|
|
|
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)
|
2,351,875
Units
$10 principal amount per unit
CUSIP No. 06054E135
|
Pricing
Date
Settlement Date
Maturity Date
|
November
22, 2022
November 30, 2022
January 26, 2024
|
|
|
|
|
|
|
|
|
BofA
Finance LLC
Accelerated
Return Notes® Linked to the Energy
Select Sector
SPDR® Fund
Fully
and Unconditionally Guaranteed by Bank of America
Corporation
■
Maturity
of approximately 14 months
■
3-to-1
upside exposure to increases in the Underlying Fund, subject to a
capped return of 41.60%
■
1-to-1
downside exposure to decreases in the Underlying Fund, 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
|
|
|
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”
beginning on page TS-7 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
$9.75 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-15 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.
_________________________
|
|
Per
Unit
|
Total
|
|
Public offering
price
|
$10.000
|
$
23,518,750.00
|
|
Underwriting
discount
|
$0.175
|
$
411,578.13
|
|
Proceeds, before
expenses, to BofA Finance
|
$9.825
|
$
23,107,171.87
|
The notes and
the related guarantee:
|
Are
Not FDIC Insured
|
Are
Not Bank Guaranteed
|
May
Lose Value
|
BofA
Securities
November 22,
2022
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
Summary
The
Accelerated Return Notes® Linked to the Energy Select
Sector SPDR® Fund, due January 26, 2024 (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 Energy Select Sector SPDR®
Fund (the “Underlying Fund”), 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
Underlying Fund, 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, 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-15.
|
Terms
of the Notes
|
Redemption
Amount Determination
|
|
Issuer:
|
BofA
Finance LLC (“BofA Finance”)
|
On the
maturity date, you will receive a cash payment per unit determined
as follows:
|
|
Guarantor:
|
Bank
of America Corporation (“BAC”)
|
|
|
Principal Amount:
|
$10.00 per
unit
|
|
|
Term:
|
Approximately 14
months
|
|
Market Measure:
|
The
Energy Select Sector SPDR® Fund (Bloomberg symbol:
“XLE”)
|
|
Starting Value:
|
$93.22
|
|
Ending Value:
|
The
average of the Closing Market Prices of the Market Measure times
the Price Multiplier 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.
|
|
Price Multiplier
|
1,
subject to adjustment for certain events relating to the Market
Measure, as described beginning on page PS-29 of the accompanying
product supplement
|
|
Participation Rate:
|
300%
|
|
Capped Value:
|
$14.16 per unit,
which represents a return of 41.60% over the principal
amount.
|
|
Maturity Valuation Period:
|
January 17,
2024, January 18, 2024, January 19, 2024, January 22, 2024 and
January 23, 2024
|
|
Fees and Charges:
|
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-15.
|
|
Calculation Agent:
|
BofA
Securities, Inc. (“BofAS”), an affiliate of BofA
Finance.
|
|
Accelerated
Return Notes®
|
TS-2
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
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:
|
The
notes may not be an appropriate investment for you
if:
|
■
You anticipate
that the Underlying Fund will increase moderately from the Starting
Value to the Ending Value.
■
You are willing to
risk a loss of principal and return if the Underlying Fund
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 shares of the
Underlying Fund or the securities held by the Underlying
Fund.
■
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.
|
■
You believe that
the Underlying Fund 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 shares of the
Underlying Fund or the securities held by the Underlying
Fund.
■
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.
|
We
urge you to consult your investment, legal, tax, accounting, and
other advisors before you invest in the notes.
|
Accelerated
Return Notes®
|
TS-3
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
Hypothetical
Payout Profile and Examples of Payments at Maturity
|
Accelerated
Return Notes®
|
This
graph reflects the returns on the notes, based on the Participation
Rate of 300% and the Capped Value of $14.16 per unit. The
green line reflects the returns on the notes, while the dotted gray
line reflects the returns of a direct investment in the Underlying
Fund, excluding dividends.
This
graph has been prepared for purposes of illustration
only.
|
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%, the Capped Value of $14.16 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 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 Market Measure, see “The Underlying
Fund” section below. The Ending Value will not include any income
generated by dividends paid on the Underlying Fund or the
securities held by the Underlying Fund, which you would otherwise
be entitled to receive if you invested in those securities
directly. In addition, all payments on the notes are subject to
issuer and guarantor credit risk.
|
Ending
Value
|
Percentage
Change from the Starting Value to the Ending Value
|
Redemption
Amount per Unit
|
Total Rate of
Return on the Notes
|
|
0.00
|
-100.00%
|
$0.00
|
-100.00%
|
|
50.00
|
-50.00%
|
$5.00
|
-50.00%
|
|
80.00
|
-20.00%
|
$8.00
|
-20.00%
|
|
90.00
|
-10.00%
|
$9.00
|
-10.00%
|
|
94.00
|
-6.00%
|
$9.40
|
-6.00%
|
|
97.00
|
-3.00%
|
$9.70
|
-3.00%
|
|
100.00(1)
|
0.00%
|
$10.00
|
0.00%
|
|
102.00
|
2.00%
|
$10.60
|
6.00%
|
|
105.00
|
5.00%
|
$11.50
|
15.00%
|
|
110.00
|
10.00%
|
$13.00
|
30.00%
|
|
113.87
|
13.87%
|
$14.16(2)
|
41.60%
|
|
120.00
|
20.00%
|
$14.16
|
41.60%
|
|
130.00
|
30.00%
|
$14.16
|
41.60%
|
|
140.00
|
40.00%
|
$14.16
|
41.60%
|
|
150.00
|
50.00%
|
$14.16
|
41.60%
|
|
160.00
|
60.00%
|
$14.16
|
41.60%
|
|
(1)
|
The
hypothetical Starting Value of 100 used in these examples
has been chosen for illustrative purposes only. The actual
Starting Value is $93.22, which was the Closing Market Price
of the Market Measure on the pricing date.
|
|
(2)
|
The
Redemption Amount per unit cannot exceed the Capped
Value.
|
|
Accelerated
Return Notes®
|
TS-4
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
Redemption
Amount Calculation Examples
|
Example
1
|
|
The
Ending Value is 80.00, or 80.00% of the Starting
Value:
|
|
Starting
Value: 100.00
|
|
Ending
Value: 80.00
|
|
|
=
$8.00 Redemption Amount per unit
|
|
Example
2
|
|
The
Ending Value is 102.00, or 102.00% of the Starting
Value:
|
|
Starting
Value: 100.00
|
|
Ending
Value: 102.00
|
|
|
=
$10.60 Redemption Amount per unit
|
|
Example
3
|
|
The
Ending Value is 130.00, or 130.00% of the Starting
Value:
|
|
Starting
Value: 100.00
|
|
Ending
Value: 130.00
|
|
|
=
$19.00, however, because the Redemption Amount for the notes cannot
exceed the Capped Value, the Redemption Amount will be
$14.16 per unit
|
|
Accelerated
Return Notes®
|
TS-5
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
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 Underlying Fund 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 Underlying Fund or the securities held by the Underlying
Fund.
|
|
■
|
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 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.
|
|
■
|
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 price of the Underlying
Fund, 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-15. These factors, together with various
credit, market and economic factors over the term of the notes, are
expected to reduce the price at which you may be able to sell the
notes in any secondary market and will affect the value of the
notes in complex and unpredictable ways.
|
|
■
|
The
initial estimated value does not represent a minimum or maximum
price at which we, BAC, 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
Underlying Fund, our and BAC’s creditworthiness and changes in
market conditions.
|
|
■
|
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.
|
|
■
|
Your
return on the notes and the value of the notes may be affected by
exchange rate movements and factors affecting the international
securities markets.
|
Conflict-related
Risks
|
■
|
BAC
and its affiliates’ hedging and trading activities (including
trades in the Underlying Fund or in shares of companies
included in the Underlying Fund) 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
|
■
|
The
sponsor and investment advisor of the Underlying Fund may adjust
the Underlying Fund in a way that could adversely affect the value
of the notes and the amount payable on the notes, and these
entities have no obligation to consider your
interests.
|
|
Accelerated
Return Notes®
|
TS-6
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
|
■
|
The
sponsor of the Energy Select Sector Index, the Underlying Fund’s
underlying index (the “Underlying Index”), may adjust the
Underlying 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 Underlying Fund or the
securities held by the Underlying Fund, 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 Underlying Fund, we, BAC and our other
affiliates do not control any company included in the Underlying
Fund, and have not verified any disclosure made by any other
company.
|
|
■
|
There
are liquidity and management risks associated with the Underlying
Fund.
|
|
■
|
The
performance of the Underlying Fund may not correlate with the
performance of its Underlying Index as well as the net asset value
per share of the Underlying Fund, especially during periods of
market volatility when the liquidity and the market price of shares
of the Underlying Fund and/or securities held by the Underlying
Fund may be adversely affected, sometimes materially.
|
|
■
|
Risks
associated with the Underlying Fund or the underlying assets of the
Underlying Fund will affect the share price of the Underlying Fund
and hence, the value of the notes.
|
|
■
|
The
payments on the notes will not be adjusted for all corporate events
that could affect the Underlying Fund. See “Description of
ARNs—Anti-Dilution and Discontinuance Adjustments Relating to
Underlying Funds” beginning on page PS-29 of product supplement
EQUITY ARN-1.
|
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.
|
Additional
Risk Factors
The
stocks held by the Underlying Fund are
concentrated in one sector.
The
Underlying Fund holds securities issued by companies in the energy
sector. As a result, the stocks that will determine the performance
of the notes are concentrated in one sector. Although an investment
in the notes will not give holders any ownership or other direct
interests in the securities held by the Underlying Fund, the return
on an investment in the notes will be subject to certain risks
associated with a direct equity investment in companies in this
sector. Accordingly, by investing in the notes, you will not
benefit from the diversification which could result from an
investment linked to companies that operate in multiple
sectors.
The
stocks of companies in the energy sector are subject to swift price
fluctuations.
The
issuers of the stocks held by the Underlying Fund develop and
produce, among other things, crude oil and natural gas, and
provide, among other things, drilling services and other services
related to energy resources production and distribution. Stock
prices for these types of companies are affected by supply and
demand both for their specific product or service and for energy
products in general. The price of oil and gas, exploration and
production spending, government regulation, world events and
economic conditions will likewise affect the performance of these
companies. Correspondingly, the stocks of companies in the energy
sector are subject to swift price fluctuations caused by events
relating to international politics, energy conservation, the
success of exploration projects and tax and other governmental
regulatory policies. Weak demand for the companies’ products or
services or for energy products and services in general, as well as
negative developments in these other areas, would adversely impact
the value of the stocks held by the Underlying Fund and, therefore,
the price of the Underlying Fund and the value of
the notes.
|
Accelerated
Return Notes®
|
TS-7
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
The Underlying
Fund
All
disclosures contained in this term sheet regarding the Underlying
Fund, 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, SSGA Funds Management, Inc.
(“SSGA”), the advisor to the Underlying Fund. The advisor, which
licenses the copyright and all other rights to the Underlying Fund,
has no obligation to continue to publish, and may discontinue
publication of, the Underlying Fund. The consequences of the
advisor discontinuing publication of the Underlying Fund are
discussed in the section entitled “Description of ARNs —
Anti-Dilution and Discontinuance Adjustments Relating to Underlying
Funds—Discontinuance of or Material Change to an Underlying Fund”
beginning on page PS-32 of the accompanying product supplement.
None of us, BAC, the calculation agent, MLPF&S or BofAS
accepts any responsibility for the calculation, maintenance, or
publication of the Underlying Fund or any successor underlying
fund.
The
Energy Select Sector
SPDR® Fund
The
shares of the XLE are issued by Select Sector
SPDR® Trust, a registered investment company. The
XLE seeks investment results that correspond generally to the price
and yield performance, before fees and expenses, of the Energy
Select Sector Index, its underlying index. The Energy Select Sector
Index measures the performance of the energy sector of the U.S.
equity market. The XLE is composed of equity securities of
companies in the oil, gas and consumable fuel, energy equipment and
services industries. The XLE trades on the NYSE Arca under the
ticker symbol “XLE.”
Investment
Approach
The
XLE utilizes a “passive” or “indexing” investment approach in
attempting to track the performance of the Energy Select Sector
Index. The XLE will invest in substantially all of the securities
which comprise the Energy Select Sector Index. The XLE will
normally invest at least 95% of its total assets in common stocks
that comprise the Energy Select Sector Index.
Investment
Objective and Strategy
The
XLE seeks to provide investment results that correspond generally
to the price and yield performance, before fees and expenses, of
the Energy Select Sector Index. The investment manager of the XLE
uses a replication strategy to try to achieve the XLE’s investment
objective, which means that the XLE generally invests in
substantially all of the securities represented in the Energy
Select Sector Index in approximately the same proportions as the
Energy Select Sector Index. Under normal market conditions, the XLE
generally invests at least 95% of its total assets in the
securities comprising the Energy Select Sector Index. In certain
situations or market conditions, the XLE may temporarily depart
from its normal investment policies and strategies provided that
the alternative is consistent with the XLE’s investment objective
and is in the best interest of the XLE. For example, if the XLE is
unable to invest directly in a component security or if a
derivative investment may provide higher liquidity than other types
of investments, it may make larger than normal investments in
derivatives to maintain exposure to the Energy Select Sector Index
that it tracks. Consequently, under such circumstances, the XLE may
invest in a different mix of investments than it would under normal
circumstances. The XLE will provide shareholders with at least 60
days’ notice prior to any material change in its investment
policies. The XLE is managed with a passive investment strategy,
attempting to track the performance of an unmanaged index of
securities. This differs from an actively managed underlying, which
typically seeks to outperform a benchmark index.
Notwithstanding
the XLE’s investment objective, the return on your Notes will not
reflect any dividends paid on shares of the XLE, on the securities
purchased by the XLE or on the securities that comprise the Energy
Select Sector Index.
The Select
Sector Indices
The
underlying index of the XLE is part of the Select Sector Indices.
The Select Sector Indices are sub-indices of the S&P 500® Index
(“SPX”). Each stock in the SPX is allocated to at least one Select
Sector Index, and the combined companies of the eleven Select
Sector Indices represent all of the companies in the SPX. The
industry indices are sub-categories within each Select Sector Index
and represent a specific industry segment of the overall Select
Sector Index. The eleven Select Sector Indices seek to represent
the eleven SPX sectors. The index compilation agent for these
indices (the “Index Compilation Agent”) determines the composition
of the Select Sector Indices based on S&P’s sector
classification methodology. (Sector designations are determined by
the index sponsor using criteria it has selected or developed.
Index sponsors may use very different standards for determining
sector designations. In addition, many companies operate in a
number of sectors, but are listed in only one sector and the basis
on which that sector is selected may also differ. As a result,
sector comparisons between indices with different index sponsors
may reflect differences in methodology as well as actual
differences in the sector composition of the indices.)
Each
Select Sector Index was developed and is maintained in accordance
with the following criteria:
|
●
|
Each
of the component stocks in a Select Sector Index (the “Component
Stocks”) is a constituent company of the SPX.
|
|
●
|
The
eleven Select Sector Indices together will include all of the
companies represented in the SPX and each of the stocks in the SPX
will be allocated to at least one of the Select Sector
Indices.
|
|
●
|
The
Index Compilation Agent assigns each constituent stock of the SPX
to a Select Sector Index. The Index Compilation Agent assigns a
company’s stock to a particular Select Sector Index based on
S&P Dow Jones Indices’s sector classification methodology as
set forth in its Global Industry Classification
Standard.
|
|
Accelerated
Return Notes®
|
TS-8
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
|
●
|
Each
Select Sector Index is calculated by S&P Dow Jones Indices
using a modified “market capitalization” methodology. This design
ensures that each of the component stocks within a Select Sector
Index is represented in a proportion consistent with its percentage
with respect to the total market capitalization of that Select
Sector Index.
|
|
●
|
For
reweighting purposes, each Select Sector Index is rebalanced
quarterly after the close of business on the second to last
calculation day of March, June, September and December using the
following procedures: (1) The rebalancing reference date is two
business days prior to the last calculation day of each quarter;
and (2) With prices reflected on the rebalancing reference date,
and membership, shares outstanding, additional weight factor
(capping factor) and investable weight factors (as described in the
section “Computation of the S&P 500 Index®” below) as of the
rebalancing effective date, each company is weighted using the
modified market capitalization methodology. Modifications are made
as defined below.
|
|
i.
|
The
indices are first evaluated to ensure none of the indices breach
the maximum allowable limits defined in rules (ii) and (v) below.
If any of the allowable limits are breached, the component stocks
are reweighted based on their float-adjusted market capitalization
weights.
|
|
ii.
|
If any
component stock has a weight greater than 24%, that component stock
has its float-adjusted market capitalization weight capped at 23%.
The 23% weight cap creates a 2% buffer to ensure that no component
stock exceeds 25% as of the quarter-end diversification requirement
date.
|
|
iii.
|
All
excess weight is equally redistributed to all uncapped component
stocks within the relevant Select Sector Index.
|
|
iv.
|
After
this redistribution, if the float-adjusted market capitalization
weight of any other component stock(s) then breaches 23%, the
process is repeated iteratively until no component stock breaches
the 23% weight cap.
|
|
v.
|
The
sum of the component stocks with weight greater than 4.8% cannot
exceed 50% of the total index weight. These caps are set to allow
for a buffer below the 5% limit.
|
|
vi.
|
If the
rule in step (v) is breached, all the component stocks are ranked
in descending order of their float-adjusted market capitalization
weights and the first component stock that causes the 50% limit to
be breached has its weight reduced to 4.6%.
|
|
vii.
|
This
excess weight is equally redistributed to all component stocks with
weights below 4.6%. This process is repeated iteratively until step
(v) is satisfied.
|
|
viii.
|
Index
share amounts are assigned to each component stock to arrive at the
weights calculated above. Since index shares are assigned based on
prices one business day prior to rebalancing, the actual weight of
each component stock at the rebalancing differs somewhat from these
weights due to market movements.
|
|
ix.
|
If
necessary, the reweighting process may take place more than once
prior to the close on the last business day of March, June,
September or December to ensure conformity with all diversification
requirements.
|
Each
Select Sector Index is calculated using the same methodology
utilized by S&P Dow Jones Indices in calculating the SPX, using
a base-weighted aggregate methodology. The daily calculation of
each Select Sector Index is computed by dividing the total market
value of the companies in the Select Sector Index by a
number called the index divisor.
The
Index Compilation Agent at any time may determine that a Component
Stock which has been assigned to one Select Sector Index has
undergone such a transformation in the composition of its business,
and should be removed from that Select Sector Index and assigned to
a different Select Sector Index. In the event that the Index
Compilation Agent notifies S&P Dow Jones Indices that a
Component Stock’s Select Sector Index assignment should be changed,
S&P Dow Jones Indices will disseminate notice of the change
following its standard procedure for announcing index changes and
will implement the change in the affected Select Sector Indices on
a date no less than one week after the initial dissemination of
information on the sector change to the maximum extent practicable.
It is not anticipated that Component Stocks will change sectors
frequently.
Component Stocks
removed from and added to the SPX will be deleted from and added to
the appropriate Select Sector Index on the same schedule used by
S&P Dow Jones Indices for additions and deletions from the SPX
insofar as practicable.
The S&P
500® Index
The
SPX includes a representative sample of 500 companies in leading
industries of the U.S. economy. The SPX is intended to provide an
indication of the pattern of common stock price movement. The
calculation of the level of the SPX is based on the relative value
of the aggregate market value of the common stocks of 500 companies
as of a particular time compared to the aggregate average market
value of the common stocks of 500 similar companies during the base
period of the years 1941 through 1943.
The
SPX includes companies from eleven main groups: Communication
Services; Consumer Discretionary; Consumer Staples; Energy;
Financials; Health Care; Industrials; Information Technology; Real
Estate; Materials; and Utilities. S&P Dow Jones Indices, which
is the sponsor of the SPX, may from time to time, in its sole
discretion, add companies to, or delete companies from, the SPX to
achieve the objectives stated above.
Company additions
to the SPX must have an unadjusted company market capitalization of
$8.2 billion or more (an increase from the previous requirement of
an unadjusted company market capitalization of $6.1 billion or
more).
|
Accelerated
Return Notes®
|
TS-9
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
S&P Dow Jones
Indices calculates the SPX by reference to the prices of the
constituent stocks of the SPX without taking account of the value
of dividends paid on those stocks. As a result, the return on the
Notes will not reflect the return you would realize if you actually
owned the SPX constituent stocks and received the dividends paid on
those stocks.
Computation of
the S&P
500® Index
While
S&P Dow Jones Indices currently employs the following
methodology to calculate the SPX, no assurance can be given that
S&P Dow Jones Indices will not modify or change this
methodology in a manner that may affect payments on the
Notes.
Historically, the
market value of any component stock of the SPX was calculated as
the product of the market price per share and the number of then
outstanding shares of such component stock. In March 2005, S&P
Dow Jones Indices began shifting the SPX halfway from a market
capitalization weighted formula to a float-adjusted formula, before
moving the SPX to full float adjustment on September 16, 2005.
S&P Dow Jones Indices’s criteria for selecting stocks for the
SPX did not change with the shift to float adjustment. However, the
adjustment affects each company’s weight in the SPX.
Under
float adjustment, the share counts used in calculating the SPX
reflect only those shares that are available to investors, not all
of a company’s outstanding shares. Float adjustment excludes shares
that are closely held by control groups, other publicly traded
companies or government agencies.
In
September 2012, all shareholdings representing more than 5% of a
stock’s outstanding shares, other than holdings by “block owners,”
were removed from the float for purposes of calculating the SPX.
Generally, these “control holders” will include officers and
directors, private equity, venture capital and special equity
firms, other publicly traded companies that hold shares for
control, strategic partners, holders of restricted shares, ESOPs,
employee and family trusts, foundations associated with the
company, holders of unlisted share classes of stock, government
entities at all levels (other than government retirement/pension
funds) and any individual person who controls a 5% or greater stake
in a company as reported in regulatory filings. However, holdings
by block owners, such as depositary banks, pension funds, mutual
funds and ETF providers, 401(k) plans of the company, government
retirement/pension funds, investment funds of insurance companies,
asset managers and investment funds, independent foundations and
savings and investment plans, will ordinarily be considered part of
the float.
Treasury stock,
stock options, restricted shares, equity participation units,
warrants, preferred stock, convertible stock, and rights are not
part of the float. Shares held in a trust to allow investors in
countries outside the country of domicile, such as depositary
shares and Canadian exchangeable shares are normally part of the
float unless those shares form a control block. If a company has
multiple classes of stock outstanding, shares in an unlisted or
non-traded class are treated as a control block.
For
each stock, an investable weight factor (“IWF”) is calculated by
dividing the available float shares by the total shares
outstanding. Available float shares are defined as the total shares
outstanding less shares held by control holders. This calculation
is subject to a 5% minimum threshold for control blocks. For
example, if a company’s officers and directors hold 3% of the
company’s shares, and no other control group holds 5% of the
company’s shares, S&P Dow Jones Indices would assign that
company an IWF of 1.00, as no control group meets the 5% threshold.
However, if a company’s officers and directors hold 3% of the
company’s shares and another control group holds 20% of the
company’s shares, S&P Dow Jones Indices would assign an IWF of
0.77, reflecting the fact that 23% of the company’s outstanding
shares are considered to be held for control. As of July 31, 2017,
companies with multiple share class lines are no longer eligible
for inclusion in the SPX. Constituents of the SPX prior to July 31,
2017 with multiple share class lines will be grandfathered in and
continue to be included in the SPX. If a constituent company of the
SPX reorganizes into a multiple share class line structure, that
company will remain in the SPX at the discretion of the S&P
Index Committee in order to minimize turnover.
The
SPX is calculated using a base-weighted aggregate methodology. The
level of the SPX reflects the total market value of all component
stocks relative to the base period of the years 1941 through 1943.
An indexed number is used to represent the results of this
calculation in order to make the level easier to work with and
track over time. The actual total market value of the component
stocks during the base period of the years 1941 through 1943 has
been set to an indexed level of 10. This is often indicated by the
notation 1941- 43 = 10. In practice, the daily calculation of the
SPX is computed by dividing the total market value of the component
stocks by the “index divisor.” By itself, the index divisor is an
arbitrary number. However, in the context of the calculation of the
SPX, it serves as a link to the original base period level of the
SPX. The index divisor keeps the SPX comparable over time and is
the manipulation point for all adjustments to the SPX, which is
index maintenance.
Index
Maintenance
Index
maintenance includes monitoring and completing the adjustments for
company additions and deletions, share changes, stock splits, stock
dividends, and stock price adjustments due to company restructuring
or spinoffs. Some corporate actions, such as stock splits and stock
dividends, require changes in the common shares outstanding and the
stock prices of the companies in the SPX, and do not require index
divisor adjustments.
To
prevent the level of the SPX from changing due to corporate
actions, corporate actions which affect the total market value of
the SPX require an index divisor adjustment. By adjusting the index
divisor for the change in market value, the level of the SPX
remains constant and does not reflect the corporate actions of
individual companies in the SPX. Index divisor adjustments are made
after the close of trading and after the calculation of the SPX
closing level.
Changes in a
company’s shares outstanding of 5.00% or more due to mergers,
acquisitions, public offerings, tender offers, Dutch auctions, or
exchange offers are made as soon as reasonably possible. Share
changes due to mergers or acquisitions of publicly held companies
that trade on a major exchange are implemented when the transaction
occurs, even if both of the companies are not in the same headline
index, and regardless of the size of the change. All other changes
of 5.00% or more (due to, for example, company stock repurchases,
private placements, redemptions, exercise of options, warrants,
conversion of preferred stock, notes, debt,
equity
|
Accelerated
Return Notes®
|
TS-10
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
participation
units, at-the-market offerings, or other recapitalizations) are
made weekly and are announced on Fridays for implementation after
the close of trading on the following Friday.
Changes of less
than 5.00% are accumulated and made quarterly on the third Friday
of March, June, September, and December, and are usually announced
two to five days prior.
If a
change in a company’s shares outstanding of 5.00% or more causes a
company’s IWF to change by five percentage points or more, the IWF
is updated at the same time as the share change. IWF changes
resulting from partial tender offers are considered on a case by
case basis.
The
following graph shows the daily historical performance of the
Underlying Fund 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 Market
Price of the Underlying Fund was
$93.22.
Historical
Performance of the Underlying Fund
This
historical data on the Underlying Fund is not necessarily
indicative of the future performance of the Underlying Fund or what
the value of the notes may be. Any historical upward or downward
trend in the price of the Underlying Fund during any period set
forth above is not an indication that the price of the Underlying
Fund 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 prices and trading pattern of the Underlying
Fund.
|
Accelerated
Return Notes®
|
TS-11
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
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, as amended, 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 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 Underlying Fund
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.
|
Accelerated
Return Notes®
|
TS-12
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
Structuring
the Notes
The
notes are our debt securities, the return on which is linked to the
performance of the Underlying Fund. 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 Underlying Fund 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
Underlying Fund, 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 $0.05 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.
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.
|
Accelerated
Return Notes®
|
TS-13
|
|
Accelerated
Return Notes®
Linked
to the Energy Select Sector SPDR® Fund, due
January 26, 2024
|
|
Summary
Tax Consequences
You
should consider the U.S. federal income tax consequences of an
investment in the notes, including the
following:
|
■
|
There
is no statutory, judicial, or administrative authority directly
addressing the characterization of the notes.
|
|
■
|
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 Underlying Fund.
|
|
■
|
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.
|
|
■
|
No
assurance can be given that the Internal Revenue Service (“IRS”) or
any court will agree with this characterization and tax
treatment.
|
|
■
|
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.
|
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 product supplement EQUITY ARN-1.
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.
|
Accelerated
Return Notes®
|
TS-14
|
Bank of America (NYSE:BAC)
Historical Stock Chart
From Dec 2022 to Jan 2023
Bank of America (NYSE:BAC)
Historical Stock Chart
From Jan 2022 to Jan 2023
