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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 COMM LIRN-1 dated July 15,
2021)
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507,000
Units
$10 principal amount per unit
CUSIP No. 06054E143
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Pricing
Date
Settlement Date
Maturity Date
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November
22, 2022
November 30, 2022
November 27, 2026
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BofA
Finance LLC
Leveraged
Index Return Notes® Linked to the
Bloomberg Commodity IndexSM
Fully
and Unconditionally Guaranteed by Bank of America
Corporation
■
Maturity
of approximately four years
■
142.50%
leveraged upside exposure to increases in the
Index
■
1-to-1
downside exposure to decreases in the Index beyond a 15.00%
decline, with up to 85.00% of your principal 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 $0.075 per unit.
See “Structuring the Notes”.
■
Limited
secondary market liquidity, with no exchange listing
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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, “Additional
Risk Factors” on page TS-8 of this term sheet, and “Risk Factors”
beginning on 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
$9.645 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” beginning on page TS-16 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
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$10.00
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$5,070,000.00
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Underwriting
discount
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$ 0.25
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$
126,750.00
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Proceeds, before
expenses, to BofA Finance
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$ 9.75
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$4,943,250.00
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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
November 22,
2022
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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|
Summary
The
Leveraged Index Return Notes® Linked to the Bloomberg
Commodity IndexSM, due November 27, 2026 (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 debt, 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 if the Ending Value of the Market Measure, which is the
Bloomberg Commodity IndexSM (the “Index”), is greater
than the Starting Value. If the Ending Value is equal to or less
than the Starting Value but greater than or equal to the Threshold
Value, you will receive the principal amount of your notes. If the
Ending Value is less than the Threshold Value, you will lose a
portion, which could be significant, 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 Participation Rate) 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, reduced
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 are paying to purchase the notes is
greater than the initial estimated value of the notes.
On the
cover page of this term sheet, we have provided the initial
estimated value for the notes. This initial estimated value 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. For more information about the initial estimated value and
the structuring of the notes, see “Structuring the Notes” on
page TS-16.
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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
four years
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Market Measure:
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The
Bloomberg Commodity IndexSM (Bloomberg
symbol: “BCOM”)
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Starting Value:
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116.3729
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Ending Value:
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The
closing level of the Market Measure on the scheduled calculation
day. The calculation day is subject to postponement in the event of
Market Disruption Events, as described beginning on page PS-22 of
the accompanying product supplement.
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Threshold Value:
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98.9170, which
is 85.00% of the Starting Value (rounded to four decimal
places).
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Participation Rate:
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142.50%
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Calculation Day:
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November 20,
2026.
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Fees and Charges:
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The
underwriting discount of $0.25 per unit listed on the cover page
and the hedging-related charge of $0.075 per unit described in
“Structuring the Notes” on page TS-16.
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Calculation Agent:
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BofA
Securities Inc. (“BofAS”), an affiliate of BofA
Finance.
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Leveraged
Index Return Notes®
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TS-2
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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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
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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 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 an Ending Value that is below the Threshold
Value.
■
You are willing to
forgo the interest payments that are paid on conventional
interest-bearing debt securities.
■
You are willing to
forgo the rights and benefits of owning the commodities or futures
contracts included in, or tracked by, 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
100% principal repayment or preservation of
capital.
■
You seek interest
payments or other current income on your investment.
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You want to
receive the rights and benefits of owning the commodities or
futures contracts included in, or tracked by, 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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Leveraged
Index Return Notes®
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TS-3
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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Hypothetical
Payout Profile and Examples of Payments at Maturity
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Leveraged Index
Return Notes®
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This
graph reflects the returns on the notes, based on the Participation
Rate of 142.50% and the Threshold Value of 85% of the Starting
Value. The green line reflects the returns on the notes, while the
dotted gray line reflects the returns of a direct investment in the
components of the Index.
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, a hypothetical Threshold
Value of 85, the Participation Rate of 142.50%, 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, Threshold Value and Ending 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 Index, see “The Index” section below.
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(1)
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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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$1.5000
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-85.000%
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50.00
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-50.00%
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$6.5000
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-35.000%
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75.00
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-25.00%
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$9.0000
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-10.000%
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80.00
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-20.00%
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$9.5000
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-5.000%
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85.00(2)
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-15.00%
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$10.0000
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0.000%
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90.00
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-10.00%
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$10.0000
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0.000%
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95.00
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-5.00%
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$10.0000
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0.000%
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97.00
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-3.00%
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$10.0000
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0.000%
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100.00(3)
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0.00%
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$10.0000
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0.000%
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105.00
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5.00%
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$10.7125
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7.125%
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110.00
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10.00%
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$11.4250
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14.250%
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120.00
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20.00%
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$12.8500
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28.500%
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140.00
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40.00%
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$15.7000
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57.000%
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160.00
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60.00%
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$18.5500
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85.500%
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180.00
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80.00%
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$21.4000
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114.000%
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200.00
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100.00%
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$24.2500
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142.500%
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(1)
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The
Redemption Amount per unit is based on the Participation
Rate.
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(2)
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This
is the hypothetical Threshold Value.
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(3)
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The
hypothetical Starting Value of 100 used in these examples
has been chosen for illustrative purposes only. The actual Starting
Value is 116.3729, which was the closing level of the Market
Measure on the pricing date.
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Leveraged
Index Return Notes®
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TS-4
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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Redemption
Amount Calculation Examples
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Example
1
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The
Ending Value is 50.00, or 50.00% of the Starting
Value:
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Starting
Value: 100.00
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Threshold
Value: 85.00
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Ending
Value: 50.00
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Redemption
Amount per unit
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Example
2
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The
Ending Value is 95.00, or 95.00% of the Starting
Value:
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Starting
Value: 100.00
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Threshold
Value: 85.00
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Ending
Value: 95.00
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Redemption Amount
(per unit) = $10.00, the principal amount, since the
Ending Value is less than the Starting Value but equal to or
greater than the Threshold Value.
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Example
3
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The
Ending Value is 105.00, or 105.00% of the Starting
Value:
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Starting
Value: 100.00
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Ending
Value: 105.00
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=
$10.7125 Redemption Amount per
unit.
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Leveraged
Index Return Notes®
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TS-5
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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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
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■
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Depending on the
performance of the Market Measure as measured shortly before
the maturity date, your investment may result in a loss; there is
no guaranteed return of principal.
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■
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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.
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■
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Payments on the
notes are subject to our credit risk, and the credit risk of BAC,
and 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.
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■
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Your
investment return may be less than a comparable
investment directly in the commodity futures contracts
represented by the Market Measure or the related
commodities.
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■
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We are
a finance subsidiary and, as such, have no independent assets,
operations or revenues.
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■
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BAC’s
obligations under its guarantee of the notes will be structurally
subordinated to liabilities of its subsidiaries.
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■
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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.
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Valuation-
and Market-related Risks
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■
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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 the
pricing date 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.
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■
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The
public offering price you are paying for the notes exceeds 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-16. These factors, together with various credit, market and
economic factors over the term of the notes, are expected to reduce
the price at which you may be able to sell the notes in any
secondary market and will affect the value of the notes in complex
and unpredictable ways.
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■
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The
initial estimated value does not represent a minimum or maximum
price at which we, BAC, 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 Market
Measure, 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 the notes at any price in any secondary
market.
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Conflict-related
Risks
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■
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BAC
and its affiliates' hedging and trading activities (including
trades related to components of the Index) and any hedging and
trading activities BAC or its affiliates engage in for our clients’
accounts, may affect the market value and return of the notes
and may create conflicts of interest with you.
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■
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There
may be potential conflicts of interest involving the calculation
agent, which is an affiliate of ours. We have the right to appoint
and remove the calculation agent.
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Market
Measure-related Risks
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■
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Bloomberg Index
Services Limited may adjust the Index in a way that affects
its level, and has no obligation to consider your
interests.
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■
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Future
prices of the Index components that are different from their
current prices may have a negative effect on the level of the
Index, and therefore the value of the notes.
|
|
Leveraged
Index Return Notes®
|
TS-6
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
|
■
|
Ownership of the
notes will not entitle you to any rights with respect to any
commodities or futures contracts or included in, or tracked by,
the Market Measure.
|
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■
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An
investment linked to commodity futures contracts is not equivalent
to an investment linked to the spot prices of physical
commodities.
|
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■
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The
notes will not be regulated by the U.S. Commodity Futures Trading
Commission.
|
|
■
|
The
Market Measure includes futures contracts traded on foreign
exchanges that are less regulated than U.S. markets and may
involve different and greater risks than trading on U.S.
exchanges.
|
|
■
|
Suspensions or
disruptions of market trading in the commodities or futures
contracts included in, or tracked by, the Index may adversely
affect the value of the notes.
|
|
■
|
Legal
and regulatory changes could adversely affect the return on and
value of your notes.
|
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-28 of the accompanying product
supplement
|
|
Leveraged
Index Return Notes®
|
TS-7
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
Additional
Risk Factors
The
Index tracks commodity futures contracts and does not track the
spot prices of the Index Commodities (as defined
below).
The
Index is composed of exchange-traded futures contracts (the “Index
Components”) on physical commodities (the “Index Commodities”).
Unlike equities, which typically entitle the holder to a continuing
stake in a corporation, a commodity futures contract is typically
an agreement to buy a set amount of an underlying physical
commodity at a predetermined price during a stated delivery period.
A futures contract reflects the expected value of the underlying
physical commodity upon delivery in the future. In contrast, the
underlying physical commodity’s current or “spot” price reflects
the immediate delivery value of the commodity.
The
notes are linked to the Index consisting of the Index Components
and not to the spot prices of the Index Commodities. An investment
in the notes is not the same as buying and holding the Index
Commodities. While price movements in the Index Components may
correlate with changes in the spot prices of the Index Commodities,
the correlation will not be perfect and price movements in the spot
markets for the Index Commodities may not be reflected in the
futures market (and vice versa). Accordingly, an increase in the
spot prices of the Index Commodities may not result in an increase
in the prices of the Index Components or the level of the Index.
The prices of the Index Components and the level of the Index may
decrease while the spot prices for the Index Commodities remain
stable or increase, or do not decrease to the same
extent.
Higher future
prices of the Index Components relative to their current prices may
have a negative effect on the level of the Index and therefore the
value of the notes.
Commodity indices
generally reflect movements in commodity prices by measuring the
value of futures contracts for the applicable commodities. To
maintain the Index, as futures contracts approach expiration, they
are replaced by similar contracts that have a later expiration.
This process is referred to as “rolling.” The level of the Index is
calculated as if the expiring futures contracts are sold and the
proceeds from those sales are used to purchase longer-dated futures
contracts.
The
difference in the price between the contracts that are sold and the
new contracts for more distant delivery that are purchased is
called “roll yield,” and the change in price that contracts
experience while they are components of the Index is sometimes
referred to as “spot return.”
If the
expiring futures contract included in the Index is “rolled” into a
less expensive futures contract with a more distant delivery date,
the market for that futures contract is trading (putting aside
other considerations) in “backwardation.” In this case, the effect
of the roll yield on the level of the Index will be positive
because it costs less to replace the expiring futures contract.
However, if the expiring futures contract included in the Index is
“rolled” into a more expensive futures contract with a more distant
delivery date, the market for that futures contract is trading in
“contango.” In this case, the effect of the roll yield on the level
of the Index will be negative because it will cost more to replace
the expiring futures contract.
There
is no indication that the markets for the Index Components will
consistently be in backwardation or that there will be a positive
roll yield that increases the level of the Index. It is possible,
when near-term or spot prices of the Index Components are
decreasing, for the level of the Index to decrease significantly
over time even when some or all of the Index Components are
experiencing backwardation. If all other factors remain constant,
the presence of contango in the market for an Index Component could
result in negative roll yield, which could decrease the level of
the Index and the value of the notes.
Risks
associated with the Index may adversely affect the market price of
the notes.
The
annual composition of the Index will be calculated in reliance upon
historic price, liquidity, and production data that are subject to
potential errors in data sources or errors that may affect the
weighting of components of the Index. Bloomberg L.P. may not
discover every discrepancy and any discrepancies that require
revision will not be applied retroactively. These discrepancies may
adversely affect the level of the Index and the market price of the
notes.
The
notes are linked to an excess return index and not a total return
index.
The
notes are linked to an excess return index and not a total return
index. An excess return index, such as the Index, reflects the
returns that are potentially available through an unleveraged
investment in the contracts composing that index. By contrast, a
“total return” index, in addition to reflecting those returns, also
reflects interest that could be earned on funds committed to the
trading of the underlying futures contracts.
|
Leveraged
Index Return Notes®
|
TS-8
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
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, Bloomberg Index Services Limited (“BISL” or
the “Index sponsor”). The Index sponsor, which licenses 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 the Index sponsor discontinuing publication or
determination of the Index are discussed in the section entitled
“Description of LIRNs— Discontinuance of a Market Measure” on page
PS-23 of the accompanying product. None of us, the calculation
agent, MLPF&S or BofAS accepts any responsibility for the
calculation, maintenance or publication of the Index or any
successor.
General
The
Index tracks the performance of a weighted basket of futures
contracts on certain physical commodities. The Index is calculated
on an excess return basis by BISL.
The
Index is currently composed of 23 exchange-traded contracts, or
Index Components, on 21 physical commodities, or Index
Commodities. It is quoted in U.S. dollars and reflects the
return of underlying commodity futures price movements only. It
reflects the returns that are potentially available through an
unleveraged investment in the futures contracts on Index
Commodities comprising the Index as described below. The value of
the Index is computed on the basis of hypothetical investments in
the basket of commodities that make up the Index.
The
Index was previously known as the Dow Jones—UBS Commodity
IndexSM. On April 10, 2014, Bloomberg L.P. and UBS
announced a partnership that has resulted in Bloomberg Indexes
being responsible for governance, calculation, distribution and
licensing of the bank’s commodity indices. The Dow Jones—UBS
Commodity IndexSM was renamed the “Bloomberg
Commodity IndexSM” as of July 1, 2014. Bloomberg
acquired the Index in September 2020.
Index
Governance, Audit and Review Structure
BISL
uses two primary committees to provide overall governance and
oversight of its benchmark administration activities:
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●
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The
product, risk and operations committee provides direct governance
and is responsible for the first line of controls over the
creation, design, production and dissemination of benchmark
indices, strategy indices and fixings administered by BISL,
including the Index. The product, risk and operations committee is
composed of Bloomberg personnel with significant experience or
relevant expertise in relation to financial benchmarks. Meetings
are attended by Bloomberg legal & compliance personnel.
Nominations and removals are subject to review by Bloomberg’s
benchmark oversight committee, discussed below.
|
|
●
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The
oversight function is provided by the benchmark oversight
committee. The benchmark oversight committee is independent of the
product, risk and operations committee and is responsible for
reviewing and challenging the activities carried out by the
product, risk and operations committee. In carrying out its
oversight duties, the benchmark oversight committee receives
reports of management information both from the product, risk and
operations committee as well as Bloomberg legal and compliance
members engaged in second level controls.
|
On a
quarterly basis, the product, risk and operations committee reports
to the benchmark oversight committee on governance matters,
including but not limited to client complaints, the launch of new
benchmarks, operational incidents (including errors &
restatements), major announcements and material changes concerning
the benchmarks, the results of any reviews of the benchmarks
(internal or external) and material stakeholder
engagements.
As
described in more detail below, the Index is reconstituted and
rebalanced each year in January with respect to relative liquidity
and production percentages. The composition and annual weightings
for the Index are determined each year by BISL employees operating
within the product, risk and operations committee under the
oversight of the benchmark oversight committee. Once approved, the
new composition of the Index is publicly announced and takes effect
in the January immediately following the announcement.
Set
forth below is a summary of the composition of, and the methodology
used to calculate, the Index as of the date of this term sheet. The
methodology for determining the composition and weighting of the
Index and for calculating its level is subject to modification in a
manner consistent with the purposes of the Index, as described
below. BISL makes the office calculation of the level of the
Index.
Additional
information about the Index is available on the following website:
bloombergindexes.com. We are not incorporating by reference the
website or any material it includes into this term
sheet.
Composition of
the Index
Commodities
Available for Inclusion in the Index. Commodities are selected
for the Index that are believed to be both sufficiently significant
to the world economy to merit consideration and that are tradable
through a qualifying related futures contract. With the exception
of several metals contracts (aluminum, lead, tin, nickel and zinc)
that trade on the London Metals Exchange (“LME”) and the contract
for Brent Crude Oil and Low Sulphur Gas Oil, each of the
commodities is the subject of at least one futures contract that
trades on a U.S. exchange. Twenty-five commodities are considered
to be eligible for inclusion in the Index: aluminum, cocoa, coffee,
copper, corn, cotton, crude oil (WTI crude and Brent crude), gold,
ultra-low-sulfur diesel (heating oil), lead, lean hogs, live
cattle, low sulphur gas oil, natural gas, nickel, platinum, silver,
soybean meal, soybean oil, soybeans, sugar, tin, unleaded gasoline,
wheat (Soft (Chicago) wheat and Hard Red Winter (Kansas City)
wheat) and zinc.
|
Leveraged
Index Return Notes®
|
TS-9
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
The 21
commodities represented in the Index for 2022 are: aluminum,
coffee, copper, corn, cotton, crude oil (WTI crude and Brent
crude), gold, ultra-low-sulfur diesel (heating oil), lean hogs,
live cattle, low sulfur gas oil, natural gas, nickel, silver,
soybean meal, soybean oil, soybeans, sugar, unleaded gasoline,
wheat (Soft (Chicago) wheat and Hard Red Winter (Kansas City)
wheat) and zinc.
Designated
Contracts for Each Commodity. One or more commodity contracts
known as “designated contracts” are selected by BISL for each of
the 25 commodities eligible for inclusion in the Index. With the
exception of several LME contracts, which are traded in London, low
sulphur gas oil, which is traded on the ICE Futures Europe, in
London, crude oil, for which two designated contracts have been
selected, and wheat for which two designated contracts that are
traded in North America have been selected, BISL selects for each
index commodity one commodity contract that is traded in North
America and denominated in U.S. dollars. Data concerning the
designated contracts will be used to calculate the Index. It is
possible that BISL will in the future select more than one
designated contract for additional commodities or may select
designated contracts that are traded outside of the United States
or in currencies other than the U.S. dollar. For example, in the
event that changes in regulations concerning position limits
materially affect the ability of market participants to replicate
the Index in the underlying futures markets, it may become
appropriate to include multiple designated contracts for one or
more commodities (in addition to crude oil and wheat) in order to
enhance liquidity. The termination or replacement of a commodity
contract on an established exchange occurs infrequently; if a
designated contract were to be terminated or replaced, a comparable
commodity contract would be selected, if available, to replace the
designated contract.
The
following table sets forth the designated contracts for the
commodities included in the Index as of the date of this term
sheet, along with their respective Final Commodity Index
Percentages (“CIPs”) (Target Weights) for 2022, as published by the
Index sponsor. Actual percentages on any business day may vary from
the Target Weights due to market price fluctuations.
|
Commodity
|
Designated
Contract
|
Trading
Facility
|
2022
Final Commodity Index Percentages (%)
|
|
Aluminum
|
High
Grade Primary Aluminum
|
LME
|
4.2457680%
|
|
Coffee
|
Coffee
“C”
|
ICE
Futures U.S.
|
2.7333550%
|
|
Copper
|
Copper
|
COMEX
|
5.3982920%
|
|
Corn
|
Corn
|
CBOT
|
5.5899030%
|
|
Cotton
|
Cotton
No. 2
|
ICE
Futures U.S.
|
1.5032870%
|
|
WTI
Crude Oil
|
Light,
Sweet Crude Oil
|
NYMEX
|
8.0368820%
|
|
Brent
Crude Oil
|
Oil
(Brent Crude Oil)
|
ICE
Futures Europe
|
6.9631180%
|
|
Gold
|
Gold
|
COMEX
|
15.0000000%
|
|
Ultra-Low-Sulfur
Diesel (Heating Oil)
|
ULS
Diesel (HO)
|
NYMEX
|
2.0526330%
|
|
Lean
Hogs
|
Lean
Hogs
|
CME
|
1.7546500%
|
|
Live
Cattle
|
Live
Cattle
|
CME
|
3.5807520%
|
|
Low
Sulphur Gas Oil
|
Low
Sulphur Gas Oil (QS)
|
ICE
Futures Europe
|
2.6496240%
|
|
Natural
Gas
|
Henry
Hub Natural Gas
|
NYMEX
|
7.9548670%
|
|
Nickel
|
Primary
Nickel
|
LME
|
2.7134270%
|
|
Silver
|
Silver
|
COMEX
|
4.7468930%
|
|
Soybean
Meal
|
Soybean
Meal
|
CBOT
|
3.5200260%
|
|
Soybean
Oil
|
Soybean
Oil
|
CBOT
|
3.1716110%
|
|
Soybeans
|
Soybeans
|
CBOT
|
5.7888440%
|
|
Sugar
|
Sugar
No. 11
|
ICE
Futures U.S.
|
2.7943260%
|
|
Unleaded
Gasoline
|
Reformulated
Blendstock for Oxygen Blending (RBOB) Gasoline
|
NYMEX
|
2.1728010%
|
|
Wheat
(Chicago)
|
Soft
Wheat
|
CBOT
|
2.8463610%
|
|
Wheat
(Kansas City HRW)
|
Hard
Red Winter Wheat
|
CBOT
|
1.6636530%
|
|
Zinc
|
Special High Grade
Zinc
|
LME
|
3.1189270%
|
|
Leveraged
Index Return Notes®
|
TS-10
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
Commodity
Groups. For purposes of applying the diversification rules
discussed below, the commodities available for inclusion in the
Index are assigned to “commodity groups”. The commodity groups, and
the commodities currently included in each commodity group, are as
follows:
|
Commodity
Group
|
Commodity
|
|
Energy:
|
Crude
Oil (WTI and Brent)
|
|
ULS
Diesel (HO)
|
|
Low
Sulphur Gas Oil
|
|
Natural
Gas
|
|
Unleaded Gasoline
(RBOB)
|
|
Precious
Metals:
|
Gold
|
|
Platinum
|
|
Silver
|
|
Industrial
Metals:
|
Aluminum
|
|
Copper
|
|
Lead
|
|
Nickel
|
|
Tin
|
|
Zinc
|
|
Livestock:
|
Live
Cattle
|
|
Lean
Hogs
|
|
Grains:
|
Corn
|
|
Soybeans
|
|
Soybean
Meal
|
|
Soybean
Oil
|
|
Wheat
(Chicago and KC HRW)
|
|
Softs:
|
Cocoa
|
|
Coffee
|
|
Cotton
|
|
Sugar
|
Commodity
Sectors. The Index also includes primary commodities (base
commodities that are not principally derived or produced from other
commodities) and derivative commodities (commodities that are
principally derived or produced from other commodities). Each
primary commodity, together with its derivative commodities, is
referred to as a “commodity sector”. Adjustments are made to
avoid the “double-counting” of primary commodities that would
result if primary commodities and derivative commodities were
viewed as wholly separate categories. BISL, as index administrator,
may determine that other index commodities qualify as derivative
commodities in the future, resulting in similar adjustments. The
current primary and derivative commodities are:
|
Primary
Commodity
|
Derivative
Commodities
|
|
Crude
Oil (WTI and Brent)
|
ULS
Diesel, RBOB Gasoline and Low Sulphur Gas Oil
|
|
Soybeans
|
Soybean Oil and
Soybean Meal
|
Annual
Reconstitution and Rebalancing of the Index
The
Index is reconstituted and rebalanced each year in January on a
price percentage basis. The annual constitution and weightings
for the Index are determined each year by BISL employees operating
within the product, risk and operations committee under the
oversight of the benchmark oversight committee. Once approved, the
new composition of the Index is publicly announced, and takes
effect in the January immediately following the
announcement.
Determination
of Relative Weightings. The relative weightings of the
designated contracts that are eligible for inclusion in the
Index are determined annually according to both liquidity and
U.S. dollar-adjusted production data in 2/3 and 1/3 shares,
respectively. Each year, for each designated contract eligible for
inclusion in the Index, liquidity is measured by the commodity
liquidity percentage (CLP) and production by the commodity
production percentage (CPP). The CLP for each commodity is
determined by taking a five-year average of the product of
trading volume and the historic dollar value of the designated
contract for that commodity, and dividing the result by the
sum of such products for all commodities which were
designated for potential inclusion in the Index, except that LME
volume is divided by three in order to make a more appropriate
comparison to U.S. exchange data and that the COMEX price and the
LME volume is used for copper, which requires adjusting the COMEX
prices to metric tons. In contrast to U.S. futures, which are
typically listed on a monthly or bimonthly basis and trade only
during specific hours, LME contracts can be traded
over-the-counter, 24 hours a day, for value on any business day
within a three-month window extending out from spot. In addition,
LME contracts can be traded for settlement on the third Wednesday
of each month extending out 27 months from the date the contract is
made. Accordingly, historical data comparable to that of U.S.
futures contracts is not available for these LME contracts and
certain adjustments to the available data are made for purposes of
calculating this component of the Index. In particular, LME
contracts that trade on the third Wednesday of
|
Leveraged
Index Return Notes®
|
TS-11
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
each
month will serve as a proxy for U.S. futures contracts. The
calculation of the Index utilizes the LME contracts that trade
on the third Wednesday of every other month, starting with
January.
The
CPP is determined for each designated contract by taking a
five-year average of annual world production figures (the most
recent five years for which data is available), adjusted by the
historic dollar value of the designated contract, and
dividing the result by the sum of such
production figures for all designated contracts. Data for
derivative commodities is not included in production data to avoid
double-counting and, where there are multiple designated contracts
for a particular commodity, the production data is allocated at
this stage to only one designated contract also to avoid
double-counting. Production weightings are allocated among
derivative commodities and primary commodities, and between
multiple contracts where applicable, before the final weightings
are determined. In addition, for natural gas, only North American
production is used.
The
CLP and the CPP are then combined (using a ratio of 2/3 CLP plus
1/3 CPP) to establish an interim commodity index percentage for
each designated contract. The Index is designed to provide
diversified exposure to commodities as an asset class. To ensure
that no single commodity or commodity sector dominates the Index,
the following diversification rules are applied to the annual
reweighting and rebalancing of the Index as of January of the
applicable year to determine the commodity index percentage
(CIP) for each designated contract:
|
|
●
No designated
contract may constitute less than 0.4% of the Index; designated
contracts which constitute less than 0.4% of the Index will be set
to zero. The related contracts are not included in the Index for
the related year, and none of the Index calculation procedures that
follow are performed with respect to these Commodities. The
disregarded interim percentages generally are allocated equally to
other commodities not affected by this rule, while treating
commodity sectors as one asset when distributing the
excess.
●
No single
commodity together with its derivatives (together, a “commodity
sector”) (e.g., crude oil together with ULS Diesel and unleaded
gasoline or soybeans together with soybean meal and soybean oil),
may constitute more than 25% of the Index. Any excess weight is
generally allocated equally to other commodities not affected by
this rule, while treating commodity sectors as one asset when
distributing the excess.
●
No single
commodity (e.g., natural gas or silver) may constitute more than
15% of the Index (note that both crude oil designated contracts and
both wheat designated contracts are considered together as one
commodity for this purpose). Any excess weight is generally
allocated equally to other commodities not affected by this rule,
while treating commodity sectors as one asset when distributing the
excess.
●
No related group
of commodities designated as a “commodity group” above (e.g.,
energy, precious metals, livestock, or grains) may constitute more
than 33% of the Index. Any excess weight is generally allocated
equally to other commodities not affected by this rule, while
treating commodity sectors as one asset when distributing the
excess.
●
Gold and silver
will be given a weight equal to their CLPs (subject to the 25%
commodity sector and 15% commodity limits). The sum of the
difference between weights based on the interim percentage and the
weights based on the CLPs generally will be allocated to the
other commodity sectors equally, while treating commodity sectors
as one asset when subtracting the excess.
●
No single
commodity (e.g., natural gas, silver) may constitute less than 2%
of the Index. If one or more single commodities have a weight less
than 2% of the Index, the sum of the difference between the 2% and
the actual weights generally will be allocated to the other
designated contracts equally and reallocated so that no single
commodity has a weight less than 2%.
●
The ratio of the
interim percentage to the CLP for a designated contract may not
exceed 3.5:1. The excess weight for all affected designated
contracts is aggregated, and is generally allocated equally to
other commodities with such a ratio below a certain number,
currently set at 2.0.
|
|
|
|
Following the
annual reconstitution and rebalancing of the Index in January, the
percentage of any single commodity or group of commodities at any
time prior to the next reconstitution or rebalancing will fluctuate
and may exceed or be less than the percentages initially
established.
Commodity Index
Multipliers. Following application of the diversification rules
discussed above, the target weights are incorporated into the Index
by calculating the new unit weights for each designated contract
included in the Index. On the fourth Index business day of the
year, the target weights, along with the settlement values on that
date for designated contracts included in the Index, are used to
determine a commodity index multiplier (CIM) for each designated
contract included in the Index. This CIM is used to achieve the
percentage weightings of the designated contracts included in the
Index, in U.S. dollar terms, indicated by their respective CIPs.
After the CIMs are calculated, they remain fixed throughout the
year. As a result, the observed price percentage of each designated
contract included in the Index will float throughout the year,
until the CIMs are reset the following year based on new CIPs. An
“Index business day” refers to a day on which the sum of the CIPs
for those index commodities that are open for trading is greater
than 50%.
Index
Calculations
The
Index is calculated on an excess return basis. BISL calculates the
Index by applying the impact of the changes to the prices of
futures contracts included in the Index (based on their relative
weightings). Once the CIMs are determined as discussed above,
the
|
Leveraged
Index Return Notes®
|
TS-12
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
calculation of the
Index is a mathematical process whereby the CIMs for the
commodities included in the Index are multiplied by respective
prices in U.S. dollars for the applicable designated contracts.
These products are then summed. The daily percentage change in this
sum is then applied to the immediately preceding index value to
calculate the then-current index value.
The
Index Is a Rolling Index. The Index is composed of futures
contracts rather than physical commodities. Unlike equities, which
typically entitle the holder to a continuing stake in a
corporation, commodity futures contracts normally specify a certain
date for the delivery of the underlying physical commodity. In
order to avoid delivering the underlying physical commodities and
to a long futures position, periodically contracts on physical
commodities specifying delivery on a nearby date must be sold and
contracts on physical commodities that have not yet reached
the delivery period must be purchased. The rollover for each
futures contract occurs over a period of five Index business days
each month according to a pre-determined schedule. This process is
known as “rolling” a futures contract position. The Index is,
therefore, a “rolling index”.
Index
Calculation Disruption Events. From time to time,
disruptions can occur in trading futures contracts on various
commodity exchanges. The daily calculation of the Index will be
adjusted in the event that BISL determines that any of the
following index calculation disruption events exists:
|
●
|
termination or
suspension of, or material limitation or disruption in, the
trading of any futures contract or first nearby futures contract
used in the calculation of the Index on that day,
|
|
●
|
the
settlement value of any futures contract used in the calculation of
the Index reflects the maximum permitted price change from the
previous day’s settlement value,
|
|
●
|
the
failure of an exchange to publish official settlement values for
any futures contract used in the calculation of the Index,
or
|
|
●
|
with
respect to any futures contract used in the calculation of the
Index that trades on the LME, a business day on which the LME is
not open for trading.
|
If an
index calculation disruption event occurs on any Index business day
during a hedge roll period (the fifth through ninth Index business
day of each month) in any month other than January affecting any
futures contract included in the Index, the portion of the roll
that would have taken place on that Index business day is deferred
until the next Index business day on which such conditions do not
exist. If any of these conditions exist throughout the hedge roll
period, the roll with respect to the affected contract will be
effected in its entirety on the next Index business day on which
such conditions no longer exist. The index calculation disruption
event will not postpone the roll for any other futures contract for
which an index calculation disruption event has not
occurred.
In the
event that an index calculation disruption event occurs during the
hedge roll period scheduled for January of each year affecting a
futures contract included in the Index, the rolling or rebalancing
of the relevant designated contract will occur in all cases over
five Index business days on which no index calculation disruption
event exists. The hedge roll period in January, and the resulting
rebalancing that is occurring, will be extended if necessary until
the affected designated contract finishes rolling over five Index
business days. The amounts of a particular futures contract rolled
or rebalanced in January will always be distributed over five Index
business days, and rolling weight at the rate of 20% per Index
business day on any Index business day following an index
calculation disruption event during such hedge roll period. This
change affects only the rolling or rebalancing process in January,
with no change to the rules for rolling futures contracts in other
monthly hedge roll periods.
Material changes
or amendments to the calculation methodology are subject to the
approval of the product, risk and operations committee. Questions
and issues relating to the application and interpretation of terms
contained in the index methodology generally and calculations
during periods of extraordinary circumstances in particular will be
resolved or determined by BISL.
The
following graph shows the daily historical performance of the Index
in the period from January 1,
2012 through
November 22,
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 the pricing
date, the closing level of the Index
was 116.3729.
|
Leveraged
Index Return Notes®
|
TS-13
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
|
|
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
“Bloomberg®”
and “Bloomberg Commodity IndexSM” are service
marks of Bloomberg Finance L.P. and its affiliates, including BISL,
the administrator of the indices (collectively, “Bloomberg”) and
have been licensed for use for certain purposes
by MLPF&S.
The
notes are not sponsored, endorsed, sold or promoted by Bloomberg.
Bloomberg does not make any representation or warranty, express or
implied, to the owners of or counterparties to the notes or any
member of the public regarding the advisability of investing in
securities or commodities generally or in the notes particularly.
The only relationship of Bloomberg to the Licensee is the licensing
of certain trademarks, trade names and service marks and of the
Index, which is determined, composed and calculated by BISL without
regard to us or the notes. Bloomberg has no obligation to take the
needs of MLPF&S or the owners of the notes into consideration
in determining, composing or calculating the Index. Bloomberg is
not responsible for and has not participated in the determination
of the timing of, prices at, or quantities of the notes to be
issued or in the determination or calculation of the equation by
which the notes are to be converted into cash. Bloomberg shall
not have any obligation or liability, including, without
limitation, to note customers, in connection with the
administration, marketing or trading of the notes.
This
term sheet relates only to the notes and does not relate to the
exchange-traded physical commodities underlying any of
the Index Components. Purchasers of the notes should not
conclude that the inclusion of a futures contract in the Index is
any form of investment recommendation of the futures contract or
the underlying exchange-traded physical commodity by Bloomberg. The
information in this term sheet regarding the Index Components has
been derived solely from publicly available documents. Bloomberg
has not made any due diligence inquiries with respect to the Index
Components in connection with the notes. Bloomberg makes no
representation that these publicly available documents or any other
publicly available information regarding
the Index Components, including without limitation a
description of factors that affect the prices of such components,
are accurate or complete.
BLOOMBERG
DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE INDEX OR ANY DATA RELATED THERETO AND
SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR
INTERRUPTIONS THEREIN. BLOOMBERG DOES NOT MAKE ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
MLPF&S, OWNERS OF THE NOTES OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDEX OR ANY DATA RELATED
THERETO. BLOOMBERG DOES NOT MAKE ANY EXPRESS OR IMPLIED
WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE INDEX OR ANY DATA RELATED
THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, TO THE MAXIMUM
EXTENT ALLOWED BY LAW, BLOOMBERG, ITS LICENSORS, AND ITS AND
THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS, SUPPLIERS, AND
VENDORS SHALL HAVE NO LIABILITY OR RESPONSIBILITY WHATSOEVER FOR
ANY INJURY OR DAMAGES-WHETHER DIRECT, INDIRECT,
CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR OTHERWISE-ARISING IN
CONNECTION WITH THE NOTES OR THE INDEX OR
ANY DATA OR VALUES RELATING THERETO-WHETHER ARISING FROM THEIR
NEGLIGENCE OR OTHERWISE, EVEN IF NOTIFIED OF THE POSSIBILITY
THEREOF.
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Leveraged
Index Return Notes®
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TS-14
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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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
will 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, 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 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.
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Leveraged
Index Return Notes®
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TS-15
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Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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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, resulted 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 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 $0.075 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” beginning on page PS-7 and
“Use of Proceeds” on page PS-18 of the accompanying product
supplement.
Validity
of the Notes
In the
opinion of McGuireWoods LLP, as counsel to BofA Finance and BAC,
when the trustee has made the appropriate entries or notations on
the applicable schedule to the master global note that represents
the notes (the “master note”) identifying the notes offered hereby
as supplemental obligations thereunder in accordance with the
instructions of BofA Finance and the provisions of the indenture
governing the notes and the related guarantee, and the notes have
been delivered against payment therefor as contemplated in this
term sheet and the related prospectus, prospectus supplement and
product supplement, such notes will be the legal, valid and binding
obligations of BofA Finance, and the related guarantee will be the
legal, valid and binding obligation of BAC, subject, in each case,
to the effects of applicable bankruptcy, insolvency (including laws
relating to preferences, fraudulent transfers and equitable
subordination), reorganization, moratorium and other similar laws
affecting creditors’ rights generally, and to general principles of
equity. This opinion is given as of the date of this term sheet and
is limited to the laws of the State of New York and the Delaware
Limited Liability Company Act and the Delaware General Corporation
Law (including the statutory provisions, all applicable provisions
of the Delaware Constitution and reported judicial decisions
interpreting the foregoing) as in effect on the date hereof. In
addition, this opinion is subject to customary assumptions about
the trustee’s authorization, execution and delivery of the
indenture governing the notes and due authentication of the master
note, the validity, binding nature and enforceability of the
indenture governing the notes and the related guarantee with
respect to the trustee, the legal capacity of individuals, the
genuineness of signatures, the authenticity of all documents
submitted to McGuireWoods LLP as originals, the conformity to
original documents of all documents submitted to McGuireWoods LLP
as copies thereof, the authenticity of the originals of such copies
and certain factual matters, all as stated in the letter of
McGuireWoods LLP dated December 30, 2019, which has been filed as
an exhibit to Pre-Effective Amendment No. 1 to the Registration
Statement (File No. 333-234425) of BofA Finance and BAC, filed with
the SEC on December 30, 2019.
Sidley
Austin LLP, New York, New York, is acting as counsel to BofAS and
MLPF&S and as special tax counsel to BofA Finance and
BAC.
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Leveraged
Index Return Notes®
|
TS-16
|
|
Leveraged
Index Return Notes®
Linked
to the Bloomberg Commodity IndexSM, due
November 27, 2026
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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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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-28 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.
“Leveraged
Index Return Notes®” and “LIRNs®” are
BAC’s registered service marks.
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Leveraged
Index Return Notes®
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TS-17
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