•
|
The Contingent Income Buffered Auto-Callable Yield Notes Linked to the Least Performing of the SPDR® S&P Regional Banking ETF and the VanEck® Gold Miners ETF, due August 31, 2026 (the “Notes”) are expected to price on August 26, 2024 and expected to issue on August 29, 2024.
|
•
|
Approximate 2 year term if not called prior to maturity.
|
•
|
Payments on the Notes will depend on the individual performance of the SPDR® S&P Regional Banking ETF and the VanEck® Gold Miners ETF (each an “Underlying”).
|
•
|
Contingent coupon rate of 9.75% per annum (0.8125% per month) payable monthly if the Observation Value of each Underlying on the applicable Observation Date is greater than or equal to 70.00% of its Starting Value, assuming the Notes have not been called.
|
•
|
Beginning with the February 26, 2025 Call Observation Date, automatically callable monthly for an amount equal to the principal amount plus the relevant Contingent Coupon Payment, if the Observation Value of each Underlying is greater than or equal to 100.00% of its Starting Value on any Call Observation Date.
|
•
|
Assuming the Notes are not called prior to maturity, if either Underlying declines by more than 20% from its Starting Value, at maturity your investment will be subject to 1:1 downside exposure to decreases in the value of the Least Performing Underlying beyond a 20% decline, with up to 80% of the principal at risk; otherwise, at maturity, you will receive the principal amount. At maturity you will also receive a final Contingent Coupon Payment if the Observation Value of each Underlying on the final Observation Date is greater than or equal to 70.00% of its Starting Value.
|
•
|
All payments on the Notes are subject to the credit risk of BofA Finance LLC (“BofA Finance” or the “Issuer”), as issuer of the Notes, and Bank of America Corporation (“BAC” or the “Guarantor”), as guarantor of the Notes.
|
•
|
The Notes will not be listed on any securities exchange.
|
•
|
CUSIP No. 09711DEH1.
|
|
Public offering price(1)
|
Underwriting discount(1)(2)
|
Proceeds, before expenses, to BofA Finance(2)
|
Per Note
|
$1,000.00
|
$27.50
|
$972.50
|
Total
|
|
|
|
(1)
|
Certain dealers who purchase the Notes for sale to certain fee-based advisory accounts may forgo some or all of their selling concessions, fees or commissions. The public offering price for investors purchasing the Notes in these fee-based advisory accounts may be as low as $972.50 per $1,000.00 in principal amount of Notes.
|
(2)
|
The underwriting discount per $1,000.00 in principal amount of Notes may be as high as $27.50, resulting in proceeds, before expenses, to BofA Finance of as low as $972.50 per $1,000.00 in principal amount of Notes.
|
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
![]() |
Selling Agent
|
|
|
Issuer:
|
BofA Finance
|
Guarantor:
|
BAC
|
Denominations:
|
The Notes will be issued in minimum denominations of $1,000.00 and whole multiples of $1,000.00 in excess thereof.
|
Term:
|
Approximately 2 years, unless previously automatically called.
|
Underlyings:
|
The SPDR® S&P Regional Banking ETF (Bloomberg symbol: “KRE”) and the VanEck® Gold Miners ETF/USA (Bloomberg symbol: “GDX”).
|
Pricing Date*:
|
August 26, 2024
|
Issue Date*:
|
August 29, 2024
|
Valuation Date*:
|
August 26, 2026, subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates” in the accompanying product supplement.
|
Maturity Date*:
|
August 31, 2026
|
Starting Value:
|
With respect to each Underlying, its Closing Market Price on the pricing date.
|
Observation Value:
|
With respect to each Underlying, its Closing Market Price on the applicable Observation Date or Call Observation Date, as applicable, multiplied by its Price Multiplier.
|
Ending Value:
|
With respect to each Underlying, its Observation Value on the Valuation Date.
|
Call Value:
|
With respect to each Underlying, 100.00% of its Starting Value.
|
Price Multiplier:
|
With respect to each Underlying, 1, subject to adjustment for certain events as described in “Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs” beginning on page PS-28 of the accompanying product supplement.
|
Coupon Barrier:
|
With respect to each Underlying, 70.00% of its Starting Value.
|
Threshold Value:
|
With respect to each Underlying, 80.00% of its Starting Value.
|
Contingent Coupon Payment:
|
If, on any monthly Observation Date, the Observation Value of each Underlying is greater than or equal to its Coupon Barrier, we will pay a Contingent Coupon Payment of $8.125 per $1,000.00 in principal amount of Notes (equal to a rate of 0.8125% per month or 9.75% per annum) on the applicable Contingent Payment Date (including the Maturity Date).
|
Automatic Call:
|
Beginning with the February 26, 2025 Call Observation Date, all (but not less than all) of the Notes will be automatically called if the Observation Value of each Underlying is greater than or equal to its Call Value on any Call Observation Date. If the Notes are automatically called, the Early Redemption Amount will be paid on the applicable Call Payment Date. No further amounts will be payable following an Automatic Call.
|
Early Redemption Amount:
|
For each $1,000.00 in principal amount of Notes, $1,000.00, plus the applicable Contingent Coupon Payment.
|
Redemption Amount:
|
If the Notes have not been automatically called prior to maturity, the Redemption Amount per $1,000.00 in principal amount of Notes will be:
a) If the Ending Value of the Least Performing Underlying is greater than or equal to its Threshold Value:
![]() b) If the Ending Value of the Least Performing Underlying is less than its Threshold Value:
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-2
|
|
|
|
|
![]() In this case, the Redemption Amount (excluding any final Contingent Coupon Payment) will be less than the principal amount and you could lose up to 80.00% of your investment in the Notes.
The Redemption Amount will also include a final Contingent Coupon Payment if the Ending Value of the Least Performing Underlying is greater than or equal to its Coupon Barrier.
|
Observation Dates*:
|
As set forth beginning on page PS-4
|
Contingent Payment Dates*:
|
As set forth beginning on page PS-4
|
Call Observation Dates*:
|
As set forth beginning on page PS-5
|
Call Payment Dates*:
|
As set forth beginning on page PS-5. Each Call Payment Date is also a Contingent Payment Date.
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
Selling Agent:
|
BofAS
|
CUSIP:
|
09711DEH1
|
Underlying Return:
|
With respect to each Underlying,
![]() |
Least Performing Underlying:
|
The Underlying with the lowest Underlying Return.
|
Events of Default and Acceleration:
|
If an Event of Default, as defined in the senior indenture relating to the Notes and in the section entitled “Description of Debt Securities of BofA Finance LLC—Events of Default and Rights of Acceleration; Covenant Breaches” on page 54 of the accompanying prospectus, with respect to the Notes occurs and is continuing, the amount payable to a holder of the Notes upon any acceleration permitted under the senior indenture will be equal to the amount described under the caption “Redemption Amount” above, calculated as though the date of acceleration were the Maturity Date of the Notes and as though the Valuation Date were the third Trading Day prior to the date of acceleration. We will also determine whether a final Contingent Coupon Payment is payable based upon the prices of the Underlyings on the deemed Valuation Date; any such final Contingent Coupon Payment will be prorated by the calculation agent to reflect the length of the final contingent payment period. In case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate.
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-3
|
|
|
|
Observation Dates*
|
Contingent Payment Dates
|
September 26, 2024
|
October 1, 2024
|
October 28, 2024
|
October 31, 2024
|
November 26, 2024
|
December 2, 2024
|
December 26, 2024
|
December 31, 2024
|
January 27, 2025
|
January 30, 2025
|
February 26, 2025
|
March 3, 2025
|
March 26, 2025
|
March 31, 2025
|
April 28, 2025
|
May 1, 2025
|
May 27, 2025
|
May 30, 2025
|
June 26, 2025
|
July 1, 2025
|
July 28, 2025
|
July 31, 2025
|
August 26, 2025
|
August 29, 2025
|
September 26, 2025
|
October 1, 2025
|
October 27, 2025
|
October 30, 2025
|
November 26, 2025
|
December 2, 2025
|
December 26, 2025
|
December 31, 2025
|
January 26, 2026
|
January 29, 2026
|
February 26, 2026
|
March 3, 2026
|
March 26, 2026
|
March 31, 2026
|
April 27, 2026
|
April 30, 2026
|
May 26, 2026
|
May 29, 2026
|
June 26, 2026
|
July 1, 2026
|
July 27, 2026
|
July 30, 2026
|
August 26, 2026 (the “Valuation Date”)
|
August 31, 2026 (the “Maturity Date”)
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-4
|
|
|
|
Call Observation Dates*
|
Call Payment Dates
|
February 26, 2025
|
March 3, 2025
|
March 26, 2025
|
March 31, 2025
|
April 28, 2025
|
May 1, 2025
|
May 27, 2025
|
May 30, 2025
|
June 26, 2025
|
July 1, 2025
|
July 28, 2025
|
July 31, 2025
|
August 26, 2025
|
August 29, 2025
|
September 26, 2025
|
October 1, 2025
|
October 27, 2025
|
October 30, 2025
|
November 26, 2025
|
December 2, 2025
|
December 26, 2025
|
December 31, 2025
|
January 26, 2026
|
January 29, 2026
|
February 26, 2026
|
March 3, 2026
|
March 26, 2026
|
March 31, 2026
|
April 27, 2026
|
April 30, 2026
|
May 26, 2026
|
May 29, 2026
|
June 26, 2026
|
July 1, 2026
|
July 27, 2026
|
July 30, 2026
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-5
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-6
|
|
|
|
Number of Contingent Coupon Payments
|
Total Contingent Coupon Payments
|
0
|
$0.00
|
2
|
$16.25
|
4
|
$32.50
|
6
|
$48.75
|
8
|
$65.00
|
10
|
$81.25
|
12
|
$97.50
|
14
|
$113.75
|
16
|
$130.00
|
18
|
$146.25
|
20
|
$162.50
|
22
|
$178.75
|
24
|
$195.00
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-7
|
|
|
|
Ending Value of the Least Performing Underlying
|
Underlying Return of the Least Performing Underlying
|
Redemption Amount per Note (including any final Contingent Coupon Payment)
|
Return on the Notes(1)
|
160.00
|
60.00%
|
$1,008.125
|
0.8125%
|
150.00
|
50.00%
|
$1,008.125
|
0.8125%
|
140.00
|
40.00%
|
$1,008.125
|
0.8125%
|
130.00
|
30.00%
|
$1,008.125
|
0.8125%
|
120.00
|
20.00%
|
$1,008.125
|
0.8125%
|
110.00
|
10.00%
|
$1,008.125
|
0.8125%
|
105.00
|
5.00%
|
$1,008.125
|
0.8125%
|
102.00
|
2.00%
|
$1,008.125
|
0.8125%
|
100.00(2)
|
0.00%
|
$1,008.125
|
0.8125%
|
90.00
|
-10.00%
|
$1,008.125
|
0.8125%
|
80.00(3)
|
-20.00%
|
$1,008.125
|
0.8125%
|
79.99
|
-20.01%
|
$1,008.025
|
0.8025%
|
70.00(4)
|
-30.00%
|
$908.125
|
-9.1875%
|
69.99
|
-30.01%
|
$899.900
|
-10.0100%
|
60.00
|
-40.00%
|
$800.000
|
-20.0000%
|
50.00
|
-50.00%
|
$700.000
|
-30.0000%
|
0.00
|
-100.00%
|
$200.000
|
-80.0000%
|
(1)
|
The “Return on the Notes” is calculated based on the Redemption Amount and potential final Contingent Coupon Payment, not including any Contingent Coupon Payments paid prior to maturity.
|
(2)
|
The hypothetical Starting Value of 100 used in the table above has been chosen for illustrative purposes only and does not represent a likely Starting Value of any Underlying.
|
(3)
|
This is the hypothetical Threshold Value of the Least Performing Underlying.
|
(4)
|
This is the hypothetical Coupon Barrier of the Least Performing Underlying.
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-8
|
|
|
|
•
|
Your investment may result in a loss; there is no guaranteed return of principal. There is no fixed principal repayment amount on the Notes at maturity. If the Notes are not automatically called prior to maturity and the Ending Value of either Underlying is less than its Threshold Value, at maturity, your investment will be subject to 1:1 downside exposure to decreases in the value of the Least Performing Underlying beyond a 20% decline and you will lose 1% of the principal amount for each 1% that the Ending Value of the Least Performing Underlying is less than its Threshold Value. In that case, you will lose some or a significant portion of your investment in the Notes.
|
•
|
Your return on the Notes is limited to the return represented by the Contingent Coupon Payments, if any, over the term of the Notes. Your return on the Notes is limited to the Contingent Coupon Payments paid over the term of the Notes, regardless of the extent to which the Observation Value or Ending Value of any Underlying exceeds its Coupon Barrier or Starting Value, as applicable. Similarly, the amount payable at maturity or upon an Automatic Call will never exceed the sum of the principal amount and the applicable Contingent Coupon Payment, regardless of the extent to which the Observation Value or Ending Value of any Underlying exceeds its Starting Value. In contrast, a direct investment in the Underlyings would allow you to receive the benefit of any appreciation in their values. Any return on the Notes will not reflect the return you would realize if you actually owned those securities and received the dividends paid or distributions made on them.
|
•
|
The Notes are subject to a potential Automatic Call, which would limit your ability to receive the Contingent Coupon Payments over the full term of the Notes. The Notes are subject to a potential Automatic Call. Beginning with the February 26, 2025 Call Observation Date, the Notes will be automatically called if, on any Call Observation Date, the Observation Value of each Underlying is greater than or equal to its Call Value. If the Notes are automatically called prior to the Maturity Date, you will be entitled to receive the Early Redemption Amount on the applicable Call Payment Date, and no further amounts will be payable on the Notes. In this case, you will lose the opportunity to continue to receive Contingent Coupon Payments after the date of the Automatic Call. If the Notes are called prior to the Maturity Date, you may be unable to invest in other securities with a similar level of risk that could provide a return that is similar to the Notes.
|
•
|
You may not receive any Contingent Coupon Payments. The Notes do not provide for any regular fixed coupon payments. Investors in the Notes will not necessarily receive any Contingent Coupon Payments on the Notes. If the Observation Value of any Underlying is less than its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment applicable to that Observation Date. If the Observation Value of any Underlying is less than its Coupon Barrier on all the Observation Dates during the term of the Notes, you will not receive any Contingent Coupon Payments during the term of the Notes, and will not receive a positive return on the Notes.
|
•
|
Your return on the Notes may be less than the yield on a conventional debt security of comparable maturity. Any return that you receive on the Notes may be less than the return you would earn if you purchased a conventional debt security with the same Maturity Date. As a result, your investment in the Notes may not reflect the full opportunity cost to you when you consider factors, such as inflation, that affect the time value of money. In addition, if interest rates increase during the term of the Notes, the Contingent Coupon Payment (if any) may be less than the yield on a conventional debt security of comparable maturity.
|
•
|
The Contingent Coupon Payment, Early Redemption Amount or Redemption Amount, as applicable, will not reflect changes in the prices of the Underlyings other than on the Observation Dates or Call Observation Dates, as applicable. The prices of the Underlyings during the term of the Notes other than on the Observation Dates or Call Observation Dates, as applicable, will not affect payments on the Notes. Notwithstanding the foregoing, investors should generally be aware of the performance of the Underlyings while holding the Notes, as the performance of the Underlyings may influence the market value of the Notes. The calculation agent will determine whether each Contingent Coupon Payment is payable and will calculate the Early Redemption Amount or the Redemption Amount, as applicable, by comparing only the Starting Value, the Coupon Barrier, the Call Value or the Threshold Value, as applicable, to the Observation Value or the Ending Value for each Underlying. No other prices of the Underlyings will be taken into account. As a result, if the Notes are not automatically called prior to maturity and the Ending Value of the Least Performing Underlying is less than its Threshold Value, you will receive less than the principal amount at maturity even if the price of each Underlying was always above its Threshold Value prior to the Valuation Date.
|
•
|
Because the Notes are linked to the least performing (and not the average performance) of the Underlyings, you may not receive any return on the Notes and may lose some or a significant portion of your investment in the Notes even if the Observation Value or Ending Value of one Underlying is greater than or equal to its Coupon Barrier or Threshold Value, as applicable. Your Notes are linked to the least performing of the Underlyings, and a change in the price of one Underlying may not correlate with changes in the price of the other Underlying. The Notes are not linked to a basket composed of the Underlyings, where the
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-9
|
|
|
|
|
depreciation in the price of one Underlying could be offset to some extent by the appreciation in the price of the other Underlying. In the case of the Notes, the individual performance of each Underlying would not be combined, and the depreciation in the price of one Underlying would not be offset by any appreciation in the price of the other Underlying. Even if the Observation Value of an Underlying is at or above its Coupon Barrier on an Observation Date, you will not receive the Contingent Coupon Payment with respect to that Observation Date if the Observation Value of the other Underlying is below its Coupon Barrier on that day. In addition, even if the Ending Value of an Underlying is at or above its Threshold Value, you will lose some or a significant portion of your investment in the Notes if the Ending Value of the Least Performing Underlying is below its Threshold Value.
|
•
|
Any payments on the Notes are subject to our credit risk and the credit risk of the Guarantor, and any actual or perceived changes in our or the Guarantor’s creditworthiness are expected to affect the value of the Notes. The Notes are our senior unsecured debt securities. Any payment on the Notes will be fully and unconditionally guaranteed by the Guarantor. The Notes are not guaranteed by any entity other than the Guarantor. As a result, your receipt of any payments on the Notes will be dependent upon our ability and the ability of the Guarantor to repay our respective obligations under the Notes on the applicable payment date, regardless of the performance of the Underlyings. No assurance can be given as to what our financial condition or the financial condition of the Guarantor will be at any time after the pricing date of the Notes. If we and the Guarantor become unable to meet our respective financial obligations as they become due, you may not receive the amount(s) payable under the terms of the Notes.
In addition, our credit ratings and the credit ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations. Consequently, our or the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s credit ratings or increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities (the “credit spread”) prior to the Maturity Date may adversely affect the market value of the Notes. However, because your return on the Notes depends upon factors in addition to our ability and the ability of the Guarantor to pay our respective obligations, such as the values of the Underlyings, an improvement in our or the Guarantor’s credit ratings will not reduce the other investment risks related to the Notes. |
•
|
We are a finance subsidiary and, as such, have no independent assets, operations, or revenues. We are a finance subsidiary of the Guarantor, have no operations other than those related to the issuance, administration and repayment of our debt securities that are guaranteed by the Guarantor, and are dependent upon the Guarantor and/or its other subsidiaries to meet our obligations under the Notes in the ordinary course. Therefore, our ability to make payments on the Notes may be limited.
|
•
|
The public offering price you pay for the Notes will exceed their initial estimated value. The range of initial estimated values of the Notes that is provided on the cover page of this preliminary pricing supplement, and the initial estimated value as of the pricing date that will be provided in the final pricing supplement, are each estimates only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit spreads and those of the Guarantor, the Guarantor’s internal funding rate, mid-market terms on hedging transactions, expectations on interest rates, dividends and volatility, price-sensitivity analysis, and the expected term of the Notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. If you attempt to sell the Notes prior to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated value. This is due to, among other things, changes in the prices of the Underlyings, changes in the Guarantor’s internal funding rate, and the inclusion in the public offering price of the underwriting discount, if any, and the hedging related charges, all as further described in “Structuring the Notes” below. These factors, together with various credit, market and economic factors over the term of the Notes, are expected to reduce the price at which you may be able to sell the Notes in any secondary market and will affect the value of the Notes in complex and unpredictable ways.
|
•
|
The initial estimated value does not represent a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates would be willing to purchase your Notes in any secondary market (if any exists) at any time. The value of your Notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Underlyings, our and BAC’s creditworthiness and changes in market conditions.
|
•
|
We cannot assure you that a trading market for your Notes will ever develop or be maintained. We will not list the Notes on any securities exchange. We cannot predict how the Notes will trade in any secondary market or whether that market will be liquid or illiquid.
|
•
|
Trading and hedging activities by us, the Guarantor and any of our other affiliates, including BofAS, may create conflicts of interest with you and may affect your return on the Notes and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell shares or units of the Underlyings or the securities or assets held by or included in the Underlyings, as applicable, or futures or options contracts or exchange traded instruments on the Underlyings or those securities, or other instruments whose value is derived from the Underlyings or those securities or assets. While we, the Guarantor or one or more of our other affiliates, including BofAS, may from time to time own shares or units of the Underlyings or the securities or assets represented by the Underlyings, except to the extent that BAC’s common stock may be included in the Underlyings, we, the Guarantor and our other affiliates, including BofAS, do not control any company included in the Underlyings, and have not verified any disclosure made by any other company. We, the Guarantor or one or more of our other affiliates, including BofAS, may execute such purchases or sales for our
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-10
|
|
|
|
|
own or their own accounts, for business reasons, or in connection with hedging our obligations under the Notes. These transactions may present a conflict of interest between your interest in the Notes and the interests we, the Guarantor and our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions, including block trades, for our or their other customers, and in accounts under our or their management. These transactions may adversely affect the prices of the Underlyings in a manner that could be adverse to your investment in the Notes. On or before the pricing date, any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or their behalf (including those for the purpose of hedging some or all of our anticipated exposure in connection with the Notes), may affect the prices of the Underlyings. Consequently, the prices of the Underlyings may change subsequent to the pricing date, which may adversely affect the market value of the Notes.
We, the Guarantor or one or more of our other affiliates, including BofAS, also expect to engage in hedging activities that could affect the prices of the Underlyings on the pricing date. In addition, these hedging activities, including the unwinding of a hedge, may decrease the market value of your Notes prior to maturity, and may affect the amounts to be paid on the Notes. We, the Guarantor or one or more of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the Notes and may hold or resell the Notes. For example, BofAS may enter into these transactions in connection with any market making activities in which it engages. We cannot assure you that these activities will not adversely affect the prices of the Underlyings, the market value of your Notes prior to maturity or the amounts payable on the Notes. |
•
|
There may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right to appoint and remove the calculation agent. One of our affiliates will be the calculation agent for the Notes and, as such, will make a variety of determinations relating to the Notes, including the amounts that will be paid on the Notes. Under some circumstances, these duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent.
|
•
|
The Notes are subject to risks associated with the banking industry. All of the stocks held by the KRE are issued by companies in the banking industry. The performance of companies in the banking industry are influenced by many complex and unpredictable factors, including industry competition, interest rates, geopolitical events, the ability of borrowers to repay loans, government regulation, and supply and demand for the products and services offered by such companies. Any adverse development in the banking industry may have a material adverse effect on the stocks held by the KRE, and as a result, on the value of the Notes. The Notes may be subject to greater volatility and be more adversely affected by a single positive or negative economic, political or regulatory occurrence affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers.
|
•
|
An investment in the Notes is subject to risks associated with investing in stocks in the gold mining industry. All or substantially all of the equity securities held by the GDX are issued by companies whose primary line of business is directly associated with the gold mining industry. As a result, the value of the Notes may be subject to greater volatility and be more adversely affected by a single economic, political or regulatory occurrence affecting this industry than a different investment linked to securities of a more broadly diversified group of issuers. Investments related to gold are considered speculative and are affected by a variety of factors. Competitive pressures may have a significant effect on the financial condition of gold mining companies. Also, gold mining companies are highly dependent on the price of gold bullion, and may be adversely affected by a variety of worldwide economic, financial and political factors. The price of gold has fluctuated in recent years and may continue to fluctuate substantially over short periods of time so the trading price of the shares of the GDX may be more volatile than other types of investments. Fluctuation in the price of gold may be due to a number of factors, including changes in inflation and changes in industrial and commercial demand for metals. Additionally, increased environmental or labor costs may depress the value of metal investments. In times of significant inflation or great economic uncertainty, gold, silver and other precious metals may outperform traditional investments such as bonds and stocks. However, in times of stable economic growth, traditional equity and debt investments could offer greater appreciation potential and the value of gold, silver and other precious metals may be adversely affected, which could in turn affect the GDX’s returns. If a natural disaster or other event with a significant economic impact occurs in a region where the companies in which the GDX invests operate, that disaster or event could negatively affect the profitability of these companies and, in turn, the GDX’s investment in them. These factors could affect the gold mining industry and could affect the value of the equity securities held by the GDX and the price of the GDX during the term of the Notes, which may adversely affect the value of your Notes.
|
•
|
An investment in the Notes is subject to risks associated with foreign securities markets, including emerging markets. Some of the securities held by the GDX are issued by foreign companies and you should be aware that investments in securities linked to the value of foreign equity securities involve particular risks. Foreign securities markets may have less liquidity and may be more volatile than the U.S. securities markets and market developments may affect foreign markets differently than U.S. securities markets. Direct or indirect government intervention to stabilize a foreign securities market, as well as cross-shareholdings in foreign companies, may affect trading prices and volumes in those markets. Also, there is generally less publicly available information about non-U.S. companies that are not subject to the reporting requirements of the SEC, and non-U.S. companies are subject to accounting, auditing and financial
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-11
|
|
|
|
|
reporting standards and requirements that differ from those applicable to U.S. reporting companies.
|
•
|
The Notes are subject to foreign currency exchange rate risk. The GDX holds securities traded outside of the United States. The GDX's share price will fluctuate based upon its net asset value, which will in turn depend in part upon changes in the value of the currencies in which the securities held by the GDX 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 held by the GDX 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 net asset value of the GDX will be adversely affected and the price of the GDX may decrease.
|
•
|
The stocks held by the KRE and the GDX are concentrated in two different sectors. The KRE and the GDX hold securities issued by companies in the regional banking sector and the gold mining sector, respectively. As a result, some of the stocks that will determine the performance of the Notes are concentrated in two sectors. Although an investment in the Notes will not give holders any ownership or other direct interests in the securities held by the KRE or the GDX, the return on an investment in the Notes will be subject to certain risks associated with a direct equity investment in companies in these sectors. Accordingly, by investing in the Notes, you will not benefit from the diversification which could result from an investment linked to companies that operate in multiple sectors.
|
•
|
The performance of an Underlying may not correlate with the performance of its underlying index as well as the net asset value per share or unit of the Underlying, especially during periods of market volatility. The performance of an Underlying and that of its underlying index generally will vary due to, for example, transaction costs, management fees, certain corporate actions, and timing variances. Moreover, it is also possible that the performance of an Underlying may not fully replicate or may, in certain circumstances, diverge significantly from the performance of its underlying index. This could be due to, for example, the Underlying not holding all or substantially all of the underlying assets included in its underlying index and/or holding assets that are not included in its underlying index, the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments held by the Underlying, differences in trading hours between the Underlying (or the underlying assets held by the Underlying) and its underlying index, or other circumstances. This variation in performance is called the “tracking error,” and, at times, the tracking error may be significant. In addition, because the shares or units of each Underlying are traded on a securities exchange and are subject to market supply and investor demand, the market price of one share or unit of an Underlying may differ from its net asset value per share or unit; shares or units of the Underlying may trade at, above, or below its net asset value per share or unit. During periods of market volatility, securities held by an Underlying may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset value per share or unit of the Underlying and the liquidity of the Underlying may be adversely affected. Market volatility may also disrupt the ability of market participants to trade shares or units of the Underlying. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares or units of the Underlying. As a result, under these circumstances, the market value of shares or units of the Underlying may vary substantially from the net asset value per share or unit of the Underlying.
|
•
|
The anti-dilution adjustments will be limited. The calculation agent may adjust the Price Multiplier of an Underlying and other terms of the Notes to reflect certain actions by an Underlying, as described in the section “Description of the Notes—Anti-Dilution and Discontinuance Adjustments Relating to ETFs” in the accompanying product supplement. The calculation agent will not be required to make an adjustment for every event that may affect an Underlying and will have broad discretion to determine whether and to what extent an adjustment is required.
|
•
|
The publisher or the sponsor or investment advisor of an Underlying may adjust that Underlying in a way that affects its prices, and the publisher or the sponsor or investment advisor has no obligation to consider your interests. The publisher or the sponsor
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-12
|
|
|
|
|
or investment advisor of an Underlying can add, delete, or substitute the components included in that Underlying or make other methodological changes that could change its price. Any of these actions could adversely affect the value of your Notes.
|
•
|
The U.S. federal income tax consequences of an investment in the Notes are uncertain, and may be adverse to a holder of the Notes. No statutory, judicial, or administrative authority directly addresses the characterization of the Notes or securities similar to the Notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment in the Notes are not certain. Under the terms of the Notes, you will have agreed with us to treat the Notes as contingent income-bearing single financial contracts, as described below under “U.S. Federal Income Tax Summary—General.” If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the Notes, the timing and character of income, gain or loss with respect to the Notes may differ. No ruling will be requested from the IRS with respect to the Notes and no assurance can be given that the IRS will agree with the statements made in the section entitled “U.S. Federal Income Tax Summary.” You are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing in the Notes.
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-13
|
|
|
|
•
|
float-adjusted market capitalization above US$500 million and float-adjusted liquidity ratio above 90%; or
|
•
|
float-adjusted market capitalization above US$400 million and float-adjusted liquidity ratio above 150%.
|
•
|
Market Capitalization: Float-adjusted market capitalization should be at least US$400 million for inclusion in the Underlying Index. Existing index components must have a float-adjusted market capitalization of US$300 million to remain in the Underlying Index at each rebalancing.
|
•
|
Liquidity: The liquidity measurement used is a liquidity ratio, defined as dollar value traded over the previous 12-months divided by the float-adjusted market capitalization as of the Underlying Index rebalancing reference date. Stocks having a float-adjusted market capitalization above US$500 million must have a liquidity ratio greater than 90% to be eligible for addition to the Underlying Index. Stocks having a float-adjusted market capitalization between US$400 and US$500 million must have a liquidity ratio greater than 150% to be eligible for addition to the Underlying Index. Existing index constituents must have a liquidity ratio greater than 50% to remain in the Underlying Index at the quarterly rebalancing. The length of time to evaluate liquidity is reduced to the available trading period for IPOs or spin-offs that do not have 12 months of trading history.
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-14
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-15
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-16
|
|
|
|
1.
|
the weight of any single component security may not account for more than 20% of the total value of the Underlying Index;
|
2.
|
the component securities are split into two subgroups-large and small, which are ranked by unadjusted market capitalization weight in the Underlying Index. Large securities are defined as having a starting index weight greater than or equal to 5%. Small securities are defined as having a starting index weight below 5%; and
|
3.
|
the final aggregate weight of those component securities which individually represent more than 4.5% of the total value of the Underlying Index may not account for more than 45% of the total index value.
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-17
|
|
|
|
1.
|
Removal of constituents. Any stock deleted from the Underlying Index as a result of a corporate action such as a merger, acquisition, spin-off, delisting or bankruptcy is typically not replaced with a new constituent. The total number of stocks in the Underlying Index is reduced by one every time a company is deleted. In certain circumstances, IDI may decide to add another constituent into the Underlying Index as a result of the pending removal of a current constituent. If a company is removed from the Underlying Index, the divisor will be adapted to maintain the index level.
|
a.
|
Mergers and acquisitions. In the event that a merger or acquisition occurs between members of the Underlying Index, the acquired company is deleted and its market capitalization moves to the acquiring company’s stock. In the event that only one of the parties to a merger or acquisition is a member of the Underlying Index, an acquiring member of the Underlying Index continues as a member of the Underlying Index and its shares will be adjusted at the next rebalance while an acquired member of the Underlying Index is removed from the Underlying Index and its market capitalization redistributed proportionately across the remaining constituents via a divisor adjustment, and the acquiring company may be considered for inclusion at the next rebalance.
|
b.
|
Suspensions and company distress. Immediately upon a company’s filing for bankruptcy, an announcement will be made to remove the constituent from the Underlying Index effective for the next trading day. If the constituent is trading on an over-the-counter market, the last trade or price on that market is utilized as the deletion price on that day. If the stock does not trade on the relevant exchange between the bankruptcy announcement and the current index business day, the stock may be deleted from the Underlying Index with a presumed market value of $0.
|
c.
|
Split-up / spin-off. The closing price of the index constituent is adjusted by the value of the spin-off and the shares of the index constituent will not be adjusted.
|
2.
|
Dividends. The Underlying Index will be adjusted for dividends that are special. To determine whether a dividend should be considered a special dividend, the compiler will use the following criteria: (a) the declaration of a dividend additional to those dividends declared as part of a company’s normal results and dividend reporting cycle; or (b) the identification of an element of a dividend paid in line with a company’s normal results and dividend reporting cycle as an element that is unambiguously additional to the company’s normal payment.
|
3.
|
Rights issues and other rights. In the event of a rights issue, the price is adjusted for the value of the right before the open on the ex-date, and the shares are increased to maintain the constituent’s existing weighting within the Underlying Index. The adjustment assumes that the rights issue is fully subscribed. The amount of the price adjustment is determined from the terms of the rights issue, including the subscription price, and the price of the underlying security. IDI shall only enact adjustments if the rights represent a positive value, or are in-the-money, or, alternatively, represent or can be converted into a tangible cash value.
|
4.
|
Bonus issues, stock splits and reverse stock splits. For bonus issues, stock splits and reverse stock splits, the number of shares included in the Underlying Index will be adjusted in accordance with the ratio given in the corporate action. Since the event won’t change the value of the company included in the Underlying Index, the divisor will not be changed because of this.
|
5.
|
Changes in number of shares. Changes in the number of shares outstanding, typically due to share repurchases, tenders or offerings, will not be reflected in the Underlying Index.
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-18
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-19
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-20
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-21
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-22
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-23
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-24
|
|
|
|
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-25
|
|
|
|
•
|
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 |
![]() |
CONTINGENT INCOME BUFFERED AUTO-CALLABLE YIELD NOTES | PS-26
|
|