|
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Subject
to Completion
Preliminary
Term Sheet dated
May
19, 2022
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Filed Pursuant
to Rule 424(b)(2)
Registration Statement No. 333-234425
(To Prospectus dated December 31, 2019,
Prospectus Supplement dated December 31, 2019 and
Product Supplement EQUITY ARN-1 dated May 20,
2020)
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Units
$10 principal amount per unit
CUSIP No.
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Pricing
Date*
Settlement Date*
Maturity Date*
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May ,
2022
June
, 2022
July , 2023
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|
*Subject
to change based on the actual date the notes are priced for initial
sale to the public (the “pricing date”)
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BofA
Finance LLC
Accelerated
Return Notes® Linked to the EURO STOXX
50® Index
Fully
and Unconditionally Guaranteed by Bank of America
Corporation
■
Maturity
of approximately 14 months
■
3-to-1
upside exposure to increases in the Index, subject to a capped
return of [17.00% to 21.00%]
■
1-to-1
downside exposure to decreases in the Index, with 100% of your
investment at risk
■
All
payments occur at maturity and are subject to the credit risk of
BofA Finance LLC, as issuer of the notes, and the credit risk of
Bank of America Corporation, as guarantor of the notes
■
No
periodic interest payments
■
In
addition to the underwriting discount set forth below, the notes
include a hedging -related charge of $0.05 per unit. See
“Structuring the Notes”
■
Limited
secondary market liquidity, with no exchange listing
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|
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The
notes are being issued by BofA Finance LLC (“BofA Finance”) and are
fully and unconditionally guaranteed by Bank of America Corporation
(“BAC”). There are important differences between the notes and a
conventional debt security, including different investment risks
and certain additional costs. See “Risk Factors” beginning on page
TS-6 of this term sheet, page PS-7 of the
accompanying product supplement, page S-5 of the accompanying
Series A MTN prospectus supplement and page 7 of the accompanying
prospectus.
The
initial estimated value of the notes as of the pricing date is
expected to be between $9.21 and
$9.88 per unit, which is less than the public
offering price listed below. See “Summary” on the following
page, “Risk Factors” beginning on page TS-6 of this term sheet and
“Structuring the Notes” on page TS-11 of this term sheet for
additional information. The actual value of your notes at any time
will reflect many factors and cannot be predicted with
accuracy.
_________________________
None
of the Securities and Exchange Commission (the “SEC”), any state
securities commission, or any other regulatory body has approved or
disapproved of these securities or determined if this Note
Prospectus (as defined below) is truthful or complete. Any
representation to the contrary is a criminal offense.
_______________________
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Per
Unit
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Total
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Public
offering price(1)
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$10.000
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$
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Underwriting
discount(1)
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$0.175
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$
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Proceeds, before
expenses, to BofA Finance
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$9.825
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$
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(1)
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For
any purchase of 300,000 units or more in a single transaction by an
individual investor or in combined transactions with the investor’s
household in this offering, the public offering price and the
underwriting discount will be $9.95 per unit and $0.125 per unit,
respectively. See “Supplement to the Plan of Distribution;
Conflicts of Interest” below.
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The
notes and the related guarantee:
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Are
Not FDIC Insured
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Are
Not Bank Guaranteed
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May
Lose Value
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BofA
Securities
May ,
2022
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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Summary
The
Accelerated Return Notes® Linked to the EURO STOXX
50® Index, due July , 2023 (the “notes”) are our
senior unsecured debt securities. 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 BofA Finance’s other
unsecured and unsubordinated obligations, and the related guarantee
will rank equally in right of payment with all of BAC’s other
unsecured and unsubordinated obligations, in each case, except
obligations that are subject to any priorities or preferences by
law. Any payments due on the notes, including any repayment of
principal, will be subject to the credit risk of BofA Finance, as
issuer, and BAC, as guarantor. The notes provide you a
leveraged return, subject to a cap, if the Ending Value of the
Market Measure, which is the EURO STOXX 50® Index
(the “Index”), is greater than its Starting Value. If the Ending
Value is less than the Starting Value, you will lose all or a
portion of the principal amount of your notes. Any payments on the
notes will be calculated based on the $10 principal amount per unit
and will depend on the performance of the Index, subject to our and
BAC’s credit risk. See “Terms of the Notes” below.
The
economic terms of the notes (including the Capped Value) are based
on BAC’s internal funding rate, which is the rate it would pay to
borrow funds through the issuance of market-linked notes and the
economic terms of certain related hedging arrangements. BAC’s
internal funding rate is typically lower than the rate it would pay
when it issues conventional fixed or floating rate debt securities.
This difference in funding rate, as well as the underwriting
discount and the hedging -related charge described below, will
reduce the economic terms of the notes to you and the initial
estimated value of the notes on the pricing date. Due to these
factors, the public offering price you pay to purchase the notes
will be greater than the initial estimated value of the notes.
On the
cover page of this term sheet, we have provided the initial
estimated value range for the notes. This initial estimated value
range was determined based on our, BAC’s and our other affiliates’
pricing models, which take into consideration BAC’s internal
funding rate and the market prices for the hedging arrangements
related to the notes. The initial estimated value of the
notes calculated on the pricing date will be set forth in the final
term sheet made available to investors in the notes. For more
information about the initial estimated value and the structuring
of the notes, see “Structuring the Notes” on page
TS-11.
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Terms
of the Notes
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Redemption
Amount Determination
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Issuer:
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BofA
Finance LLC (“BofA Finance”)
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On the
maturity date, you will receive a cash payment per unit determined
as follows:
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Guarantor:
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Bank
of America Corporation (“BAC”)
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Principal Amount:
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$10.00 per
unit
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Term:
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Approximately 14
months
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Market Measure:
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The
EURO STOXX 50® Index (Bloomberg symbol: “SX5E”), a
price return index
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Starting Value:
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The
closing level of the Market Measure on the pricing
date
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Ending Value:
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The
average of the closing levels of the Market Measure on each
calculation day occurring during the maturity valuation period. The
scheduled calculation days are subject to postponement in the event
of Market Disruption Events, as described beginning on page PS-26
of the accompanying product supplement.
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Participation Rate:
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300%
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Capped Value:
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[$11.70 to
$12.10] per unit, which represents a return of [17.00% to 21.00%]
over the principal amount. The actual Capped Value will be
determined on the pricing date.
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Maturity Valuation Period:
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Five
scheduled calculation days shortly before the maturity
date.
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Fees and Charges:
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The
underwriting discount of $0.175 per unit listed on the cover page
and the hedging -related charge of $0.05 per unit described in
“Structuring the Notes” on page TS-11.
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Calculation Agent:
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BofA
Securities, Inc. (“BofAS”), an affiliate of BofA
Finance.
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Accelerated
Return Notes®
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TS-2
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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The
terms and risks of the notes are contained in this term sheet and
in the following:
These
documents (together, the “Note Prospectus”) have been filed as part
of a registration statement with the SEC, which may, without cost,
be accessed on the SEC website at www.sec.gov or obtained from
Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“MLPF&S”) or BofAS by calling 1-800-294-1322. Before you
invest, you should read the Note Prospectus, including this term
sheet, for information about us, BAC and this offering. Any prior
or contemporaneous oral statements and any other written materials
you may have received are superseded by the Note Prospectus.
Certain terms used but not defined in this term sheet have the
meanings set forth in the accompanying product supplement. Unless
otherwise indicated or unless the context requires otherwise, all
references in this document to “we,” “us,” “our,” or similar
references are to BofA Finance, and not to BAC.
Investor
Considerations
|
You
may wish to consider an investment in the notes
if:
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The
notes may not be an appropriate investment for you
if:
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■
You anticipate
that the Index will increase moderately from the Starting Value to
the Ending Value.
■
You are willing to
risk a loss of principal and return if the Index decreases from the
Starting Value to the Ending Value.
■
You accept that
the return on the notes will be capped.
■
You are willing to
forgo the interest payments that are paid on conventional interest
bearing debt securities.
■
You are willing to
forgo dividends or other benefits of owning the stocks included in
the Index.
■
You are willing to
accept a limited or no market for sales prior to maturity, and
understand that the market prices for the notes, if any, will be
affected by various factors, including our and BAC’s actual and
perceived creditworthiness, BAC’s internal funding rate and fees
and charges on the notes.
■
You are willing to
assume our credit risk, as issuer of the notes, and BAC’s credit
risk, as guarantor of the notes, for all payments under the notes,
including the Redemption Amount.
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■
You believe that
the Index will decrease from the Starting Value to the Ending Value
or that it will not increase sufficiently over the term of the
notes to provide you with your desired return.
■
You seek principal
repayment or preservation of capital.
■
You seek an
uncapped return on your investment.
■
You seek interest
payments or other current income on your investment.
■
You want to
receive dividends or other distributions paid on the stocks
included in the Index.
■
You seek an
investment for which there will be a liquid secondary
market.
■
You are unwilling
or are unable to take market risk on the notes, to take our credit
risk, as issuer of the notes, or to take BAC’s credit risk, as
guarantor of the notes.
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We
urge you to consult your investment, legal, tax, accounting, and
other advisors before you invest in the notes.
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Accelerated
Return Notes®
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TS-3
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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Hypothetical
Payout Profile and Examples of Payments at Maturity
The
below graph is based on hypothetical numbers and
values.
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Accelerated
Return Notes®
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This
graph reflects the returns on the notes, based on the Participation
Rate of 300% and a Capped Value of $11.90 per unit (the midpoint of
the Capped Value range of [$11.70 to $12.10]). The green line
reflects the returns on the notes, while the dotted gray line
reflects the returns of a direct investment in the stocks included
in the Index, excluding dividends.
This
graph has been prepared for purposes of illustration
only.
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The
following table and examples are for purposes of illustration only.
They are based on hypothetical values and show
hypothetical returns on the notes. They illustrate the
calculation of the Redemption Amount and total rate of return based
on a hypothetical Starting Value of 100, the Participation Rate of
300%, a Capped Value of $11.90 (the midpoint of the Capped Value
range of [$11.70 to $12.10]) per unit and a range of hypothetical
Ending Values. The actual amount you receive and the resulting
total rate of return will depend on the actual Starting Value,
Ending Value, Capped Value and whether you hold the notes to
maturity. The following examples do not take into account
any tax consequences from investing in the notes.
For
recent actual levels of the Market Measure, see “The Index” section
below. The Index is a price return index and as such the Ending
Value will not include any income generated by dividends paid on
the stocks included in the Index, which you would otherwise be
entitled to receive if you invested in those stocks directly. In
addition, all payments on the notes are subject to issuer and
guarantor credit risk.
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Ending
Value
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Percentage
Change from the Starting Value to the Ending Value
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Redemption
Amount per Unit
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Total Rate of
Return on the Notes
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0.00
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-100.00%
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$0.00
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-100.00%
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50.00
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-50.00%
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$5.00
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-50.00%
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80.00
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-20.00%
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$8.00
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-20.00%
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90.00
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-10.00%
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$9.00
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-10.00%
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94.00
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-6.00%
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$9.40
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-6.00%
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97.00
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-3.00%
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$9.70
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-3.00%
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100.00(1)
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0.00%
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$10.00
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0.00%
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102.00
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2.00%
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$10.60
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6.00%
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106.34
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6.34%
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$11.90(2)
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19.00%
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110.00
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10.00%
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$11.90
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19.00%
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120.00
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20.00%
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$11.90
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19.00%
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130.00
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30.00%
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$11.90
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19.00%
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140.00
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40.00%
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$11.90
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19.00%
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150.00
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50.00%
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$11.90
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19.00%
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160.00
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60.00%
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$11.90
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19.00%
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(1)
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The
hypothetical Starting Value of 100 used in these
examples has been chosen for illustrative purposes only, and does
not represent a likely actual Starting Value for the Market
Measure.
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(2)
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The
Redemption Amount per unit cannot exceed the
hypothetical Capped Value.
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Accelerated
Return Notes®
|
TS-4
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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Redemption
Amount Calculation Examples
|
Example
1
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The
Ending Value is 80.00, or 80.00% of the Starting
Value:
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Starting
Value: 100.00
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Ending
Value: 80.00
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=
$8.00 Redemption Amount per unit
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|
Example
2
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|
The
Ending Value is 102.00, or 102.00% of the Starting
Value:
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Starting
Value: 100.00
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Ending
Value: 102.00
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|
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=
$10.60 Redemption Amount per unit
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Example
3
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The
Ending Value is 130.00, or 130.00% of the Starting
Value:
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|
Starting
Value: 100.00
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|
Ending
Value: 130.00
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|
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=
$19.00, however, because the Redemption Amount for the notes cannot
exceed the Capped Value, the Redemption Amount will be
$11.90 per
unit
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|
Accelerated
Return Notes®
|
TS-5
|
|
Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
|
|
Risk
Factors
There are
important differences between the notes and a conventional debt
security. An investment in the notes involves significant risks,
including those listed below. You should carefully review the more
detailed explanation of risks relating to the notes in the “Risk
Factors” sections beginning on page PS-7 of the accompanying
product supplement, page S-5 of the Series A MTN prospectus
supplement, and page 7 of the prospectus identified above. We also
urge you to consult your investment, legal, tax, accounting, and
other advisors before you invest in the
notes.
Structure-related
Risks
|
■
|
Depending on the
performance of the Index as measured shortly before the maturity
date, your investment may result in a loss; there is no guaranteed
return of principal.
|
|
■
|
Your
return on the notes may be less than the yield you could earn by
owning a conventional fixed or floating rate debt security of
comparable maturity.
|
|
■
|
Payments on the
notes are subject to our credit risk, and the credit risk of BAC,
and any actual or perceived changes in our or BAC’s
creditworthiness are expected to affect the value of the notes. If
we and BAC become insolvent or are unable to pay our respective
obligations, you may lose your entire investment.
|
|
■
|
Your
investment return is limited to the return represented by the
Capped Value and may be less than a comparable investment directly
in the securities included in the Index.
|
|
■
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We are
a finance subsidiary and, as such, have no independent assets,
operations or revenues.
|
|
■
|
BAC’s
obligations under its guarantee of the notes will be structurally
subordinated to liabilities of its subsidiaries.
|
|
■
|
The
notes issued by us will not have the benefit of any cross-default
or cross-acceleration with other indebtedness of BofA Finance or
BAC; events of bankruptcy or insolvency or resolution proceedings
relating to BAC and covenant breach by BAC will not constitute an
event of default with respect to the notes.
|
Valuation-
and Market-related Risks
|
■
|
The
initial estimated value of the notes considers certain assumptions
and variables and relies in part on certain forecasts about future
events, which may prove to be incorrect. The initial estimated
value of the notes is an estimate 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 BAC, BAC’s
internal funding rate on the pricing date, mid-market terms on
hedging transactions, expectations on interest rates 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.
|
|
■
|
The
public offering price you pay for the notes will exceed the initial
estimated value. 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 the initial estimated value. This is
due to, among other things, changes in the level of the Index,
changes in BAC’s internal funding rate, and the inclusion in the
public offering price of the underwriting discount and the hedging
-related charge, all as further described in “Structuring the
Notes” on page TS-11. 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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|
■
|
The
initial estimated value does not represent a minimum or maximum
price at which we, BAC, MLPF&S, 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 Index,
our and BAC’s creditworthiness and changes in market
conditions.
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|
■
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A
trading market is not expected to develop for the notes. None of
us, BAC, MLPF&S or BofAS is obligated to make a market for, or
to repurchase, the notes. There is no assurance that any party will
be willing to purchase your notes at any price in any secondary
market.
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Conflict-related
Risks
|
■
|
BAC
and its affiliates’ hedging and trading activities (including
trades in shares of companies included in the Index) and any
hedging and trading activities BAC or its affiliates engage in that
are not for your account or on your behalf, may affect the market
value and return of the notes and may create conflicts of interest
with you.
|
|
■
|
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.
|
Market
Measure-related Risks
|
■
|
Your
return on the notes may be affected by factors affecting the
international securities markets, specifically changes within the
Eurozone. The Eurozone is and has been undergoing severe financial
stress, and the political, legal and regulatory ramifications are
impossible to predict. Changes within the Eurozone could adversely
affect the performance of the Index and, consequently, the value of
the notes. In addition, you will not obtain the benefit of any
increase in the value of the euro against the U.S. dollar, which
you would have received if you had owned the securities in the
Index during the term of your notes, although the level of the
Index may be adversely affected by general exchange rate movements
in the market.
|
|
Accelerated
Return Notes®
|
TS-6
|
|
Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
|
|
|
■
|
The
Index sponsor may adjust the Index in a way that affects its level,
and has no obligation to consider your interests.
|
|
■
|
You
will have no rights of a holder of the securities represented by
the Index, and you will not be entitled to receive securities or
dividends or other distributions by the issuers of those
securities.
|
|
■
|
While
BAC and our other affiliates may from time to time own securities
of companies included in the Index, we, BAC and our other
affiliates do not control any company included in the Index, and
have not verified any disclosure made by any other
company.
|
Tax-related
Risks
|
■
|
The
U.S. federal income tax consequences of the notes are uncertain,
and may be adverse to a holder of the notes. See “Summary Tax
Consequences” below and “U.S. Federal Income Tax Summary” beginning
on page PS-38 of the accompanying product supplement.
|
Other
Terms of the Notes
The
provisions of this section supersede and replace the definition of
“Market Measure Business Day” set forth in the
accompanying product supplement.
Market Measure
Business Day
A
“Market Measure Business Day” means a day on which:
(A)
the Eurex (or any successor) is open for trading; and
(B)
the Index or any successor thereto is calculated and
published.
|
Accelerated
Return Notes®
|
TS-7
|
|
Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
|
|
The
Index
All
disclosures contained in this term sheet regarding the Index,
including, without limitation, its make-up, method of calculation,
and changes in its components, have been derived from publicly
available sources. The information reflects the policies of, and is
subject to change by, STOXX Limited (“STOXX” or “Index sponsor”).
STOXX, which owns the copyright and all other rights to the Index,
has no obligation to continue to publish, and may discontinue
publication of, the Index. The consequences of STOXX discontinuing
publication of the Index are discussed in the section of
product supplement EQUITY ARN-1 beginning on page PS-28 entitled
“Description of ARNs - Discontinuance of an
Index.” None
of us, BAC, the calculation agent, MLPF&S, or BofAS accepts any
responsibility for the calculation, maintenance or publication of
the Index or any successor index.
The
Index was created by STOXX, which is part of the Deutsche Börse
Group. Publication of the Index began in February 1998, based on an
initial Index level of 1,000 at December 31, 1991. On March 1,
2010, STOXX announced the removal of the “Dow Jones” prefix from
all of its indices, including the Index.
Index
Composition and Maintenance
For
each of the 20 EURO STOXX regional supersector indices, the stocks
are ranked in terms of free-float market capitalization. The
largest stocks are added to the selection list until the coverage
is close to, but still less than, 60% of the free-float market
capitalization of the corresponding supersector index. If the next
highest-ranked stock brings the coverage closer to 60% in absolute
terms, then it is also added to the selection list. All current
stocks in the Index are then added to the selection list. All of
the stocks on the selection list are then ranked in terms of
free-float market capitalization to produce the final index
selection list. The largest 40 stocks on the selection list
are selected; the remaining 10 stocks are selected from the largest
remaining current stocks ranked between 41 and 60; if the number of
stocks selected is still below 50, then the largest remaining
stocks are selected until there are 50 stocks. In exceptional
cases, STOXX’s management board can add stocks to and remove them
from the selection list.
The
Index components are subject to a capped maximum index weight of
10%, which is applied on a quarterly basis.
The
composition of the Index is reviewed annually, based on the closing
stock data on the last trading day in August. Changes in the
composition of the Index are made to ensure that the Index includes
the 50 market sector leaders from within the EURO
STOXX® Index.
The
free float factors for each component stock used to calculate the
Index, as described below, are reviewed, calculated, and
implemented on a quarterly basis and are fixed until the next
quarterly review.
The
Index is subject to a “fast exit rule.” The Index components are
monitored for any changes based on the monthly selection list
ranking. A stock is deleted from the Index if: (a) it ranks 75 or
below on the monthly selection list and (b) it has been ranked 75
or below for a consecutive period of two months in the monthly
selection list. The highest-ranked stock that is not an index
component will replace it. Changes will be implemented on the
close of the fifth trading day of the month, and are effective the
next trading day.
The
Index is also subject to a “fast entry rule.” All stocks on
the latest selection lists and initial public offering (IPO) stocks
are reviewed for a fast-track addition on a quarterly basis. A
stock is added, if (a) it qualifies for the latest STOXX blue-chip
selection list generated end of February, May, August or November
and (b) it ranks within the “lower buffer” on this selection
list.
The
Index is also reviewed on an ongoing monthly basis. Corporate
actions (including initial public offerings, mergers and takeovers,
spin-offs, delistings, and bankruptcy) that affect the Index
composition are announced immediately, implemented two trading days
later and become effective on the next trading day after
implementation.
Index
Calculation
The
Index is calculated with the “Laspeyres formula,” which measures
the aggregate price changes in the component stocks against a fixed
base quantity weight. The formula for calculating the Index
value can be expressed as follows:
The
“free float market capitalization of the Index” is equal to the sum
of the product of the price, the number of shares and the free
float factor and the weighting cap factor for each component stock
as of the time the Index is being calculated.
The
Index is also subject to a divisor, which is adjusted to maintain
the continuity of the Index values across changes due to corporate
actions, such as the deletion and addition of stocks, the
substitution of stocks, stock dividends, and stock
splits.
Neither we nor any
of our affiliates, including the selling agent, accepts any
responsibility for the calculation, maintenance, or publication of,
or for any error, omission, or disruption in, the Index or any
successor to the Index. STOXX does not guarantee the accuracy or
the completeness of the Index or any data included in the Index.
STOXX assumes no liability for any errors, omissions, or disruption
in the calculation and dissemination of the Index. STOXX
disclaims all responsibility for any errors or omissions in the
calculation and dissemination of the Index or the manner in which
the Index is applied in determining the amount payable on the notes
at maturity.
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Accelerated
Return Notes®
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TS-8
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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The
following graph shows the daily historical performance of the Index
in the period from January 1, 2012
through May 16, 2022. We
obtained this historical data from
Bloomberg L.P. We have not independently
verified the accuracy or completeness of the information
obtained from Bloomberg
L.P. On May 16,
2022, the closing level of the Index
was
3,685.34.
Historical
Performance of the Index
This
historical data on the Index is not necessarily indicative of the
future performance of the Index or what the value of the notes may
be. Any historical upward or downward trend in the level of the
Index during any period set forth above is not an indication that
the level of the Index is more or less likely to increase or
decrease at any time over the term of the
notes.
Before
investing in the notes, you should consult publicly available
sources for the levels of the Index.
License
Agreement
One of
our affiliates has entered into a non-exclusive license agreement
with STOXX providing for the license to it and certain of its
affiliated companies, including us, in exchange for a fee, of the
right to use indices owned and published by STOXX (including the
Index) in connection with certain securities, including the
notes.
The
license agreement requires that the following language be stated in
this term sheet:
STOXX
and its licensors (the “Licensors”) have no relationship to us,
other than the licensing of the Index and the related trademarks
for use in connection with the notes. STOXX and its Licensors do
not:
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sponsor, endorse,
sell, or promote the notes;
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recommend that any
person invest in the notes or any other securities;
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have any
responsibility or liability for or make any decisions about the
timing, amount, or pricing of the notes;
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have any
responsibility or liability for the administration, management, or
marketing of the notes; or
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consider the needs
of the notes or the holders of the notes in determining, composing,
or calculating the Index, or have any obligation to do
so.
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STOXX and its
Licensors will not have any liability in connection with the notes.
Specifically:
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STOXX and its
Licensors do not make any warranty, express or implied, and
disclaims any and all warranty concerning:
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the results to
be obtained by the notes, the holders of the notes or any other
person in connection with the use of the Index and the data
included in the Index;
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the accuracy or
completeness of the Index and its data;
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the
merchantability and the fitness for a particular purpose or use of
the Index and its data;
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STOXX and its
Licensors will have no liability for any errors, omissions, or
interruptions in the Index or its data; and
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Under no
circumstances will STOXX be liable for any lost profits or
indirect, punitive, special, or consequential damages or losses,
even if STOXX or its Licensors knows that they might
occur.
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The
licensing agreement discussed above is solely for our benefit and
that of STOXX, and not for the benefit of the holders of the notes
or any other third parties.
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Accelerated
Return Notes®
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TS-9
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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Supplement
to the Plan of Distribution; Conflicts of Interest
Under
our distribution agreement with BofAS, BofAS will purchase the
notes from us as principal at the public offering price indicated
on the cover of this term sheet, less the indicated underwriting
discount.
MLPF&S will
purchase the notes from BofAS for resale, and will receive a
selling concession in connection with the sale of the notes in an
amount up to the full amount of underwriting discount set forth on
the cover of this term sheet.
MLPF&S and
BofAS, each a broker-dealer subsidiary of BAC, are members of the
Financial Industry Regulatory Authority, Inc. (“FINRA”) and will
participate as selling agent in the case of BofAS and as dealer in
the case of MLPF&S in the distribution of the notes.
Accordingly, offerings of the notes will conform to the
requirements of Rule 5121 applicable to FINRA members. Neither
BofAS nor MLPF&S may make sales in this offering to any of its
discretionary accounts without the prior written approval of the
account holder.
We may
deliver the notes against payment therefor in New York, New York on
a date that is greater than two business days following the pricing
date. Under Rule 15c6-1 of the Securities Exchange Act of 1934,
trades in the secondary market generally are required to settle in
two business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, if the initial settlement of the
notes occurs more than two business days from the pricing date,
purchasers who wish to trade the notes more than two business days
prior to the original issue date will be required to specify
alternative settlement arrangements to prevent a failed
settlement.
The
notes will not be listed on any securities exchange. In the
original offering of the notes, the notes will be sold in minimum
investment amounts of 100 units. If you place an order to
purchase the notes, you are consenting to MLPF&S and/or one of
its affiliates acting as a principal in effecting the transaction
for your account.
MLPF&S and
BofAS may repurchase and resell the notes, with repurchases and
resales being made at prices related to then-prevailing market
prices or at negotiated prices, and these will include MLPF&S’s
and BofAS’s trading commissions and mark-ups or mark-downs.
MLPF&S and BofAS may act as principal or agent in these
market-making transactions; however, neither is obligated to engage
in any such transactions. At their discretion, for a short,
undetermined initial period after the issuance of the notes,
MLPF&S and BofAS may offer to buy the notes in the secondary
market at a price that may exceed the initial estimated value of
the notes. Any price offered by MLPF&S or BofAS for the notes
will be based on then-prevailing market conditions and other
considerations, including the performance of the Index and the
remaining term of the notes. However, neither we nor any of our
affiliates is obligated to purchase your notes at any price, or at
any time, and we cannot assure you that we or any of our affiliates
will purchase your notes at a price that equals or exceeds
the initial estimated value of the notes.
The
value of the notes shown on your account statement will be based on
BofAS’s estimate of the value of the notes if BofAS or another of
our affiliates were to make a market in the notes, which it is not
obligated to do. That estimate will be based upon the price that
BofAS may pay for the notes in light of then-prevailing market
conditions and other considerations, as mentioned above, and will
include transaction costs. At certain times, this price may be
higher than or lower than the initial estimated value of the
notes.
An
investor’s household, as referenced on the cover of this term
sheet, will generally include accounts held by any of the
following, as determined by MLPF&S in its discretion and acting
in good faith based upon information then available to
MLPF&S:
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the
investor’s spouse (including a domestic partner), siblings,
parents, grandparents, spouse’s parents, children and
grandchildren, but excluding accounts held by aunts, uncles,
cousins, nieces, nephews or any other family relationship not
directly above or below the individual investor;
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a
family investment vehicle, including foundations, limited
partnerships and personal holding companies, but only if the
beneficial owners of the vehicle consist solely of the investor or
members of the investor’s household as described
above; and
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a
trust where the grantors and/or beneficiaries of the trust consist
solely of the investor or members of the investor’s household as
described above; provided that, purchases of the notes by a trust
generally cannot be aggregated together with any purchases made by
a trustee’s personal account.
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Purchases in
retirement accounts will not be considered part of the same
household as an individual investor’s personal or other
non-retirement account, except for individual retirement accounts
(“IRAs”), simplified employee pension plans (“SEPs”), savings
incentive match plan for employees (“SIMPLEs”), and
single-participant or owners only accounts (i.e., retirement
accounts held by self-employed individuals, business owners or
partners with no employees other than their
spouses).
Please
contact your Merrill financial advisor if you have any questions
about the application of these provisions to your specific
circumstances or think you are eligible.
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Accelerated
Return Notes®
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TS-10
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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Structuring
the Notes
The
notes are our debt securities, the return on which is linked to the
performance of the Index. The related guarantees are BAC’s
obligations. As is the case for all of our and BAC’s respective
debt securities, including our market-linked notes, the economic
terms of the notes reflect our and BAC’s actual or perceived
creditworthiness at the time of pricing. In addition, because
market-linked notes result in increased operational, funding and
liability management costs to us and BAC, BAC typically borrows the
funds under these types of notes at a rate that is more favorable
to BAC than the rate that it might pay for a conventional fixed or
floating rate debt security. This rate, which we refer to in this
term sheet as BAC’s internal funding rate, is typically lower than
the rate BAC would pay when it issues conventional fixed or
floating rate debt securities. This generally relatively lower
internal funding rate, which is reflected in the economic terms of
the notes, along with the fees and charges associated with
market-linked notes, typically results in the initial estimated
value of the notes on the pricing date being less than their public
offering price.
At
maturity, we are required to pay the Redemption Amount to holders
of the notes, which will be calculated based on the performance of
the Index and the $10 per unit principal amount. In order to meet
these payment obligations, at the time we issue the notes, we may
choose to enter into certain hedging arrangements (which may
include call options, put options or other derivatives) with BofAS
or one of our other affiliates. The terms of these hedging
arrangements are determined by seeking bids from market
participants, including MLPF&S, BofAS and its affiliates, and
take into account a number of factors, including our and BAC’s
creditworthiness, interest rate movements, the volatility of the
Index, the tenor of the notes and the tenor of the hedging
arrangements. The economic terms of the notes and their
initial estimated value depend in part on the terms of these
hedging arrangements.
BofAS
has advised us that the hedging arrangements will include a hedging
-related charge of approximately $0.05 per unit, reflecting an
estimated profit to be credited to BofAS from these transactions.
Since hedging entails risk and may be influenced by
unpredictable market forces, additional profits and losses from
these hedging arrangements may be realized by BofAS or any third
party hedge providers.
For
further information, see “Risk Factors—General Risks Relating to
ARNs” beginning on page PS-7 and “Use of Proceeds” on page PS-22 of
the accompanying product supplement.
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Accelerated
Return Notes®
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TS-11
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Accelerated
Return Notes®
Linked
to the EURO STOXX 50® Index, due July ,
2023
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Summary
Tax Consequences
You
should consider the U.S. federal income tax consequences of an
investment in the notes, including the
following:
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There
is no statutory, judicial, or administrative authority directly
addressing the characterization of the notes.
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You
agree with us (in the absence of an administrative determination,
or judicial ruling to the contrary) to characterize and treat the
notes for all tax purposes as a single financial contract with
respect to the Index.
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Under
this characterization and tax treatment of the notes, a U.S. Holder
(as defined beginning on page 38 of the prospectus) generally will
recognize capital gain or loss upon maturity or upon a sale or
exchange of the notes prior to maturity. This capital gain or loss
generally will be long-term capital gain or loss if you held the
notes for more than one year.
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No
assurance can be given that the Internal Revenue Service (“IRS”) or
any court will agree with this characterization and tax
treatment.
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Under
current IRS guidance, withholding on “dividend equivalent” payments
(as discussed in the product supplement), if any, will not apply to
notes that are issued as of the date of this term sheet unless such
notes are “delta-one” instruments.
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You
should consult your own tax advisor concerning the U.S. federal
income tax consequences to you of acquiring, owning, and disposing
of the notes, as well as any tax consequences arising under the
laws of any state, local, foreign, or other tax jurisdiction and
the possible effects of changes in U.S. federal or other tax laws.
You should review carefully the discussion under the section
entitled “U.S. Federal Income Tax Summary” beginning on page PS-38
of the accompanying product supplement.
Where
You Can Find More Information
We and
BAC have filed a registration statement (including a product
supplement, a prospectus supplement, and a prospectus) with the SEC
for the offering to which this term sheet relates. Before you
invest, you should read the Note Prospectus, including this term
sheet, and the other documents relating to this offering that we
and BAC have filed with the SEC, for more complete information
about us, BAC and this offering. You may get these documents
without cost by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, we, any agent, or any dealer participating in
this offering will arrange to send you these documents if you so
request by calling MLPF&S or BofAS toll-free at
1-800-294-1322.
“Accelerated
Return Notes®” and “ARNs®” are BAC’s
registered service marks.
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Accelerated
Return Notes®
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TS-12
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