in the indices); and
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◆
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ongoing event-related changes, which will generally be reflected in the indices at the time of the event and will include changes resulting from mergers, acquisitions, spin-offs, bankruptcies, reorganizations and other similar corporate events.
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Supplement to the Plan of Distribution; Role of BofAS and Conflicts of Interest
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Australia
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Barbados
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Belgium
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Crimea
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Cuba
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Curacao Sint Maarten
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Gibraltar
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Indonesia
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Iran
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Italy
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Kazakhstan
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Malaysia
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New Zealand
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North Korea
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Norway
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Russia
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Syria
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●
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Venezuela
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U.S. Federal Income Tax Summary
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